Quick Question re PAYE via your PSC if Inside IR35

[DrStrange]

Thanks everyone

[jamesbrown]

All you really need to understand is that, regardless of the structure of the supply chain above you personally, if your engagement is inside IR35, then the net effect should be that you receive the total income received from the client (deemed employer) net of all employment taxes. Anything that does not achieve this effect will place you and the supply chain above you at significant risk. The best (only sane) way to mitigate this is to work through a legitimate umbrella company and leverage their pension options.

[jamesbrown]

The idea was the PSC is an Umbrella (albeit a budget, one-man, unaccredited one)

I get how implausible this would ordinarily be, however its a special case and I have leeway which is what led to the thought.

I should probably stop there, but to indulge you...

A "PSC" that is an "umbrella" is a "PSC". As an aside, neither of these terms means much in UK law (except that a proper umbrella needs to consider more areas of legislation more carefully). What matters w/r to IR35 is that this vehicle will meet all of the basic requirements for IR35 to apply in principle, such as you owning 5% or more of the share capital. Also, your argument relies on the total ignorance of the real Fee Payer, i.e., the company paying your "shadow PSC", because they have an obligation in law (ITEPA Pt. 2, Ch. 10) to apply a deemed direct payment. Moreover, this arrangement would probably be examined very carefully under the Anti-Avoidance provisions of 61W in Ch. 10, leading to even greater risk/penalties.

[DrStrange]

"Can't be done"

Are there rules against this, or is it more of "no fee payer would accept it" kind of thing?

[eek]

The idea was the PSC is an Umbrella (albeit a budget, one-man, unaccredited one)

I get how implausible this would ordinarily be, however its a special case and I have leeway which is what led to the thought.

Can't be done - you don't have the leeway there....

[DrStrange]

The idea was the PSC is an Umbrella (albeit a budget, one-man, unaccredited one)

I get how implausible this would ordinarily be, however its a special case and I have leeway which is what led to the thought.

[jamesbrown]

if all money received in has been paid out via PAYE within the tax year, is such a pay/bonus option feasible?

No, you are confused. Under Chapter 10, in the completely implausible scenario that the Fee Payer agrees to pay your PSC rather than an Umbrella, the Fee Payer makes a deemed direct payment to your PSC, i.e., net of all employment taxes. Your PSC is then free to distribute the amount received without any further deduction of tax because it has already suffered all employment taxes. There is no scenario in which your PSC receives the gross amount under Chapter 10, that only happens under Chapter 8. As an aside, the 5% expenses allowance disappeared long ago.

[DrStrange]

Ah

I thought it'd still count as an "Employer Contribution"

Thanks folks

[eek]

"...and it screws up your pension options..."

Can't the Ltd just pay these direct to the SIPP?

Yep - but you've lost the employer and employee NI (which has already been deducted) and would need to claim back the income tax deduction in your year end tax return.


So your pension contribution will be 15.8% less than from an umbrella...

[DrStrange]

"...and it screws up your pension options..."

Can't the Ltd just pay these direct to the SIPP?

[eek]

Just don't - most firms will refuse to do deemed payments and it screws up your pension options...

also I'm at a loss as to what an umbrella can do wrong - 99% of the time the issue isn't at the umbrella it's going to be with the agency (with the agency claiming it's all the umbrella's fault).

[DrStrange]

Thanks, all I found on the deemed payment from my search was what I understood to be old rules (i.e. with the 5% discount) or information about ensuing the Employers NIC, Income Tax and NIC were all paid - I didn't see anything specifically about the timing of such payments.

To answer your questions:

1) My brolly (PayStream) are annoying me and I'd rather do the admin myself than deal with them tbh
2) No, and I understand it'd be difficult to implement. Trying to work out if the hassle of attempting to do > benefits
3) I don't currently have a PSC but thinking out loud about setting one up to act as my brolly, so I can control things.

[northernladuk]

Why are you using your PSC rather than an umbrella? Much easier.

Are you being paid like this now? Very few clients and agents will allow payments to a PSC as there is some responsibility back on the payer if you don't pay your tax.

If you've got a PSC do you not have an accountant?

Google 'Deemed Payment' it's all there.

[DrStrange]

If you're Inside and the invoices are paid into your PSC, are the PAYE rules such that you must pay out the full amount each pay period, or are you able to pay minimum wage each month and then a bonus in the final pay period for whatever is left?

I understand you can't split the income over tax years but, if all money received in has been paid out via PAYE within the tax year, is such a pay/bonus option feasible?