Reply to: Another One of 'Em Urgent Questions

[rootsnall]

Hey thanks, guys, that's much appreciated. Cheers.

Bluebird - Six years does seem like a rather long shadow. If they decide that it is not outside IR35, for what would I then be liable?

You'd owe the NI ( employers and employees ) that you avoided by using a Ltd rather than an umbrella plus penalties ( appear to be zero for the cases lost so far ), plus interest. You wouldn't be much worse off then going umbrella up front and I'd of thought the odds of them picking on you for 6 months work are minimal but you never know !?

[Bluebird]

i.e. If the price differential is not that big, then first of all how does SJD calculator work (rhetorical) but more importantly, then that changes the whole outlook on this.

By the way, I have been speaking to two of the accountancy firms that frequent here and the advice is the COMPLETE OPPOSITE. How does that work?

who's telling you what about what ?

[floatsy]

i.e. If the price differential is not that big, then first of all how does SJD calculator work (rhetorical) but more importantly, then that changes the whole outlook on this.

By the way, I have been speaking to two of the accountancy firms that frequent here and the advice is the COMPLETE OPPOSITE. How does that work?

[floatsy]

Thanks for that BlueBird.

Actually I think I know where I am going wrong.
I was using the SJD calculator and it suggests I get a lot more if I am with the limited...but another accountant is saying that's not the case...

[Bluebird]

Hey thanks, guys, that's much appreciated. Cheers.

Bluebird - Six years does seem like a rather long shadow. If they decide that it is not outside IR35, for what would I then be liable?

I think it depends on whether they think you've done it on purpose.

HMRC generally have gone down the route of demanding all of the back tax + penalties, however recently HMRC have indicated that where there is obvious intend to defraud, then they will prosecute rather than "do a deal".

[floatsy]

Hey thanks, guys, that's much appreciated. Cheers.

Bluebird - Six years does seem like a rather long shadow. If they decide that it is not outside IR35, for what would I then be liable?

[rootsnall]

I've done it a couple of times for one off contracts but in pre IR35 days. If you can find an accountant who'll open the Co, do the ongoing paperwork for 6 months and then close it then I would assume they don't think there is anything wrong. As with most things contracting there is no hard and fast rules, you'll have to listen to what the acountants have to say ( try the usual suspects on here ) and make your own call ! If you are on decent money for 6 months then the numbers will be well in favour of setting up a Ltd and declaring outside IR35.

[Bluebird]

OK To make it clearer, here's my thought process:

1. I am genuinely operating on the terms of specialist skills, can define how to approach my work, won't be getting holiday/bonus pay etc

2. The diff in net pay is about ... 15-22% per month which I found quite substantial (again I'm going by these SJD calculators - which gave me a diff figure to listentotaxman.com but that's another story)

ie. between just going umbrella or forming my own limited

3. I asked some of these big accountant firms what the cost I could expect to pay IF I went Ltd. and they basically said:

a) Accountancy fees - say 800 per year
b) Company form/close - say 200 per year

Total 1000 and that would settle the whole matter.
ie. These accountants would pretty much do everything for me anyway

Therefore cost/benefit...I was leaning towards the company.

Is this clearer, or I have missed the x factor in my equation?

Thanks again,
float

I would guess it depends on what your rate is...

I would think you are financially better of doing a Ltd company - but don't forget that even if you think you're inside IR35 you need to be able to keep all you rrecords and guard against investigation for 6 years.

I would have thought [ although it's only a thought ] that anybody opening a company and then closing it down within the same year taking lost of the profits as dividends doesn't look like somebody in business in the true sense of the word.

So in summary, yes you'd be better of financially, but peace of mind wise you're better off using a Brolly

[floatsy]

OK To make it clearer, here's my thought process:

1. I am genuinely operating on the terms of specialist skills, can define how to approach my work, won't be getting holiday/bonus pay etc

2. The diff in net pay is about ... 15-22% per month which I found quite substantial (again I'm going by these SJD calculators - which gave me a diff figure to listentotaxman.com but that's another story)

ie. between just going umbrella or forming my own limited

3. I asked some of these big accountant firms what the cost I could expect to pay IF I went Ltd. and they basically said:

a) Accountancy fees - say 800 per year
b) Company form/close - say 200 per year

Total 1000 and that would settle the whole matter.
ie. These accountants would pretty much do everything for me anyway

Therefore cost/benefit...I was leaning towards the company.

Is this clearer, or I have missed the x factor in my equation?

Thanks again,
float

[floatsy]

When I was living overseas but came home for the summer I worked out it was worthwhile setting up a Ltd even for a couple of months work. It's also a very slim risk IR35 wise if you are only doing 6 months work, if they make you pay up the NI contributions down the track then so be it.

Is that the only consequence usually?

Anyway thanks roots, I spoke to 2 accountants this morning, they gave conflicting advice of course

[floatsy]

It would and you could probably defend your contract against accusations of disguised employement with a bit of care, but for a few months? Go umbrella and forget about IR35 implications. The cost is around 10% of your gross by paying full PAYE/NIC plus the umbrella fees, set against complete peace of mind.

Your call, but personally I wouldn't bother with a Limited in your position.

Thanks, malvolio - have read a few of your posts !

I used these calculators on that SJD website and it just looked like I would get so much more for a ltd company - so given that the nature of the work is above, I thought it would be worth it but I must be missing something (ie.....it wasn't just 10%)..

OK Onto the next silly question which has been asked a thousand times - any good umbrellas

[rootsnall]

When I was living overseas but came home for the summer I worked out it was worthwhile setting up a Ltd even for a couple of months work. It's also a very slim risk IR35 wise if you are only doing 6 months work, if they make you pay up the NI contributions down the track then so be it.

[malvolio]

It would and you could probably defend your contract against accusations of disguised employement with a bit of care, but for a few months? Go umbrella and forget about IR35 implications. The cost is around 10% of your gross by paying full PAYE/NIC plus the umbrella fees, set against complete peace of mind.

Your call, but personally I wouldn't bother with a Limited in your position.

[floatsy]

IMHO, its not worth it if you want a perm job in 5-6 months.

Is this based on cost? I spoke to an accountant this morning who said that it's worth it because the tax benefits outweigh the setup costs (say 1000 pounds for the full year including all accountancy services).

[floatsy]

Thanks cowboy Bob - If the arrangement is entered on the basis that I will operate as someone selling specialist skills/services, and I don't get bonus/holiday pay etc, and I work in terms of the 'how' to do the job - I genuinely would have thought this constituted IR35....

But willing to take your advice.

In any case, the contract and nature of engagement (if it is the above) - would determine status? Or have I got this wrong?

Thanks.