Reply to: IR35 tax code

[northernladuk]

If he does other things for his limited company other than just managing it (such as doing stuff for clients), then he is most certainly employed by the company.

https://www.gov.uk/employment-status/director

Most certainly? That article says may be so depends on other things, one of those would be a contract of employment.

[m0n1k3r]

Is the fact that you aren't employed by your LTD causing some confusion here?

If he does other things for his limited company other than just managing it (such as doing stuff for clients), then he is most certainly employed by the company.

https://www.gov.uk/employment-status/director

[Herts47]

I understand that, but you just say I have 2 employments and I wish to allocate my tax code between them. You don't even have to mention being a contractor/freelancer etc. This is quite normal for people with multiple employments and so I don't see that you risk putting your head above the parapet.

I've contacted HMRC via online website and saw I had a K code on my limited company and a BR x code on my IR35 agency. The problem with IR35 is now clear to me: They "presume" I will earn what I've earned so far on my limited company for the whole tax year and also the agency IR35 income for the year. they therefore think I have 2 incomes and have exceeded my personal allowance so now owe them. It's a crazy scenario to assume earnings for the whole year and tax you on it without you having earned it yet. Another contractor I've spoken to has had exactly the same thing happen to them.

IR35 needs to be sorted out as there must be so many others being stuffed for tax due to the assumptions of HMRC - especially when you are registered for PAYE anyway as I am, and employ myself through my limited company. I get that IR35 was invented to catch contractors who didn't pay PAYE and drew dividends, but I've always been PAYE on my company and you end up getting slaughtered tax wise. I've now said I am not going to be earning anything else from my company for the rest of the tax year, and my code changed immediately - but didn't go onto the IR35 agency - so they just took away most of the personal allowance from my limited company annual allocation and haven't put it anywhere else. I then completed a form to ask that my personal allowance goes onto my IR35 agency and it apparently takes 3 weeks to process (although they are damn quick to adjust the tax code when they think you owe them money). The whole thing is a shambles.

And incidentally, the agency have backed away from all responsibility of informing the limited company what happens with IR35. They refused to accept the Starter Declaration C Form (technically the P46) as I'm a PSC, and said I have to sort out my own tax situation. If they had put through this form in the first place my tax code would have been sorted out and HMRC would have known I was only on one income. The lack of understanding about IR35 is awful - and this is a very prominent agency.

[fidot]

That sounds good - thank you. Only thing is I'm reluctant to go through hours of hanging around to speak to HMRC and I certainly don't want them burrowing into past contracts. Not that I've got anything to hide as everything is done by my accountant, but I don't want to highlight me to them if you know what I mean.

I understand that, but you just say I have 2 employments and I wish to allocate my tax code between them. You don't even have to mention being a contractor/freelancer etc. This is quite normal for people with multiple employments and so I don't see that you risk putting your head above the parapet.

[Herts47]

Try explaining to a permie on £40k why your £100k is not fair.
You’re right that it’s not good legislation but you do (should) get much more gross salary.

I was adding on costs to an employees gross salary, so your £40k is much more with benefits, pension etc, plus bonus. Yes a contractor gets it gross but if you take this off the contractor (who has to fund this themselves plus insurance, accountants, corp tax etc) - a like for like salary between an employee and contractor on the same role (and within IR35) means the contractor will now be worse off.

It's the contractors choice of course but I think it's a shame the Government have introduced this legislation with no thought - and despite reservations from small businesses and tax experts. If you pick the legislation and contract law apart there are so many holes and IR35's are employees - whether it's hidden by agencies or not, and should be treated as such. An employee being treated the same could easily win in a tribunal as the legislation is discriminatory.

[Lance]

Yep I know. And also IR35 doesn't allow any expenses to be claimed either. How the hell this legislation got through I just don't know as to say it's discriminatory is being polite. A contractor is significantly worse off than an employee earning less now. No employee rights and, in my case, paying almost 60% to HMRC each week for the pleasure of working my butt off!

Try explaining to a permie on £40k why your £100k is not fair.
You’re right that it’s not good legislation but you do (should) get much more gross salary.

[Herts47]

See here, particularly number 14 onwards.

Thank you for this. I'd seen the update but not this page and it's very useful. It doesn't mention anything about HMRC deeming an IR35 employment to be a secondary employment from the limited company though - and why the hell they've given me a DO 0 code and what to do about it. A reply to my post has suggested I need to contact HMRC to reallocate my taxable allowance to this employment (yes, I'm using the word employment because that's what it is and I'm going to look into AWR's as well but that's another story). Trouble is, you start contacting HMRC (when you can finally get through to them), and you highlight them to yourself and all sorts of investigations. I'll no doubt get it sorted through self assessment but it's not right you have to wait until the end of the tax year to sort out overpayment of tax - which is HMRC's fault not mine. No doubt they will try and adjust my tax code for next year rather than give me a full refund.

I do hope someone has the clout and knowledge to fight the contractor's cause on this and, wishful thinking, both HMRC and the Govt sort this mess out and give the contractor equal rights for an employee or fair taxation and expenses of their limited company.

[Herts47]

See the FAQs here

http://forums.contractoruk.com/publi...bout-ir35.html

Thanks. I read those before I posted as I couldn't find specific tax information on them but they are useful - certainly the options as walking away from the contract is looking good right now!

[Herts47]

And remember your

All Expenses
Accountant
Insurance
Etc
Etc

Now come out of your net earnings

Yep I know. And also IR35 doesn't allow any expenses to be claimed either. How the hell this legislation got through I just don't know as to say it's discriminatory is being polite. A contractor is significantly worse off than an employee earning less now. No employee rights and, in my case, paying almost 60% to HMRC each week for the pleasure of working my butt off!

[Herts47]

Who's doing the PAYG deduction? Your story suggests the agency but if so then they should be able.to answer.
If it's the client then you want to talk to their HR department.

The agency are doing the PAYE deduction and unfortunately they don't know the answers! My contact has referred to her Area and Branch manager but, surprise, surprise, I haven't heard from them yet and I'm due another payslip next week.

[Qdos Contractor]

See here, particularly number 14 onwards.

[tarbera]

And remember your

All Expenses
Accountant
Insurance
Etc
Etc

Now come out of your net earnings

[mudskipper]

See the FAQs here

http://forums.contractoruk.com/publi...bout-ir35.html

[Lance]

I've had 2 payslips and get paid weekly. The second payslip had 2 weeks to it (one timesheet was authorised late). Yes I'm seriously considering walking away. I won't get any tax refund until my self assessment (if at all because trying to convince HMRC they are wrong is like getting blood out of a stone), and the agency have said they honestly don't know the answers so am waiting for Area and Branch manager to call me but they've not called to date - probably because they don't have a clue either.

Who's doing the PAYG deduction? Your story suggests the agency but if so then they should be able.to answer.
If it's the client then you want to talk to their HR department.

[Herts47]

So basically you have been working Inside IR35 for past 2 payslips (months?).

Like unravelling rat's nest trying to get the pimp and client to sort out this mess. Life is too short.

Personally I'd walk and go and find another gig outside (IR35) not "outside", like a farmer or dry stone waller.

qh

I've had 2 payslips and get paid weekly. The second payslip had 2 weeks to it (one timesheet was authorised late). Yes I'm seriously considering walking away. I won't get any tax refund until my self assessment (if at all because trying to convince HMRC they are wrong is like getting blood out of a stone), and the agency have said they honestly don't know the answers so am waiting for Area and Branch manager to call me but they've not called to date - probably because they don't have a clue either.