Reply to: Permie offered contract with the same company

[Taita]

Thank you all for the help, I feel like I have avoided a trap.

In the end I went overtime with 2x my hourly rate which is not too bad.

Excellent result!

[Proximo]

Thank you all for the help, I feel like I have avoided a trap.

In the end I went overtime with 2x my hourly rate which is not too bad.

[Taita]

Agreed. Ltd/umbrella would also avoid the NICs due to the amount being below the thresholds.

The employer is being naive to contemplate this as it is their responsibilty to operate PAYE.

Quite! The alternative arrangements you are contemplating are fraught with potential for misunderstanding and likely to trigger an HMRC investigation for your employer/yourself. The result may not cost either of you anything more than wasted time and anxiety but still hardly worth the effort.

Do the overtime and keep it neat and tidy. By all means try for a different rate of pay for the additional work but best to keep the whole thing within the current PAYE arrangement.

[Contreras]

I think HMRC could well wonder why the employer is paying him off the books.

Go down the overtime route - safest and simplest.

HMRC will definitely want that 13.8% Employer contribution, from your Employer. It sounds fraudulent to me doing work off payroll when you are employed already.

Agreed. Ltd/umbrella would also avoid the NICs due to the amount being below the thresholds.

The employer is being naive to contemplate this as it is their responsibilty to operate PAYE.

[mudskipper]

I think HMRC could well wonder why the employer is paying him off the books.

Go down the overtime route - safest and simplest.

[TheCyclingProgrammer]

I see. Would the taxman then simply add the declared amounts to my PAYE income and work out the tax?

Yes. It will be taxed at your marginal rate.

As I said above, you might not necessarily need to register as self-employed for a single one-off job. IMO you shouldn't have to but you might want to check with HMRC and get their opinion. Registering as self-employed for a single job would mean having to register for self-assessment if you weren't already and paying additional NIC (unless your earnings are below the small earnings exemption limit, but you still need to apply for the exemption).

If you go through an umbrella, as it will be your second job you'll probably be put on the payroll with a BR tax code which will mean you get taxed at basic rate - this could result in you underpaying tax if you're a higher rate payer though which you'll still owe at the end of the year.

[TheCyclingProgrammer]

You don't necessarily need to register as self-employed for a one-off piece of work; IMO you could just declare it under "additional income" on your self-assessment and pay tax accordingly. Personally I don't think doing a one-off freelance job would constitute as "trading" and therefore make registering as self-employed necessary. Obviously if it became an ongoing thing then this could change things.

If you're not already registered for self-assessment, then you might be able to get HMRC to collect the tax through your tax code up to a certain limit (it's not a very high limit though - £2500 I think).

I certainly wouldn't go to the effort of setting up a Ltd co. and if your employer is not willing to engage you directly, and/or you aren't already registered for self-assessment and the amount is too much to have the tax collected through your tax code and you want to avoid that faff, then by far the simplest solution is to use an umbrella.

[Proximo]

As yourself.

I see. Would the taxman then simply add the declared amounts to my PAYE income and work out the tax?

[northernladuk]

Got it, thanks.

I think I would be marginally better after tax, however it is not worth having the taxman over my head.
Looking into what triggers an IR35 investigation, I think this sort of odd engagement pattern would probably stand out.

You are clearly inside IR35 so this is irrelevant. Go down then over time route if at all possible. Remember this is still you employer. If this weird arrangement goes south it's going to affect your employment so just stick to being an employee.

[mudskipper]

Looking at the Self Assessment form, is that the option: "I have been getting untaxed income that cannot be collected through my PAYE tax code" ?

Who would I be invoicing the company as, if I don't set up my own Ltd?

As yourself.

[Proximo]

Overtime would be the simplest/safest/cleanest solution.

The alternative is to send them an invoice from you for the amount, then, on your tax return declare it as extra income.

Looking at the Self Assessment form, is that the option: "I have been getting untaxed income that cannot be collected through my PAYE tax code" ?

Who would I be invoicing the company as, if I don't set up my own Ltd?

[mudskipper]

Is this similar to what Contreras is saying, basically negotiate a higher overtime?

Overtime would be the simplest/safest/cleanest solution.

The alternative is to send them an invoice from you for the amount, then, on your tax return declare it as extra income.

[Proximo]

If you really want to do this, then find out whether your employer would be happy for you to bill them as you and stick the extra income on your tax return - no brollies/limited.

But the overtime option sounds much more practical and less hassle.

Is this similar to what Contreras is saying, basically negotiate a higher overtime?

[Proximo]

5) As self-employed ?
6) Negotiate a better overtime rate?
7) Decline the offer as working a 7-day week for 7 weeks is madness.

Yes it'll be inside IR35. What your employer is doing is reducing their NICs bill. If you go ltd then that totally becomes your problem. As self-employed the company would be on dodgy ground, IMHO, as they have a responsibility to apply PAYE. Even going via umbrella seems dodgy for similar reason.

You need to check if you are better off (after tax) compared to accepting an overtime rate, because it is doubtful IMHO.

Got it, thanks.

I think I would be marginally better after tax, however it is not worth having the taxman over my head.
Looking into what triggers an IR35 investigation, I think this sort of odd engagement pattern would probably stand out.

[Contreras]

I have an interesting opportunity, need some help to assess whether it's sensible or not.

I have been a permie with a corporation for nearly two years now. I have not done contracting before. There is a project that another part of the company wants us to do; we do not have the resource for it and it also clashes with our priorities (what is else is new?)

I am being told in an indirect way to do it in my own time. They can give me overtime but since I have a good relationship with my manager he has offered to bill my time on the project as an external contractor. This is more attactive to me as I can negotiate my own rate. We ran this through HR and I have also checked my employment contract (it basically defers back to the manager) and everything looks ok.

This is a clear project with a beginning and an end and fixed requirements. The total work involved is around 10-14 days of effort. I would be doing this on the weekends. I do not expect to make more than 3-4k out of it.

I have the following questions:

1) Is it practical for me to do this on a contract given the above?
2) If yes, is LTD the best option or should I go with an umbrella?
3) Do I fall within IR35 given the above?
4) Any other gotchas?

Thanks,
Prox

5) As self-employed ?
6) Negotiate a better overtime rate?
7) Decline the offer as working a 7-day week for 7 weeks is madness.

Yes it'll be inside IR35. What your employer is doing is reducing their NICs bill. If you go ltd then that totally becomes your problem. As self-employed the company would be on dodgy ground, IMHO, as they have a responsibility to apply PAYE. Even going via umbrella seems dodgy for similar reason.

You need to check if you are better off (after tax) compared to accepting an overtime rate, because it is doubtful IMHO.