Reply to: IR35 post April 2020: Choosing a legitimate Umbrella

Thanks both.

[lucyclarityumbrella]

Fact check.

If I have a new contract offer to start post April 2020 for which I will use an umbrella company, the Client does not have to make any determination? My company are not using PSCs at all going forward.

Yep, you are an employee so no determination required, as IR35 determines employment status

[eek]

Fact check.

If I have a new contract offer to start post April 2020 for which I will use an umbrella company, the Client does not have to make any determination? My company are not using PSCs at all going forward.

Yep, no determination required as you will be being paid via PAYE and HMRC are getting their Employer NI payments (which is what they care about).

Fact check.

If I have a new contract offer to start post April 2020 for which I will use an umbrella company, the Client does not have to make any determination? My company are not using PSCs at all going forward.

[mogsrodgers]

No, I mean the end client doesn't make the deduction, I receive gross and my current accountant would make the relevant Income Tax/NI deductions (I think he would do this for a higher monthly fee than what I am paying right now).

No can do, I'm afraid. If determined inside the net figure must be paid to the Ltd company with the agency or end client making the deductions

[Superfly]

It's dependent on the end client, but my guess is most won't want to make the deductions in order to pay the Ltd company so will request an umbrella.

No, I mean the end client doesn't make the deduction, I receive gross and my current accountant would make the relevant Income Tax/NI deductions (I think he would do this for a higher monthly fee than what I am paying right now).

As long as the end client has determined me inside, that would cover their backs if HMRC come calling. It would be up to me to decide how I structure the payment as long as I pay all the required PAYE tax. Would this be okay?

[lucyclarityumbrella]

Will the client expect to pay into Umbrella if they find a contractor is inside IR35, or would it be possible to continue using a Limited Company but not take anything out as dividends, everything goes through PAYE (except pension contributions) or do I have to use an Umbrella?

It's dependent on the end client, but my guess is most won't want to make the deductions in order to pay the Ltd company so will request an umbrella.

[Superfly]

Will the client expect to pay into Umbrella if they find a contractor is inside IR35, or would it be possible to continue using a Limited Company but not take anything out as dividends, everything goes through PAYE (except pension contributions) or do I have to use an Umbrella?

[northernladuk]

Not really. The rather pedantic point I was making is that YOU do nothing. You are employed now. You don't have a say in the process anymore. You chose you pension amount. The rest goes through the system and ends up in your pocket. It's not your job anymore.

[hgllgh]

Yes but not quite. You can't set the salary. You are PAYE. You can move the max limit in to the pension so it isn't taxed yes but the rest will be salary. Tax will dictate what you get, not you. I think that's what you meant though?

There will be other deductions outnofnyour take home like holiday pay as well.

I'm sure midlandslass will send you an accurate breakdown if you need one.

Thanks. Right so the Brolly makes a 'company pension contribution' of 40K and then I pay what's leftover (40K) as PAYE salary. So the only difference in that sense from my normal Ltd is that I pay PAYE on 40K instead of low PAYE + divs.

[northernladuk]

So, if a contract paid the equivalent of 80K/year I could pay 40K into the brolly pension and at set the salary at 40K to avoid Higher Rate Tax?

Yes but not quite. You can't set the salary. You are PAYE. You can move the max limit in to the pension so it isn't taxed yes but the rest will be salary. Tax will dictate what you get, not you. I think that's what you meant though?

There will be other deductions outnofnyour take home like holiday pay as well.

I'm sure midlandslass will send you an accurate breakdown if you need one.

[hgllgh]

The brolly will have to net you National Minimum Wage over that fill your boots

As Northern Lad said, you can pay more that £40k in via the brolly, but they will claw back the tax over that through self-assessment probably or your tax code!

So, if a contract paid the equivalent of 80K/year I could pay 40K into the brolly pension and at set the salary at 40K to avoid Higher Rate Tax?

[lucyclarityumbrella]

... can you put ALL of your earnings in the brolly into your SIPP .. is there not a 40k limit ?

The brolly will have to net you National Minimum Wage over that fill your boots

As Northern Lad said, you can pay more that £40k in via the brolly, but they will claw back the tax over that through self-assessment probably or your tax code!

[CanPayButWouldRatherNot]

You can put all in but you'll only get tax relief on the first 40k.

Possibility of backdating it if you've been in the scheme for previous years but I'd assume that as we are talking about new brollies then this isn't an option.

ah ok ... sadly used the earlier years as part of the loan charge pension workaround (c/o Loan ranger)

btw thanks for the ii tips on the pension threads ... been using them

[northernladuk]

quick follow up on the pension angle


(51 and looking at 55 with interest)

... can you put ALL of your earnings in the brolly into your SIPP .. is there not a 40k limit ?

You can put all in but you'll only get tax relief on the first 40k.

Possibility of backdating it if you've been in the scheme for previous years but I'd assume that as we are talking about new brollies then this isn't an option.