Reply to: £750 a day inside

[jayn200]

Well yes, it is a stupid question, you're supposed to know these kinds of basics

Anyway, it is net pay to you personally. Which means any pension funding is coming out of your taxed income, as are any travel and subsistence expenses. And you can only reclaim the tax on your pension contributions via self assessment.

CT and VAT would not be your concern. You are, when all is said and done, an employee with no employment rights. That is the real crime here.

Ridiculous statement, a crime really?

Employment rights are not designed to protect people earning 150k+ a year. They don't need any government protections, they are compensated sufficiently, that's capitalism working, doesn't need any government intervention as there is no exploitation. I'm sure most here would prefer umbrella at 750 a day with no employment protections to perm employment at 60k with full employment protections (there will be someone to quote me and say 60k is better).

Now low paid temp or otherwise contractors earning 100 a day or 120 a day with no employment rights, that's exploitation and needs to be tackled. They are not being compensated enough to offset lack of employment protections.

[sludgesurfer]

Thanks. I understand you now.

[eek]

The grammar in your second sentence renders it impossible for me to understand. The entire post beyond the first two sentences was from a lady who advises professionally in this field whom I had discussion with outside of the forum. It sets out clearly what are the options in the vast majority of cases and goes some way to providing an answer as to why there is so much misunderstanding of the options in this area.

Some of her details are wrong simply because IR35 is a decision made first and the (sane) options then flow from that initial decision by the client.

So outside IR35 options:-

Limited Company (sane)
Umbrella (possible)
PAYE (not sane)

Inside IR35 options

Limited Company (possibly via deemed payments but utterly insane for all people involved)
Umbrella (sane if all 3 of the contractor, the agency and the client trust the umbrella company)
PAYE (risk free for client, work for agency may not be best option for contractor)

Blanket bans follow the Inside IR35 options.

[sludgesurfer]

Not quite - the fact a contract / role has been deemed to be inside IR35 is a statement of fact. The consequence of that is that the same options is to insist the person uses an umbrella or works via agency PAYE.

The grammar in your second sentence renders it impossible for me to understand. The entire post beyond the first two sentences was from a lady who advises professionally in this field whom I had discussion with outside of the forum. It sets out clearly what are the options in the vast majority of cases and goes some way to providing an answer as to why there is so much misunderstanding of the options in this area.

[eek]

This quote below is useful. Thanks to "Compliance Lady" (i think). It is no doubt on a sticky somewhere.


"PSC - Inside IR35 - Quoted rate must be exclusive of Employer costs (ERNIC, App Levy), PAYE is processed on this rate so EENIC and Income tax are deducted at source. No holidays or pension rights.

PSC - Outside IR35 - Quoted rate is gross and tax is down to your company structure etc. The total rate is paid to your Company and you do the rest.

Umbrella - IR35 does not apply (you're an employee) - Quoted contract rate is the gross amount paid to Umb which includes Employer & Employee costs. So you will have deducted from this ERNIC, App Levy, ER Pen, Hol Acc (which you get back), EENIC and Income Tax plus the umbrella fee. You may be able to offset some expenses against your gross rate and reduce the overall tax take.

PAYE - IR35 does not apply (you're a worker) - Quoted rate must be exclusive of Employer costs (ERNIC, ER Pen, App Levy, Hol Pay (which you get back)). PAYE is processed on this rate so EENIC, EEPen and Income Tax are edeucted at source.

The confusion I think is a lot of people are saying 'Inside IR35' when they mean umbrella or PAYE. That makes it difficult for you to understand what the rate constitutes. The easiest way to understand it is to ask the recruiter 'Can I work through my PSC then?' if they say no, it's not inside IR35. It's either Umbrella or PAYE."

Not quite - the fact a contract / role has been deemed to be inside IR35 is a statement of fact. The consequence of that is that the same options is to insist the person uses an umbrella or works via agency PAYE.

[sludgesurfer]

This quote below is useful. Thanks to "Compliance Lady" (i think). It is no doubt on a sticky somewhere.


"PSC - Inside IR35 - Quoted rate must be exclusive of Employer costs (ERNIC, App Levy), PAYE is processed on this rate so EENIC and Income tax are deducted at source. No holidays or pension rights.

PSC - Outside IR35 - Quoted rate is gross and tax is down to your company structure etc. The total rate is paid to your Company and you do the rest.

Umbrella - IR35 does not apply (you're an employee) - Quoted contract rate is the gross amount paid to Umb which includes Employer & Employee costs. So you will have deducted from this ERNIC, App Levy, ER Pen, Hol Acc (which you get back), EENIC and Income Tax plus the umbrella fee. You may be able to offset some expenses against your gross rate and reduce the overall tax take.

PAYE - IR35 does not apply (you're a worker) - Quoted rate must be exclusive of Employer costs (ERNIC, ER Pen, App Levy, Hol Pay (which you get back)). PAYE is processed on this rate so EENIC, EEPen and Income Tax are edeucted at source.

The confusion I think is a lot of people are saying 'Inside IR35' when they mean umbrella or PAYE. That makes it difficult for you to understand what the rate constitutes. The easiest way to understand it is to ask the recruiter 'Can I work through my PSC then?' if they say no, it's not inside IR35. It's either Umbrella or PAYE."

[northernladuk]

Nope, was Public Sector.

Ah Student Loans?

[eek]

Yep, those calls sound about right.

But I’ll be amazed if anyone can run an inside IR35 contract through their Ltd. Clients are on the hook to make sure the taxes are paid and they’ll make sure of that by refusing to work with Ltds and insisting on PAYE or Umbrellas.

It's possible for an agency to work with a person limited company but it requires the agency to do deemed payments and deduct the appropriate amount of employer NI (paid by the agency) and employee NI and income tax (deducted on your company's behalf) before paying the rest to your limited company.

But as you can tell from the above there is zero reason why any agency will go to all that effort - it's easier to just say agency payroll or from this list of umbrella companies.

[cojak]

I have the same question, from your calculation I would be looking at 52% reduction in the offered day rate,inside IR35 when compared with the day rate outside IR35. This does seem a big drop. Also, has anyone elected to work on an IR35 contract but manage all the tax deductions through their limited company and accountant. This would be my preferred option .

Yep, those calls sound about right.

But I’ll be amazed if anyone can run an inside IR35 contract through their Ltd. Clients are on the hook to make sure the taxes are paid and they’ll make sure of that by refusing to work with Ltds and insisting on PAYE or Umbrellas.

[DanielW]

Equivalent date rates both outside and inside IR35

Just had a potential role presented to me- not at interview stage yet but been informed...

Rate is £750 inside IR35 through an Umbrella - would give a net day rate after NIC and PAYE contributions of circa £350

This is a worst case figure and likely higher once tax codes and allowances are factored in – probably closer to £390-400

---

Anyone on a similar rate now and willing to share their net per day please?

I have the same question, from your calculation I would be looking at 52% reduction in the offered day rate,inside IR35 when compared with the day rate outside IR35. This does seem a big drop. Also, has anyone elected to work on an IR35 contract but manage all the tax deductions through their limited company and accountant. This would be my preferred option .

[WTFH]

And what happens if ...

Yes, there's lots of "what happens if", we can't play out every single scenario, which is why any contractor who has been doing it for a while will advise you to have a good archest built up.

Going to be a load of hassle sorting your tax out surely?

That's why contractors pay to have an accountant.

Read a few horror stories of umbrella company screw ups

There's a lot of horror stories about contractor screw ups.
Most of the horror stories about umbrellas are because people have gone for unregistered umbrellas, or ones that operate schemes.


Contracting over the last decade has become more and more difficult and it's not going to get any easier over the next 4+ years unless something major changes in HMGov & HMRC.

[tsmith]

I think checking with your accountant is important. Would there be any issue in making Pension contributions (from retained funds in PSC) if you're an employee (either standard PAYE or Umbrella) at the time? Can you make those payments even if you're not actively working via the PSC? I guess you could argue you are actively out looking for business.

And what happens if you go back to PSC limited after a few months. Going to be a load of hassle sorting your tax out surely? Read a few horror stories of umbrella company screw ups

Its already a ballache of multiple months on bench between roles - staring at jobserve everyday

Now Im gonna have tax nightmares on top.

Contracting just isnt worth the hassle. Back to perm it is

[Paralytic]

You can choose to leave funds in your LtdCo and/or use them the fund your pension - check with your accountant the best way forward. If there's any business activity (such as pension contribs) then I don't think you can make it dormant.

I think checking with your accountant is important. Would there be any issue in making Pension contributions (from retained funds in PSC) if you're an employee (either standard PAYE or Umbrella) at the time? Can you make those payments even if you're not actively working via the PSC? I guess you could argue you are actively out looking for business.

[ladymuck]

The double posting gremlin is back!

You could get an income tax refund but you'll never get a NI refund.

You can choose to leave funds in your LtdCo and/or use them the fund your pension - check with your accountant the best way forward. If there's any business activity (such as pension contribs) then I don't think you can make it dormant.

[tsmith]

Remember no expense deductions, if you're doing a like for like comparison.

What happens if you only work 6 months a year through umbrella? Can you claim tax back? Recruiter told me Im having to pay myself employers national insurance through this umbrella setup so is that going to reduce tax reclaimable by 12.5%?

750 a day for 6 months = £99,000 gross

Through umbrella Contractor Take Home Pay & Expenses Calculator | Parasol thats

£7900 net per month x 6 = £47,400 net

According to this The Salary Calculator - Take-Home tax calculator

Usual PAYE perm job with salary of £99,000 for the year - would be take home of £66,000

If I cant reclaim that tax back with umbrella contract Im £20,000 worse off than being perm.

And what happens to my limited company? Stop taking monthly salary and leave it dormant for the foreseeable future?