Reply to: Inside IR35 Contract Via Limited company- how to withdraw Salary

[Prab35]

Thanks for your inputs guys.

Choosing an Umbrella is an easy option and they will tell you how much I get net pay if I give my Daily rate. but reason for Choosing Limited company was I have other income coming for different projects which company bid for and choosing inside IR35 Limited company route is a new approach and no clear info available that's the reason I posted here.

Also Agency gave me an option that I can switch to Umbrella any time I want.

[northernladuk]

Payee not PAYE - devil is in the detail (and the extra e).

Fair enough. Missed that point. Previous posts editted.

[eek]

In his opening post which says 'Limited company (Agency Payee)'

Payee not PAYE - devil is in the detail (and the extra e).

[eek]

Thanks for the response eek and northernladuk.

eek @ I asked agency and they don't have any clue and simply asking me to provide P45 so that you will get taxed correctly which I did on Monday. Spoke to my accountant and she is also not aware because this process is bit new and most of the people may not aware of this. Her comments like below

"I am still extremely unsure of this setup.

1. You cannot take the whole amount out as the tax paid is in lieu of corporation tax
2. I cannot see this being paid as employment income as then it should be paid into your personal account
3. I am not sure how this is going to work out at all as your status is not an employee nor self employed.
4. If this is the case then you should be able to take wages from your company.

I am not sure what to advise you as this whole setup is very ambiguous but I will send a letter to HMRC to find out.

northernladuk@ Agency given me an option to choose either my limited company or Umbrella so I chooses Limited company route. I did a research and felt Limited company route is better option for longer run because my Company working with 2 other incomes and not willing to closing the company.
I'm not Sure need to pay taxes twice and HMRC will not deduct tax twice.

I found a video in you tube which is useful but they didn't explain I have to be an employee for my limited company to take salary. please take a look

https://www.youtube.com/watch?v=_Ufvoay5eCc

Let's answer your points

1) deemed payments are already fully taxed - so you can take the none VAT side of the money out and pay it into your own bank account.
No Corporation tax is involved here - the deemed payment is taxed paid.

2) It is employment income but as your limited company is your employer the agency cannot pay you directly - they have to pay the money into your company's bank account.

3) Your limited company remains your employer

4) Yes - you take the entire none VAT side of the deemed payment and pay it into your bank account.

In reality you should be using an umbrella firm for all inside IR35 work - deemed payments are restrictive and as you have now discovered both complex and a complete hassle.

[northernladuk]

Where did the offer of agency payroll appear in the OP's list of options - the offers were:
i) Umbrella
ii) Deemed payments into his limited company.

In his opening post which says 'Limited company (Agency Payee)'

[Prab35]

Thanks for the response eek and northernladuk.

eek @ I asked agency and they don't have any clue and simply asking me to provide P45 so that you will get taxed correctly which I did on Monday. Spoke to my accountant and she is also not aware because this process is bit new and most of the people may not aware of this. Her comments like below

"I am still extremely unsure of this setup.

1. You cannot take the whole amount out as the tax paid is in lieu of corporation tax
2. I cannot see this being paid as employment income as then it should be paid into your personal account
3. I am not sure how this is going to work out at all as your status is not an employee nor self employed.
4. If this is the case then you should be able to take wages from your company.

I am not sure what to advise you as this whole setup is very ambiguous but I will send a letter to HMRC to find out.

northernladuk@ Agency given me an option to choose either my limited company or Umbrella so I chooses Limited company route. I did a research and felt Limited company route is better option for longer run because my Company working with 2 other incomes and not willing to closing the company.
I'm not Sure need to pay taxes twice and HMRC will not deduct tax twice.

I found a video in you tube which is useful but they didn't explain I have to be an employee for my limited company to take salary. please take a look

https://www.youtube.com/watch?v=_Ufvoay5eCc

[northernladuk]

Sorry but I think that's more than a mite unfair - deemed payments are new and very few people have done them until now - so double checking what you need to do makes perfect sense.

And were I an agency if the choice offered was someone using their choice of an umbrella firm or insisting on the worker using receiving deemed payments I can see a lot of reasons why you may wish to insist on deemed payments or nothing - because Oh Boy there are cowboys out there...

Looks like you are right as Mal mentioned it is as well so yes, I could have worded it differently but the world is unfair and when it comes to dealing with your own income pushing 80k a year a bit of diligence is required.. All this is retrospective. He's already signed up and started as he says 'Agency paid for last month work into limited company account'. So he hasn't double checked, he's signed up for something he doesn't have a clue about. Surely the first question in any situation like this is 'How do I get paid' and you work backwards. He's signed up to something, got on with it and only now is asking how it get's paid?

I get what you are saying about the agency in the second point so they've nudged him towards one option but still up to the OP to understand it. I think you are giving him far too much credit here. It reads to me the OP hasn't fully understood something before he's signed up to it.

So yes, apologies it does appear I've been a bit harsh, but if it makes the OP sit up and think about what he's doing and spend more time understanding how he's going to get paid £80k a year then I'll take that criticism on the chin.

[eek]

Ah.. it is the same gig as mentioned here?

https://forums.contractoruk.com/ir35...-umbrella.html

So you've misunderstood their offering? It's Umbrella or Agency PAYE and they can pay the net amount it in to your personal or LTD account?

Where did the offer of agency payroll appear in the OP's list of options - the offers were:
i) Umbrella
ii) Deemed payments into his limited company.

The agency given an option to choose umbrella or My limited company from 06/04 so I decided to go with my limited company.

Now in theory an umbrella is a better option but what umbrella companies were allowed and would you trust them?

[eek]

The agency pays in to the bank account they were given by the worker. All you have to do is change that to your personal one.

However VAT worries me. Have you invoiced the agency for the work done and added VAT to your invoice? You are being paid net of all taxes, and that includes VAT. It also implies you have generated a CT liability out of thin air, come year end...

YourCo should have zero involvement in that process.

NLUK is harsh but correct, for once. Your job is being a contractor, not whatever it is you do to earn money. You would do well to find out how it all works. Perhaps start by (re-)reading those guides on the right of the page. For now transfer the net pay to your own account and tell the agency which account to use in future.

And again this is why the OP is correct to ask.

For deemed payments the agency pays into the company bank account (it has to by law). The company can then forward the money on to the director without any additional paperwork as that has all been done by the agency.

You need to be on the agency's payroll for them to pay directly into your bank account and that way lies employment rights and other things most Agencies don't want to go near which is why umbrellas exist.

As for what the OP needs to do it's actually taken me 10 minutes on google to find a decent example of what you need to do Deemed payment and business expenses in the public sector - Whitefield Tax Limited - Isle of Wight Accountants - IR35 specialists covers it about as well as I can find.

[northernladuk]

NLUK is harsh but correct, for once.

As opposed to you who is harsh and incorrect.

[eek]

If the agency is doing the PAYE why is it going in to the Limited? Why not just have it paid directly from the agency in to your personal account?

Do you really think you need to pay taxes twice just because you are going via your LTD? I would have thought, bearing in mind this is your livelihood I thought you might have done a bit of research in to this first. Taking a gig and setting up a pay system you don't even begin to understand is... well erm...

If you've such a poor grasp on how LTDs vs PAYE works maybe you are better getting rid of the limited so removing a complication that you clearly aren't understanding?

How do you know you've not completely ballsed up and set up a system that is going to lose you a ton of money? Wouldn't going through an Umbrella that allowed unlimited payments in to a pension pot be a much better option or did you not think of that? Was it not an option?

Sorry but I think that's more than a mite unfair - deemed payments are new and very few people have done them until now - so double checking what you need to do makes perfect sense.

And were I an agency if the choice offered was someone using their choice of an umbrella firm or insisting on the worker using receiving deemed payments I can see a lot of reasons why you may wish to insist on deemed payments or nothing - because Oh Boy there are cowboys out there...

[malvolio]

The agency pays in to the bank account they were given by the worker. All you have to do is change that to your personal one.

However VAT worries me. Have you invoiced the agency for the work done and added VAT to your invoice? You are being paid net of all taxes, and that includes VAT. It also implies you have generated a CT liability out of thin air, come year end...

YourCo should have zero involvement in that process.

NLUK is harsh but correct, for once. Your job is being a contractor, not whatever it is you do to earn money. You would do well to find out how it all works. Perhaps start by (re-)reading those guides on the right of the page. For now transfer the net pay to your own account and tell the agency which account to use in future.

[northernladuk]

Ah.. it is the same gig as mentioned here?

https://forums.contractoruk.com/ir35...-umbrella.html

Hi guys,

hope you can able to help my query.

I’m currently working for client A outside IR35 till 05/04/21 and moving to Inside IR35 from 06/04/21.
The agency given an option to choose umbrella or My limited company from 06/04 so I decided to go with my limited company.

agency comments like below.
PSC -Your pay rate will be recalculated to account for the employer and apprenticeship levy if you remain with your PSC, and the employee tax and NI will then be deducted from your monthly invoice.

So you've misunderstood their offering? It's Umbrella or Agency PAYE and they can pay the net amount it in to your personal or LTD account?

Why did you choose LTD and not Umbrella? Did you look in to salary sacrifice and pension offerings to reduce your tax burden? Why did you chose LTD when you don't understand it?

[northernladuk]

If the agency is doing the PAYE why is it going in to the Limited? Why not just have it paid directly from the agency in to your personal account?

I would have thought, bearing in mind this is your livelihood I thought you might have done a bit of research in to this first. Taking a gig and setting up a pay system you don't even begin to understand is a bit odd?

Wouldn't going through an Umbrella that allowed unlimited payments in to a pension pot be a much better option?

[eek]

Hi All,
Please guide me on the below query.
Contract type- Inside IR35 Contract Via Limited company (Agency Payee)
I'm a Director (50%shareholding) as well as an employee of my limited company
Agency paid for last month work into limited company account

example scenario
Day Rate - £400 +VAT
Days worked - 21
Total Earned income - £8400 +VAT
20% Basic rate Income tax - £1680
Classic I NI - £490
Net income after tax & NI - £6230
Sales VAT income - £1680
Net cash paid into my Limited company - £7910
actual Salary - £6230

Query - how can I withdraw my net salary from my limited company ?
Do I need to run Payroll again in my limited company ?
If Yes, I have to pay Tax and NI again while transferring salary in to personal account. Also I will be having two jobs ( 1st one for Agency Payee and 2nd one is Limited company employee) and next month onwards HMRC will Start deducting more Tax ?

If No, how can I withdraw the amount from my limited company ? as dividend

Thanks
Prb

VAT goes to HMRC

That £6230 can be paid directly into your personal bank account as salary - no paperwork is required....

But I would be asking the agency what you need to do - simply because I bet they haven't got a clue and I personally would like to watch their panic as they try to find someone who could explain it.