Yet another Limited inside IR35 vs Umbrella thread

[FranQ]

Hi,

As you can see this is my first post, so, sorry if this is not the correct place.

First of all, I haven't set up my company yet. I've been offered a job (actually my first job in the UK, I'm an expat) and I can go for PAYE or Limited, but because of April 2020 changes I might be forced to be inside IR35.

I've been reading other posts in the forum and the conclusion for me has been that for this case Umbrella is a better solution than Limited+inside IR35. But then I found this article in the internet: Can IR35 contractors still work through a limited company? | Crunch

The thing is they are offering me 22 GBP/h as PAYE vs 28.6 GBP/h as Limited, so in the salary calculators I'm getting 31K vs 34K (Ltd, all income as my salary). I might be wrong because this is all new to me..

So, what do you think about that?

Thank you

[GhostofTarbera]

Is your new contract inside IR35 or not???

Only change in April is the end client determines the status, IR35 has been about since 1999


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[ladymuck]

It would be best if you could get the client determination first and then that would give you a clearer idea what to do.

I would be wary of taking on a new contract with any client if they couldn't give the status determination now.

[Paralytic]

It would also be good to find out if your client (and/or agency if one is involved) will accept payments going via your PSC (Ltd company) for an inside IR35 gig. In doing so, they're effectively saying that they trust that you'll deduct the appropriate PAYE, because if you don't, one of them could become liable.

So while doing so is theoretically acceptable, it might not be in practice.

[GhostofTarbera]

It would also be good to find out if your client (and/or agency if one is involved) will accept payments going via your PSC (Ltd company) for an inside IR35 gig. In doing so, they're effectively saying that they trust that you'll deduct the appropriate PAYE, because if you don't, one of them could become liable.

So while doing so is theoretically acceptable, it might not be in practice.

Also ask them for magic pony and for AC/DC to come and play in your house - as similar chance


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[lucyclarityumbrella]

If you do end up choosing between PAYE and Umbrella the take home weekly looks like this (if on a standard tax code assuming 37.5 hours per week);
Standard PAYE: £629.03 (£22 per hour as taxable salary)
Umbrella PAYE: £704.85 (£28.60 as contract rate)
You also mention that it may be "inside", just be aware that the proposed changes are due in April 2020, so you need to look at whether they may change the status part way through or if the assignment finishes before the potentail change to inside will happen.
HTHs

[DolanContractorGroup]

Hi,

As you can see this is my first post, so, sorry if this is not the correct place.

First of all, I haven't set up my company yet. I've been offered a job (actually my first job in the UK, I'm an expat) and I can go for PAYE or Limited, but because of April 2020 changes I might be forced to be inside IR35.

I've been reading other posts in the forum and the conclusion for me has been that for this case Umbrella is a better solution than Limited+inside IR35. But then I found this article in the internet: Can IR35 contractors still work through a limited company? | Crunch

The thing is they are offering me 22 GBP/h as PAYE vs 28.6 GBP/h as Limited, so in the salary calculators I'm getting 31K vs 34K (Ltd, all income as my salary). I might be wrong because this is all new to me..

So, what do you think about that?

Thank you

Hi FranQ,

If you're going through an agency, the PAYE rate would be what the agency would pay you by taking you on their own payroll. Generally, the Ltd rate is for both umbrella and PSC (limited company contractors).

With the IR35 changes on the horizon, and from the research that we've done, you actually may be better off by working inside-IR35 through your limited company after April 2020. Much of the employment costs (specifically Employers NI) are the responsibility of the agency/client (whoever the fee payer is) so that won't be taken from your rate, but they would through umbrella.

However, whether the agency/client have the means to operate 'deemed employment payments', or their appetite to work with inside-IR35 contractors, will dictate if you can do this. Umbrella may be the only option in this instance.

Thanks


Zeeshan

[Snooky]

Much of the employment costs (specifically Employers NI) are the responsibility of the agency/client (whoever the fee payer is) so that won't be taken from your rate, but they would through umbrella.

This would certainly be true if, post April, the client or agency swallowed the cost of the extra employers NI etc, but I'm fairly certain this is not going to happen in most cases. The client will not pay higher rates just because of a tax change which affects the contractor unless that contractor is completely irreplaceable or brings incredible value to the business.

So the agency will still receive exactly the same gross rate from the client as before and they will rework the contract so that the rate the contractor receives is net of those PAYE deductions.

IMHO of course.

[Amanensia]

This would certainly be true if, post April, the client or agency swallowed the cost of the extra employers NI etc, but I'm fairly certain this is not going to happen in most cases. The client will not pay higher rates just because of a tax change which affects the contractor unless that contractor is completely irreplaceable or brings incredible value to the business.

So the agency will still receive exactly the same gross rate from the client as before and they will rework the contract so that the rate the contractor receives is net of those PAYE deductions.

IMHO of course.

Exactly this.

[GhostofTarbera]

This would certainly be true if, post April, the client or agency swallowed the cost of the extra employers NI etc, but I'm fairly certain this is not going to happen in most cases. The client will not pay higher rates just because of a tax change which affects the contractor unless that contractor is completely irreplaceable or brings incredible value to the business.

So the agency will still receive exactly the same gross rate from the client as before and they will rework the contract so that the rate the contractor receives is net of those PAYE deductions.

IMHO of course.

+1

Scary how accountant firm think differently


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