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Advice on choosing Umbrella or PAYE for my contract? Details inside.

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    Advice on choosing Umbrella or PAYE for my contract? Details inside.

    Hi everyone,

    I have been at my current client for about 7 months operating outside IR35 via LTD company where I am the sole director.
    • My day rate is £550 a day.
    • As per many other clients, they have applied a PSC ban and given a choice of Umbrella or PAYE.
    • PAYE would be via an agency not the client itself.
    • Umbrella I have an option to select my own or go with a recommended one from the agency.
    • Should I go Umbrella, the client has raised the day rate to £640 a day to cover for loss of income.
    • The contract extension is for another 3 months from 1 April 2021 with a view for possible extension.
    I am aware by staying I risk an investigation by HMRC but I am in a tricky situation where I need the money in the tough economy to support my family and kids. When the right opportunity comes I will leave.

    In terms of Umbrella or PAYE, what would be the better option?
    • In my case I rarely pay into my pension currently, but would like to.
    • There is a possibility of working with multiple clients e.g. take an odd 10 day consulting contract with another client while working with my main client. But realistically I don't know whether that will happen, it's something in the future which may not happen.
    • My expenses are quite low, about £150 a month currently.

    Was advised to post here as I created this in an incorrect place before.

    I'd appreciate any help and guidance and happy to answer any questions in case I missed something above.

    #2
    What IR35 cover have you go? Can you prove your existing outside IR35 is genuinely Outside IR35?

    If you're going to continue, this must be a priority, surely. Establish your evidence, agree your working practices "as is" with the client (i.e. "as is" being outside).
    Then, get your client to issue a statement that they intend to take advantage of the situation by applying things to your new contract that will benefit them as part of putting you inside IR35. Either that or you're going to be looking over your shoulder for HMRC for years to come.


    In terms of umbrella co's, Lucy at Clarity is a member on here and gives good advice. lucyclarityumbrella
    The greatest trick the devil ever pulled was convincing the world that he didn't exist

    Comment


      #3
      Originally posted by ChrisHadfield View Post
      My day rate is £550 a day.
      Should I go Umbrella, the client has raised the day rate to £640 a day to cover for loss of income.
      On a day rate of £640 per day via umbrella the equivalent PAYE rate would be around £570.00 per day, so on that basis you will net slightly more via umbrella.

      Originally posted by ChrisHadfield View Post
      In terms of Umbrella or PAYE, what would be the better option?
      In my case I rarely pay into my pension currently, but would like to.
      If the umbrella offers salary sacrifice then this can make a difference as the pension is taken before your taxabla salary is reached so both tax and NI are reduced by the pension amount.

      Originally posted by ChrisHadfield View Post
      There is a possibility of working with multiple clients e.g. take an odd 10 day consulting contract with another client while working with my main client. But realistically I don't know whether that will happen, it's something in the future which may not happen.
      We can support multiple contracts if you wish, we would just talk to you in terms of tax implications of being paid twice in one tax month.

      Originally posted by ChrisHadfield View Post
      My expenses are quite low, about £150 a month currently.
      If the client is agreeing to reimburse expenses then we can process these, otherwise I would say it becomes irrelevant unless you can prove you are not under supervision, direction or control by the end client in order to "try" and claim via self assessment, but please be aware at the moment this is not a usual occurence from what I can see.

      HTHs

      Comment


        #4
        Originally posted by LondonManc View Post
        What IR35 cover have you go? Can you prove your existing outside IR35 is genuinely Outside IR35?

        If you're going to continue, this must be a priority, surely. Establish your evidence, agree your working practices "as is" with the client (i.e. "as is" being outside).
        Then, get your client to issue a statement that they intend to take advantage of the situation by applying things to your new contract that will benefit them as part of putting you inside IR35. Either that or you're going to be looking over your shoulder for HMRC for years to come.
        lucyclarityumbrella

        Hi LondonManc ,

        Yes I have reasonable evidence that I am/was Outside IR35 up to 31 March 2021.

        Can you please explain the bit:

        Originally posted by LondonManc View Post
        Establish your evidence, agree your working practices "as is" with the client (i.e. "as is" being outside).
        Then, get your client to issue a statement that they intend to take advantage of the situation by applying things to your new contract that will benefit them as part of putting you inside IR35. Either that or you're going to be looking over your shoulder for HMRC for years to come.
        lucyclarityumbrella
        In practical terms what do I need to do?

        Comment


          #5
          Originally posted by ChrisHadfield View Post


          Hi LondonManc ,

          Yes I have reasonable evidence that I am/was Outside IR35 up to 31 March 2021.

          Can you please explain the bit:

          In practical terms what do I need to do?
          At its highest level, will the new contract be outside IR35 or inside, based on the client's determination? You can still use an umbrella but be outside. Let's assume they say inside. What you need to establish is that there is enough difference between your way of working under the old contract and the new contract to prove that everything that made your contract outside is no longer applicable. Have a look through this guide to see what things will be different and get them confirmed with the client: https://www.qdoscontractor.com/ir35/...mpliance-guide
          The greatest trick the devil ever pulled was convincing the world that he didn't exist

          Comment


            #6
            Originally posted by LondonManc View Post

            At its highest level, will the new contract be outside IR35 or inside, based on the client's determination? You can still use an umbrella but be outside. Let's assume they say inside. What you need to establish is that there is enough difference between your way of working under the old contract and the new contract to prove that everything that made your contract outside is no longer applicable. Have a look through this guide to see what things will be different and get them confirmed with the client: https://www.qdoscontractor.com/ir35/...mpliance-guide
            Problem is he says he's only got 'reasonable evidence' which is no good. He's also struggling a bit with the IR35 knowledge and how to stay safe so further throws in to doubt that evidence and we haven't quizzed him on his working practices yet.

            If his client has decided they never intended RoS to be used or expects D&C then he's stuffed whatever he does.

            Where you are absolutely correct, looking at this post (and his other duplicate one) I think you might be getting his hopes up a bit too much.

            IMO whatever he does he's outside to inside and there is no getting away from the fact. Even if he thinks he is HMRC won't and all this can only be sorted out during an investigation which isn't pleasant.
            'CUK forum personality of 2011 - Winner - Yes really!!!!

            Comment


              #7
              Given the announcement in the budget today, £100million for HMRC to spend on at least 1000 tax investigators, anything that changes/increases your NI contributions moving forwards, get out.
              Leave: "To remove oneself from association with or participation in"

              Comment


                #8
                Originally posted by northernladuk View Post

                Problem is he says he's only got 'reasonable evidence' which is no good. He's also struggling a bit with the IR35 knowledge and how to stay safe so further throws in to doubt that evidence and we haven't quizzed him on his working practices yet.

                If his client has decided they never intended RoS to be used or expects D&C then he's stuffed whatever he does.

                Where you are absolutely correct, looking at this post (and his other duplicate one) I think you might be getting his hopes up a bit too much.

                IMO whatever he does he's outside to inside and there is no getting away from the fact. Even if he thinks he is HMRC won't and all this can only be sorted out during an investigation which isn't pleasant.
                It certainly isn't my intention to raise hopes, more to give a difficult but realistic path to provide a distinction between the two statuses.

                Originally posted by drob1984 View Post
                Given the announcement in the budget today, £100million for HMRC to spend on at least 1000 tax investigators, anything that changes/increases your NI contributions moving forwards, get out.
                Easier said than done if the market is dead, the warchest hasn't been maintained or is running low and it's the only gig you've got on the table.
                The greatest trick the devil ever pulled was convincing the world that he didn't exist

                Comment


                  #9
                  Originally posted by ChrisHadfield View Post
                  Hi everyone,

                  I am aware by staying I risk an investigation by HMRC but I am in a tricky situation where I need the money in the tough economy to support my family and kids. When the right opportunity comes I will leave.
                  I do wonder about this perceived Risk. Clearly, at present, we just don't know.

                  However, if the client has just blanket banned PSCs without any evidence of having undergone any investigation into your working habits, I wonder what possibly might be the outcome.

                  Clearly their decision was not based IR35 knowledge and so, if you were investigated, I also wonder if actually, your working practices were, and indeed still are, to be found Outside IR35, I wonder if that would ever favourably change the landscape of your being arbitrarily forced Inside, somehow.

                  I would like to see such a case while, currently, we have no method of bringing about our own case to reclaim tax if we later deem ourselves Outside, in the way HMRC did with contractors if they deemed us Inside.

                  Comment


                    #10
                    Originally posted by simes View Post

                    I do wonder about this perceived Risk. Clearly, at present, we just don't know.

                    However, if the client has just blanket banned PSCs without any evidence of having undergone any investigation into your working habits, I wonder what possibly might be the outcome.

                    Clearly their decision was not based IR35 knowledge and so, if you were investigated, I also wonder if actually, your working practices were, and indeed still are, to be found Outside IR35, I wonder if that would ever favourably change the landscape of your being arbitrarily forced Inside, somehow.

                    I would like to see such a case while, currently, we have no method of bringing about our own case to reclaim tax if we later deem ourselves Outside, in the way HMRC did with contractors if they deemed us Inside.
                    Not true.

                    Once again quoting from the HMRC IR35 for agencies workshop I attended on Friday.

                    If an SDS is appealed and the contract is found to be outside the previous RTI submissions can be updated / corrected and the correct payments made. This means it is actually possible to recover NI payments if they were incorrectly deducted.

                    However this assumes you are using your own limited company and have receiving deemed payments through you limited company (which is quite an assumption given how tax inefficient it would be)

                    But if you had attended the workshop the sane approach for a client is to ban the use of PSCs (to avoid IR35 being an issue) and insist on people being paid by the agency or via an umbrella company. And banning the use of PSCs is not the same as a blanket declaration that everyone is inside. A blanket ban is legal, ruling everyone inside is not.
                    Last edited by eek; 7 March 2021, 17:52.
                    merely at clientco for the entertainment

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