Contractors: IR35 & general discussion

[Blown2CV]

often the whole topic of workers' rights is undermined by the fact that as director and controller of your own company you can award you the employee any manner of benefits and rights that you would actually want to have, but if you don't want to pay for it because it reduces your take home then this kind of suggests too much of blurred line between 'you' the company and you the individual. In any case it's fine to not want to pay for these things, but the issue then comes when you want another entity to pay for it because you the individual feels you are owed it (just not by you the company...).

[theboss]

Deep Thought said:

Countdown said:

wombleh said:

It would also force end clients to be more realistic about things, they can have blanket inside positions if they want, but then they end up with just really expensive staff so they'd be better off either engaging contractors on an outside basis for specific bits of work, hiring temps but only when it is genuinely temporary, or actually hiring staff and looking after them properly.

It really is strange why some Employers are making "blanket inside" rulings for roles that are clearly "outside" when they know full well that its going to cost them significantly more to fill the role.

I think its a case of the legal teams are making decisions based on perceived risks and rolling out a blanket policy which the rest of the company must comply with irrespective.

Some of the PAYE contracts I've seen have been so far removed from IR35 its ridiculous.

Luckily I haven't had to bother with one yet.

[Gazzab]

Countdown said:

wombleh said:

It would also force end clients to be more realistic about things, they can have blanket inside positions if they want, but then they end up with just really expensive staff so they'd be better off either engaging contractors on an outside basis for specific bits of work, hiring temps but only when it is genuinely temporary, or actually hiring staff and looking after them properly.

It really is strange why some Employers are making "blanket inside" rulings for roles that are clearly "outside" when they know full well that its going to cost them significantly more to fill the role.

They aren’t blanket inside. They aren’t inside or outside. They are just fixed term employment / temp work. Why does an inside contract cost them more than outside? Surely all the additional costs are for the ‘temp’ to cover ?

[Olivera]

Countdown said:

It really is strange why some Employers are making "blanket inside" rulings for roles that are clearly "outside" when they know full well that its going to cost them significantly more to fill the role.

IR35 is (many would say deliberately) vague and onerous on the end client. Even if a role is clearly outside they still need to:

1) Perform the IR35 assessment, possibly involving multiple departments (HR, Legal etc)
2) Be financially on the hook for getting the determination wrong
3) Have a dispute process if the worker is in disagreement with the determination
4) Periodically review the determination to see if the assessment is still accurate
5) Have an even bigger ball ache if the role is deemed inside (note truly inside IR35 not umbrella), but more likely just binning the role off

IR35 is now a quagmire that most clients don't want to get involved with.

[Deep Thought]

Gazzab said:

They aren’t blanket inside. They aren’t inside or outside. They are just fixed term employment / temp work. Why does an inside contract cost them more than outside? Surely all the additional costs are for the ‘temp’ to cover ?

Because they invariably have to offer a notably higher rate if its inside / temp work to offset the Employers NI, Apprenticeship Levy and the higher personal taxation to offset too.

[Gazzab]

Deep Thought said:

Gazzab said:

They aren’t blanket inside. They aren’t inside or outside. They are just fixed term employment / temp work. Why does an inside contract cost them more than outside? Surely all the additional costs are for the ‘temp’ to cover ?

Because they invariably have to offer a notably higher rate if its inside / temp work to offset the Employers NI, Apprenticeship Levy and the higher personal taxation to offset too.

Well I guess this is the case for some contractors. All I have seen in my world is rates reducing, opportunities reducing, taxes increasing, down time increasing…..hence why I am now perm. Can’t escape IR35 though, as many in my teams are contractors - so whether in or out the bureaucracy has increased, the hmrc fear is high etc. It’s a total st show.

[Deep Thought]

Gazzab said:

Well I guess this is the case for some contractors. All I have seen in my world is rates reducing, opportunities reducing, taxes increasing, down time increasing…..hence why I am now perm. Can’t escape IR35 though, as many in my teams are contractors - so whether in or out the bureaucracy has increased, the hmrc fear is high etc. It’s a total st show.

My area has seen rates increase notably if deemed inside.

That would be mostly working with large global corps who are risk averse RE: IR35 status.

Current place is making noises about offering me a perm role, which i am tentatively courting for now. Typically i can get x2 contracting as i would as a permie, but i know that differs for people, role to role.

Ideally i'd continue taking WFH contracts for the next 5 years until i hit 60 and then draw a line on working.

[wombleh]

In my area (technical architect) I think it's reacting to the market, end of 2022 the rates were way up and loads of outside contracts being offered. Now it's gone a bit quieter again and rates seem back down, everything on jobserve seems to be inside and on similar rate as pre-IR35 changes.

Purely anecdotal but it does seem like there are less senior (in experience/knowledge) contractors available and more dross turning up, possibly a lot of folk have retired, gone abroad or taken a permanent role.

[Blown2CV]

it will settle down i think (i.e. rates up, more sensible terms, fewer applicants). Once most of the swimmers have taken roles and demand starts to increase. Within the next year i think, maybe sooner.

Rates have been ste for some time and the blip ones that aren't get 500 applicants.

I keep getting a week where i get loads of phone calls, and then nothing for three weeks.

I'm gonna take a waypoint check judged by my march 2025 bonus!!

[blueg33]

Quick Question. For those who pay themselves via dividends, what percentage do you set aside for income tax?

Also how much of a pain is VAT.?

[wombleh]

We use quickbooks and VAT sorted by clicking on the report button once a quarter, submits it to HMRC for you. The only effort really is ensuring that expenses are accounted properly with VAT amounts.

[Gazzab]

blueg33 said:

Quick Question. For those who pay themselves via dividends, what percentage do you set aside for income tax?

Also how much of a pain is VAT.?

VAT is simple. My accountant would take my data and fill in the form for me. Then it would automatically pay.
I would always put about 40% to one side.

[blueg33]

wombleh said:

We use quickbooks and VAT sorted by clicking on the report button once a quarter, submits it to HMRC for you. The only effort really is ensuring that expenses are accounted properly with VAT amounts.

Thanks. I am using FreeAgent and it looks like it does the same thing. Didn't expect to get to the threshold quite so quickly. But I guess that means T/O is ahead of expected. My contracting is a sideline to my day job and I have always had an accounts team to look after the money side at work. So much is this is new to me.

[Lefty]

I put half of every invoice that gets paid into a business savings account. That’s more than enough to cover all vat, CT and PAYE bills plus leaving a buffer. Then I know that anything in the main current account can be used for anything I want to.

[Regbuser]

blueg33 said:

Quick Question. For those who pay themselves via dividends, what percentage do you set aside for income tax?

Also how much of a pain is VAT.?

Yes, VAT is straight forward, although applying the right code, or manually jiggling for marginal rates can be a pain (in QB). But my accountant is always there to check and advise.

Yes, you'll need to set aside, or plan for a fair whack, as you'll be entering the world of payments on account at end of Jan and July, and balancing payments too.

Oh, and the inevitability of a 0 or minus tax code!

[sleepezy]

VAT should be easy - I am an accountant by training so look after all my own MI/VAT/PAYE/CT etc using excel which works well for me but I know what I am doing (I think anyway!). If you're running a simple one man consultancy then either use a basic package (eg FreeAgent as you are) or get an accountant/bookkeeper to do it for you to keep you on the straight and narrow.

As has been said, normally expenses are the pain as you have more expense transactions to record than invoices to raise - e.g. last week I had one invoice and 7 VATable expense receipts - but nothing is difficult really so long as you're organised. Also do look at the flat rate scheme as this can be easier to administer and normally to your benefit too.

Income Tax will depend on where you sit in the scheme of things re marginal tax rates - under self assessment I have to make two payments a year, one in July as a part payment, normally based on prior year so purely and estimate, and a final payment at the start of the next year. I typically pay myself once a year at the start of the new financial year (dividends and salary, and pension for that matter but that's irrelevant for this as outside the scope of income tax). About a week later I've calculated and submitted my self assessment for the tax year just ended - at that point I then know what payments are going to be needed both in July and the following January. All this likely doesn't help you though as I can do this as all my income is through the company - you've indicated you have employment elsewhere and would have to wait for that company to issue your P60 and P11D before completing a self assessment which they probably don't do until about July?

In simple terms though you need to look at what your marginal income tax rate is and put that proportion of your dividends into a savings account for whenever you pay your tax. It might take a couple of years to sort itself out into a predictable estimate if you're moving between different marginal rate bands or if you start commuting more from your normal employment into pension to reduce your tax bill but should roughly work for you.

If this is too difficult (that's not meant as a sarcastic comment, not everyone is an accountant and it can take a disproportionate amount of your personal free time to prepare this stuff if you're having to figure it out as you go along) I'd recommend getting a small firm to look after both your company and personal returns - you really don't need to fall foul of the rules nor pull your hair out trying to get the boring stuff right.

[blueg33]

sleepezy said:

VAT should be easy - I am an accountant by training so look after all my own MI/VAT/PAYE/CT etc using excel which works well for me but I know what I am doing (I think anyway!). If you're running a simple one man consultancy then either use a basic package (eg FreeAgent as you are) or get an accountant/bookkeeper to do it for you to keep you on the straight and narrow.

As has been said, normally expenses are the pain as you have more expense transactions to record than invoices to raise - e.g. last week I had one invoice and 7 VATable expense receipts - but nothing is difficult really so long as you're organised. Also do look at the flat rate scheme as this can be easier to administer and normally to your benefit too.

Income Tax will depend on where you sit in the scheme of things re marginal tax rates - under self assessment I have to make two payments a year, one in July as a part payment, normally based on prior year so purely and estimate, and a final payment at the start of the next year. I typically pay myself once a year at the start of the new financial year (dividends and salary, and pension for that matter but that's irrelevant for this as outside the scope of income tax). About a week later I've calculated and submitted my self assessment for the tax year just ended - at that point I then know what payments are going to be needed both in July and the following January. All this likely doesn't help you though as I can do this as all my income is through the company - you've indicated you have employment elsewhere and would have to wait for that company to issue your P60 and P11D before completing a self assessment which they probably don't do until about July?

In simple terms though you need to look at what your marginal income tax rate is and put that proportion of your dividends into a savings account for whenever you pay your tax. It might take a couple of years to sort itself out into a predictable estimate if you're moving between different marginal rate bands or if you start commuting more from your normal employment into pension to reduce your tax bill but should roughly work for you.

If this is too difficult (that's not meant as a sarcastic comment, not everyone is an accountant and it can take a disproportionate amount of your personal free time to prepare this stuff if you're having to figure it out as you go along) I'd recommend getting a small firm to look after both your company and personal returns - you really don't need to fall foul of the rules nor pull your hair out trying to get the boring stuff right.

Thanks, I have an accountant and they have access to my FreeAgent account. It is complicated as I have the consultancy which I started in Jan, 2 x paid NED roles on PAYE, an expenses only Trustee role, my normal PAYE job and a holiday let. I am trying to keep them all as separate as possible. The holiday let is loss making.

[Countdown]

blueg33 said:

Thanks, I have an accountant and they have access to my FreeAgent account. It is complicated as I have the consultancy which I started in Jan, 2 x paid NED roles on PAYE, an expenses only Trustee role, my normal PAYE job and a holiday let. I am trying to keep them all as separate as possible. The holiday let is loss making.

I have to say that shouldn't be complicated for any half-decent accountant, Most of that info will already be on your GGID login, the other stuff you can post on FreeAgent and he should be able to run reports to complete the SA100

[blueg33]

Countdown said:

blueg33 said:

Thanks, I have an accountant and they have access to my FreeAgent account. It is complicated as I have the consultancy which I started in Jan, 2 x paid NED roles on PAYE, an expenses only Trustee role, my normal PAYE job and a holiday let. I am trying to keep them all as separate as possible. The holiday let is loss making.

I have to say that shouldn't be complicated for any half-decent accountant, Most of that info will already be on your GGID login, the other stuff you can post on FreeAgent and he should be able to run reports to complete the SA100

Good. Its complicated for my tiny brain. Thank heavens for accountants

[sleepezy]

blueg33 said:

Thank heavens for accountants

Quoted for posterity

But as above - nothing there too hard for an accountant - I'd go so far as to say the current SA system makes it all relatively easy so long as you have the information in the right format.