Newbie to the IR35 concept?
Discussion
Evening all,
Has anyone ever been employed via IR35 or similar? I'm just reading the fine print for a job advert, it's literally double the £/hr that I currently make, for basically the same job - but at the bottom it mentions "on a contract basis (inside IR35)"
Having just googled this it suddenly doesnt seem like quite such a good deal - I'm assuming this means I'm effectively my own agency, responsible for pension and employer NI, and therefore am probably no better off on salary after all that? I've always been PAYE in the past.
Can anyone clarify for me please?
Thanks in advance!
Has anyone ever been employed via IR35 or similar? I'm just reading the fine print for a job advert, it's literally double the £/hr that I currently make, for basically the same job - but at the bottom it mentions "on a contract basis (inside IR35)"
Having just googled this it suddenly doesnt seem like quite such a good deal - I'm assuming this means I'm effectively my own agency, responsible for pension and employer NI, and therefore am probably no better off on salary after all that? I've always been PAYE in the past.
Can anyone clarify for me please?
Thanks in advance!
If it helps (it probably won't that much as you'll need to work your own numbers to check) I just did a quick calc based on my inside IR35 rate and actual cash into my bank.... and it comes out to me receiving 53% of the IR35 charge out rate to the client.
That's the IR rate, minus employers NI, then minus employees NI and PAYE.
And of course I get no holidays, sickness or redundancy pay, I have to sort my pension payments from what I receive, etc..., and I'll be dumped as soon as the client finds a permie or the project comes to an end.
But then I don't have to worry about being a permie with all the politics and bulls
t that goes with it.
That's the IR rate, minus employers NI, then minus employees NI and PAYE.
And of course I get no holidays, sickness or redundancy pay, I have to sort my pension payments from what I receive, etc..., and I'll be dumped as soon as the client finds a permie or the project comes to an end.
But then I don't have to worry about being a permie with all the politics and bulls
t that goes with it.https://www.contractorcalculator.co.uk/calculators...
Some useful resources here OP.
Should give you an idea of what your take-home would be so you can compare it with your current take-home.
I tend to assume I will be working somewhere between 45 & 47 weeks per year.
Some useful resources here OP.
Should give you an idea of what your take-home would be so you can compare it with your current take-home.
I tend to assume I will be working somewhere between 45 & 47 weeks per year.
To address the second part of your post, typically, for "inside IR35" roles, you will work through an umbrella company, so you work as their employee and are still PAYE. They will take all the necessary deductions (notably employers NI which comes off the top of your rate) and issue you a P60 at the end of the tax year.
I worked inside IR35 from June ’21 to Nov ’21 with one client. And from Nov ’21 to Nov ‘22 with a different client.
The umbrellas, in the main, “have room for improvement”. My experience – YMMV
The first client
The agency said I HAD to use their chosen umbrella – if I didn’t - no contract - this is NOT the case- they are not allowed to do this. You can smell the backhanders from here. The woman at the agency has since left due to the agency’s dodgy nature.
The umbrella were asked by my pension advisor/provider to supply information to confirm they weren’t involved in money laundering, standard compliance checks and balances required by law. They never provided them, so pension funds were never transferred.
Money was paid into their pension fund for me, which I have been unable to get hold of - £800 has vanished, and no-one knows a thing about it.
The contractor next to me had the issue of the umbrella deciding that there was an issue with his tax code and just paying all his wage to HMRC, leaving him with zero salary. This happened for 2 weeks. He had to get his previous accountant and solicitor involved to solve the issue. The fault was at their end. The didn’t warn him - they just did it.
We couldn’t claim expenses of any kind.
It was one of the top 3 factors in leaving the client – and they were informed as such.
After the client and the agency being informed of my issues regarding the umbrella’s reluctance to supply compliance paperwork, the contractor above was allowed to change umbrella companies. The client has many issues, the main one being a 34% staff turnover and a 40% staff turnover in engineering.
Second client
New umbrella- which I had to choose from an option of six. Two paid expenses, and four didn’t. Therefore, almost all contractors present at the client (about 400 of us) used just 2 of the umbrellas.
April ’22, they decided that they won’t allow expenses anymore. I just couldn’t be bothered transferring my umbrella position over. I was seriously looking for other roles by then.
It took many, many phone calls to sort out the pension payments and how the money was paid to MY pension. I was charged for this.
Despite many phone calls and emails telling them not to enrol me in their pension scheme, they did. So I was charged an admin fee for them dealing with that, and another admin fee for paying money into “my” pension scheme.
I was paid weekly, but the pension payment sat in their bank account until the end of the month., they couldn’t pay it direct debit, so it had to be done via a BACS run. It was deemed “very difficult” for them to inform the pension people that the payment had gone through. I had to chase this up and inform others each time.
The umbrella never ever responded to actions required without a great deal of prompting – via phone calls or emails unless they were chasing fees. I never seemed to speak to the same person twice so explanations had to be repeated over and over again. No notes seemed to be on the system to assist them.
I am having difficulties getting money out of “their pension scheme set up for me” so I can have it transferred into “my” pension scheme. Googling their pension provider is lots of 1 out of 5 reviews and a general “keep away” attitude.
The fees just keep coming with umbrellas, and you are charged left, right and centre. As above, I would be surprised if you take home anything more than 50% of your charge rate. Outside IR35, this would be in 70-78% mark.
The only way it “worked” for me was to pay a huge amount of pension, thereby reducing the tax and NI take, but leaving with me just over minimum wage take home pay.
Now I’m back with a normal contract relationship outside IR35.
It’s a good way of getting into contract type work, but all that happens is that most just keep looking for a non-IR35 contract anyway.
The clients have had to drastically increase the rates if they want the work to be inside IR35.
Work that was £50/hr outside IR35 3 years ago, is now inside IR35 and was at £55-57/hr 12 months ago. Now its £70+/hr. This is BAE systems – Barrow.
Rumour has it - the MOD are getting concerned about this as the rates are going up on their work, otherwise it simply doesn’t get done, the same people should be doing it, and they are now spending 40% more to get it done. And the bums on the seats aren’t arriving to do it anyway!
An ex-colleague went from £65/hr outside IR35 to £100/hr inside IR35 Both positions defence work. A rate that sent shock waves around. He told them that’s what he needed to make it worth his while moving.
TL-DR: tread carefully in umbrella land.
The umbrellas, in the main, “have room for improvement”. My experience – YMMV
The first client
The agency said I HAD to use their chosen umbrella – if I didn’t - no contract - this is NOT the case- they are not allowed to do this. You can smell the backhanders from here. The woman at the agency has since left due to the agency’s dodgy nature.
The umbrella were asked by my pension advisor/provider to supply information to confirm they weren’t involved in money laundering, standard compliance checks and balances required by law. They never provided them, so pension funds were never transferred.
Money was paid into their pension fund for me, which I have been unable to get hold of - £800 has vanished, and no-one knows a thing about it.
The contractor next to me had the issue of the umbrella deciding that there was an issue with his tax code and just paying all his wage to HMRC, leaving him with zero salary. This happened for 2 weeks. He had to get his previous accountant and solicitor involved to solve the issue. The fault was at their end. The didn’t warn him - they just did it.
We couldn’t claim expenses of any kind.
It was one of the top 3 factors in leaving the client – and they were informed as such.
After the client and the agency being informed of my issues regarding the umbrella’s reluctance to supply compliance paperwork, the contractor above was allowed to change umbrella companies. The client has many issues, the main one being a 34% staff turnover and a 40% staff turnover in engineering.
Second client
New umbrella- which I had to choose from an option of six. Two paid expenses, and four didn’t. Therefore, almost all contractors present at the client (about 400 of us) used just 2 of the umbrellas.
April ’22, they decided that they won’t allow expenses anymore. I just couldn’t be bothered transferring my umbrella position over. I was seriously looking for other roles by then.
It took many, many phone calls to sort out the pension payments and how the money was paid to MY pension. I was charged for this.
Despite many phone calls and emails telling them not to enrol me in their pension scheme, they did. So I was charged an admin fee for them dealing with that, and another admin fee for paying money into “my” pension scheme.
I was paid weekly, but the pension payment sat in their bank account until the end of the month., they couldn’t pay it direct debit, so it had to be done via a BACS run. It was deemed “very difficult” for them to inform the pension people that the payment had gone through. I had to chase this up and inform others each time.
The umbrella never ever responded to actions required without a great deal of prompting – via phone calls or emails unless they were chasing fees. I never seemed to speak to the same person twice so explanations had to be repeated over and over again. No notes seemed to be on the system to assist them.
I am having difficulties getting money out of “their pension scheme set up for me” so I can have it transferred into “my” pension scheme. Googling their pension provider is lots of 1 out of 5 reviews and a general “keep away” attitude.
The fees just keep coming with umbrellas, and you are charged left, right and centre. As above, I would be surprised if you take home anything more than 50% of your charge rate. Outside IR35, this would be in 70-78% mark.
The only way it “worked” for me was to pay a huge amount of pension, thereby reducing the tax and NI take, but leaving with me just over minimum wage take home pay.
Now I’m back with a normal contract relationship outside IR35.
It’s a good way of getting into contract type work, but all that happens is that most just keep looking for a non-IR35 contract anyway.
The clients have had to drastically increase the rates if they want the work to be inside IR35.
Work that was £50/hr outside IR35 3 years ago, is now inside IR35 and was at £55-57/hr 12 months ago. Now its £70+/hr. This is BAE systems – Barrow.
Rumour has it - the MOD are getting concerned about this as the rates are going up on their work, otherwise it simply doesn’t get done, the same people should be doing it, and they are now spending 40% more to get it done. And the bums on the seats aren’t arriving to do it anyway!
An ex-colleague went from £65/hr outside IR35 to £100/hr inside IR35 Both positions defence work. A rate that sent shock waves around. He told them that’s what he needed to make it worth his while moving.
TL-DR: tread carefully in umbrella land.
Cheers all for the feedback, it looks like something to be avoided then!
Luckily having just spoken to a recruiter it looks like there's 2 very similar jobs up, one is the inside IR35 and one is normal staff for a still reasonable rate. Guess which one I've asked for further information on!
Luckily having just spoken to a recruiter it looks like there's 2 very similar jobs up, one is the inside IR35 and one is normal staff for a still reasonable rate. Guess which one I've asked for further information on!
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