 Tax Affinity Accountants local branches We have a lot of limited company owners asking about IR35 - the HMRC rule about removing some rights to work as a limited company personal service provider and be counted instead as an employee due to pay tax and ni at the PAYE tax rates.
Obviously many consultants and contractors are worried that they will end up having to pay more tax some at 40% higher rate of income tax rather than the 19% corporation tax previously paid on their limited company. So we have compiled a simple questions & answer to help answer common questions that arise: Q. As a consultant / contractor, can I work inside and outside IR35 on different jobs? A. Yes. It is possible to have one job found outside IR35 and another to be inside IR35. Each job will be assessed on its own merits as per the IR35 status tests. IR35 applies on a case-by-case basis. Q. If I accept an job inside IR35, will I be worse of financially? A. Yes. An inside IR35 job means you have to pay all PAYE/NIC deductions as per a normal employee on all your gross income. This will be made at sourc and have a direct impact on your take-home pay. If you were working through your own Limited company previously. You were paying tax on net income (after expenses). However, there are options such as re-negotiating and increasing your day rate, looking for contracting work that is considered outside IR35. Working for more than one company and making sure your paperwork proves your outside IR35. Contracting through our purpose built umbrella company to help clients. We have many options available. Q. If I disagree with my status given, is there anything I can do to challenge it? A. Yes. When your client has assessed your IR35 status they should provide you with a Statement Determination Statement (SDS) which will detail the reasons for your Outside/Inside IR35 status. Once you have received this, you can dispute the determination. The client has 45 days to respond. If you choose to dispute your IR45 status, we recomend you gather evidence to support the reasons which you believe the decision is wrong. Q. Will HMRC be looking to recover backdated tax for previous jobs it deems to be inside IR35? A. No word yet. When the client decides your inside IR35 after April 6th 2021 it means that they have to make the PAYE & NI deductions after that date. If you were in the engagement prior to 6th April, the responsibility for IR35 remains your own. So, your status before will remain be your responsibility and can hold a retrospective liability risk. HMRC has previously said it will not proceed with targeted campaigns of those who have had a change in status and IR35 was first started in the public worker sector such as NHS and local authority previously and this was not the case then. Having seen many clients go through this a couple of year ago when IR35 was introduced to public sector worker. We managed to successfully guide most of them to a tax efficient solution. So are now very experienced to help the new batch of private sector IR35 workers after 6th April 2021. Get in touch today and we will be happy to help you keep more of your hard earned money. By Anni Khan at Tax Affinity Accountants Tax Affinity Accountants are experts Business, Tax and Accountancy. With branches in Worcester Park and Kingston upon Thames and Epsom and Ewell they are considered in the Industry to be expert business accountants and tax advisors for both individuals and small & medium sized businesses (SME's). Helping and supporting both individuals and limited company owners / self employed people throughout the UK and the world, they regularly help clients grow their business providing tailored advice and support. Their support has been considered invaluable by many clients and key to their success. For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.
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 At Tax Affinity Accountants, we often get asked what are the differences and benefits of working through a limited company compared to an umbrella company. So we have decided to explain this in a quick easy way.
An umbrella company is like an agency with whom you are employed and therefore they are your employer and not the place where you work. They will issue you with payslips and P60, P11d and a P45 at the end of your employment. They should also pay you for any sick or maternity pay as may be required. Umbrella companies will charge you for using their services and will deduct their fees from your pay. They will also ask to be refunded their employer NIC contributions paid to HMRC on your behalf again deducting this from your pay. The income tax tends to be higher than being straight forward employed on PAYE. You do not need to worry about paperwork and record keeping as the umbrella company does all this like an employer would. A limited company is a separate legal entity to you. That you may well own as a shareholder and run as a director. A limited company can be your employer and pay you wages via PAYE like a normal employer but be contracting out your services to the place you work. And if you are the shareholder it can pay you dividends (share of the profits) periodically or on a regular basis. A limited company pays corporation tax not income tax and the tax rate is much lower than normal PAYE or via an umbrella company. There is a certain amount of paperwork and record keeping which is required and normally you will require the services of a good accountant. It is also very difficult to try to pay yourself sick or maternity pay, which is why most people do not claim these. But the plus side is as your keeping more income then this should more than make up for any loss of benefit or time spent keeping records. Tax wise it is usually much better option to be working though a limited company compared to an umbrella company as a good accountant, like Tax Affinity Accountants, should help you save much more in tax than fees they ever charge. Helping to ensure more of your hard earned income stays in your hands. By Anni Khan at Tax Affinity Accountants Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting contractors and self employed people throughout the UK, they regularly help clients grow their business providing tailored advice. For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.  If you work for the NHS or for Local Government and you are a contractor then you will have been notified that there will be changes coming in as of April 2017. We are increasingly being asked the same question by many clients who are confused and have not been advised correctly by their recruitment agnecy or end client. So we have compiled an easy bullet point guide below:
For a vast majority of contractors this means the recruitment agency or NHS / Council paying you has to decide how to pay you after April 2017. They may opt for the safest course of action / most profitable for them which may not be financially beneficial for you. And increasingly we are seeing a knee jerk reaction by most NHS and Council Management staff and recruitment Agencies is to incorrectly lable everyone the same even when HMRC does not say this in their rules. The vast majority of NHS and Council Management staff and recruitment Agencies are wrongly saying everyone is inside the scope for IR35 just because they cannot be bothered to work out who is and who isn't and they do not care if a person pays more tax than is really due. So have at look below at the correct options as per HMRC, that all contractors have in all ongoing negotiations:
By Anni Khan at Tax Affinity Accountants Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting business throughout the UK, they regularly help clients grow their business providing tailored advice. For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.  IR35 is the name of piece of 'intermediaries legislation' by HMRC which is designed to establish whether a contractor is considered self employed or employed for tax purposes.
An investigation can be triggered by HMRC either as a random check or when they find a contractor that they suspect of being declared as self employed but actually working in a manner like an employee and therefore paying less tax than normal. They call such a person a 'disguised employee'. There are certain key signals to HMRC if someone is a 'disguised employee'. And a few of these are listed below:
Contractors therefore need to be aware and compliant to the rules and regulations of working and make sure certain things are in place to ensure safety for both the company they are working for and for themselves. An experienced quality accountant like Tax Affinity Accountants can help you to be safe and ensure procedures and practices are in place to ensure you are compliant. If you are worried you should contact us as soon as possible. By Anni Khan at Tax Affinity Accountants Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and advisors for small businesses. Helping and supporting business throughout the UK, they regularly help clients grow their business providing tailored advice. For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends. |
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