Advice needed - inside IR35 contract

Charlotte

Hi,
I currently work through my own Ltd company, but have recently been offered 6 months full time contract work where the end client wont engage with Ltd companies, hence they have automatically deened as inside IR35. The work came through an agency who are pushing me to sign up with an umbrella company. Having looked these, it would appear that I'd only end up with a take home % of the gross contract value of 60%. And thats before any expenses such as travel etc. It appears that the umbrella companies expect the contractor to pay the employers NI and and an appreticeship levy from my rate. My understanding is that this is illegal and it would be their responsibility to pay it (or the end client/agency) withhout eroding my rate.
The agency do have an option where they can do the payroll instead of an umbrella, but they are insisting I'll end up worse off.
Im now wondering what my best opption is if I want to take on the contract. I dont mind paying my employee taxes and even some travel costs but I do object to having to pick up the employers taxes especially if its illegal.
My Ltd co accountant seems rather reluctant to advise me (perhaps as me taking the contract would mean lost business for them), the agency is pushing umbrella (presumably as they then avoid having to pay the employer taxes themselves).
I need some sound advice thats in my best interests. I havent signed anything yet, so not committed to it as yet.

Many thanks for reading

TomFromCrunch

Hey Charlotte, welcome to the forum! Sorry for the delayed response - I've just been speaking to our experts to get a decent explanation for you.

The situation you describe has been highlighted by many contractors who find themselves working on ‘inside IR35’ assignments. In general terms we'd offer the following comments (obviously we can't provide advice as we haven't seen any documents described in your post).

Firstly, in terms of IR35 rules, the end client must provide you (and your Agency) with a Status Determination Statement (SDS) explaining why the assignment is judged to be inside IR35.

IR35 rules don't allow ‘blanket assessments’ as you describe in your post. Your Agency should know this and you should ask them, or the end-client, for a copy of the SDS covering your assignment. If you disagree with the assessment (ie. you believe the assignment is outside IR35) you can appeal the decision using the end-client’s process for receiving appeals.

The second part of your post involves the way the Umbrella company calculates your take home pay.

The Umbrella company must provide you with a full breakdown of the costs deducted from your daily rate - this usually includes Employers NI and the apprenticeship levy. There is nothing ‘illegal’ in this. The Umbrella company is your employer. Many contractors have negotiated increases to their daily rates to cover these deductions. You should ask your Agency what they have done to increase the daily rate to ensure your take home pay isn’t reduced by these deductions.

You can find out more about these matters in our Business guide: What is IR35?. (it's free to download as you're a Crunch Chorus member). You can also check out our IR35 hub. Hope this helps!

Fdcapital

Basically being able to run your own personal service company is no longer possible if you work for medium or larger companies. HM Government needs to raise more tax so this option has been sadly closed off.

TomFromCrunch

Although IR35 has indeed made it more tricky, it's definitely still possible - with many of our clients navigating this world with support from Crunch.

Our Premium package offers complete flexibility for those working within IR35, and we’ve got a range of helpful tools as well:

IR35 Review - free status indicator

The first thing to do is to check if your assignment is likely to be affected by IR35. You can do so with our free IR35 calculator.

You can gain an indication as to whether your contract is inside or outside of IR35. If the calculator indicates your contract is outside of IR35, then you can challenge the Status Determination given by your end client, making it possible to work for medium or large-sized clients through your personal service company.

You can use our calculator to get a free status determination as often as needed, at no additional cost. You simply answer the questions and the tool will give you either an ‘Inside IR35’, ‘Outside IR35’, or ‘borderline’ result.

For those that are on the Crunch Premium subscription, you also get one detailed report (usual price £49.50 +VAT) and one accountant contract review (usual price £90 +VAT) in any 12 month period.

The downloadable report includes detailed information on your areas of risk and our recommendations on actions you could take. If you need more than one report in a 12-month period you can purchase additional reports as needed for £49.50 +VAT.

If you’re on the Crunch Premium package and your assignment does fall inside of IR35, there are a number of options available for you.

IR35 Deductions Tool

We’ve added our brand new tool for recording IR35 Deductions as part of the Premium package. This allows you to account for any IR35 deductions quickly and easily when recording a client payment against your invoice.

IR35 Payroll

We offer a monthly IR35 Payroll Service as part of the Premium subscription. Each month, we’ll run calculations for you based on the work you complete on any assignments that are inside IR35 and produce a payslip so you know exactly how much to pay yourself and what tax is due.

If you work on multiple assignments, and some fall inside IR35 but others fall outside, you’ll still be able to run these alongside each other through your Crunch account.

Umbrella Service through Crunch

If your end-client has decided they’ll only work with contractors via an umbrella company, if you’re on the Crunch Premium package we’ve got you covered with our Umbrella Service.

An Umbrella Service is a flexible way of working on a month by month basis. This means if you have a short contract that falls within IR35, you could use our Umbrella Service for the duration of the contract and then continue working through your limited company for any assignments outside IR35.

Our monthly Umbrella Service is included in the package already, so you can switch seamlessly between the two as often as you need to. If you need a weekly payroll Umbrella Service then there’s an additional charge of £5 per timesheet.

Please do ask if there are any questions or things we can help you with!

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