April’s IR35 reform isn’t too far away, and now is a good time to start thinking about what you’d do if you were to be found inside IR35 and the possible impact this could have on your take home pay.
In this blog we give you a general overview of your options and the facts.
Option one – Work under an Umbrella company
If you’re found inside IR35 your best option may be to work under an Umbrella company for the duration of your contract. When using an Umbrella you effectively become an employee of the Umbrella, who will deal with your tax, PAYE and National Insurance Contributions (NIC), whilst also deducting their service fee from your final contractor pay. What you then receive at the end of the week or month (whichever payment agreement you have with your end-hirer / client) is your net pay. Your Umbrella will also take care of invoicing your end-hirer / client, so there’s no need for you to contact them.
So whilst you won’t be entitled to the same tax perks as you would if you were contracting through your Limited Company (which can equate to as much as 20-30% greater take home pay than working through an Umbrella), you’ll still be able to contract whilst resting easy, knowing they’re keeping you on the right side of the taxman. And as an ‘employee’ of the Umbrella you’ll be entitled to the same rights as employees, such as sickness and annual holiday pay, and maternity and paternity pay.
How can Taxevo help? Taxevo’s group company, SG Umbrella is there to help when you’re in need of using an Umbrella company for the duration of your contract. For those Taxevo clients who have our Essential, Core or Plus package you’ll be able to switch over whenever you wish, at no additional cost then switch back once your contract has ended. During your time with SG Umbrella you’ll enjoy the same accountant and service, whilst knowing you’re safe from HMRC whilst working inside IR35.
When you’re ready to switch back simply let your accountant know and we’ll have all your information ready and raring to go – it’s that simple. Get in touch today to find out more.
Option two – Keep working through your Limited Company
If you’re found inside IR35 it doesn’t mean you can’t continue to contract through your Limited Company. You will be taking home less than you would if you were contracting outside IR35, but there are some positives to continue using your Limited Company.
If you’re working on multiple contracts, one might be outside, so it’s worth continuing to use your company.
There may also be other tax benefits which you’re entitled to, which your specialist contractor accountant will be able to advise you on.
How can Taxevo help? Before making any big decisions, we advise talking through your options with your accountant. Here at Taxevo we want you to take home as much of your contractor pay as possible, and will advise you on how to compliantly do so.
Option three – Return to permanent employment
If you’re considering retirement or going back into permanent employment, than April’s reform might be a good time to do so. You might be wondering whether the potential financial risk and conditions surrounding contracting may no longer outweigh the benefits, and that you’re better off in a permanent role. We believe that whilst April’s reform will only cause a temporary disruption, we strongly advise discussing any plans with your specialist contractor accountant first who will be able to advise you on what they believe is the best move.
How can Taxevo help? Our team of accountants are here to ensure you make the right decision for you. If you decide to go back to permanent employment, we can pop your Limited Company into a dormant state (advisable if you’re considering returning to contracting within two years), or close it down completely. We’ll also advise you on how to extract money from your company in the most cost and tax effective way, and help you with wealth planning.
Option four – Challenge your client / end-hirer’s decision
From April a contractor’s IR35 status will be determined by the client / end-hirer. The associated tax and financial risks of getting a status wrong also lies with them, and for those reasons it is believed that many will put contractors inside IR35 so as to remove themselves from any possible risk.
How can Taxevo help? If you disagree with their decision, or feel as though a blanket decision has been made, then you’re able to challenge it. Your Taxevo accountant will guide you through the appeal process, and advise you on what action to take.
Taxevo are here for contractors, now and beyond
IR35 has always been a tricky area for contractors, but one which you should always have an understanding of and know where to get help if needed. Our team of accountants specialise in the needs and requirements of Limited Company contractors, which includes all IR35 related issues. Get in touch today to find out how we can help and support you through April’s changes, and beyond.