Q. With the advent of the new IR35 rules I have been told as a central government contractor that I now have to work through an umbrella company rather than my current limited company. My contract is managed by not one but 2 agencies. One is Capita and the other agency I received the contract through, each getting their share of the proceeds.
If the the government are now going to treat me as an employee for tax purposes can I ask to be put on their payroll as a PAYE worker and enter the civil service pension scheme for the duration of the contract (4 months)? This would cut out the need for agencies thus saving the client money and as PAYE I don’t have to pay umbrella fees while hopefully using the money saved to cover employers NI.
I haven’t signed the contract extension yet but it seems to me that employing people directly on fixed term contracts may help to shift the funds from the agency to the contractor and thus go somewhere to reducing the loss of income for contractors or is this impossible based on government rules?
A. There is no harm in posing the question but this would require a discussion with the public authority and agency directly. End client organisations may be reluctant to start employing contractors, particularly on short term contracts, because they would then be required to provide full employment rights and this could prove much more costly for them.
You could ask the agency to pay you on a PAYE basis but they may be reluctant to do so for the same reasons as the public authority. Under the public sector guidelines you could continue to operate via your limited company and basic tax & employees NIC would be deducted at source by the agency.
Something I would look at. Companies are not allowed to make unauthorised deductions from a persons wages. If you are required to pay an agency fee where you are subject to employment legislation, then does this constitute an unauthorised deduction? Otherwise agencies could pay people on the minimum wage with the agency taking a fee which takes below the minimum wage. Agencies may think this legislation wont apply. Without going into the minute details I think they are on very shaky ground. Employers are responsible for temp recruitment fees not employees.
Hello,
Question please- what is the best option for an NHS locus (contractor) doctor or an accountant working for a public sector who are now caught in IR35? I understand the options are – being subjected to PAYE, using umbrella company or being a deemed employee which I have been told would mean being treated as a limited company but PAYE and NI still deducted from source. If possible, I would prefer to continue with the limited company but obviously want the best optioning terms of the take home. Would the deemed employee option require the money to be taxed again under corporation tax after all the PAYE and NI deductions?
Thanks