We’ll help you answer some of the important questions you might ask to help you as an Umbrella Contractor
IR35 is the chancellor’s weapon against tax and national insurance contributions (NICs) avoidance through the use of an intermediary such as a service company or partnership.
Previously, intermediaries such as service companies could be set up to provide the services of a worker to a client company enabling the client to make payments to the company without deducting paye or nics.
The worker would be able to take payments from the company in the form of dividends instead of a salary, thereby saving NICs. HM Revenue & Customs (HMRC) have clearly defined what a personal service company is and have also clarified that any other entities employing the services of individuals who work as disguised employees are also caught by IR35. For further details of HMRC guidelines see www.hmrc.gov.uk/ir35.
The new MSC legislation has replaced the IR35 bulletin and removes the need for clarity for those contractors working though an MSC.
However, as our solutions are outside this msc legislation, ir35 will continue to apply. If you contract your services to one client and are acting as an employee, you cannot avoid IR35 – but you can maximise your earnings.
No a dividend is supposed to be unearned income split between the shareholders. We believe that HMRC’s stance on this will be that if a contractor invoices for all the monies coming into the company, takes a small salary and receives the rest as a dividend, this will be classed as earned income and will then attract national insurance (NI). Since the 2007 budget, dividends have been targeted for both PSCs and MSCs.
At Microsystems we always try to stay one step ahead. Our self employed solution is as tax-efficient as receiving a livable wage and dividend without the attached risks. You will also be free from any nasty personal tax bill surprises at the end of the year.
If you do, be very wary. We have already had confirmation that new legislation will be enforced for next year (2008), to tackle nic and tax on dividends via personal service companies.
Some solutions are inefficient, particularly for those contracts falling outside ir35. If you are considered to be self-employed, then you should take advantage of it.
By using one of our solutions, Microsystems would have identified whether IR35 impacted you. Therefore you would already be paying the correct amount of tax and ni, making such a situation quite unlikely.
In the exceptional circumstance that we have incorrectly assessed the status of one of your contracts, we will pay any outstanding tax and any subsequent legal fees relating to that contract on your behalf.
We provide advice for self employment solution, while fees for our flexible umbrella solution is £60 per month or £25 per week. All our fees are tax deductible and therefore reduce substantially, especially for higher rate taxpayers. Our fee covers all the services and benefits we offer including comprehensive insurance liability and membership of our privilege scheme. We do not charge if you are not on a current contract; nor do we charge joining, leaving or lock-in fees.
Contractors’ take home earnings vary from contract to contract depending on ir35 status and expenses incurred to perform the task in hand. For an accurate illustration pleasecontact one of our ir35 consultants on 0208 2023888 or register on the members area and take advantage of our calculator tools.
With our flexible umbrella solution we will pay you the day after we receive your agency/client remittance. If you are outside ir35 we will pay you the day after we receive yourtimesheet. We operate a daily pay run and make payments by bacs; usually same day to clear.
This is only applicable if you use one of our paye solutions, and is calculated at 1/12 of total net pay before our fee and allowable expenses. We feel it is fairer for you rather than us to earn interest on your own money therefore the full amount is paid as you earn it. This process is called ‘rolled-up holiday pay’.
We naturally greatly appreciate referrals. As a token of our appreciation for recommending a friend or colleague to us, we will send you a free gift (terms and conditions apply).
We’ve had the honour of successfully serving our clients since 1997.