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Contractor 9 IR35 Articles Feed - The latest Contractor 9 IR35 Articles and Information

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9 IR35

What Contractors Should Know about IR35

Have you heard about IR35? It's an important tax law which HMRC are hot on, and  all contractors. should understand. It will be one of the factors that determines whether you:

Manage your own limited company

Use the services of an umbrella company

It's worth knowing a little bit about IR35, even if you still use an umbrella company, instead of running your own limited company.

• The IR35 Test for Contractors
• IR35 Umbrella Companies
• How to Pass IR35
• One minute guide to IR35
• IR35, Is an Umbrella the Right Choice
• What is your best Option, Umbrella Company or own Limited Company
• Umbrella Company Registration
• IR35 True or False
• Get More Out of Your Umbrella Company with Pulse Umbrella
• What is IR35

 

 

As a Pulse employee you are safe from IR35 and Managed Service Company legislation which is otherwise a risk to contractors who seek to reduce their income tax liability. Whether you are ‘caught’ by IR35 becomes irrelevant because you are paying the right amount of tax from the very beginning.

To truly assess a worker’s IR35 status would need careful consideration. However, if you operate in the following way you are likely not to be “self employed” and are likely to fall under IR35 legislation (i.e. deemed employed).

you only have one current contract (i.e. you do not have multiple contracts at the same time)

you travel to the same workplace each day

you do not provide your own equipment, software or tools

you are paid by the hour or day

you work under the day to day management of the client

you are not financially liable to rectify faults or errors as a result of your work

you have no right of substitution (i.e. you cannot sub-contract the work and if you cannot go into work that day you cannot send someone in your place)

 

 

Check It Out

If you would like to check if you are affected by IR35, visit the HMRC website www.hmrc.gov.uk/employment-status/

Our IR35 umbrella company solutions set the highest of standards supporting contractors. We ensure your affairs are dealt with efficiently and effectively, with all administration processed on your behalf.

As an employee, all your income will be taxed at source, so you don't need to worry about IR35, MSC rules, or the stress and cost of running your own company.

Since the April 2007 Budget and the introduction of the Managed Service Company Legislation, IR35 umbrella companies are the only umbrella options available to those inside IR35.

If you use a PAYE umbrella scheme, all your revenue is taxed as though you are an employee, the same as if you were inside IR35. You could in theory use a PAYE umbrella company if you were outside IR35, but for higher earners this would be losing out on tax advantages. For those contractors outside IR35, a limited company is now the most tax efficient route.

Even if your current contract is outside IR35, you should have an understanding of the legislation because your next contract may not be.

 

Q, As a contractor, am I entitled to holiday pay?

A, Contractors operating through their own limited company, or following a partnership or sole-trader model are not employees and therefore do not benefit from any employment rights. Contractors joining pulse become employees of pulse and so are entitled to employment rights and benefits, including holiday pay.

pulse handle holiday pay in a straightforward way – every time we pay you, we will make an on account payment to you in respect of the holiday that you have accrued. So, we will pay you in advance for your holidays.

Q, Am I insured as a pulse employee?

A, Yes, as an employee of pulse you will benefit from the following inclusive insurance:
£1m Professional Indemnity insurance
£5m Public Liability insurance
£10m Employers Liability insurance

Q, Is pulse a managed service company?

A, No, pulse is not a managed service company. You will not be a director or shareholder. Upon joining pulse you become a pulse employee and receive all money via our compliant PAYE payroll service.

Q, I’ve received quotes from a number of umbrella companies and all the figures are different, why is that?

A, All UK umbrella companies operate under the same PAYE legislation. If provided with the same information regarding your anticipated business expenses then each umbrella should provide you with the same return. If an umbrella company offers a higher quoted return than pulse then they may be either exceeding allowable expenses limits or operating a non-compliant payroll. Either way, be wary of these operators as they may be placing you at risk of a future tax bill and fines.

Q, What is an expenses ‘dispensation’?

A, Essentially a dispensation is an agreement between HMRC and pulse to reduce the amount of paperwork to manage expenses. Under a dispensation there is no need for pulse to include allowed expenses on an employee P11D and there is no need for the employee to include expenses on their tax return. There is a degree of misrepresentation in the industry about what dispensations are for. They are not a carte blanche for you to claim for expenses you haven't incurred, and the Government has said it will take action against companies that abuse the dispensation system.

 

Q, Do I need to submit receipts for expenses?

A, Yes, you will need to send us receipts for expenses claimed. This is easy to do using our Freepost address and is explained in our expenses guide.

Q, Do pulse pay sick, maternity and paternity leave?

A, Yes, as long as the statutory requirements are met, you will receive these benefits. More details can be found in our employee handbook.

Q, How quickly will I be paid?

A, If you’re with a bank that supports faster payments then you’ll receive your pay the same day we are paid. This applies to all major UK banks, except for Santander (Abbey National) and Nationwide Building Society accounts, for all amounts up to £10,000. Otherwise BACS takes 2-3 days. You can elect to receive CHAPS same day payments instead, but we’ll pass on the cost of this service, £20.

Q, How do I tell you my hours?

A, You use our fast and simple online portal.

Q, Will I be paid monthly or weekly?

A, This will depend on the payment cycle of your contract/agency. If they pay us weekly we will pay you weekly.

Q, I have more than one contract and can I be paid more than once each week/month?

A, We pay you every week/month as soon as we receive you money. If we receive multiple payments for you (say in the same week) then we will pay you the first immediately and will pay you the second amount in the following week.

Q, What ID you I need to provide?

A, If you’re a UK citizen we’ll just need to take a copy of your passport, if you’re not then we’ll also need some other proof of your right to work in the UK. You can get copies of your documents certified at a Post Office so that we need only the copies. This is straightforward and is explained in our sign-up process.

 

 

Q, How long will the agency take to pay?

A, This depends upon the specific payment terms of your agency, but we recommend that you get us a weekly timesheet by close of business Friday and monthly timesheets on the last day of the month so that we can immediately invoice for your work.

Q, Do I get taxed on your fee?

A, Strictly speaking, it's not a fee. It's the difference between what we receive and what we allocate to your account, which makes it, in the jargon, a margin. We deduct £27 (weekly) or £99 (monthly) from the contract income, which is before tax. So, the actual cost to you is less, and the exact amount will vary from one person to another depending on your individual tax circumstances. It will cost a typical higher rate taxpayer £14.10 (weekly) or £51.69 (monthly).

Q, Why do you deduct Employers' National Insurance from the amount you pay me?

A, Strictly speaking, we don't. We deduct it from the amount we are paid by your client or agent, and the amount that remains, broadly speaking, is your taxable salary. We are required to pay Employers' NI by law.

Q, How do I get a mortgage or other credit as a contractor?

A, As a member of pulse you are an employee, you will be able to benefit from this and provide payslips to prove your income. If you require any help with this our preferred firm of independent financial advisers "pulse money" are on hand for impartial advice.

Q, Am I taxed on expenses?

A, No there is no tax or National Insurance deducted from legitimate business expenses.

Q, Do I get a payslip?

A, Yes. This will be posted on our portal so that you can view or print it.