Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.
Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.
Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.
The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]
IR35 is HMRC legislation that seeks to enclose all contractors who fall outside the Inland Revenue's definition of 'self employment'. IR35 was conceived in a bid to capture perceived 'unpaid taxes'. The reality is that IR35 legislation simply places a stranglehold on contractors and prohibits effective growth and expansion. It's no wonder that recruitment agencies are turned off by IR35, IR35 discourages contracting and is not supportive of the freelance community.
You can see if you fall Inside or Outside of IR35 using the IR35 Status Calculator
90% of recruiters think IR35 is ineffective and would like to see changes made to IR35 legislation to make it more than window dressing.
According to REC recruiters think;
The industry talking shop plan to put their findings to OTS (Office of Tax Simplification). Will it make any difference? Probably not, in the opinion of some, there is no single influential body that is taken seriously enough by HMRC. But then a little push by many individuals is certainly better than doing nothing at all.
IR35 is a noble attempt at countering what is officially known as disguised employment - effectively a means of paying less tax. Why doesn't the UK contingent workforce sector take a lesson or two from the City? They have proved time and again that there are legal, proven and untouchable ways of avoiding paying tax.
J Brooks, REC; "IR35 has been an awkward, unsatisfactory attempt to tackle the problem of disguised employment ever since it was set up in 1999. These survey results make it plain that the recruitment industry would not accept anything less than a serious overhaul of the current system.
"While many recruiters would be happiest to see IR35 simply removed from the statute book, there would also be support for a pragmatic attempt to clarify the rules. If contractors, employers and recruiters could be certain in advance whether they fall within IR35 or not, many of the current problems could be eliminated."
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It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.
Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].
Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.