What are your options when working inside IR35?

As we inch ever closer to The April 2021 IR35 reform, many of you might be wondering what will happen if you’re found inside IR35 and the impact this will have on your take home pay.

Whilst your dedicated SG Accountant is on hand to answer any questions about your personal circumstances, it’s good to have a general overview of the facts and what your options are. In this blog we look at just that.

Option 1: Work through an Umbrella company

If found inside IR35 working through an Umbrella company for the duration of that contract could be your best option. You effectively become an employee of the Umbrella, which will deal with your PAYE, tax and National Insurance Contributions, whilst also deducting their fee from your final pay. What you then receive at the end of each month is your net pay. They also deal with invoicing the end-hirer/client on your behalf, so you’re completely taken out of the equation.

So whilst you’re not able to take full advantage of the tax benefits which come with being Limited (which could equate to as much as 20-30% more take home pay than working through an umbrella ), you’re still able to continue to contract, safe in the knowledge that everything has been taken care of for you. And as you’re now classed as an ‘employee’ you’ll also be entitled to sickness and holiday pay, and other benefits such as maternity and paternity pay.

How can SG help? SG Accounting’s sister company, SG Umbrella is on hand to offer Umbrella services to Limited Company contractors who find themselves in this exact position. There’s no additional charge, so if Umbrella is the best option for your next contract, simply let your SG accountant know and they will switch you over. You’ll keep your accountant and same level of service you enjoyed with SG, but just reap all the benefits of being with SG Umbrella and stay safe from HMRC whilst working inside IR35.

Then when you’re ready to switch back, let your accountant know and they’ll pop you back over to SG – it’s that simple! They’ll keep hold of all your account information, so it’s easy for them to jump back into your accounts and get you contracting through your Limited Company once more. This service is available to all SG clients at no extra cost, just get in touch with your SG accountant today for more information.

Option 2: Continue to work through your Limited Company

Being found inside IR35 doesn’t mean you have to stop contracting through your Limited Company – because you absolutely still can! And whilst you’ll be taking home less than you would if you were to be outside of IR35, there’s still some positives to continue on as Limited.

If you’re able to work on multiple contracts at the same time, some may still be outside, so it’ll still be worth your while to be Limited.

Due to HMRC providing a 5% allowance to help cover the running costs of your Limited Company, you’ll only pay tax on 95% of your income, whereas when using an Umbrella you’ll receive 0% allowance and pay tax on 100% of your income.

How can SG help? We strongly advise discussing your options with your personal SG accountant, as they’ll be able to advise you on which option is the best for you. Whatever they suggest, you can rest assured knowing they’ve got your best interests and take home pay at heart.

Option 3: Return to permanent employment

Some Contractors considering retiring or heading back into permanent employment, see April 2021 as maybe be the right time to do so. You may also be thinking that the conditions and potential financial risk surrounding contracting might not outweigh the benefits, and that you’re better off and more secure in a permanent role. We anticipate the changes in April 2021 to cause only temporary disruption though, so would suggest thinking carefully before making a big decision in advance of seeing how the contracting landscape looks when the dust settles.

How can SG help? Whatever your decision, again we strongly advise you talk through your personal circumstances with your SG Accountant. If you do decide to go back to permanent employment they will be able to advise you from either placing your company into a dormant state (advisable if you think you may come back to contracting within 2 years), or closing it down completely. We can advise on how to most cost effectively take your money from the company, and help with wealth planning if you have reserves to invest.

Option 4: Challenge your end-hirer / client’s decision

From April the final decision of a contractor’s IR35 status will lie with the end-hirer/client, therefore you will be taken completely out of the equation. The associated tax risks and financial penalties of getting your status wrong also lies with the end-hirer/client. For this reason many clients many decide to place all contractors within IR35 as to protect themselves from incorrectly deciding your IR35 status.

How can SG help? If you believe your status has been incorrectly determined, or you’ve been a victim of a blanket IR35 status determination, then you’re able to appeal their decision. Speak directly to your SG accountant who will be able to advise you on what action to take, and whether they believe your contract should be inside or outside.

Your SG accountant is here for you – no matter what

When it comes to IR35 no matter the question, big or small, your SG accountant is on hand to offer support and guidance wherever needed. If you’ve got a contract that needs reviewing, you’re unsure about your working practices, or you just need a bit of hand holding in the lead up to April 2021, simply give your accountant a call and they’ll happily support you with whatever you need.

SG are here for you and your IR35 needs, now, come April 2021 and beyond.