Please if someone could help me, I am extremely confused as now (due to regulation change for CIS industry) I am no longer allowed to work for agencies as self employed.
So now I am in the same time:
1.self employed working for myself when I find clients
2.employee working for an agency
3.work with an umbrella company for another agency
I have some questions about this umbrella company.
They sent me a form to claim for food, travel and overnight accommodation.
A.As I am also self employed, am I allowed to claim for food and drinks that I buy during the working hours? They said I can
B.Should I claim for this on weekly basis or wait until I will do my tax return and claim them at that point ?
C.They said The standard rates are: Tax at 20% and the NI rate is 12.8% this is subject to your earnings. You will need to speak to HMRC to discuss these further.
They also charge £ 15 a week.
So if I add all this together, I am not very sure that I will be very ok working with this umbrella company.
D.If I pay this huge 32.8 % (20% tax +12.8 % NIC),
can I offset my personal allowance 10 k when I am doing my tax return ?
E.I know that this year nic start at £ 7755.
I am confused as I knew they are other rules for NIC for self employed
9% between £7755 and £41450
2% for the amount over £41450
NOT 12.8 %, as the umbrella tells me.
Please if someone could help me with a bit of knowledge as this is beyond my powers.
Thank you very much indeed.
Have a lovely Sunday,
Kind regards,
Adrian
__________________
This is just my personal opinion. Advice should be sought from a suitably qualified Accountant.
P.S. I only ride a motorbike because I want to dry my clothes faster
I don't have any CIS workers so I'm not the right person to answer this but the figures are confusing me.
I can see that working under the umbrella one becomes an employee of the brolly co. and they are going to need to deduct the 20% tax at source.
But why only 12.8% for employers class 1 NI when the current rate is 13.8%??? Is this right or does the person that your talking to not know their figures?
To me they don't seem to be taking enough and why are they not telling you that the NI that they're taking at source is in addition to another 12% employee's contribution (so 45.8% in total, not 32.8% as quoted) ... And how does that fit with having to be self employed to be an employee of an umbrella company?
From what I'm seeing under the new rules and forgetting class 2 conts the self employed construction worker will need to be paying 16.8% more than under the old rules (13.8% employer plus 3% (12% employee - 9% self employed)).
This seems like another IR35 but nobody seems to be making a fuss about it so come on someone, what am I missing?
Shaun.
p.s. This is not my arena, I do not deal with CIS and nothing that I say on this subject should in anyway be taken as guidance. I've joined the discussion as I'm genuinely interested in finding out more and hope people with experience in this field (espechially in relation to the post April 2014 changes) will chip in to enlighten me a little as to what I'm missing.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
On subject but off post a little I've just been having a firk around and found this interesting article on the Baker Tilly site (If you don't know them they're a top notch mid tier firm so when they say something it's generally worth listening to).
Which basically says that Adrians going to be funding the country so I think that we should all get together in saying a big thankyou to Adrian for the extra £520 million that he (and a few others) are going to be contibuting to the treasury this year.
Bet you don't even get a christmas card off the prime minister for all your efforts though Adrian!
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi BKN Forum. I'm Helen. This is my very first post here.I am a fairly recently qualified AICB with Payroll and SA.I wouldnt usually feel quite knowledgeable enough to post advice to more experienced folks.But having helped a couple of people through this scenario, I have had to research it and speak to agencies etc.
Government brought out new legislation to prevent employers avoiding NIC by using self-employed CIS workers through agencies.The new legislation states that where a worker is subject to supervision, direction or control then they must be treated as employees and taxed via PAYE.
Agencies seem to have taken a blanket approach to this (rather than try to prove that any individual is not supervised) and forced all their self-employed workers into the Umbrella scheme (whether CIS or not).This effectively means that you are employed by the agency/umbrella company.
The worst of it is that it costs you dear.Usually, an umbrella company will deduct their fee (could be from around £10-£30) from your gross pay. They then deduct your expenses (travel, food etc) before calculating your PAYE and both NICs on the balance. They add back your expenses, but then you have to pay the Employers NI as well as your own, so this is deducted too. You should also get some holiday pay (although it might be rolled up into your rate) and this should be around 12.8%.Is it possible thats where you got that figure from?The NIC should still be 13.8%.
You can claim for travel and all food, subject to number of hours etc.If you dont claim your expenses on a week-by-week basis, you will pay Employer NIC on your whole pay.I dont imagine you can get this back.The PAYE and Employee NIC might all sort itself out at year-end when you do your SA.
Personally, I think that as the new rules simply mean that the worker has to pay the Employer NIC it doesnt really seem like a crackdown on employers.Sometimes you can negotiate a higher rate with the agency because of this.Apparently, there is a way round it all by making yourself a limited company but I cannot advise as that is beyond my knowledge.
If you want, I have made an Excel calculator so that I can check that my two people are getting their correct amount of net pay (as it is tricky to work out).I can send you this if it would help.
welcome to the forum and really enjoyed your first post.
On the limited company approach they would go over into deemed employment / IR35 territory which is an area that I do know something about as it's IT contractor territory.
So, reading your appraisal the 12.8% deduction for holidays is nothing to do with the NI side of things which will be another 25.8% (13.8 employer plus 12% employee class 1's) that Adrians been told nothing about yet by the brolly co.
To me this is sounding a bit of a nightmare for construction workers where, correct me if I'm wrong, but they will be worse off working through a brolly co and have no employee rights in the bargain.
This is the Government that was supposed to repeal IR35 and it looks as though instead they've basically created something that is the son of IR35.
Hope that you're not shy about making further posts as we're a really freindly bunch always open to alternate opinions and quality information such as in your first post.
kindest regards,
Shaun.
p.s. looking at your userid you wouldn't be a DC fan perchance would you?
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you for the very nice welcome.Yeah, youre totally right.It's quite unbelievable.And it's not just construction workers, it's mostly all people who would have been previously self-employed through agency.And you didn't even include the retained margin (both of mine are £20.00 per week) which the Umbrella takes for the pleasure of processing your pay.Supposedly, there are now some workers' rights as they are now actual employees with regard to the work that they do through agencies.In reality however, this breaks down into holiday pay, which is deducted from the hourly rate anyway, and entitlement to SSP.
Adrian, as Shaun says, you need to also consider holiday pay as well as employer NIC deductions.Holiday pay might be paid to you each week (rolled up) but this is almost illegal and it should be deducted and retained until you take hols or end contract.
Ive just been submitting last week's expenses for one of my "brolly" clients.He earns a decent hourly rate on this contract but his net pay this week (even after expenses taken into account) will be only 63% of his gross.He is a self-employed architect and has nothing to do with CIS.Its been really hard for him to get his head around as he is not even accustomed to CIS deductions.
My other affected client is a CIS worker.He does receive rolled up holiday pay every week but it is actually deducted from his hourly rate then added back on and taxed.The worst thing for him is that he will no longer receive his regular, annual tax rebate.Even though he's now claiming expenses at source, so nets slightly more each week, this small increase is reduced by the Employer NI and he still feels cheated out of his annual rebate.
Adrian, good luck and I hope it all works out well for you.If there's anything I can help you with let me know.Especially if you just want to make sure the "brollies" don't cheat you.If you give me some rough figures I could let you know what to expect.
Looking forward to posting again soon.
P.S. Shaun, regarding being a fan, I might be - Although Can't Deny/Confirm.
Best regards
Helen
-- Edited by HellsBells on Sunday 15th of June 2014 09:44:11 PM
Anybody is still free to take on self-employed work in the same ways as before. The only difference is where they work through an agency they will probably be forced into employment through umbrella for the agency contract only. So they might be both employed and self-employed (as Adrian). If you Google "Onshore Intermediaries and False Self Employment" there's lots of (too much) info.
So what I see the difference between self employed and working with an umbrella is that I have to pay the NIC for myself and the NIC for the umbrella.
This stinks to me, why should you have to pay a tax that is levied at the employer, not the employee. Surely this is a breach of employment regulations (illegal deductions from pay?) I can understand the Govt wanting to crack down on false self employment (and many agencies did jump on that bandwagon) but agencies seem to be passing the cost back to the employee, rather than charging their clients the additional employers NIC.
Another question, how does the £2000 employers NIC fit into this, can the employee claim this? I doubt that they would be able to
If the ultimate employer's stance is that the worker is not supervised then the Agency has to employ them. I don't understand why the Revenue don't just rigorously enforce the old employment tests, instead of messing about with IR35 and now this?
Just thought I should clarify a point on one of the agency/umbrella differences.Im not saying I'm expert on this, I'm just trying to help by sharing my experiences of it (and Adrian, your plea was too sincere to overlook).
In both the cases that I'm involved with, the worker was given the choice to be employed (no option of self-employed) by either the agency or the umbrella.If you're employed by the agency, you don't pay Employer NI.Only if you're employed by the umbrella.Its likely the pay rates will be different depending on which option you choose.
My architect client was starting this contract in April 2014 after the new leg. came into effect. He was offered hourly rate £x to be employed by the agency, or £x + 2 if employed by the umbrella.He chose the umbrella, as his circumstances, with high expenses, (away from home) made this worthwhile.
My subcontractor client (CIS) had started his contract prior to new leg.Even though he's been CIS for years, he was not notified by HMRC that changes were happening.He received communication from an umbrella company stating that he was now employed by them (for this contract) and these were his terms and conditions.Given that I had investigated for my first client, I spoke to his agency and tried to negotiate a higher rate to cover the Employer NIC.They would not consider this but offered him the option of being employed by the agency (as opposed to umbrella), but, only if he accepted a £2.00 per hour drop in his rate.He was raging.He is a big burly builder and had me run ragged trying to sort it out (hence the reason I learned about it).In the end, he felt he was forced to accept the umbrella deal and to pay the Employer NIC.
John, there is some useful info here (and it's lengthy and yes, I did read it end-to-end).Probably only worthwhile reading if you have clients who are affected (or are affected yourself):
Guys, given what Ive gleaned from this thread, I'm thinking that I should know more about IR35.Am I likely to need a good knowledge of this?If anyone knows where we can see a good synopsis (in simplest terms) I would be most grateful.
Thank you.Have a good Tuesday.
Helen
-- Edited by HellsBells on Tuesday 17th of June 2014 03:28:10 PM
