If you receive an In Scope IR35 status determination from your client or suspect one is heading your way, then you’ll need to start considering what the best approach to take is. We consider the options below.
Perhaps you want to switch to PAYE?
Many of the larger recruitment agencies manage their own contractor PAYE payroll. NRL’s in-house payroll team manage thousands of PAYE contractors each week, including pension auto-enrolment – an added benefit of being a PAYE contractor.
Would you be better stepping under an umbrella?
Umbrella companies support contractors with compliant PAYE calculations and deductions, acting as the middle person between you and your recruitment agency. NRL has a preferred supplier list for umbrella companies who have gone through a thorough compliance audit process for your reassurance – although you should always undertake your own research before making any decision.
Can I just continue working under my Limited Company?
Yes, of course you can.
The Fee Payer who pays your invoices will be responsible for deducting tax and National Insurance contributions, which they’ll take through a process HMRC calls deemed payment. You can continue to invoice for your services but may need to consider where the deemed payments will come from – a deduction in your takeaway pay, or through an increase in service charges should your End Client accept the additional cost.
Can you work directly for your End Client?
If your project is long-term you could approach your End Client to see if they’d consider giving you a permanent or fixed-term contract as an employee of their business. This would solely depend on how they are approaching IR35, because there will be additional costs for them to manage you as an employee – but where your skills are in demand, they may prefer to consider this option.
Weighing up the pros and cons
Don’t forget that IR35 status determinations are made for each assignment you work on, so the average length of your contracts may dictate which approach will be best for you.
If you work on smaller, short-term projects then it may not be beneficial to move to a pay model such as PAYE or Umbrella – especially if you don’t expect every assignment to be In Scope.
For many contractors, the Limited Company model will still provide the flexibility they require – carefully balanced with deemed payment for any In Scope assignments to ensure compliance.