Inside IR35 for Limited Company Contractors | How it Works

On the 1st April 2021, the new private sector off-payroll rules for IR35 come into force. In this video we're taking a closer look at if and how you can continue to operate through your Limited Company if some or all of your contracts are deemed inside IR35.
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⏱️ Time Stamps:
1:35 - Can You Operate Your Ltd Company Inside IR35
2:02 - Inside IR35 Example Tax Calculation
3:47 - Why Use Your Ltd Company Inside IR35?
5:32- Using An Umbrella Company
6:02 - The Outlook for Contractors and Freelancers in 2021 and Beyond.
7:78 - Recap
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The broad strokes are: The new IR35 private sector rules are coming into force on 1st April 2021. You can still use your existing personal services limited company inside IR35 or even create a new one. You can also use your personal services limited company as a stepping stone to being a full small trading business. We also talk about Umbrella Companies and why, although a viable option for inside IR35 contracts, are often a short term solution unless required by your agency or client.
Initially the IR35 private sector 2020 rules were just that, to be implemented in 2020. Due to the coronavirus pandemic, the UK government decided in all their wisdom to defer the new IR35 private sector rules until April 2021. In fact, many contractors and freelancers were already in discussions with their agencies and end clients, and using tools like QDOS IR35 to help get a status determination. Roll on 2020 and the question of whether the new IR35 private sector rules could potentially be deferred again, or better still completely canned, crops up time and time again. The one thing we are sure about is that this will not be death of contracting and freelancing, and in our opinion, it will give rise to a new chapter in how contractors and freelancers operate.
We have provided a simplified example of what your accounting and tax calculation could look like operating inside IR35 through your Limited Company. If you'd like more specific information relating to your business needs and IR35, don't hesitate to head to our website and book a free discovery call, where one of our specialist qualified accountants will be more than happy to assist you. We have specialist accountants for limited company directors and contractors.
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#ir35 private sector 2020

[@tahirukharian]

Hi Tony, Fantastic ,informative and very impressive presentation , when will you be updating us 2023 new rules on IR35??

[@fulv_uk]

Interesting video. But what you are not saying is the difference in take home money between the two. Company will need to be prepared to pay more for inside IR35 contracts as contractors are loosing big time. As far as I can, I will refuse inside IR35 contracts unless they accept to pay more. Clients offering outside IR35 contracts will always take the priority when the contractor have the choice.

[@Jack-xy4fy]

They do seem to be paying more from what they were a year or so ago.

[@lolamaven3971]

Very helpful. thanks

[@tonydCFO]

You're welcome Lola. Thank you for leaving a comment.

[@ZR_ZingoRingo]

Thanks do you have a video about the outside IR35 and offshoring, please…thanks

[@barrywood2730]

If you work for a company and it's past April 2021 then you are not except as the rules still apply, but you have to decide whether you are inside or outside the regulations.

[@Ed-em6mf]

Compared to your older videos, you've improved well in production quality

[@tonydCFO]

Thank you Edgar. We now have a production team which is why.

[@psychologyphd9662]

Hi i’m going into locum social work can you advise the best route to go? thank you x

[@sivaharshanarendrapurapu9295]

Great content ...watched a few of your videos ..thank you for an excellent job ..!

[@tonydCFO]

Hi Siva, thank you for your comment and we are glad they are helpful.

[@Mogsoni]

If you work part time for different companies would that make you exempt ?

[@eazybean6160]

Hi, if I'm a single director limited company and working inside IR35 and end client is classed as small, will my company be paid gross by end client and I will have to process this income through PAYE and pay income tax and NI? TIA

[@tonydCFO]

IR35 is complex, confusing and in our opinion, harmful to the economy. However, it's not all doom and gloom and an army of contractors are adapting to the new impending rules by keeping their Limited Companies operational and carrying out multiple contracts, both inside and outside of IR35. Let me know in the comments below if you're thinking about this approach, or whether you feel IR35 will be the death of contracting?

[@oscaricles8013]

Taking into account the pandemic and lockdowns the untold damage the dirty media won't tell us its done businesses gone, jobs, firms etc etc? Economy has fallen off a cliff this is the straw that broke the camels back. IR35 will cause even more damage to an already dire and damaged machine do these peep live in the Twilight Zone? Only a fool/s would bring this in now timing could not be worse it'll cause more probs than it'll solve its inevitable and predictable!

[@dale-fi1fi]

nope closing my company an moving jobs roles no point anymore

[@marviwilson1853]

My understanding of IR35 is that it was really designed to close loopholes that stopped freelance workers from paying UK taxes. In that respect then it is a benefit to the UK economy.

[@Raj-ul9my]

Most agencies were doing this, they allowed people to set up limited companies in the uk so they can avoid getting taxed via PAYE. I think know this and it was a loophole, it was wrong but their was no law enforcing it, so agency working and contractors were allowed to get paid through their so called limited companies which they set up only for the purposes of avoid paying tax and NI even though they were actually working for a boss and for a company under supervision. I am glad this has happened, the true self employed people are construction workers and builders. That’s it or if you have opened a business.

[@SuperAG100]

Hi Tony, really good video. What I'd like to know is if you are inside and operating through a LTD then which method would you use to pay yourself - in your example, you say £6230 is paid as a salary to yourself so does that mean you would keep payroll services for the LTD going and have payslips produced every month depending on how many days you've worked? Or should the income be drawn as dividends? thanks a lot.

[@tonydCFO]

Hi SuperAG100, this is a difficult question to answer unless we know your fuller circumstances and objectives. There is no one size fits all. If you pay yourself a salary then generally yes you will need to keep payroll services going. You may find our bitesize advisory service helpful >>> aidhanfinancial.com/bitesize-advisory/

[@CaratacusAD]

The biggest problem I've seen is that a lot of agencies are advertising a day rate for inside IR35 contracts is your forced into using an umbrella company and either way they're deducting the employers NI costs from that contractor's advertised rate instead building it into the client/umbrella fee, i.e making the contractor pay for their own employment which isn't technically legal and in reality, Net you are making money off a rate for lower than advertised to you, again illegal. Be incredibly careful when reading the definitions of rates in your contract, especially 'assignment' vs 'gross'. They get around this by people not reading or challenging these contracts. Also it's an example of the hands off approach of government policy that allows this abuse.

[@mrredlapel]

So if I’m on cis scheme , I will have to pay double insurance , tax at 20% and the fee to the umbrella ?

[@dale-fi1fi]

yep pretty much i am shutting my limited company down an working direct for the company i sub contracted to

[@goth_dude6874]

Are people really earning that daily rate if so let me know how ?

[@kevinwoolford69]

A lot of major engineering companies are stopping taking on contractors period or umbrella only...

[@tonydCFO]

Hi Kevin, yes regrettably there are companies applying a 'blanket' policy of no contractors or go through an Umbrella Co. But not all are doing this and in our view, market forces will have an influence come post Apr 2021, especially if these major companies cannot attract the best and right talent. Only time will tell.

[@JohnDoe-zd2if]

What solutions do you see for nurses who operate through their Ltd and work with NHS clients, the work is supplied via agencies and paid through an intermediary Ltd? What are the ways to continue to write off the expenses ? Thank you !

[@tonydCFO]

Hi John thank you for your question - unfortunately this is not something we can answer simply on a KZbin comment as you are requesting advice. You can get a qualified response by using our bitesize advisory service here >>> aidhanfinancial.com/bitesize-advisory/

[@clubhouse7372]

Hi John Doe..I am looking for answer for same question...could you let me know any

[@vidshah1]

I am an international student who is allowed full-time job on university sponsorship. Can I take up an opportunity in inside IR35?

[@jamess3474]

What is IR 35? What does it mean? What does it stand for?

[@BrainInteractive]

I heard if you use a limited company for Inside IR35 contracts you have more control over what can be considered a business expense and how pensions contributions work. Is this true?

[@Kazakhsha-styleUk]

not any more lol

[@dale-fi1fi]

all gone them perks my friend the government want every penny your earn

[@reedmark75]

Why are umbrella companies a short term solution and what would you class as a long term solution?

[@tonydCFO]

Hi Mark, Umbrella solutions traditionally have been used a short term solution as the tax regime is the same as employment income. The majority of long term contractors opted for a Ltd Co model. However, in the new IR35 world, perhaps they will start becoming more of a long term solution to contractors. Only time will tell.

[@Mogsoni]

If we can no longer use our limited companies will we be still liable for the bounce back loans when they go bust ?

[@tonydCFO]

Hi Martin, your company is liable for the BBL whilst it is solvent. If your company goes bust (ie insolvent) then you have to go down a insolvency liquidation route. This is quite involved and your situation is assessed on a case by case basis.

[@luckystripe672]

I thought the conservatives were supposed to be in support of lower taxes to try and encourage a healthy economy? These new IR35 restrictions will only slow the economy down, as employers will feel forced into taking on permanent staff rather than the more flexible self employed.

[@tonydCFO]

Hi Lucky Stripe, thank you for your comment and view. We welcome them.

[@isaiahrhys1711]

Instablaster

[@Jack-xy4fy]

This comment didn't age well, contractor market is booming. My rate has almost tripled since this change.

[@luckystripe672]

@@Jack-xy4fy, you think the UK economy is currently doing well?

[@Jack-xy4fy]

@@luckystripe672 I never said that. The basis of your comment was that organisations would stop taking contractors and only take perms thus damaging the economy more. But that's not what's happening, everyone is screaming out for contractors (umberella obviously), and the rates are through the roof. I've personally tripled my daily rate in just over a year. The world economy is shit at the moment, its a logical fallacy to blame that on IR35 since that only affects the UK. Blaming the current state of the world economy on anyone other than Joe biden and the US democrats isnt just Dishonest, its shilling to laughable extents.

[@fbndeloa2064]

I run a care company and have some employees who work for me as self employed. Our business is very small . Can I continue to use the care workers who are self employed? I have some employees under paye and others as self employed carers. Many thanks

[@dale-fi1fi]

nope they have to use an umbrella company or you have to set them on as permanent staff

[@cu99460]

You said (01:20) ''IR35 determination is down to you, the contractor - if your watching this before 1st April, 2021'' - this is incorrect. If you look at 2016-18, BBC presenters were getting caught in IR35 disputes and some even losing under the banner of Personal Service Companies. So, I would say your IR35 determination was never your choice, unless you were contracting work before 2000, when IR35 came about. Your best bet is just to pay within IR35 rules to prevent a penality and lost of financial interest to HMRC. I know it a sucker, but I done a little but of homework on this. HMRC will not care about anything you determine.

[@SuperCapuka]

I just hate umbrella payroll companies they are the cancer of construction work, I know people being deducted £100 per week as their fee to only just produce a piece of paper. I was a limited company and now agencies aren’t able to pay people via limited companies, ridiculous. I have been pushed to PAYE and I will be paying lots more in tax and hardly getting anything back.

[@dale-fi1fi]

same il be losing £250 a week because of how it works an the cost

[@tonydCFO]

Hi SuperCapuka, indeed Umbrella Co's can be somewhat onerous including the taxation. These are the consequences of IR35.

[@cata_macu]

Hi, I’m working as a driver for Dhl through an agency with my Limited company, is there any way I can still work with my Limited company or I will have to move to PAYE? Thanks

[@dale-fi1fi]

nope that has all gone now

[@danny1229c]

i have been a self employed ltd driver for years and now its all over thanks to this bollocks ! the companies won't touch you and the agencies won't touch you now unless you go umberella which i'd never do so once again a man can't work off his own back and keep what he should keep for his labour and choose how much he works. it's all bollocks and moving the goal posts to keep us slaves to the 5 day week 45 hour shite

[@kani9325]

Are you really sure one can still operate with a Ltd company inside IR35?

[@tonydCFO]

Hi Kani, yes you can so long as your agency/end client permit it. They may insist you work through an umbrella or off-payroll route, in which case your Ltd Co should not be used.

[@dale-fi1fi]

yes you can if you are using your own vehicle an equipment

[@christopherrome4475]

HELL MET MAN - Protesting against the UK's IR35 Regulations - KZbin

[@blisterj]

The whole lot of this nannying has already destroyed the industry hence the current huge availability on the job market as contractors either leave the business and go else where or foreign labour simply go home. I have been contractor for 30 years and having over 21 pc taken from your weel y or monthly rate is ridiculous.

[@ihf8766]

No one knows if it’s coming in to March,they haven’t made the final decision yet

[@barrywood2730]

The new rules in April 2021 are planned to come in. It has past through parliament and got Royal accediation from the Queen. Although I think it would be very two-faced of the government to deny ltd company furlough and then in April 2021 indicate that 90% were supposed to be hidden employees (caught by IR35). Lets hope that they have some common sense and at least delay IR35 for another year. To be honest it's the least they could do!

[@ihf8766]

@@barrywood2730 yea maybe so the reason it wasn’t introduced last year because they knew lockdown was coming and they would of had to pay us all furlough,so made out they were doing us all a big favour by not bringing it in,don’t have to be a rocket scientist to work that out.as an hgv driver this government is in for one big shock when we decide not to bother going to work,it will be worse than any COVID lockdown

[@danny1229c]

@@ihf8766 as a fellow hgv driver i really hope there is a massive shortage of drivers and nobody steps in to fill the slot, its tge only way to change anything is to do it the hard way and vring the country to its knees but i doubt it'll happen as all i see ate sheep these days with no will or back bone

[@ihf8766]

@@danny1229c yea exactly lorry drivers are just like little sheep,grin and bear the loss they are gonna lose each week and carry on,as long as they have a scania to drive with plenty of spot lights on it