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Contractor now on payroll, salary sacrifice rules.

Can a contractor rebate fees to have these processed on payroll with salary sacrifice?

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A client has a director who has been invoicing fees via a PSC for consultancy services. The client now understands that these payments should have been processed via payroll. IR35 does not apply as it is a director providing services, the payroll requirements trumps IR35.

The payroll processing will happen going foward and the director has requested that the majority of fees are paid via contributions to a SIPP, with enough annual allowance in place to cover these.

The director has also offered to rebate some recent fees and also have these processed via payroll - is this possible? And if so, could the salary sacrifice arrangements also apply?

Second question - if the director is able to demonstrate to HMRC that had payroll applied from the start of the assignment then the majority of fees would have been paid into a SIPP, AND that the director's PSC has made substantial ER contributions to the SIPP - would any of this help reduce the liabilities of my client and /or the rate of penalties that would apply.

Grateful for consisderation of these facts!

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