IR35 - worked examples

Can't find any

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Trying to run some initial calcs.  
Does anyone have links to worked examples?  I can't find any.  
In particular client is telling me they will have BR tax deducted (they'd be HR tax payer if a normal payroll were run) - are there some special calcs from a payroll point of view? 
Thanks 
 

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By adf2410
14th Mar 2020 00:22

I was subject to the public sector off payroll thingy for a while in 18/19 and while I was most definitely earning more than BR wages, BR tax was all that was deducted. I didn't ever understand why, because I had to 'fill in' a P46 when I started the assignment, so I always expected that my tax code would put in an appearance at some point. It didn't.

I paid some more tax on those earnings at the appropriate time after I submitted my tax return. I also thought it was interesting that one bit of government wanted me to travel to and stay at a location a long way away from my home in order to fulfil this role, and another bit of of government taxed me on my travel and subsistence to do so. I won't be doing that again!

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By David Heaton
14th Mar 2020 15:02

Presumably you're dealing with the contractor who has his/her own PSC and the fee-payer will be deducting PAYE?

The worker already has an employment - in the PSC. When the client or agency that is the fee-payer sets up a payroll record, it will need to decide a PAYE code. The official online guidance doesn't give any special guidance, just "deduct PAYE as appropriate". If the worker gives the fee-payer a starter checklist with Statement C to indicate that there is already another employment, the fee-payer will operate BR. If nothing is signed, it will be 0T W1/M1. Any excess or refund due for the tax year as a whole is then an SA matter. The new regulations haven't made any special arrangements for PAYE codes to be moved around, but you may be able (if appropriate) to change the allocation of the primary code to the deemed employment, so that the deductions are close to the final liability.

The PSC will be paid net. Your client will then be able to draw the net earnings from the PSC without any PAYE or NIC deduction. Your PSC's payroll operation is not necessarily that simple, though, because the PSC remains responsible for auto-enrolment pensions, student loan deductions, any statutory payments and, bizarrely, holiday pay (which will depend on the 'pay' in the PSC, not the deemed pay in the deemed employment). If NMW applies (unlikely in a one-person PSC), it's the responsibility of the PSC, not of the fee-payer.

If the worker's PSC also has contracts outside the OPW regime but in IR35 (eg, because the client is 'small'), it becomes even more complex and silly, because you then have a deemed payment on 5 April as well. If IR35 doesn't apply to the other contracts (eg, real self-employment in the limited company wrapper), you may have regular payroll mixed in with your non-taxable payroll drawings unless the associated profit is taken as dividend.

I haven't seen any worked examples, probably because the rules are still being invented as new problems are emerging, and because there are so many possible combinations of circumstances.

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Replying to David Heaton:
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By kevin.robins
14th Mar 2020 22:15

I just watched a webinar about this and the lecturer said that in all cases where the contract is deemed as one where the payer will need to deduct tax and NI the new employee checklist is not completed (although most of the information is still needed including the NINO and employee private address).There will be a special box to be ticked in the RTI submission and in all these cases they are equivalent “box C” employees and the code to be operated will be BR. There were quite clear on this- the employee may have have an additional Personal liability if they are a higher rate taxpayer.
However the specific NI table for the employee must be established an used.

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Replying to kevin.robins:
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By David Heaton
15th Mar 2020 17:22

I agree that's the logical way to deal with OPW, Kevin, but the draft regulations haven't actually done that. HMRC's online 'find the right code' runs as if the employee has signed statement C, which is the 'right' answer because the fee-payer knows there is already an employment in the PSC.

However, Reg 46, the old P46 rule, hasn't been changed (yet) to deem statement C (mandating code BR) to be automatic, so the deemed employer will strictly still need a signed starter checklist (electronic signing counts) before using BR instead of 0T (and HMRC seems to be expecting all cases to be BR). HMRC's guidance uses examples with both 20% and another rate of deduction but skirts the issue of the starter code. If everyone uses BR, many contractors will underpay tax and need to catch up via SA. Next year, they'll have an underpayment, so their primary tax code should be reduced, but that code is in the PSC, which isn't deducting any PAYE ...

If PSC workers are supposed to be taxed like real employees, they should have the primary tax code allocated to their deemed employment. The problem is possibly that there's no budget for changing the legislation or software, and no time to do it before ministers require the new rules to come into force. The PSC payroll will be the primary employer on NPS and the deemed employer the secondary employer. HMRC don't have time to reverse that logic, so the 1250L code will always go to the PSC where, probably, no earnings are paid. For a worker who only takes on IR35 contracts for public sector or non-small clients, it would make sense for the primary code to go to the deemed employment, but it won't. This could be fixed with a revised starter checklist, but it won't be, at least not yet. For those with some OPW work and some non-OPW work, it'll be confusing.

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Replying to David Heaton:
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By David Heaton
16th Mar 2020 17:19

Additional info, Kevin:
Look at ESM 10019, HMRC's draft guidance on the new rules, which says what I said above - if the contractor doesn't return the starter declaration, 0T is the appropriate code. This accords with the law, but in practice every (sensible) contractor will make a starter declaration and be taxed under BR.

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Caroline
By accountantccole
16th Mar 2020 14:33

Thank you.
Presumably the 5% admin thing has gone away or is only available in the companies with small clients?

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Replying to accountantccole:
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By David Heaton
16th Mar 2020 17:24

Yes. If the contract is in OPW (Chapter 10, Part 2, ITEPA), there's no 5% (this first applied in 2017 with the public sector rules), although the fee-payer can pay expenses gross if they would have been payable gross to a direct employee. The 'ordinary' IR35 rules (Chapter 8) remain as they were.

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By Rgab1947
09th Jul 2020 09:55

Reading the comments here from some very knowledgeable people has given me a head ache.

IR35 is a mess and only a Schizophrenic civil servant living on another planet desperate for money even if it stifles the economy would have thought of it.

Unfortunately I have a number of clients in IT so I have to get my head around it. Bedlam here I come.

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