First time posting on here, so hello to all. Started to go it on my own earlier this year.....exciting and nervous times!!!
No doubt you heard about the ongoings in the world of contractors and IR35. I guess I would like confirmation or correction on whether my understanding is correct. Appreciate any input or thoughts, as I know its a topic with countless scenarios.
Lets just assume a contractor is inside IR35, works via the client - agency - ltd company(lets just call a PSC for ease) - contractor relationship.
- Client pays agency the normal day rate.
- Agency pays the PSC a net amount after deducting EE NI and PAYE
- Agency also calculates ER NI and apprenticeship levy out of its own pocket on top of the gross day rate amount that is owed to the PSC.
- Agency directly pays all these 4 taxes to HMRC and pays a net amount to PSC.
- PSC then has to calculate the actual EE NI, PAYE (will get any/if any rebate at the end of the tax year)
- PSC also needs to calculate its own ER NI out of this.
The calcualtion of the PSC ER NI is where my true questions lies, as technically the ER NI in this whole chain is being paid twice. Is that assumption correct?
And surely the PSC ER NI would be within the day rate owed to the contractor not on top? e.g gross earnings of the PSC = EE NI + PAYE + Net Pay + ER NI + allowable expenses
Hopefully the second part of my question makes sense, trying to explain this to a client in part time role I am currently working at (which happens to be an Agency)
Appreciate any help my fellow finance professionals can give.