Contractors' Questions: Can I do two inside IR35 contracts at the same time?

Contractor’s Question: I’m currently working for Client ‘A’ outside IR35 until 05/08/24 and then moving to inside IR35 from 06/08/24.

The agency gave me an option to choose umbrella company or my own limited company from 06/08, so I decided to go with my limited company.

But I’ve landed another contract with Client ‘B’ which is also inside IR35 (via umbrella only) starting also from 06/08.

So can I do both inside IR35 contracts at the same time ? Client A contract via my limited company and client B contract via an umbrella company, or is there tax risk here?

And if I can do both inside IR35 contracts simultaneously, will I pay more tax for the Client B contract because this amount will get directly paid to my personal account? Or Client A will deduct more to pay additional tax?

Expert’s Answer: The short answer is simply “yes”-- you can absolutely work for multiple clients concurrently. 

Pick n’ mix

It is entirely possible to have two outside IR35 engagements, two inside IR35 engagements, two employments or any combination of the above -- each engagement is determined individually on its own merits.

From a tax perspective, if PAYE is applied to both engagements (employed via umbrella and inside IR35 via PSC), then it will depend on the income received from these engagements. 

Starting point: your tax-free personal allowance in 2024-25 of £12,570

You only have one personal allowance (tax-free pay up to £12,570) applied to your collective income. If the entirety of your personal allowance is used up by the engagement with Client A, then you will pay tax on all income received from Client B.

Typically with concurrent contracts, the personal allowance will be entirely used up via your main employment i.e. the employment in which you receive the majority of your income, and then your second employment is taxed on your total income (typically placed on a BR code).

Under the so-called the deemed payment rule, the ‘fee-payer’ should be using BR code. And this would typically apply in all cases of deemed payment operation due to the individual’s main employment being with their PSC. 

Deemed payment income (cont.)

In your scenario, the umbrella employment would likely use up the entirety of the tax allowance; and all of the deemed payment income to your PSC will be taxed in full. 

What may happen is, if you draw salary from your PSC and those combined incomes push you into the higher rate tax bracket, then there may be additional tax which you would need to pay to HMRC. 

If you do not go over the higher rate tax threshold there should be no additional employment taxes to pay. Your accountant should be able to provide estimated prediction of any additional taxes due based on your income levels.

Check the small print

The tax position aside, it is also worth checking the terms and conditions of both inside IR35 contracts. Often umbrella employment contracts contain a clause which requires you to notify the umbrella company if you are providing services concurrently or have a second employment (and this can be of vital importance for certain industries such as driving where hours need to be monitored). 

Contractor engagements, even inside IR35, often contain anti-compete clauses where you must obtain permission to provide services to a similar client. It is worth checking with your engagers, and the contractual wording, to ensure you do not unwittingly breach any terms. Good luck!

The expert was David Harmer, associate director of contractor solutions at Markel Tax.