Confirm the decision before comparing rates
Identify the client, worker or intermediary, fee payer and exact engagement. Obtain the status determination outside Margin101. The comparison is only meaningful when both scenarios cover the same work and billable-day basis.
Prerequisites
- The engagement and fee-payer facts have been identified. (not complete)
- An external status determination has been obtained for this engagement. (not complete)
- Both commercial scenarios cover the same scope and billable days. (not complete)
- Every compared rate and fixed client cost has been normalised to a VAT-exclusive amount; stop if that basis cannot be confirmed. (not complete)
- The applicable employer on-cost rate is user-confirmed rather than inferred by Margin101. (not complete)
Keep the commercial inputs separate
| Input | Meaning | Boundary |
|---|---|---|
| Outside service day rate excluding VAT | The entered service fee for the same engagement and billable-day basis. | It is not worker take-home. |
| Outside fixed client cost excluding VAT | Other client-side cost entered for the outside scenario. | Use the same cost scope in both scenarios. |
| Inside deemed payment per day excluding VAT | The user-confirmed VAT-exclusive direct-payment basis for the inside scenario. | Margin101 does not calculate payroll deductions or VAT. |
| Inside employer on-cost and fixed cost excluding VAT | Applicable client-side amounts entered on top of the deemed payment, with fixed cost entered excluding VAT. | The on-cost rate is user-confirmed, not a statutory default. |
Compare client cost on one basis
Before using the engine, normalise the service rate, deemed-payment basis and fixed client costs to user-confirmed VAT-exclusive amounts. This is a modelling input boundary, not a VAT recovery decision: Margin101 neither deducts VAT nor determines whether any VAT is chargeable or recoverable. The engine multiplies each entered daily amount by the shared billable days, adds the matching fixed client cost and, for the inside scenario, applies the entered employer on-cost rate to the deemed direct payment. It then compares total VAT-exclusive client cost and derives the inside deemed rate that would match the outside client cost when the fixed-cost floor allows it.
Worked example from the tested engine fixture
Every displayed output below comes from compareOffPayrollCommercialScenarios. The inputs are labelled assumptions, not UK benchmarks.
| Input | Value | Qualification |
|---|---|---|
| Billable days | 200 | Same engagement scope in both scenarios |
| Outside service day rate excluding VAT | £600 | User assumption |
| Outside fixed client cost excluding VAT | £2,000 | User assumption |
| Inside deemed payment per day excluding VAT | £500 | User-confirmed VAT-exclusive assumption |
| Inside employer on-cost | 15% | User-confirmed assumption, not an embedded statutory default |
| Inside fixed client cost excluding VAT | £3,000 | User-confirmed VAT-exclusive assumption |
| Result | Outside scenario | Inside scenario |
|---|---|---|
| VAT-exclusive service fees or deemed direct payment | £120,000 | £100,000 |
| Employer on-cost | Not applied | £15,000 |
| Total client cost excluding VAT | £122,000 | £118,000 |
| Effective client cost per day excluding VAT | £610 | £590 |
Test assumptions and stop when the basis is unclear
- Change billable days only when both scenarios still describe the same engagement scope.
- Keep every compared rate and fixed client cost on the same VAT-exclusive basis; stop rather than estimating VAT treatment.
- Confirm the employer on-cost rate and each fixed client cost from the actual arrangement.
- Treat an unreachable fixed-cost floor as a stop condition, not as a zero deemed rate.
- Stop if status is unclear or disputed, the payroll basis is unclear, or umbrella, agency or fee-payer facts are incomplete.
Carry the reviewed rate into the commercial quote
After confirming the commercial basis, use the Global Service Rate & Quote Planner to add delivery capacity, overhead, scope, risk and target contribution. Do not import worker take-home or tax estimates into the customer quote.
Official sources and review boundary
Sources checked
- Margin101 DataHub: UK off-payroll commercial comparison boundary — Margin101: Governed source-reference page for the exact HMRC dependency version acknowledged by this companion.
- HMRC: Understanding off-payroll working — HM Revenue & Customs: Official status-process boundary; Margin101 does not determine status.
- HMRC: Fee-payer responsibilities — HM Revenue & Customs: Official deemed-employer cost boundary for applicable arrangements.
Common questions
Frequently asked questions
- Does Margin101 decide whether an engagement is inside IR35?
- No. Confirm status outside Margin101 for the specific engagement before using the commercial client-cost comparison.
- Does matched client cost mean matched worker take-home?
- No. Client cost does not establish equivalent worker income, tax, benefits, rights, risk or legal status.
- Does Margin101 deduct VAT to create the comparison basis?
- No. Enter both scenarios on a user-confirmed VAT-exclusive basis. Margin101 does not determine whether VAT is chargeable or recoverable and stops short of VAT advice.
- Where should the reviewed commercial rate go next?
- Carry it into the Global service quote, then add capacity, overhead, delivery scope, risk and target contribution without importing payroll or take-home estimates.