Contractors - You still think it is worth it?

[wombleh]

PurpleTurtle said:

In the very early days of IR35 a well known provider of this cover offered a 'free' contract review service, as part of its IR35 insurance offer.

I answered their questions with total honesty, it said I was in IR35
Bloke I at next to (same job/same role/been there 10yrs longer than me) answered how he wanted to answer the questions, it said he was outside IR35.

I took the view that, in the event of a claim, your first hurdle would be getting any insurer to cough up, that they might try to wiggle off the hook "because you didn't properly describe your working arrangement when you took out the cover

That said, I've since heard a few people say that an IR35 investigation has been known to be dropped once HMRC know you've got insurance. It's easier for them to go after those that don't. Don't know how much truth there is in this.

It's a small industry and dropping cases would quickly become well known.

I think there is some truth in your last sentence as the checks done before giving insurance cover aren't that much, just a couple of questions about the contract. They used to insist on reviewing every contract but that's now optional, which indicates to me they have gotten more confident of defending any cases.

I wonder if HMRC are even chasing investigations that much, they've not had many successes over the years it's been running. If they can push for changes like the recent public sector ones and get more inside to start then that's far cheaper and more effective.

[gavsdavs]

wombleh said:

It's a small industry and dropping cases would quickly become well known.

I think there is some truth in your last sentence as the checks done before giving insurance cover aren't that much, just a couple of questions about the contract. They used to insist on reviewing every contract but that's now optional, which indicates to me they have gotten more confident of defending any cases.

I wonder if HMRC are even chasing investigations that much, they've not had many successes over the years it's been running. If they can push for changes like the recent public sector ones and get more inside to start then that's far cheaper and more effective.

I'm not sure about IR35, but I've seen HMRC try and scare and isolate people into paying up to settle. I've not heard of anyone being actively pursued for IR35 but I dont' follow the contractor websites for evidence...

[Welshbeef]

PurpleTurtle said:

In the very early days of IR35 a well known provider of this cover offered a 'free' contract review service, as part of its IR35 insurance offer.

I answered their questions with total honesty, it said I was in IR35
Bloke I at next to (same job/same role/been there 10yrs longer than me) answered how he wanted to answer the questions, it said he was outside IR35.

I took the view that, in the event of a claim, your first hurdle would be getting any insurer to cough up, that they might try to wiggle off the hook "because you didn't properly describe your working arrangement when you took out the cover

That said, I've since heard a few people say that an IR35 investigation has been known to be dropped once HMRC know you've got insurance. It's easier for them to go after those that don't. Don't know how much truth there is in this.

Hmm vested interest springs to mind.

[alfie2244]

I thought the determination whether inside IR35 or not now laid with the end client and it was they that would be penalised if wrong? eta Just remembered it applies to Public sector only at the moment sorry

[PostHeads123]

The IR35 insurances referred to these days the only insurance you will get without a letter from your end client confirming your working practices is to cover the cost of an accountant and not the tax, interest plus penalties owed. If you want IR35 insurance that would cover you for the tax owed ++ your client will have to provide a letter confirming your working practices and these need to make you clearly outside of IR35.

Its sh*t, HMRC and gov screwed it up for a lot of people they just don't get now projects are suffering and delayed TFL have already stated the changes on the public sector side makes projects hard to resource.

I'm looking to go back to contracting after 5 years of permy but will do it inside of IR35, the main reason I'm doing this is what I see anyone getting contractor to perm offers at clients often get a perm salary far higher than the role would usually pay, plus I'm sick of permy I just don't do brown nosing or play the game, so I'm going no where hahaha

[bucksmanuk]

alfie2244 said:

I thought the determination whether inside IR35 or not now laid with the end client and it was they that would be penalised if wrong? eta Just remembered it applies to Public sector only at the moment sorry

Public sector only? I thought that…..
I know someone who has just left a 6 month contract for a Japanese medical equipment manufacturer in London. She was informed, as far as they were concerned, the work was INSIDE IR35. She didn’t get a say in it.

[wombleh]

PostHeads123 said:

The IR35 insurances referred to these days the only insurance you will get without a letter from your end client confirming your working practices is to cover the cost of an accountant and not the tax, interest plus penalties owed. If you want IR35 insurance that would cover you for the tax owed ++ your client will have to provide a letter confirming your working practices and these need to make you clearly outside of IR35.

That's not the case as stated above, possibly they'd ask for that if you're borderline.

You get cover with IPSE membership just for the legal representation but QDOS cover the lot including any tax liability and interest.

[theboss]

The only thing which determines IR35 status is your working practices. Under the current system public sector clients are now required to apply a series of tests the outcome of which dictates whether you are treated as inside or outside, with the client/agency making the necessary deductions if you are in.

Whilst I don't like IR35, I don't think the new setup is necessarily such a bad thing because it forces an increased awareness amongst clients and agencies of IR35 and how working practises affect the status.

I'd never apply for a stated INSIDE IR35 contract personally, but on the other hand I'd feel more reassured in taking a stated OUTSIDE IR35 contract (which do get advertised) knowing from the outset that the client was satisfied the working arrangements would support this, than before the new arrangements came into place. At least there is less ambiguity when you're approached about the job.

If this comes into the private sector I would expect companies to generally be more capable of adapting and being supportive of 'outside IR35' working practices than public sector orgs as they obviously see commercial value in engaging flexible workers and may therefore be more likely to make concessions in order to continue doing so.

For contractors I think its a case of being forced to decide whether you're happy to work under 'inside' or 'outside' working conditions and if the latter then standing your ground. Personally I'll always aim to work outside and I much prefer my working practises to fully reflect this i.e. working autonomously, using own tools and premises, working on multiple engagements concurrently so the more aware and 'on-side' the clent is, the better.

[schmunk]

theboss said:

Personally I'll always aim to work outside ...IR35... and I much prefer my working practises to fully reflect this i.e. working autonomously, using own tools and premises, working on multiple engagements concurrently so the more aware and 'on-side' the clent is, the better.

That sounds very positive but in practice, I anticipate that a significant proportion (significant majority?) of "consultants" don't really operate like this, though; they:

• go to the "client's" office 5 days a week for an indefinite period of time (notionally a fixed contract, but in practice continually extended without significant review);
• get told what to do;
• have fairly little flexibility on how or when to do it;
• use the "client's" systems and equipment;
• have minimal risk from failure of their work (other than being fired/"disengaged")
• have a fancy contract which says "nothing in this contract implies that you are an employee" and other similar reassuring but, in practice, virtually worthless wording
• each week/month change the date on their pre-filled timesheet/invoice and send it to the "client" for payment

These are the ones who should be (but seemingly often aren't) caught by IR35. I fully expect HMRC to extend their new tool/process to all employers, at which point firms' risk management and tax teams will very quickly start reviewing terms for new and existing contracts. Reputation management trumps cost saving, in any serious company.

[theboss]

schmunk said:

theboss said:

Personally I'll always aim to work outside ...IR35... and I much prefer my working practises to fully reflect this i.e. working autonomously, using own tools and premises, working on multiple engagements concurrently so the more aware and 'on-side' the clent is, the better.

That sounds very positive but in practice, I anticipate that a significant proportion (significant majority?) of "consultants" don't really operate like this, though; they:

• go to the "client's" office 5 days a week for an indefinite period of time (notionally a fixed contract, but in practice continually extended without significant review);
• get told what to do;
• have fairly little flexibility on how or when to do it;
• use the "client's" systems and equipment;
• have minimal risk from failure of their work (other than being fired/"disengaged")
• have a fancy contract which says "nothing in this contract implies that you are an employee" and other similar reassuring but, in practice, virtually worthless wording
• each week/month change the date on their pre-filled timesheet/invoice and send it to the "client" for payment

These are the ones who should be (but seemingly often aren't) caught by IR35. I fully expect HMRC to extend their new tool/process to all employers, at which point firms' risk management and tax teams will very quickly start reviewing terms for new and existing contracts. Reputation management trumps cost saving, in any serious company.

Totally agree. I've worked in these environments as I'm sure most contractors have. Sometimes working practises aren't negotiable but usually, in my experience, you get treated more or less as you expect to get treated. Some put up a resistance to any of the above and attempt to distinguish their working practises (or walk), others are more than happy to work as permies in all but name because they think of themselves as such.

My point is that clients haven't really cared about IR35 - they want the best of both worlds in terms of flexible hiring/firing for project deliveries but also want to supervise/direct/control. The contractor wants to be outside IR35, technically (probably) works as though he is inside, but carries the risk and hopes for the best. I hope the new system shakes that up slightly. In a worst case (for most contractors) scenario all companies effectively impose inside-IR35 terms. I do suspect that that will be the case for certain types of contract roles, but there will also be requirements which fit more into the 'outside IR35' working model and therefore it will be clearer for contractors to determine and distinguish their status.

It will be interesting to see how things pan out.

[worsy]

schmunk said:

theboss said:

Personally I'll always aim to work outside ...IR35... and I much prefer my working practises to fully reflect this i.e. working autonomously, using own tools and premises, working on multiple engagements concurrently so the more aware and 'on-side' the clent is, the better.

That sounds very positive but in practice, I anticipate that a significant proportion (significant majority?) of "consultants" don't really operate like this, though; they:

• go to the "client's" office 5 days a week for an indefinite period of time (notionally a fixed contract, but in practice continually extended without significant review);
• get told what to do;
• have fairly little flexibility on how or when to do it;
• use the "client's" systems and equipment;
• have minimal risk from failure of their work (other than being fired/"disengaged")
• have a fancy contract which says "nothing in this contract implies that you are an employee" and other similar reassuring but, in practice, virtually worthless wording
• each week/month change the date on their pre-filled timesheet/invoice and send it to the "client" for payment

These are the ones who should be (but seemingly often aren't) caught by IR35. I fully expect HMRC to extend their new tool/process to all employers, at which point firms' risk management and tax teams will very quickly start reviewing terms for new and existing contracts. Reputation management trumps cost saving, in any serious company.

So just to expand this

Having to request and get authorisation for holidays is a big no no
Mutuality of obligation, do they turn up and expect payment when the project is complete but contract still valid for example
Attending training paid by the client
Attending social events that are normally for employees only
Managing staff (ie appraising rather than just task details)

[cerbfan]

Piersman2 said:

CaptainSlow said:

Welshbeef said:

CaptainSlow said:

Why does this trigger it? I'm currently considering going contracting and will do the books myself.

Accountancy firms charge £180 to do your books for the year. Spend the time you'd use doing this on generating the growth of your company instead.

That seems very low. Doing my own books wouldn't take me much time either. Do HMRC look at who is submitting Corp Tax returns and use this as a trigger as you originally suggested?

I've used a firm of accountants in Peterhead for the 25 years I've been a contractor. I don't know if it's a trigger or not, but it seems sensible to me that if I was looking to distill a list of thousands and thousands of companies down to a list that I wanted to investigate I'd be considering the entity submitting the books. Trusted, reliable, recognised 'firm' vs unknown entity? I know which I'd pick to go and look at first.

A fellow Blootoonser! I use Bain Henry Reid as well and have done for all my contracting life and they are very good if not a little expensive and also against me doing anything remotely questionable to reduce my tax bill, which in the current light of things is probably no bad thing.

[g7orge]

gavsdavs said:

I'm not sure about IR35, but I've seen HMRC try and scare and isolate people into paying up to settle. I've not heard of anyone being actively pursued for IR35 but I dont' follow the contractor websites for evidence...

I went through an IR35 investigation when it first hit IT contractors a good few years ago - I had insurance through the PCG (who were absolutely useless)

The IR come in all guns blazing - It went on for 2 years. It was a hideous experience.

They refused to look at my contract, they were only interested in looking at the contract between the client and the agency. They had a set of 30 questions (that I will find up) that all skewed any answers given to showing that you are somehow full time employed. They wanted to give this to the clients HR to answer which I refused. Very long story short - I got a good tax consultancy to step in - cost me a couple of grand but it shut the investigation down within a month of them being involved. The IR sent me a one line letter stating they were happy to now close the case.

Didn't stop me contracting -

[Otispunkmeyer]

interesting read this thread

I would like, in the future, to work for myself either by contracting or having my own business providing a service. Not sure what it is exactly that I'd want to be doing but at the same time I wouldn't feel confident enough to be doing whatever it is right now... not enough experience to rely on.

How did you guys end up contracting/offering your own services.... pushed into? jumped ? did you have a plan or did it all kinda just happen?

[theboss]

Late 2008 for me, I was 27 and working for a consultancy services provider... effectively suffering all the downsides of contracting (working wherever the account is based, living out of a case etc) without any of the advantages or the autonomy or flexibility to be able to pick and choose which jobs I wanted to do. My skillset is Windows virtualisation and app delivery infrastructures notably Citrix.

Secured an infrastructure contract luckily by virtue of the fact I held security clearance (ordinarily they would just take seasoned contractors rather than risk a permie taking the initial leap). Went from about £50k to £400/day, first contract lasted 12 months then I left for something better in the City... and that has carried on ever since with rates having long since plateaued at £500-600 for what I do. I’ve never been out of work and I supplement “full time” contract income with a lot of ad-hoc and retained consultancy and support work which has boosted my business’s income nicely over the years.

It’s definitely become less compelling in recent years with the dividend tax and a few other changes, the market in my particular skill area is also changing and rates certainly aren’t going up. I think it’s less compelling than it was 10 years ago but I certainly know what I’d prefer to carry on doing for the foreseeable future and I value my independence and autonomy greatly. I’ve also built a great network of clients and associates and have enough ad-hoc work in the pipeline to move into a purely freelance working model without tying myself into a long term contract - the problem being that in doing so I risk excluding myself from the bigger / better funded projects where they want to secure professional services for 12+ months at a time.

[PostHeads123]

Usual rumours going about now is that in this years autumns budget some of the public sector IR35 changes already in place will start being applied to private sector gigs. linky > http://www.contractoruk.com/news/0013227more_just_...

Edited by PostHeads123 on Wednesday 25th October 14:00