Contractors: IR35 & general discussion

[Olivera]

deadtom said:

Thank you, that's a good point you've raised, and why I asked in this thread. I did ask if I would be within IR35 and the response was pretty much 'err, yes I think iso, not entirely sure though', but it sounds like I need to get a better answer and clarity re. things like insurance. I do know that work equipment and ongoing training would be supplied, which suggests it would be very firmly within IR35.

I have been given a copy of the basic contract and all it says about attendance and availability is that I have to turn up when agreed. It doesn't say anything about office attendance.

I'll bang my pedantic drum again, but in the vast majority of cases (probably including yours) the term 'Inside IR35' actually means 'on the payroll', whether that's through an Umbrella or on the books of an agency. Therefore 'Inside IR35' or IR35 in general does not apply in any way to your arrangement, you're just a normal payroll employee.

[deadtom]

Olivera said:

I'll bang my pedantic drum again, but in the vast majority of cases (probably including yours) the term 'Inside IR35' actually means 'on the payroll', whether that's through an Umbrella or on the books of an agency. Therefore 'Inside IR35' or IR35 in general does not apply in any way to your arrangement, you're just a normal payroll employee.

I hope you'll forgive my ignorance, but is 'normal payroll employee' not the same as permanent employee?

[Olivera]

deadtom said:

I hope you'll forgive my ignorance, but is 'normal payroll employee' not the same as permanent employee?

A payroll employee is someone employed that pays PAYE tax. The employers could be the main company, or an Umbrella, or an agency. General employment rights are the same across them all. Permanent versus temporary employee arrangements are defined via specifics of the individual contracts. In all cases IR35 does not apply.

[Guvernator]

To be completely honest it sounds like they don't really know what they are talking about and I'm not really surprised. IR35 can be a bit of a tricky beast and not many companies are actually geared up to understand it's various nuances which is why most companies either outsourced their IR35 process or just avoided it all together with blanket bans.

[Eric Mc]

deadtom said:

I hope you'll forgive my ignorance, but is 'normal payroll employee' not the same as permanent employee?

No, there are many temporary employees too. Employment legislation (both tax law and general law) recognises that employment does not have to be of a permanent nature. It can be of a "temporary nature" too. The hours/days worked in themselves are not the determining factor when deciding when somebody is an employee or not.

Most of the people who work on supermarket check-outs will be "temporary employees".

[Burrow01]

Olivera said:

deadtom said:

Thank you, that's a good point you've raised, and why I asked in this thread. I did ask if I would be within IR35 and the response was pretty much 'err, yes I think iso, not entirely sure though', but it sounds like I need to get a better answer and clarity re. things like insurance. I do know that work equipment and ongoing training would be supplied, which suggests it would be very firmly within IR35.

I have been given a copy of the basic contract and all it says about attendance and availability is that I have to turn up when agreed. It doesn't say anything about office attendance.

I'll bang my pedantic drum again, but in the vast majority of cases (probably including yours) the term 'Inside IR35' actually means 'on the payroll', whether that's through an Umbrella or on the books of an agency. Therefore 'Inside IR35' or IR35 in general does not apply in any way to your arrangement, you're just a normal payroll employee.

Depends, if you are via an Umbrella, then you are an employee of the Umbrella company, not the end customer, and so are subject to the Umbrella employment contract conditions.

[Olivera]

Burrow01 said:

Depends, if you are via an Umbrella, then you are an employee of the Umbrella company, not the end customer, and so are subject to the Umbrella employment contract conditions.

Yes that's what I meant, perhaps clearer as "employed (PAYE) by an Umbrella or agency", either way IR35 is not applicable.

[Blown2CV]

Olivera said:

Burrow01 said:

Depends, if you are via an Umbrella, then you are an employee of the Umbrella company, not the end customer, and so are subject to the Umbrella employment contract conditions.

Yes that's what I meant, perhaps clearer as "employed (PAYE) by an Umbrella or agency", either way IR35 is not applicable.

any contractor employed by an umbrella and being paid through PAYE is doing so specifically to comply with IR35 so i wouldn't say it's not applicable, technically. The biggest focus when it comes to compliance is on the group of contractors who are doing roles to which the IR35 rules do not apply, i.e. outside contractors.

[Olivera]

Blown2CV said:

any contractor employed by an umbrella and being paid through PAYE is doing so specifically to comply with IR35 so i wouldn't say it's not applicable, technically.

No, they're being paid PAYE via an Umbrella precisely because IR35 (in it's entirety) does not apply at all, and hence no determination needs to be made (inside or outside).

Blown2CV said:

The biggest focus when it comes to compliance is on the group of contractors who are doing roles to which the IR35 rules do not apply, i.e. outside contractors.

I'll be pedantic once more, but there are usually three categories of contractor:

1) Via PSC - IR35 does not apply, determined as Outside IR35
2) Via PSC - IR35 applies, determined as Inside IR35 (extremely rare, lots of obscure accounting rules apply)
3) Not via PSC - IR35 does not apply, normal payroll employee (Umbrella/Agency etc)

[Regbuser]

The thing that would worry me about deadtom's possible choice, is that as an employee, they have protected employment rights; okay they may not like working at the office three days per week, but if the employer wants rid, then there's a whole civil service consultation procedure to go through, which could take months, or years.
But the minute they're a temp. then it doesn't matter what's been agreed, as the client can just state they want deadtom in the office five days a week, the "as required" clause.

[Countdown]

Olivera said:

Blown2CV said:

any contractor employed by an umbrella and being paid through PAYE is doing so specifically to comply with IR35 so i wouldn't say it's not applicable, technically.

No, they're being paid PAYE via an Umbrella precisely because IR35 (in it's entirety) does not apply at all, and hence no determination needs to be made (inside or outside).

If they're being paid via an Umbrella isn't that only because following a determination the role has been determined "inside"?

I doubt any Contractor chooses to operate via an Umbrella if they can operate via a PSC. The only reason they're doing so is because they're forced to because the end-Client has determined the role inside.

We've just done the same for an Interim CTO. He's got a PSC but because the role has been determined as "inside" he's being paid via an Umbrella (well via an Agency who are paying the Umbrella who are paying him).

[Blown2CV]

sigh. The point i was making was that far from IR35 not applying to umbrella contractors, it just means that they have no choice but to comply with the regs, so there is no need to scrutinise their tax affairs. On the other hand those that are saying "IR35 does not apply to me" i.e. 'outside' contractors do need to be scrutinised as they have the flexibility to not comply with the rules and to avoid tax etc. Most of the effort with IR35 is validating that those who say they are outside IR35 are in fact meeting that criteria.

[theboss]

Countdown said:

If they're being paid via an Umbrella isn't that only because following a determination the role has been determined "inside"?

I doubt any Contractor chooses to operate via an Umbrella if they can operate via a PSC. The only reason they're doing so is because they're forced to because the end-Client has determined the role inside.

We've just done the same for an Interim CTO. He's got a PSC but because the role has been determined as "inside" he's being paid via an Umbrella (well via an Agency who are paying the Umbrella who are paying him).

Yes.

In Oliviera’s example above, it’s like the clients are determining “if (2) then go straight to (3)”

Arguing that IR35 doesn’t apply is obtuse. It may not apply in the literal sense but the two go hand on hand - PAYE is the de facto engagement structure for an off payroll worker that would otherwise have been determined to be inside.

[Gazzab]

Outside = determined as outside and the contractor can use a psc.
Inside = determined as inside and the contractor will likely have to use an umbrella on the clients or agencies list.
Payroll/temp = no determination. IR35 irrelevant. A fixed term engagement via an umbrella.

[Olivera]

Countdown said:

If they're being paid via an Umbrella isn't that only because following a determination the role has been determined "inside"?

In my experience most large corporates have 'blanket banned' PSCs, so the answer to that is no. IR35 is a onerous, arcane and subjective piece of legislation, hence large corporates have just lumped everyone into category 3, even those that could legitimately operate via a PSC outside of IR35. In other words no IR35 determination ever takes place.

[Guvernator]

Olivera said:

In my experience most large corporates have 'blanket banned' PSCs, so the answer to that is no. IR35 is a onerous, arcane and subjective piece of legislation, hence large corporates have just lumped everyone into category 3, even those that could legitimately operate via a PSC outside of IR35. In other words no IR35 determination ever takes place.

Why are most contracts advertised as insider IR35 then? I'd say 90% of the IT roles I see on job boards are advertised as such. My current role certainly was and I'm paid via umbrella.

So while technically you may be correct, in reality the term inside IR35 has become synonymous with any role not being operated through a PSC.

[Olivera]

Guvernator said:

Why are most contracts advertised as insider IR35 then? I'd say 90% of the IT roles I see on job boards are advertised as such.

Because most HR, recruitment staff and even contractors fundamentally misunderstand the legislation. I agree that somehow 'inside IR35' has colloquially come to mean 'a normal PAYE employee', but it still remains wrong.

[CorradoTDI]

Hi all,

Currently working inside IR35 and will be well into the 60% tax trap this year...

I don't currently pay into a pension regularly (but have a couple of existing products from previous jobs)

Can anyone advise a product that I can set up and pay a lump into to reduce my gross income and how this is done please (i.e. do I need to do it before 5th April and then just declare on Self Assessment?)

[Blown2CV]

Olivera said:

Blown2CV said:

any contractor employed by an umbrella and being paid through PAYE is doing so specifically to comply with IR35 so i wouldn't say it's not applicable, technically.

No, they're being paid PAYE via an Umbrella precisely because IR35 (in it's entirety) does not apply at all, and hence no determination needs to be made (inside or outside).

Yes they are. They are deliberately complying with IR35 as a law that specifically applies to people in precisely their situation.

IR35 exists to 'weed out' disguised employees masquerading as service-providing contractors. If all you're doing is removing your disguise then the law (from the lawmakers perspective) did its job. By taking the half-way house employment dictated by IR35, then you would have been exactly the people for whom IR35 was created. If you're abiding by the law in this way, you would not be prosecuted. That doesn't at all mean the law doesn't apply to you.

I can see why lots of people fall into this trap, because despite all the focus in IR35 being on outside contractors, it is only designed to weed out those outside contractors who are actually disguised employees, NOT all outside contractors. If you're a freelancer with a PSC providing services in the same supplying way as a larger company would, then IR35 doesn't apply to you.

So, those who would/could have been disguised employees and those who still are are the individuals in scope of the regulations.

[Gazzab]

Let’s take a large bank or insurer…:typically they stopped doing business with any psc contractors. They didn’t want the hassle or risk involved with assessing each contractor to determine if they are inside or outside. So they stopped engaging psc contractors and just insisted that all contractors were via an umbrella without any form of ir35 determination. So they just avoided ir35 entirely. Without a determination then it’s not inside or outside, it’s just a bit of temp work via an umbrella