IR35

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Doofus

Original Poster:

25,732 posts

172 months

Tuesday 19th June 2018
quotequote all
Not sure if this should be here or on Jobs & Employment...

I do some consulting work for varous clients, through a Ltd Co. Advising on strategy, coaching, project mgt. That kind of thing.

I've been asked to take on a project by a new client who are insisting that the cpnteact is 'inside IR35'.

This isn't something I'm familiar with. In essence, is it just that I'll need to pay tax and NI as if I were an employee? How does this work if I invoice through my Ltd co (not an umbrella), from which I pay income tax and NI anyway? Do I just increase my day rate by 40%?

sybaseian

1,826 posts

274 months

Tuesday 19th June 2018
quotequote all
Doofus said:
Not sure if this should be here or on Jobs & Employment...

I do some consulting work for varous clients, through a Ltd Co. Advising on strategy, coaching, project mgt. That kind of thing.

I've been asked to take on a project by a new client who are insisting that the cpnteact is 'inside IR35'.

This isn't something I'm familiar with. In essence, is it just that I'll need to pay tax and NI as if I were an employee? How does this work if I invoice through my Ltd co (not an umbrella), from which I pay income tax and NI anyway? Do I just increase my day rate by 40%?
This is a very grey area as to wether your proposed contract is inside IR35. There are plenty of recent cases where HMRC has claimed a contract was inside IR35, but at tribunal they have lost the case and the contract was found to be outside it.

It has been pointed that the HMRC tool for deciding if you are a disguised employee and therefore inside IR35 does not work correctly (BBC TV Stars to name one case).

http://www.contractorweekly.com/ir35/ir35-guide/

robinessex

11,046 posts

180 months

Tuesday 19th June 2018
quotequote all
Was contracting for 25 yrs. YOU NEED AN ACCOUNTANT. Don't upset HMRC, they never forget you if you get on the wrong side of them. IR 35 was introduced by a Labour government. The Conservatives promised in an election manifesto to abolish it, but it went the same way almost political manifesto promises, complete bks

arfur

3,871 posts

213 months

Tuesday 19th June 2018
quotequote all
Doofus said:
Not sure if this should be here or on Jobs & Employment...

I do some consulting work for varous clients, through a Ltd Co. Advising on strategy, coaching, project mgt. That kind of thing.

I've been asked to take on a project by a new client who are insisting that the cpnteact is 'inside IR35'.

This isn't something I'm familiar with. In essence, is it just that I'll need to pay tax and NI as if I were an employee? How does this work if I invoice through my Ltd co (not an umbrella), from which I pay income tax and NI anyway? Do I just increase my day rate by 40%?
If this is Govt contract then there will be an agency. You invoice in full to the agency and they pay your ltd minus paye/ni but all the vat

Raise your price might work, but if not, stay clear. This will be hapenning more and more over the next 12 months (probably)

Doofus

Original Poster:

25,732 posts

172 months

Tuesday 19th June 2018
quotequote all
It's not a government contract. It's directly hired by a business co-owned by a educatiobal establishment and a plc.

Doofus

Original Poster:

25,732 posts

172 months

Tuesday 19th June 2018
quotequote all
robinessex said:
Was contracting for 25 yrs. YOU NEED AN ACCOUNTANT. Don't upset HMRC, they never forget you if you get on the wrong side of them. IR 35 was introduced by a Labour government. The Conservatives promised in an election manifesto to abolish it, but it went the same way almost political manifesto promises, complete bks
Thank you. I HAVE AN ACCOUNTANT. I was an accountant. I am not a contractor.

PostHeads123

1,042 posts

134 months

Tuesday 19th June 2018
quotequote all
I would be a bit worried you don't realise what IR35 is epically if you have been operating as a 1 man bad ltd and were an accountant.

In a nutshell inside IR35 means you cant take dividends from any revenue you generate from that client, the revenue is treated as income and you / your limited will pay employee AND employers NI on as well as usual income tax, it also limits expenses you can claim. Inside of IR35 usually works out around 50% - 52% take home of daily rate vs. around 70-73% take home outside of IR35 with dividends.

Whether you and inside or outside of IR35 gets determined by a lot of things but its mainly to do with working practices (have a google) , most contractors claim to be outside or IR35 but reality is they aren't they just hope they don't get caught and tbh most don't. You client is probably saying its inside as there was a shift in the public sector which meant the client determined your IR35 status and if they got it wrong they paid up, this isn't in the private sector yet you can still decide your status, but I guess some clients may be hedging on the side of caution and saying it is inside IR35.

If you are of an age where pensions are priority if the contract is inside of IR35 you can kind of offset it by pumping the cash into a pension.

Edited by PostHeads123 on Tuesday 19th June 13:38


Edited by PostHeads123 on Tuesday 19th June 13:40


Edited by PostHeads123 on Tuesday 19th June 13:42

super7

1,922 posts

207 months

Tuesday 19th June 2018
quotequote all
How long is the piece of work for? Is it a full time engagement?

Surely whether the contract is within IR35 or outside of IR35 is down to the contractor to decide? Not the company? At the end of the day, you will be invoicing the customer and they'll be paying it? Whether your inside or out is irrelevant to the customer?

If you have more than one client, don't work for the new one 365days a year, and not beholding to the customer to provide you work, plus a load of other things, your outside of it?

arfur

3,871 posts

213 months

Tuesday 19th June 2018
quotequote all
super7 said:
How long is the piece of work for? Is it a full time engagement?

Surely whether the contract is within IR35 or outside of IR35 is down to the contractor to decide? Not the company? At the end of the day, you will be invoicing the customer and they'll be paying it? Whether your inside or out is irrelevant to the customer?

If you have more than one client, don't work for the new one 365days a year, and not beholding to the customer to provide you work, plus a load of other things, your outside of it?
If it was Govt, then its the Govt that decide if on or off payroll for that particular contract. If it's private then expect next year that the law will change and the end company will be responsible for declaring if on or off payroll. Sounds like this company have already decided to perform this due dilegence in advance. Note that next year, if introduced you could be working off payroll for that contract and then for the Co to declare it on payroll. Guess what HMRC will do with that ?

Doofus

Original Poster:

25,732 posts

172 months

Tuesday 19th June 2018
quotequote all
Ok, let's clarify a few things. I do not operate as a 'one man band'. I have, in the past, started, purchased and sold around ten companies, and employed up to 60 people at any one time. I currently own two online retail companies, and alongside those, I provide some of my time to SMEs, offering advice on strategy, coaching owners & managers and running small projects on their behalf.

I don't 'contract', and I never have. Consequently, IR35 has remained outside my sphere of reference until now. This particular 'engagement' is neither full time, not permanent, and yet the client insists it's within IR35.

As I think I have explained, I have never dealt with IR35 before. This is because It's never applied to me, and not because I am an idiot.

So thank you for the information given, but not for the patronising responses, which seemingly arose from blind assumptions about my circumstances, none of which I had encourgaed.

anonymous-user

53 months

Tuesday 19th June 2018
quotequote all
If the client insists it is inside IR35, have them take you on as a payroll employee for the duration of the project.

Eric Mc

121,785 posts

264 months

Tuesday 19th June 2018
quotequote all
Walk away and find another contract.

If that is not an option, have them list out in full and complete details all the reasons why they think this engagement needs to be accounted for under the IR35 regulations.

red_slr

17,123 posts

188 months

Tuesday 19th June 2018
quotequote all
I assume you invoice for work done? This wont be the case with the new project. They want you on PAYE. So you will become an employee.
Personally, given your posts above I would walk away from this one if its not something you really want to get involved with.

The Selfish Gene

5,470 posts

209 months

Tuesday 19th June 2018
quotequote all
Eric Mc said:
Walk away and find another contract.

If that is not an option, have them list out in full and complete details all the reasons why they think this engagement needs to be accounted for under the IR35 regulations.
I tend to agree with this one.

Also - isn't there some risk if you take this and accept you are inside IR35 then all of your other work will be considered that too?

I suspect it's just the end client (or agency) are being totally lazy.

I wouldn't touch it with a barge pole unless desperate personally.


Doofus

Original Poster:

25,732 posts

172 months

Tuesday 19th June 2018
quotequote all
I'm not particulary bothered about the project. It's a bigger company than I usually work with, and I am most definitely not 'corporate' minded. I'm not entirely sure what they think I'll be adding. They got my name through another client, but I don't think they've spent much time thinking about what they need.

We've only had a very brief conversation so far, so I'll up my day rate by 50%. If they bite, the fair enough. If not, no worries.

Doofus

Original Poster:

25,732 posts

172 months

Tuesday 19th June 2018
quotequote all
The Selfish Gene said:
isn't there some risk if you take this and accept you are inside IR35 then all of your other work will be considered that too?
A day each week attending a board meeting (I'm not a director), or a few days each month steering an ERP project, or a warehouse reorganisation isn't really a risk, no.

The Selfish Gene

5,470 posts

209 months

Tuesday 19th June 2018
quotequote all
Doofus said:
The Selfish Gene said:
isn't there some risk if you take this and accept you are inside IR35 then all of your other work will be considered that too?
A day each week attending a board meeting (I'm not a director), or a few days each month steering an ERP project, or a warehouse reorganisation isn't really a risk, no.
well not a risk at all with regard to IR35.............why do they think you're in IR35 then?

sounds like they're just being worriers, lazy and not understanding IR35.

So yep - double your rate and see if they go for it to cover your hassle.


bigandclever

13,750 posts

237 months

Tuesday 19th June 2018
quotequote all
Doofus said:
The Selfish Gene said:
isn't there some risk if you take this and accept you are inside IR35 then all of your other work will be considered that too?
A day each week attending a board meeting (I'm not a director), or a few days each month steering an ERP project, or a warehouse reorganisation isn't really a risk, no.
IR35 is applied on a contract by contract basis anyway.

WhiskyDisco

796 posts

73 months

Tuesday 19th June 2018
quotequote all
PostHeads123 said:
If you are of an age where pensions are priority if the contract is inside of IR35 you can kind of offset it by pumping the cash into a pension.
This.

I know a few contractors (I know, this is not the OP's position) that have been doing this for a few years now. One or two are sitting pretty now and don't need to work.

Autopilot

1,298 posts

183 months

Thursday 21st June 2018
quotequote all
Doofus said:
Ok, let's clarify a few things. I do not operate as a 'one man band'. I have, in the past, started, purchased and sold around ten companies, and employed up to 60 people at any one time. I currently own two online retail companies, and alongside those, I provide some of my time to SMEs, offering advice on strategy, coaching owners & managers and running small projects on their behalf.

I don't 'contract', and I never have. Consequently, IR35 has remained outside my sphere of reference until now. This particular 'engagement' is neither full time, not permanent, and yet the client insists it's within IR35.

As I think I have explained, I have never dealt with IR35 before. This is because It's never applied to me, and not because I am an idiot.

So thank you for the information given, but not for the patronising responses, which seemingly arose from blind assumptions about my circumstances, none of which I had encourgaed.
In a nutshell.......(and open for debate, so please feel free to critique!)....

IR35 is there to stop work places being filled with people that look, act and smell like employees, but actually operate Ltd Companies so therefore obtain Ltd company benefits, namely tax efficiency through low PAYE/NI, taking dividends and claiming a full compliment of expenses.

I'm a 'contractor' and operate through my own ltd. I typically find a role I'm interested in, apply, start the role, deliver what is required then leave that role. I'm not a disguised employee at all. IR35 legislation itself hasn't changed, but if you're working in the Public Sector, then the PS Client chooses whether your role is in or out. 'Public Sector' is defined as being subject to the Freedom of Information Act. It's very likely this will change in the near future and extend to roles in the Private Sector.

HMRC released a tool that asks questions about your working practices that will help determine whether your role is in or out and can be found here (link at bottom) - https://www.gov.uk/guidance/check-employment-statu...

Ironically, this tool was only released a week before the change because all the contractors that built it were deemed inside IR35 so left so it ran late.

Personally, it does feel like there is scaremongering going on. IR35 used to feel like it was there to stop people taking the piss but now it feels like it's a tool to try and force roles within IR35 whether they are or not. If IR35 status on a PS role was deemed to be incorrect, the fee payer gets hit with the bill for NI and PAYE so lots of organisations just say everybody is inside (which they aren't allowed to do) to avoid the risk. There are a number of tests used to determine status but the bit the PS organisation I'm at are interested in is 'Supervision, Direction and Control', the right to provide a substitute and what mechanism is used to pay a sub.

I'm fairly savvy when it comes to these various legislations, so am regularly used as the test subject before scrutinising other contractors. I get reviewed every couple of months to see if anything has changed. My division are great, but there is pressure from above to try and put us inside IR35.

If my role was deemed to be inside (it should never happen, I have an output to deliver and am not managed or controlled by the PS in any way), I'd leave as somebody else pointed out, HMRC would see this as though you'd always been inside IR35 so expect to get investigated and get a big unaffordable bill!

Typically, if you take a role inside IR35, you need around a 35% increase in rate to keep you inline with an outside IR35 role.

I'm sure people do it, but I'd be very surprised if you could get a PS Role inside IR35 and even be able to use a Ltd Company. There are no upsides for the fee payer but lots of downsides allowing the use of a Ltd.

Back to the OP's position, I'd argue the fact that 'due diligence' is being used, it sounds like risk avoidance and a complete misunderstanding to me. I wouldn't necessarily be put off this role, but I'd argue, especially by your description of what you do, that you won't be managed, supervised or controlled etc. If you did take this role inside of IR35, your overall salaried wage would be higher so would need to be mindful of how that could impact your household. A prime example is if anybody in the house gets child benefit, you'd potentially lose that because of your salaried wage. Lots to think about!