IR35 and Umbrella Companies Confused
Discussion
Autopilot said:
It is absolutely the end clients responsibility as it's up to them what the engagement looks like. It's a role and its associated working practices that are assessed, so the status will be set before it goes to a recruiter for advertising. They don't care about the Ltd Co contractor, they aren't a factor as right now it's about how they want a job done.
Let's use an example as the original question was not about the use of a recruitment agency. Contractor A works through his ltd co B and provides project based services to a large Company C (UK based). C then secures projects (let's say both product and services) with end clients D, E and F. D is in the UK, E is in Europe and F is in Asia. C places a number of its own staff (including some from its European offices/companies who may be permanent or contract staff themselves) and A on each of these with A working part time on each.
For now let's assume that prior to the new legislation all of this was outside IR35.
Under the new rules - how does all that work?
The rules defining what is in or out of IR35 have not changed in any way whatsoever.
The only change is who makes the decision.
The organisation hiring the individual (no matter how many agencies or other "intermediaries" they go through to get that individual) has to make that decision.
This system has already been in place for two years in the public sector - so the mechanics as to how it works are pretty well known now.
The only change is who makes the decision.
The organisation hiring the individual (no matter how many agencies or other "intermediaries" they go through to get that individual) has to make that decision.
This system has already been in place for two years in the public sector - so the mechanics as to how it works are pretty well known now.
x5x3 said:
Autopilot said:
It is absolutely the end clients responsibility as it's up to them what the engagement looks like. It's a role and its associated working practices that are assessed, so the status will be set before it goes to a recruiter for advertising. They don't care about the Ltd Co contractor, they aren't a factor as right now it's about how they want a job done.
Let's use an example as the original question was not about the use of a recruitment agency. Contractor A works through his ltd co B and provides project based services to a large Company C (UK based). C then secures projects (let's say both product and services) with end clients D, E and F. D is in the UK, E is in Europe and F is in Asia. C places a number of its own staff (including some from its European offices/companies who may be permanent or contract staff themselves) and A on each of these with A working part time on each.
For now let's assume that prior to the new legislation all of this was outside IR35.
Under the new rules - how does all that work?
If it were People aka bum on seat then:
For D - it would be D. In that scenario the determination would be made by D (who retains liability) and passed to C who would then ensure that A worked through either it's own payroll or a brolly (or they would assume liability).
For E and F, it gets woolly as previous experience is all UK public sector. I understand the determination and liability would be with C.
Edited to say
If C is a foreign entity then B (A really) makes the determination.
Eric Mc said:
Lord Marylebone said:
Sorry, just saw this now:
I don’t think it’ll change anything for me.
As previously said above, it’s the end client that determines if I am an ‘employee’ for them or not.
I don’t have a specific desk at the clients place.
I don’t have an email address at the clients place.
I sign in and out as a guest.
I don’t have fixed work hours or days.
I work from home quite a bit.
I work for multiple clients at the same time.
Etc
What about substitution?I don’t think it’ll change anything for me.
As previously said above, it’s the end client that determines if I am an ‘employee’ for them or not.
I don’t have a specific desk at the clients place.
I don’t have an email address at the clients place.
I sign in and out as a guest.
I don’t have fixed work hours or days.
I work from home quite a bit.
I work for multiple clients at the same time.
Etc
All our assignments at our clients are time limited. What I mean by that is they may call us in to do a task that lasts a day, or 3 months, but it always has a limit. These are tasks that the client doesn't have the skills to do themselves.
Also:
The client doesn't dictate to us what work we do or how we do it. They ask us to investigate a potential piece of work, advise them, write a report on it, and then complete the work for them how we want to, and that's it.
Our clients are not obliged to offer us any work, and we aren't obliged to accept it. Sometimes we don't even get to finish the piece of work we are working on for various reasons, either at our decision or via their decision.
The above is the relationship between the Consultancy company and the end client.
Where it gets slightly more complex for me, is that I work for the consultancy company as a limited company, and there's just me working for my own Ltd company.
But the same rules apply: I could send anyone to do my job at the consultancy company (provided they were suitably qualified), I work for other businesses as well as the consultancy company, I decide what jobs I do and don't do for the consultancy company, I do sometimes refuse their work or assignments. The consultancy company isn't obliged to give me any work, and indeed it can be sporadic. They don't dictate to me how I do my work or carry out the tasks. They trust me to make all the decisions on that particular piece of work.
Edited by anonymous-user on Thursday 9th January 18:04
Have you ever had to exercise the substitution clause?
Or have other contractors operating under the same agreement ever exercised the substitution clause?
Having a substitution clause is obviously a good thing i.e. it's better than not having a substitution clause. But if the reality is that it is never put into action, HMRC will argue that it is a sham.
Or have other contractors operating under the same agreement ever exercised the substitution clause?
Having a substitution clause is obviously a good thing i.e. it's better than not having a substitution clause. But if the reality is that it is never put into action, HMRC will argue that it is a sham.
Eric Mc said:
Have you ever had to exercise the substitution clause?
Or have other contractors operating under the same agreement ever exercised the substitution clause?
Having a substitution clause is obviously a good thing i.e. it's better than not having a substitution clause. But if the reality is that it is never put into action, HMRC will argue that it is a sham.
Very few contractors will ever have exercised the right to substitution. Or have other contractors operating under the same agreement ever exercised the substitution clause?
Having a substitution clause is obviously a good thing i.e. it's better than not having a substitution clause. But if the reality is that it is never put into action, HMRC will argue that it is a sham.
HMRC can argue what they like but their determination doesnt hinge on whether or not a substitution clause has been exercised, nor would i expect them to pursue it either based only on that or using terms like sham. That sort of thing doesnt go down well in court, as they have found out.
And this only becomes an issue under investigation by HMRC anyway and any contractor worth their salt these days will have the assurance of a third party review by the likes of QDOS to determine whether or not its outside of IR35.
Having the right to substitute is one of the determining factors, not IF you've ever substituted.
Eric Mc said:
The rules defining what is in or out of IR35 have not changed in any way whatsoever.
The only change is who makes the decision.
The organisation hiring the individual (no matter how many agencies or other "intermediaries" they go through to get that individual) has to make that decision.
This system has already been in place for two years in the public sector - so the mechanics as to how it works are pretty well known now.
By hiring organisation do you mean the organising who the work is being completed for? As it's them who need to make the decision rather than the individual contractor as before. They really don't hire the individual though.The only change is who makes the decision.
The organisation hiring the individual (no matter how many agencies or other "intermediaries" they go through to get that individual) has to make that decision.
This system has already been in place for two years in the public sector - so the mechanics as to how it works are pretty well known now.
rustyuk said:
Eric Mc said:
The rules defining what is in or out of IR35 have not changed in any way whatsoever.
The only change is who makes the decision.
The organisation hiring the individual (no matter how many agencies or other "intermediaries" they go through to get that individual) has to make that decision.
This system has already been in place for two years in the public sector - so the mechanics as to how it works are pretty well known now.
By hiring organisation do you mean the organising who the work is being completed for? As it's them who need to make the decision rather than the individual contractor as before. They really don't hire the individual though.The only change is who makes the decision.
The organisation hiring the individual (no matter how many agencies or other "intermediaries" they go through to get that individual) has to make that decision.
This system has already been in place for two years in the public sector - so the mechanics as to how it works are pretty well known now.
Deep Thought said:
Very few contractors will ever have exercised the right to substitution.
HMRC can argue what they like but their determination doesnt hinge on whether or not a substitution clause has been exercised, nor would i expect them to pursue it either based only on that or using terms like sham. That sort of thing doesnt go down well in court, as they have found out.
And this only becomes an issue under investigation by HMRC anyway and any contractor worth their salt these days will have the assurance of a third party review by the likes of QDOS to determine whether or not its outside of IR35.
Having the right to substitute is one of the determining factors, not IF you've ever substituted.
You would like to think that I'm sure. But it's something HMRC will look at and use as a point in any case they decide to challenge. Just because something is written into a contract does not mean it is intended to be used. And HMRC, if they want to expend the time, will look into all that. They have.HMRC can argue what they like but their determination doesnt hinge on whether or not a substitution clause has been exercised, nor would i expect them to pursue it either based only on that or using terms like sham. That sort of thing doesnt go down well in court, as they have found out.
And this only becomes an issue under investigation by HMRC anyway and any contractor worth their salt these days will have the assurance of a third party review by the likes of QDOS to determine whether or not its outside of IR35.
Having the right to substitute is one of the determining factors, not IF you've ever substituted.
It doesn't mean they will succeed of course. But that's not the point. The point is how much the hiring entity is willing to take the risk as the costs will be on their shoulders if a decision goes against them.
rustyuk said:
Eric Mc said:
The rules defining what is in or out of IR35 have not changed in any way whatsoever.
The only change is who makes the decision.
The organisation hiring the individual (no matter how many agencies or other "intermediaries" they go through to get that individual) has to make that decision.
This system has already been in place for two years in the public sector - so the mechanics as to how it works are pretty well known now.
By hiring organisation do you mean the organising who the work is being completed for? As it's them who need to make the decision rather than the individual contractor as before. They really don't hire the individual though.The only change is who makes the decision.
The organisation hiring the individual (no matter how many agencies or other "intermediaries" they go through to get that individual) has to make that decision.
This system has already been in place for two years in the public sector - so the mechanics as to how it works are pretty well known now.
Eric Mc said:
You would like to think that I'm sure. But it's something HMRC will look at and use as a point in any case they decide to challenge. Just because something is written into a contract does not mean it is intended to be used. And HMRC, if they want to expend the time, will look into all that. They have.
If they're investigating an individual - which is the only time they'd get in to this detail, then the individual is already Having A Bad Day, and yes all wording will be examined. However if thats all they can get someone on - that they havent / they believe they wont ever invoke it, then they havent enough evidence to take it forward anyway. Yes, they'll make your life miserable but they cant make that alone stick, if all other outside IR35 conditions are met (as you say below)Eric Mc said:
It doesn't mean they will succeed of course. But that's not the point. The point is how much the hiring entity is willing to take the risk as the costs will be on their shoulders if a decision goes against them.
It looks like not too many hiring entities are prepared to take ANY risk. Deeming everyone inside IR35 with a blanket approach OR offering fixed term contracts on (enhanced) FTE rates pro-rata'd seem to be the way its going. But then thats what HMRC wants - they want to give the impression of choice but the reality is they are doing their menacing intimidation routine in the background to put the Fear Of God in to the end clients who rightly so will be risk averse.
Eric Mc said:
You can run, but you can't hide.
Which is fine - IF HMRC were applying this fairly and objectively and were on the side of "right".BUT theres a large percentage of roles that otherwise meet any reasonable criteria as not being an employee of the company yet will be deemed inside IR35 by a blanket approach.
Granted there are an element of the contracting community who are in disguised employment - i have a friend who's husband has been a contractor for 11 years in the same job role for the same company who plans to just "convert to an inside IR35 contract" with them.
(i cant see that ending well) - but the bulk of us are going to be hit, simply because we're easy tax revenue targets.Deep Thought said:
Eric Mc said:
You can run, but you can't hide.
Which is fine - IF HMRC were applying this fairly and objectively and were on the side of "right".BUT theres a large percentage of roles that otherwise meet any reasonable criteria as not being an employee of the company yet will be deemed inside IR35 by a blanket approach.
Granted there are an element of the contracting community who are in disguised employment - i have a friend who's husband has been a contractor for 11 years in the same job role for the same company who plans to just "convert to an inside IR35 contract" with them.
(i cant see that ending well) - but the bulk of us are going to be hit, simply because we're easy tax revenue targets.Deep Thought said:
Which is fine - IF HMRC were applying this fairly and objectively and were on the side of "right".
BUT theres a large percentage of roles that otherwise meet any reasonable criteria as not being an employee of the company yet will be deemed inside IR35 by a blanket approach.
Granted there are an element of the contracting community who are in disguised employment - i have a friend who's husband has been a contractor for 11 years in the same job role for the same company who plans to just "convert to an inside IR35 contract" with them. (i cant see that ending well) - but the bulk of us are going to be hit, simply because we're easy tax revenue targets.
If the 'employer' is now the one on the hook then they are likely to err on the side of caution, which I imagine will be more prevalent the larger the organisation (and particularly listed entities).BUT theres a large percentage of roles that otherwise meet any reasonable criteria as not being an employee of the company yet will be deemed inside IR35 by a blanket approach.
Granted there are an element of the contracting community who are in disguised employment - i have a friend who's husband has been a contractor for 11 years in the same job role for the same company who plans to just "convert to an inside IR35 contract" with them.
(i cant see that ending well) - but the bulk of us are going to be hit, simply because we're easy tax revenue targets.worsy said:
Deep, not sure whether you are posting on the Contractor Toast thread in Jobs section, however the reality is that HMRC have changed the rules because they were n't winning. It may not be fair but this is the reality. We have to adapt or die effectively.
I havent been no, thanks. I'll look it up.Yes, absolutely agree with you. And yes, the contractor market will adapt. It always does.
janesmith1950 said:
f the 'employer' is now the one on the hook then they are likely to err on the side of caution, which I imagine will be more prevalent the larger the organisation (and particularly listed entities).
Yup absolutely. They are moreoften taking a blanket approach rather than looking at each contract individually. And I can see their point. HMRC is behind the scenes making veiled threats about what happens if they make the "wrong" choice, so why would some HR person put their neck on the line?janesmith1950 said:
It'll be decisions at board level that'll determine the company policies and I wouldn't expect HR departments to be able to make as hoc decisions in it, as the liabilities could become enormous if done at scale.
Yes, board level for the overall strategy, but i was meaning if they did it on a case by case basis - which is what HMRC propose companies do - it would ultimately be down to the HR department to making decisions.I also think the board would take a steer from HR (presumably Head of HR)
Thats what i am seeing happening where i am anyway.
Edited by Deep Thought on Friday 10th January 13:07
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