Do I fall under IR35

[erolb]

Going to hopefully start my first contract. Contract is directly with an American firm as a technical account manager on a customer site in the UK. I'll be submitting invoices directly to the US company on a weekly basis. My question is, do I fall into the IR35 trap?

Thanks in advance.

[Eric Mc]

Do you operate as a sole trader, a limited company or through a partnership?

Edited by Eric Mc on Thursday 20th January 09:19

[erolb]

Thanks Eric.

I'll be going as a Limited company. I take it that my choice will affect whether I will be captured by IR35?

Regards

[rhinochopig]

Advice I was given was this, and even then they can still get you:

• Fixed term contracts, with a proper scope.
• No obligation either way WRT work.
• Substitution - the contract should be with your company not you, and you should have a clause that allows you to substitute someone else who is a similar SQEP to you.
• Ideally have more than one customer if you're doing long term contracts with the same org.

Edited by rhinochopig on Thursday 20th January 14:18

[Eric Mc]

erolb said:

Thanks Eric.

I'll be going as a Limited company. I take it that my choice will affect whether I will be captured by IR35?

Regards

Thanks for clarifying. IR35 does not apply to sole traders - which why I needed to ask.

What Rhino says is essentially true. Having only one customer is a pointer that you aren't really "in business" and are using your company as means of being hired without the employer having to account for PAYE and NI on what they pay you.

Does the US company have a presence in the UK i.e. do they have a UK based opeartion which already has its own UK staf?

If you are hoping to escape IR35, you MUST do everuything you can, both in the contract and in the way you operate, establish the fact that your relationship with the people you work for is not a "disguised employment".

[rhinochopig]

Eric Mc said:

erolb said:

Thanks Eric.

I'll be going as a Limited company. I take it that my choice will affect whether I will be captured by IR35?

Regards

Thanks for clarifying. IR35 does not apply to sole traders - which why I needed to ask.

What Rhino says is essentially true. Having only one customer is a pointer that you aren't really "in business" and are using your company as means of being hired without the employer having to account for PAYE and NI on what they pay you.

Does the US company have a presence in the UK i.e. do they have a UK based opeartion which already has its own UK staf?

If you are hoping to escape IR35, you MUST do everuything you can, both in the contract and in the way you operate, establish the fact that your relationship with the people you work for is not a "disguised employment".

I've gone from having several customers to finding myself this year with a single customer as they pay better and the work is a lifetime op re the CV. My approach has been to scope the work as discrete packages, which I then produce a bid for against their ITT. When the work package finishes and I bid again for the follow on packages.

My contract also has the substitution clause - for what it's worth.

Edited by rhinochopig on Thursday 20th January 14:26

[zippy3x]

rhinochopig said:

Advice I was given was this, and even then they can still get you:

• Fixed term contracts, with a proper scope.
• No obligation either way WRT work.
• Substitution - the contract should be with your company not you, and you should have a clause that allows you to substitute someone else who is a similar SQEP to you.
• Ideally have more than one customer if you're doing long term contracts with the same org.

Edited by rhinochopig on Thursday 20th January 14:18

Every article I have read for a long time has said that having more than one contract is irrelevant. Each contract is judged on it's own merit.

The other big indicator is Direction and Control - if you're micromanaged, told what to do and more importantly how to do it - that's a bad thing.

The other thing worth mentioning is that any reviews of contracts are only half the story - if your actual working practices are employee like, then you can be judged to be within IR35 even if the contract is outside.

[erolb]

Thanks all for the input so far.

It would appear that the only true way to avoid IR35 is to go the sole trader route. The contract is worth around £75k. I suppose the next logical question would be how worse off will I be financially if I become a sole trader outside of IR35 as opposed to a LTD under IR35.

Eric, in answer to your question, the US company has no presence or employees in the UK, or Europe for that matter.

Regards

[Eric Mc]

All true.

[zippy3x]

erolb said:

Thanks all for the input so far.

It would appear that the only true way to avoid IR35 is to go the sole trader route. The contract is worth around £75k. I suppose the next logical question would be how worse off will I be financially if I become a sole trader outside of IR35 as opposed to a LTD under IR35.

Eric, in answer to your question, the US company has no presence or employees in the UK, or Europe for that matter.

Regards

Who is supplying the contract?

The PGC (Professional Contractors Group) and others, provide IR35 approved contract templates that will put you (contractually atleast) outside of IR35. As long as your working practices reflect this contract and the points made above, then you're likely outside IR35.

Most agencies and a lot of clients insist on contractors working through a limited company (which would include an umbrella). As your contracting direct, you will need to even see if the sole trader is an option.

Also remember Ltd means limited liability....

[rhinochopig]

zippy3x said:

erolb said:

Thanks all for the input so far.

It would appear that the only true way to avoid IR35 is to go the sole trader route. The contract is worth around £75k. I suppose the next logical question would be how worse off will I be financially if I become a sole trader outside of IR35 as opposed to a LTD under IR35.

Eric, in answer to your question, the US company has no presence or employees in the UK, or Europe for that matter.

Regards

Who is supplying the contract?

The PGC (Professional Contractors Group) and others, provide IR35 approved contract templates that will put you (contractually atleast) outside of IR35. As long as your working practices reflect this contract and the points made above, then you're likely outside IR35.

Most agencies and a lot of clients insist on contractors working through a limited company (which would include an umbrella). As your contracting direct, you will need to even see if the sole trader is an option.

Also remember Ltd means limited liability....

Which is a good point when working with litigious US firms.

[JonRB]

erolb said:

It would appear that the only true way to avoid IR35 is to go the sole trader route. The contract is worth around £75k. I suppose the next logical question would be how worse off will I be financially if I become a sole trader outside of IR35 as opposed to a LTD under IR35.

Trouble is most clients won't deal with a Sole Trader as they (ironically) feel there is not enough protection of HMRC coming after them for Employers NI payments - ie. the Sole Trader being classified as an employee.

Which raises the rather ridiculous situation, if you are trading as a company and caught by IR35 that you can deemed to be not an employee as far as your client paying Employers NI & other employee benefits concerned whilst at the same time be deemed to be a disguised employee for the purposes of IR35.

[zippy3x]

JonRB said:

erolb said:

It would appear that the only true way to avoid IR35 is to go the sole trader route. The contract is worth around £75k. I suppose the next logical question would be how worse off will I be financially if I become a sole trader outside of IR35 as opposed to a LTD under IR35.

Trouble is most clients won't deal with a Sole Trader as they (ironically) feel there is not enough protection of HMRC coming after them for Employers NI payments - ie. the Sole Trader being classified as an employee.

Which raises the rather ridiculous situation, if you are trading as a company and caught by IR35 that you can deemed to be not an employee as far as your client paying Employers NI & other employee benefits concerned whilst at the same time be deemed to be a disguised employee for the purposes of IR35.

It's almost as if HRMC isn't interested in fairness and are merely grubbing around for money wherever they can.

[Eric Mc]

You don't say!!

[Ultraviolet]

Be aware that you can insure yourself against any ir35 investigation and also against any additional tax liability that may result...

uv

[Ultraviolet]

...take a look at qdos or similar..

Edited by Ultraviolet on Thursday 20th January 16:41

[Eric Mc]

How many insurance payouts have there beenn following an IR35 determination?

[deckster]

Eric Mc said:

How many insurance payouts have there beenn following an IR35 determination?

How many insured contracts have had an IR35 case go against them?

[Mr Freefall]

erolb said:

Going to hopefully start my first contract. Contract is directly with an American firm as a technical account manager on a customer site in the UK. I'll be submitting invoices directly to the US company on a weekly basis. My question is, do I fall into the IR35 trap?

Thanks in advance.

Join this, most what I would call professional freelance contrators are members, take out one of there packages
http://www.pcg.org.uk/cms/index.php

Phone Danny Batey here and get your contract reviewed.
http://www.bauerandcottrell.co.uk/

If you are you are going into freelance contracting then 90% of all your admin and legal stuff will be covered by these two companies, then you can get on with your job!

Oh, and good luck freelancing.

Mr F

[erolb]

Many thanks

Mr Freefall said:

erolb said:

Going to hopefully start my first contract. Contract is directly with an American firm as a technical account manager on a customer site in the UK. I'll be submitting invoices directly to the US company on a weekly basis. My question is, do I fall into the IR35 trap?

Thanks in advance.

Join this, most what I would call professional freelance contrators are members, take out one of there packages
http://www.pcg.org.uk/cms/index.php

Phone Danny Batey here and get your contract reviewed.
http://www.bauerandcottrell.co.uk/

If you are you are going into freelance contracting then 90% of all your admin and legal stuff will be covered by these two companies, then you can get on with your job!

Oh, and good luck freelancing.

Mr F