Newbie concerned about IR35

[goldilockz]

Hi everyone,

I am brand new to the forums and contracting and was hoping you could help please.

In a nutshell, I am a freelance writer and left my FT job in October 2016 to set up as a contractor. The client I am currently contracted under does not have the ability to hire permanent members of staff for whatever reasons, so I was given the option by the agency who recruited me to be employed via either an Umbrella company or to set up my own limited company. I initially opted for the former, and for the first few months was paid via an umbrella. I noticed that my take home pay was significantly lower than expected, around £600 less per month, I believe due to Employer's NI. I then decided to go for the limited company option, and have set up my company in the last week.

I am currently contracted through a recruitment agency, who provided my contract, pays me and who deals with the client at the other end. I had an IR35 expert look at the contract and it failed as it looks too much like I could be a permanent employee. I have asked them if the contract could be amended, but even if it can, I believe the working practises are more important in this case, and admittedly, I could be deemed to be working in much the same was a permanent employee, particularly as I currently only produce work for one client at the moment (I work for them approx 40 hours a week). My questions are:

- If I had more than one client and took on some extra work, would this make me more likely to be operating outside of IR35 as far as HMRC are concerned?

- If my contract was unable to be amended accordingly and I had to operate my business within IR35, is it really worth having a limited company? Would I be better off continuing via the umbrella company?

Thank you in advance for your help and apologies for my ignorance, I'm very new to all of this!

Goldi

[SueEllen]

1. Don't put your name in posts or any other information that can identify you. These threads are easily found from the internet.

2. IR35 is on a contract per contract basis. So while your main individual contract is within IR35 your other contracts may not be.

3. Yes you are right it is based on your working practices.

4. More info click on "IR35 /S660/ BN66" under CUK Navigation this way ----->

[jamesbrown]

IR35 is assessed for each contract separately, so having multiple contracts won't render each of the individual contracts outside. It may help at the very margins w/r to demonstrating that you're in business on your own account, but I only mention this for completeness. The answer is no.

If you're inside IR35 on all contracts, there isn't much point in having a company, given the hassle/costs and inability to claim T&S expenses. Better to stick with an umbrella now, especially if you're just starting out.

[Cirrus]

- If I had more than one client and took on some extra work, would this make me more likely to be operating outside of IR35 as far as HMRC are concerned?

No. IR35 is on a contract-by-contract basis

- If my contract was unable to be amended accordingly and I had to operate my business within IR35, is it really worth having a limited company? Would I be better off continuing via the umbrella company?

No. IR35 is not something somebody can assess for you - apart from the Revenue. Hundreds of people will give you their opinions but they are either i) people who don't actually know, or ii) people who know a bit but whose livelihoods depend on telling you things that suit them.

Unless you are silly you stand little chance of being investigated and that investigation succeeding against you.

[northernladuk]

Just with my pedant hat on. Try avoid words like 'employed' and instead use 'engaged'. It really muddies the waters and is pretty key when you are talking about IR35. You will be employed by the Umbrella if you start with them so you will be confusing employed on the gig and employed by the Umbrella etc... If you get the terminology absolutely correct many complications should disappear.

But what everyone else says. I went Umbrella for my first gig to find my feet and it was a much smoother introduction than thrashing around and putting myself at risk. It's only one gig in a long career so I wouldn't be overly worried about grabbing every penny in your first gig. Don't let the umbrella rip you off of course but using that model just to start isn't a really problem.

If you are worried your umbrella is pulling the wool over your eyes speak to Lucy at ContractorUmbrella. They have a great reputation, they spend a lot of time representing contractors in various areas and run the All Umbrellas Are Equal setup.

[LondonManc]

I'd suggest that if your contract involves significant expenses and you're going to be inside IR35 then you try and negotiate either a better rate or that the client picks up the expenses (if they're expecting you to stay away or know you cannot daily commute to their site for example).

[Louisa@AardvarkAccounting]

As you've already said, it's more about what actually happens day-to-day with your end client.

Therefore even if your contract fails then make sure you are at least working like contractor and 'in business on your own account'.

You need to think if someone came into the office and looked at you, do you think they'd automatically see you have the same relationship as an 'employee/employer relationship'?

Factors to help yourself point away from this:

- can you send a substitute or pass on some work to perhaps another freelancer writer to do on behalf of your company for the end client?
- do you have ultimate control over what you do and how you do it?
- are there any obligations for work; during, in between and in the future?
- plus does your company have a financial risk, have to provide all equipment, insurances, pay for all your training, advertise, etc

These should be discussed in depth with an accountant, they can go through what can be done with each of the three factors to help you if in fact you are an 'independant contractor'.

[northernladuk]

As you've already said, it's more about what actually happens day-to-day with your end client.

Therefore even if your contract fails then make sure you are at least working like contractor and 'in business on your own account'.

You need to think if someone came into the office and looked at you, do you think they'd automatically see you have the same relationship as an 'employee/employer relationship'?

Factors to help yourself point away from this:

- can you send a substitute or pass on some work to perhaps another freelancer writer to do on behalf of your company for the end client?
- do you have ultimate control over what you do and how you do it?
- are there any obligations for work; during, in between and in the future?
- plus does your company have a financial risk, have to provide all equipment, insurances, pay for all your training, advertise, etc

These should be discussed in depth with an accountant, they can go through what can be done with each of the three factors to help you if in fact you are an 'independant contractor'.

My accountant wouldn't be my first port of call for IR35 issues to be honest....

[Louisa@AardvarkAccounting]

My accountant wouldn't be my first port of call for IR35 issues to be honest....

Maybe not all accountants... But most have been exposed to reviewing endless contracts and discussing working practices with clients until they're blue in the face

But if you've got IR35 cover with another provider or an 'expert' who'll be covering any taxes for you, I'd check with them too

[jmo21]

Just with my pedant hat on.

Like you've got any other type of hat!