Nooby IR35 - Disguised Employment advise needed

[Dornez]

Hello everyone,

I'm new to contracting and my client got worried about IR35. I would like to just double check with you as well as I have done with an other source that we are outside IR35.

I'm registered as a sole trader (from my research here IR35 doesn't apply to sole traders but please correct me if I'm wrong).
I'm currently doing a contract for the client on web design/CRM services. The agreement was I find the people to do it and I organize them to do the work required. The contract will be around 7 months in length (we are about 2-3 months in and the contract can be terminated any time by either party).
I have 3 people who do the work for me, 1 in the UK also sole trader and 2 people in Hungary both self employed, the amount of work they do depends on their availability
They have other projects going on as well, I only have this one.
They invoice me based on the work they done for me by the hour and I send a summed invoice to my client at the end of every week also by the hour with the fee I agreed with him and the rate difference is my payment.
Not sure if the following information is relevant or not (in my clients view it is):
I had a full time job when I started this and I left it about a month ago looking for a new full time job.
My total turnover won't exceed 83k, therefore I don't charge / I'm not registered for VAT

Please let me know if the above is fine so I can assure him about it.
Also even though I don't think this applies to me but do I count as an intermediary and should I be submitting employment intermediary reports?

Thank you for your answer in advance...

[chopper]

A business, with subcontractors.

You should probably have an accountant. You should probably not be a sole trader, but instead a Limited Company.

[Neil@Intouch]

I'm registered as a sole trader (from my research here IR35 doesn't apply to sole traders but please correct me if I'm wrong).

I'm currently doing a contract for the client on web design/CRM services. The agreement was I find the people to do it and I organize them to do the work required. The contract will be around 7 months in length (we are about 2-3 months in and the contract can be terminated any time by either party).
I have 3 people who do the work for me, 1 in the UK also sole trader and 2 people in Hungary both self employed, the amount of work they do depends on their availability
They have other projects going on as well, I only have this one.
They invoice me based on the work they done for me by the hour and I send a summed invoice to my client at the end of every week also by the hour with the fee I agreed with him and the rate difference is my payment.

I would agree with 'chopper', it might be beneficial to set up a Ltd Company for this work. If you could provide some further details on how much you are likely to earn based on this 7 month contract and the subcontractor costs it will be easier to advise.

Then an Accountant that you appoint can help you with this process and discuss IR35 in more detail. The fact you are able to use sub-contractors for this contract, and there is no notice period, will help massively in terms of this legislation.

[pr1]

AFAIK a sole trader can't be inside (or outside) IR35, IR35 is about putting a limited company (intermediary) in between you and your client

However, your client is possibly worried that if you don't pay your (sole trader) taxes, then they will be on the hook for paying them - meaning they may be looking into you going through a LtdCo, in which case IR35 would become relevant

[northernladuk]

AFAIK a sole trader can't be inside (or outside) IR35, IR35 is about putting a limited company (intermediary) in between you and your client

However, your client is possibly worried that if you don't pay your (sole trader) taxes, then they will be on the hook for paying them - meaning they may be looking into you going through a LtdCo, in which case IR35 would become relevant

That's what I'd read in to it. It's not often a client is worried about IR35. It's your tax situation so has nothing to do with them. Maybe you do know and you've just come across wrong in your post but I'd say go back and make absolutely sure what you are talking about it. It may make the situation much clearer and your course of action obvious. e.g. just swap to a brolly.

[Lance]

A business, with subcontractors.

You should probably have an accountant. You should probably not be a sole trader, but instead a Limited Company.

I don't think there's necessarily a problem with running a business as a sole trader but it's not the most effective I agree.

As others have said I think the client's main concern will be your tax compliance status. They may have used IR35 as an example and probably don't understand it, but they probably understand that they have some responsibility to ensure they're not party to tax evasion.

So the OP really should talk to an accountant ASAP as there will be tax to pay somewhere along the line, and other compliance issues around the people he's sub-contracting to do the work.

[malvolio]

I don't think there's necessarily a problem with running a business as a sole trader but it's not the most effective I agree.

All else apart, there is a nasty risk that he gets stiffed with the subbies' tax bill since he is acting as the agent...

As others have said I think the client's main concern will be your tax compliance status. They may have used IR35 as an example and probably don't understand it, but they probably understand that they have some responsibility to ensure they're not party to tax evasion.

So the OP really should talk to an accountant ASAP as there will be tax to pay somewhere along the line, and other compliance issues around the people he's sub-contracting to do the work.

Yes, absolutely. It may all be fine, but there are several gotchas out there right now.