Dynamic Management Services

[malvolio]

Essentially their packaging option will make their "umbrella consultancy" (it's not an umbrella or consultancy in the normal sense) look sufficiently like a large consultancy for tax purposes that IR35 cannot be applied, even if you fail tests with respect to the client.

Sorry, but wrong. If you are challenged on an IR35 basis, the inspector will ignore all intermediaries and look at the relationship between you and the end client. There's a clear example of why they will do this in the earlier days of IR35 - they challenged the relationship with the intermediate consultancy not the end client (in this case, FOMoCo) and lost: had they challeneged it all the way through they would probably have won. That don't make that mistake any more.

Can't remember the case off the top of my head, (Tilbury perhaps?) can possibly dig it out if anyone wants the details.

[ASB]

Yes, Tillbury. Some limited info: http://www.out-law.com/page-4042

[IR35 Avoider]

Sorry, but wrong. If you are challenged on an IR35 basis, the inspector will ignore all intermediaries and look at the relationship between you and the end client. There's a clear example of why they will do this in the earlier days of IR35 - they challenged the relationship with the intermediate consultancy not the end client (in this case, FOMoCo) and lost: had they challeneged it all the way through they would probably have won. That don't make that mistake any more.

Can't remember the case off the top of my head, (Tilbury perhaps?) can possibly dig it out if anyone wants the details.

For IR35 to apply there must be "IR35-fail" work circumstances and there must be non-PAYE income from an intermediary that can reasonably be taken to represent remuneration for work at a particular client. Contractors always focus on the first of these - subverting the second provides a different way out.

Think about it. Employees of Accenture and EDS work at client sites under IR35-fail circumstances all the time, without IR35 being applied. You can say this company does not work in entirely the same way, and indeed I'm sure it doesn't, but it only has to be sufficiently the same that it and its employees are entitled to the same tax treatment. What "sufficiently" means is of course a debatable question, and will be one on which they will have been advised by their lawyers.

This company will use the same options to remunerate it's employees as are open to any large company, such as EDS or Accenture. The fact is that there are tax-efficient options available to large companies that are not available to one-man bands.

I'm not disagreeing that a particular scheme of this kind could fail in practise, just pointing out that there is a route through the legislation that means they can succeed, if they are careful enough.

[ASB]

If the EDS/Accenture drone owned more than 5% they could be caught.

[DaveB]

Think about it. Employees of Accenture and EDS work at client sites under IR35-fail circumstances all the time, without IR35 being applied. You can say this company does not work in entirely the same way, and indeed I'm sure it doesn't, but it only has to be sufficiently the same that it and its employees are entitled to the same tax treatment. What "sufficiently" means is of course a debatable question, and will be one on which they will have been advised by their lawyers.

The key word here is Employees. IR35 doesn't apply to employees because it does'nt need to and it's not intended to. As employees they are taxed and NI'd anyway as is the company. Bonuses payed to employees are taxable as well. Once you are an employee thats it, no way out. They closed off the loopholes of paying bonuses in bullion or diamonds etc years ago.

This company will use the same options to remunerate it's employees as are open to any large company, such as EDS or Accenture. The fact is that there are tax-efficient options available to large companies that are not available to one-man bands.

So why don't Accenture et al do this instead of paying their employees in the normal way? Having worked with consultants from both companies I know they are paid as normal employees and not as freelancers like us.

Yes there are tax efficient options open, but these relate to corporation tax, not personal taxation.

I'm not disagreeing that a particular scheme of this kind could fail in practise, just pointing out that there is a route through the legislation that means they can succeed, if they are careful enough.

Not from what we have seen so far there isn't.

[IR35 Avoider]

If the EDS/Accenture drone owned more than 5% they could be caught.

Yes. Ensuring that no contractor owns more than 5% of the company is the easy part.

[IR35 Avoider]

Once you are an employee thats it, no way out

Re-read my previous posts. I've already explained what large companies can do.

So why don't Accenture et al do this instead of paying their employees in the normal way? Having worked with consultants from both companies I know they are paid as normal employees and not as freelancers like us.

The consultancy, like Accenture et al, will pay a salary in a normal way. There may also be other incentives, which big companies can legally pay, as mentioned previously. Do you really know for a fact that Accenture and EDS only remunerate their employees via PAYE salary, and nothing else?

[DaveB]

Re-read my previous posts. I've already explained what large companies can do.



The consultancy, like Accenture et al, will pay a salary in a normal way. There may also be other incentives, which big companies can legally pay, as mentioned previously. Do you really know for a fact that Accenture and EDS only remunerate their employees via PAYE salary, and nothing else?

Having worked with them yes I do. They do pay bonuses, but as I said before bonuses are taxable. Don't know if they give share options but even if they do AFAIK you end up paying tax on value of the shares when you sell them anyway.

So far you have not given any details on the other incentives that are apparently available to big complanies. Come on, let us in on the secret.

[IR35 Avoider]

Not from what we have seen so far there isn't.

My posts are a bit short and incomplete - am posting during ad breaks.

You need to read the IR35 legislation in detail. It does not apply if there is no caught intermediary. A consultancy paying its employees via PAYE as well as non-PAYE methods such that the payments cannot be reasonably taken to be remuneration for work at a particular client is not a caught intermediary. Even if there are fail-IR35 circumstances, if there are no relevant payments hence no intermediary IR35 cannot apply. Of course it's a big if - that's why lawyers are needed.

[IR35 Avoider]

Having worked with them yes I do. They do pay bonuses, but as I said before bonuses are taxable. Don't know if they give share options but even if they do AFAIK you end up paying tax on value of the shares when you sell them anyway.

So far you have not given any details on the other incentives that are apparently available to big complanies. Come on, let us in on the secret.

Government-approved share and share option schemes. (Unless this has changed since I looked at it five years ago.) Glad you can confirm that this is what Accenture et al do. Of course this consultancy may have a slightly different balance between salary and share options, but that's a question of degree rather than principle.

I did mention shares and share options in an early post, which I invited you recently to re-read. I don't blame you for missing it the first time, but I think if you're going to adopt a bolshie tone you should go back and check when invited to do so, rather than just banging on.

If I remember correctly, CGT is at most 10% on securities held for long enough. Five years ago when I checked, CGT was the only tax due on such shares - I'm sure you will point out if there have been any change since then. And of course if you have a small number of shares in your employer, you will get some dividends as well.