Inside IR35 - Redundancy?

**Mordac** · 30 October 2006, 00:07

What does you contract of employment say? Not many contracts entitle you to redundancy if you decide to leave. IR35 is not relevant here. You might be inside as far as paying more tax is concerned, but that doesn't buy you any employment rights (yes, we know it's unfair, but now you know why we all think Gordon Brown is a c**t).
If you are going to think in terms of redundancy and rights, perhaps contracting isn't for you. Trust me, it can get way worse than this...

**DaveB** · 30 October 2006, 10:07

It sounds like you are a paid employee of the company just like any other permie. Just because the company you work for does contract work doesnt mean you are a contractor. In your case IR35 is irrelavent as it doesnt apply to permanent employees.

As far as redundancy goes you have no right to it if you leave volunterily. If the company decides it no longer requires your services you might be entitled to something, it depends on your contract of employment with them.

You can read all about employee rights following redundancy here and work out what you might get here

Generally speaking the legal minimum is 1 weeks pay, to a maximum of £290 pw, per year of employment subject to you having been employed for a minimum of two years and an £8,700 maximum payment.

**tim123** · 30 October 2006, 10:31

Originally posted by jwinters

The contracting company has through instruction from their accountant
deemed my work to fall inside IR35 and for the last two years been happily
giving the IR 49% of the invoiced amount. 49% = 11% Employer NI then
giving me the rest to me as PAYE ie. 8% employee NI + 27-30% TAX.

If you're paying 11 of gross as ERNI then the contracting co is doing the calcs wrong.

tim

**IR35 Avoider** · 30 October 2006, 12:44

I presume your contract of employment with the company specifies that they have to turn x% of the fees you bring in into salary for you?

If not, i.e. things are a bit informal, then instead of paying you salary with your final fees they could make you a tax-free payment. I don't think redundancy (which is a term with a strict legal meaning) has anything to do with whether they can do this - as long as you are not contractually entitled to a payoff on leaving, up to 30K is tax-free. (Anything you are legally entitled to is not tax-free.)

**jwinters** · 31 October 2006, 21:42

Originally posted by DaveB

It sounds like you are a paid employee of the company just like any other permie. Just because the company you work for does contract work doesnt mean you are a contractor. In your case IR35 is irrelavent as it doesnt apply to permanent employees.

DaveB,

My employer tells me that the work I do at another companies site falls under IR35. ie. There is a service contract between my employer and company x. For the past 3 months I've been going to company x to work on various things to sort out their network, etc.. I complete my timesheet and get signoff from company x. My employer then invoices company x for said amount.

My empoyer takes the total amount of the invoice as inside IR35 and thus can only get it out of the company as PAYE. They are unwilling to give me TAX free redundancy upto 30K because they think they can only pay it out as PAYE and don't want to be liable for the TAX.

**Denny** · 31 October 2006, 22:02

Boo

**Denny** · 31 October 2006, 22:03

Ir35 Not Relevant

I don't get it. You are a permie employee being paid a salary. In which case, it doesn't matter that you work on your employer's client sites - in owner managed business terminology, you are the contractor's 'substitute' not the actual contractor. Therefore, you are an employee consultant and therefore IR35 has no relevance to you at all.

Like any other employee you pay full tax on all your income, past the tax free threshhold applicable to all employees but have deducted from your pay only PAYE and employees NI contributions. The contractor (your employers) also pay employers NI and employees NI if they are employed by their company as Directors. Your employers (business owners) would be under IR35 scrutiny not you and would themselves be outside IR35 or very likely to be because they are exercising their full rights of substitution by putting you on the client site instead of working there themselves. As their employee it makes no difference if you are working on your employer's client site for a fixed term either, because you and your employer has MOO (Mutuality of Obligation) whereby they have to provide you with work and you have to work the stipulated hours they require. This is very unlike the working arrangement between contractors and the client. So, if your employer's lose the gig with a client, you don't. They would be obliged to find you work elsewhere even if it means they don't make money whilst you are doing it. Of course, if that goes on too long you could be made redundant, but that's a different issue and you are unlikely to get compensation unless you've been with the company for over a year.

This forum is not going to help you, unless, of course, you are being paid gross as a freelance sub-contractor, and it doesn't seem to me that you are. Likewise, it is highly inappropriate for your employers to be discussing IR35 issues with you at all regarding their own relationship with the client, as this simply does not affect you at all.

**jwinters** · 1 November 2006, 00:06

Originally posted by Denny

I don't get it. You are a permie employee being paid a salary. In which case, it doesn't matter that you work on your employer's client sites - in owner managed business terminology, you are the contractor's 'substitute' not the actual contractor. Therefore, you are an employee consultant and therefore IR35 has no relevance to you at all.

[...snip...] Your employers (business owners) would be under IR35 scrutiny not you and would themselves be outside IR35 or very likely to be because they are exercising their full rights of substitution by putting you on the client site instead of working there themselves. [...snip...]

Denny thanks for your reply.

I agree with your points about me being the contractors 'substitute' and not the actual contractor. All I need to do now is find someone to retroactively insure my employer against IR35 infringement. As my employer said that they would make me redundant if they wouldn't be liable for potentially evading IR35.

**Lucifer Box** · 1 November 2006, 05:54

Originally posted by jwinters

Denny thanks for your reply.

I agree with your points about me being the contractors 'substitute' and not the actual contractor. All I need to do now is find someone to retroactively insure my employer against IR35 infringement. As my employer said that they would make me redundant if they wouldn't be liable for potentially evading IR35.

But the effect of IR35 is to "deem" you to be an employee and to tax you accordingly. But you are an employee so even if it applied, which it doesn't, it would make no difference. Both you and your employers are highly confused. Can they not clear this up by talking to their accountants?

Or are your employers trying to evade their tax liabilities in some way by paying you gross, cash in hand or as some sort of self employed sole trader or the like?

Inside IR35 - Redundancy?