Newbie concerned about IR35

[MarkAnon]

Umbrella company? - NO

Definately not use umbrella company. I looked into this and went down the Ltd route.... seems they take a huge chunk of your hard-earned and do very little else.

[goldilockz]

Hi everyone,

Thanks so much for your responses, so much very useful info here!

Mark, I agree. I am frustrated that I was getting only 57% of my estimated income as take home pay via the umbrella company: they had so many other expenses that it barely seemed worth it as I'd moved from a job that paid more or less the same. As a limited company OUTSIDE IR35, I would be getting about £1500 a month extra, but not inside it. I want to ensure there is as little ambiguity as possible in my business operations so that I couldn't be accused of being inside IR35. It's very difficult for a newbie though!

Louisa@AardvarkAccounting: This is really useful, thank you. I want to make sure, as I said above, that I am operating as a business on my own account. I don't have any employees and am the sole person in the business, as a writer. The answers to the questions you posed (which were very helpful by the way!) are in red below.

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? Not really. I am in touch with other writers who are in the same situation as me, but can't imagine a situation where I'd be able to ask them to step in for me, or vice versa. I could ask one of my friends who is a freelancer with her own limited company, but I'm not sure this is what HMRC would be after.
- do you have ultimate control over what you do and how you do it? Yes, I suppose so. I have clients who provide me with work but this is something I am able to negotiate, and the hours I do and where I work is up to me, as long as I complete the work!
- are there any obligations for work; during, in between and in the future? Not really. I work on one piece at a time. For example, the project I am working on just now is estimated to run until May. When this finishes, I will get a different project to work on, which may take a couple of weeks or a few months. It will be with a different client but within the same agency, so the contract will remain the same.
- plus does your company have a financial risk, have to provide all equipment, insurances, pay for all your training, advertise, etc None of this. I need no equipment other than a computer and access to journals, but have no business expenses at all.

[Louisa@AardvarkAccounting]

You don't need all of the factors to help you point away from employment. You only need one of the three but the more you have the better!

If you have a friend who also is a freelancer with her own Ltd Co, that's a plus. You don't actually have to send a substitute. But you need to make sure that you would have the 'right' to send a replacement, in which the end client would not be able to refuse; providing they had the appropriate skills to do the work. If you think realistically this is feasible, you might want to get a letter between your Ltd Co and the end client to confirm this.

With control the strongest part is 'how' you do the work. If you determine the method, as you have the specialist skills with very little/no supervision, that's great. Try to keep a diary or notes of times where you have exercised this control.

Finally, with the obligations, this can be the hardest factor to argue. But if you've already got either factors above which are strong, you're onto a winner!

[SueEllen]

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? [Not really. I am in touch with other writers who are in the same situation as me, but can't imagine a situation where I'd be able to ask them to step in for me, or vice versa. I could ask one of my friends who is a freelancer with her own limited company, but I'm not sure this is what HMRC would be after.

Red removed because it's annoying. Multi-quote is easy to learn.

If your client is happy for anyone to do the work with the relevant skills as long as you sort it out then you are covered. There are actual arguments about what this means specifically but in general if you don't have to do the work yourself but can get someone you employ/sub-contract to do it for you, then you are covered.

- do you have ultimate control over what you do and how you do it? Yes, I suppose so. I have clients who provide me with work but this is something I am able to negotiate, and the hours I do and where I work is up to me, as long as I complete the work!

Good.

- are there any obligations for work; during, in between and in the future? Not really. I work on one piece at a time. For example, the project I am working on just now is estimated to run until May. When this finishes, I will get a different project to work on, which may take a couple of weeks or a few months. It will be with a different client but within the same agency, so the contract will remain the same.

Good

- plus does your company have a financial risk, have to provide all equipment, insurances, pay for all your training, advertise, etc None of this. I need no equipment other than a computer and access to journals, but have no business expenses at all.

Who pays for the journals? Who pays for your computer? How do you keep up to date in your field? Do the employees at the client get sent to training courses and you don't?

[goldilockz]

Hi SueEllen and Louisa,

Thanks for your responses. I'm feeling a bit less like the HMRC are going to knock my door down in anger now!

With regards to arranging for someone else to do the work, I could certainly ask the agency I am 'engaged with' to provide a letter or a clause detailing this in my contract. I don't think there would ever be an instance in which this is required, but for the purposes of IR35, perhaps it would be necessary.

With regards to the computer and journals, the end client has provided access to these for the duration of my contract. I pay for an 'office' during working hours but that is my only expense, and I wouldn't even consider it an expense as it's working from a friend's conservatory and doesn't cost a great deal.

Wondering though if it is worth taking out IR35 tax enquiry insurance just in case or if it wouldn't be worthwhile.

Thanks again for your help!