Does The Ir35 Proof Scheme Really Exist

[Bookworm]

Ooooops

Okey dokey. After all the very salient points, and I dont use that word to often, I can only conclude that I would not be alone in doing the perverbial ostrich on this issue, even though I am not keen to take the risk that Hector decided to knock on my door. If the market, my colleagues and individuals are keeping low then I will asume the correct position and lie flatter than a snakes belly in the hope that Hector does not tread on me.

[malvolio]

Hey, you got it! Now you're thinking like someone trying to run a freelancer business in Gay Gordon's new utopia...

[redowl]

Still confused

I have been following this thread and I am still confused, although I am a newbie.

Does an umbrella company make money by providing you as a service to a client, as you are technically a permanent member of their staff or purely from monthly fees ?

If the former, how does this differ from a contractor with a limited company offering the same service ?

[tim123]

I have done a little research, strangely, including having read that particular piece in the past. Where does it contradict what I said?

Yeh you're right, it doesn't. I didn't read it, I had assumed that it was the item JA wrote about MOO within a contract. Obviously that article is somewhere else

Malvolio, I'd like to continue this point, but as I am about to go on holiday I don't have time. Another time perhaps?

tim

[malvolio]

No, the umbrella makes its money from charging you for its services - which is a good reason not to use them IMHO. Plus they usually cost a bit more than having your own accountant (and a lot more than doing it yourself, if you know how).

The umbrella/employment thing is a bit complex, different companies do different things and I've never really got my head around it properly, but AIUI you are essentially their employee, they pay you a wage plus dividends based on your earnings. It's trade off of hassle vs. IR35 caught, in effect

So why not run a Ltd of your own? I never really understand why you should pay someone else to manage your own money. It's not like they add any value, after all. And with your own company, as I said above, you are much more able to keep out of IR35

[redowl]

Thanks for the advice.

My issue is that I have a possible contract covering maternity leave, which from the little I know, would be inside IR35. Therefore the expense of setting up my own company, against using an umbrella company doesnt add up ?

[malvolio]

What expense? Company set up is roughly £50, accountant about £40-£80 a month. Umbrella is around 5% of earnings, so do the sums - 6 months at even £250 a day is £375, against £290 for the DIY option.

if you're IR35'd you're already down, so why give away any more?

[ASB]

Moo again

There seems to be a bit of confusion here.

Firstly if there is a contract there is MOO. It IS that simple. If there were no MOO then you could do the work, the other party say "not paying" and that is the end of the matter.

Am I saying everything will fail IR35 because of this? No, of course not.

There are a number factors which have to exist in order for a contract to be potentially a contract of employment. One is personal service. One is the irreducible minimum of MOO (can't remember the case and cant be bothered to look). On the MOO front it is quite unclear as to the level this is. Various opinions are put forward, but the truth is nobody knows.

However, the Holy Grail DOES exist - but it's a bit difficult to reach - all you need is a substitution clause which gives you the absolute right to substitue. But this is not easy, the courts have held that fettering on ability does not make it a sham.

Where the problem arises is that it is none of the contracts that anybody has signed that determines the contract that is tested for IR35. However as a matter of law (or at least until higher precedent is set) a substitution clause IS a magic bullet. Oddly enough this is one of the reasons that the IR focus on trying to get sombody to say "we want him.her" so that they can attempt to ignore it from the inferred contract.

[Bookworm]

Is there hope in the real world

If simple answers were to be the order of the day, and having read the many comments about the contract and how it can be manipulated to get me out of IR35, I sit here with raised eye-brows thinking what client or agency would sign a contractor up and give that contractor the absolute right of substitution.... if the right was absolute, what would stop me from getting the contract on my merits and skills and then 2 days later telling my client that my friend (with no expertise in the field) would be replacing me. This cannot be a real possibility, unless I am reading everything wrong.

[partimer]

sub

The substitution clause is not a magic bullet. It is a good indicator against IR35 but not by itself. You'll find that most people have things like "permitted substitutes" in the contracts because most clients would not allow you to send Bob the Builder to replace you in the IT department.

Only an idiot customer would allow you to send Jack the Ripper as your sub (but they're out there).

Also, you have to remember that the IR look at the actuality of the working conditions and the "agent/customer contract". Like we have all been saying, it's a total mess !!
FUD.
Like an idiot when IR35 first crawled out of the sewer, I sent a contract to that Luton place where you can get your contract viewed by the IR. After much hassle I got a "not IR35 contract". Second contract I send in, (contracts are dealt on a contract by contract basis) which was identical to the first, was a failure. Utter farce. There was a tiny article in Freelance Informer (who ?) many years ago about it.

Better to prepare your defence properly (don't stick your head in the sand) and wait for the knock on the door ...
Make sure the customer is on your side otherwise you have no chance.