How to fall outside IR35

[peter12]

Hi guys,
I'm working as a BA at a bank, thinking of setting up my own Ltd company for contracting. I've been told by an accountant that being inside IR35 means my net pay is 60%, whereas outside means about 78% net pay.

is there a way to be outside IR35? I've only have 1 client which is CS whom I will be working for.

Thank you and look forward to hearing from you

Peter

[PhilAtBFCA]

Being Outside IR35

peter12

Being outside IR35 is not your choice, it will be a fact based on your contract terms and working arrangements.

I would search for some good information on how to tell if you are outside IR35, you could analyse this yourself, but may need some help from a professional.

The difference between being inside IR35 and Outside IR35 can be calculated exactly on your circumstances and I would suggest that giving rough % are just a generalised guidelines. To see how you could easily calculate it using a spreadsheet ( just enter contract rate + expenses ) you may want to try this link .

Lastly setting up your own company is not just a financial consideration. In the current regulatory environment you need to really want to run your own business, although financially you will always be better off than in an Umbrella.

Phil

[Hex]

Get your contract reviewed by a professional and they'll tell you what they think. Bauer and Cottrell get a good press: http://www.bauerandcottrell.co.uk/

[DaveB]

Look to the right of this post and on the CUK Navigation pane you will see a link marked Legal : IR 35. Go read it.

[Pacciae]

Qdos get my vote every time to review my terms and let me know about IR35 and implications

[xoggoth]

The problem with reviews by experts is that actual working conditions come into it and these may not be clear if you have recently started. No hurry, you have until April.

[gingerjedi]

peter12

Being outside IR35 is not your choice, it will be a fact based on your contract terms and working arrangements.

I would search for some good information on how to tell if you are outside IR35, you could analyse this yourself, but may need some help from a professional.

The difference between being inside IR35 and Outside IR35 can be calculated exactly on your circumstances and I would suggest that giving rough % are just a generalised guidelines. To see how you could easily calculate it using a spreadsheet ( just enter contract rate + expenses ) you may want to try this link .

Lastly setting up your own company is not just a financial consideration. In the current regulatory environment you need to really want to run your own business, although financially you will always be better off than in an Umbrella.

Phil

But it is, I would imagine there are thousands of contractors who suspect they may fall inside but choose to take the risk.

Looking at the risk to gain ratio a betting man would claim to be outside IR35 every time.

[PhilAtBFCA]

Outside IR35

But it is, I would imagine there are thousands of contractors who suspect they may fall inside but choose to take the risk.

Looking at the risk to gain ratio a betting man would claim to be outside IR35 every time.

Gingerjedi

I agree that there are contractors that suspect they may fall inside IR35 but choose to take the risk - for sure that is there choice.

But if you gamble with this then do you know the risk you run - your personal liability ? perhaps read this

Burying your head in the sand and not taking a decision on your IR35 tax status is not taking reasonable care in the eyes of HMRC and will lead to penalties and interest if you get a review.

I would seriously think before taking a gamble on it. Its not a gamble you stand a good chance of winning so why gamble to lose ?

With HMRC gathering information they way they do now ( Q6 on P35 and Question on SATR's ) their targeted compliance may be more accurate in future, and what you suggest I think makes you an easy target.

On the other hand, why not educate yourself about IR35 and place yourself as far outside as you can, this is where you do have choices, IMHO, an is taking reasonable care as far as HMRC is concerned. Once you have chosen to place yourself within the contractual terms and working conditions, then take an informed decision about IR35, and then consider getting a contract review to support your decision.

Lastly, and without wishing to sound rude, most betting men I have met, consistently lose over the long term, with ocassional wins that they tend to use to forget the losses.

Phil

[KentPhilip]

Gingerjedi

I agree that there are contractors that suspect they may fall inside IR35 but choose to take the risk - for sure that is there choice.

But if you gamble with this then do you know the risk you run - your personal liability ? perhaps read this

Burying your head in the sand and not taking a decision on your IR35 tax status is not taking reasonable care in the eyes of HMRC and will lead to penalties and interest if you get a review.

I would seriously think before taking a gamble on it. Its not a gamble you stand a good chance of winning so why gamble to lose ?

With HMRC gathering information they way they do now ( Q6 on P35 and Question on SATR's ) their targeted compliance may be more accurate in future, and what you suggest I think makes you an easy target.

On the other hand, why not educate yourself about IR35 and place yourself as far outside as you can, this is where you do have choices, IMHO, an is taking reasonable care as far as HMRC is concerned. Once you have chosen to place yourself within the contractual terms and working conditions, then take an informed decision about IR35, and then consider getting a contract review to support your decision.

Lastly, and without wishing to sound rude, most betting men I have met, consistently lose over the long term, with ocassional wins that they tend to use to forget the losses.

Phil

Which would suggest you think the odds are against you.
Can you substantiate this? Are you suggesting that the majority of companies that operate outside IR35 are investigated by HMRC?
I thought, perhaps wrongly, that only a few are, because HMRC does not have the resources to do everyone.

[LisaContractorUmbrella]

Which would suggest you think the odds are against you.
Can you substantiate this? Are you suggesting that the majority of companies that operate outside IR35 are investigated by HMRC?
I thought, perhaps wrongly, that only a few are, because HMRC does not have the resources to do everyone.

There are not that many cases of IR35 investigation compared to the number of contractors but I think what Phil is saying is that you are still taking a big gamble if you should get caught because of the penalties involved. In the recent(ish) Dragonfly case the contractor had to hand over £100,000 to the HMR&C for operating outside of IR35 when, in their opinion, he was inside. As long as you put money aside for that eventuality then you are just taking a calculated risk - if you don't you are risking a great deal more