How to fall outside IR35

[weemster]

How long is it they can go back ?

[AnthonyQuinn]

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

Do the following.
1. setup your company properly. Have visiting cards, letterheads a company phone number.
2. Carry a laptop to your bank (if allowed) and switch it on. Spend some minutes on it when you can. Do whatever you can on your own laptop.
3.Try to include in your contract a clause that says that , with the agreement of the bank, you could replace yourself with another consultant for periods of time. (Knowing full well that this will never happen).
4. Conduct any other business and any other work that you can. Invoice through your company.
5. Don go to jollies etc that your bank organises.

[Torran]

6. take some proper advice and don't rely on tulip like the points above.

[LisaContractorUmbrella]

Do the following.
1. setup your company properly. Have visiting cards, letterheads a company phone number.
2. Carry a laptop to your bank (if allowed) and switch it on. Spend some minutes on it when you can. Do whatever you can on your own laptop.
3.Try to include in your contract a clause that says that , with the agreement of the bank, you could replace yourself with another consultant for periods of time. (Knowing full well that this will never happen).
4. Conduct any other business and any other work that you can. Invoice through your company.
5. Don go to jollies etc that your bank organises.

You can do all of the above but if you are working on a 9-5 contract alongside permanent employees, for 1 client, have no need to work on a laptop for the contract, don't know anyone who could replace you or know full well the bank wouldn't allow it it would all be irrelvant. Your contract must reflect your working practises otherwise, with regard to your IR35 status, it is not worth the paper it's written on.

[Torran]

You can do all of the above but if you are working on a 9-5 contract alongside permanent employees, for 1 client, have no need to work on a laptop for the contract, don't know anyone who could replace you or know full well the bank wouldn't allow it it would all be irrelvant. Your contract must reflect your working practises otherwise, with regard to your IR35 status, it is not worth the paper it's written on.

exactly. Those 5 points were the Mickey mouse way to pretend you are avoiding IR35. In an investigation you would be torn a new one

[Moscow Mule]

1) Try not to have your name on the contract anywhere.
2) Have an unfettered right of substitution (implied by 1)
3) If at all possible, use 2.
4) If there's no work to do, don't bill - just go home.
5) Come and go as you please (probably not appropriate for support jobs )
6) Work from home when you feel like it.

[AnthonyQuinn]

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

Is it the HMRC that decides or is it a court? Surely you are not bound by HMRC's interpretation?

[AnthonyQuinn]

You can do all of the above but if you are working on a 9-5 contract alongside permanent employees, for 1 client, have no need to work on a laptop for the contract, don't know anyone who could replace you or know full well the bank wouldn't allow it it would all be irrelvant. Your contract must reflect your working practises otherwise, with regard to your IR35 status, it is not worth the paper it's written on.

Correct. My apologies. Should have added the following
1. Avoid 9-5 at all costs. Work from 'your office' at home whenever possible.

Do you need to know someone who would replace you. Your company would look for that person when required. You dont need him / her as a backup???

[LisaContractorUmbrella]

Correct. My apologies. Should have added the following
1. Avoid 9-5 at all costs. Work from 'your office' at home whenever possible.

Do you need to know someone who would replace you. Your company would look for that person when required. You dont need him / her as a backup???

There have been cases when the substitution clause has been dismissed because the contractor did not actually know someone who could replace him if necessary. HMR&C's opinion is that if you are going to work outside IR35 you should operate as a business e.g. if you employed a building firm to build an extension for you, you would expect the job to be finished as promised even if the builder who started the job became unavailable. Totally different to the average contractor situation, obviously, but that, rightly or wrongly is the way it's viewed by HMR&C.

[PhilAtBFCA]

Ir35

IR35 needs to be determined first by the tax payer.

IF HMRC object , as they might at some point, they may take a different view.

You you the tax payer object to their view, your recourse is generally speaking in the new tribunal system, so a tribunal will decide. In IR35 cases I would expect these to be experienced decision makers at A "Complex" Hearing at First Tier.

The Case Law at the hearing will most likely refer to the standard cases in an employment status dispute.

On how a decision should be arrived at they will refer to Tilbury V Gittings where it was held that an IR35 status case should be decided on:-

1. The Contract
2. The actual working conditions
3. The "overall picture" taken if you stand back and look

On employment status the main case is Ready Mixed Concrete and is featured on HMRC website.

In this case it was held that in order for there to be an employment status the situation has to have what is know as the "irreducible minimum of 3" factors:-

1. Personal Service
2. Control
3. Mutuality of Obligation

To be found inside IR35 all three of the factors above need to have been demonstrated.

To be clear - to be outside IR35 - Only one of those factors need not to be shown.

The IR35 legislation is written in a way that you do not need to prove self employment. You need to prove that there is "not employment" , there is a very slight difference between these two. ( So "NOT employment" = Outside IR35 and "Employment" =Inside IR35 )

As a generalisation, cases that have been lost, have been lost where the working arrangements do not match the actual contract wording. i.e. a substitute clause is just a sham for whatever reason ( not possible, not intentioned, not even known by either party ) or control where a clause says no control, but the contractor goes for a performance review each quarter.

I wrote recently on the Tilson Employment Tribunal Case, this is slightly different but again, the same case law was used. It was a classic example of where working conditions did not refelect the contractual conditions.

I have tried to keep this as short as possible, and in looking at your IR35 status I would try and keep it simple and reflect on the above cases and the factors in your case. Failing that, get a good review, which will probably be based on the above anyway.

I hope this helps.

Phil