Subcontracting benefits

[DrEvil]

I've been contracting for a number of years now but I'm just in the process of starting to subcontract work to other contractors/ltd companies as my client needs extra resource which I'm providing them. one extra intitially.

Aside from the profit, albeit small, from providing the extra resource is there any other benefits arising from doing this?

I.e. does it "guarantee" that I'm out of IR35?, do I avoid the 24 month rule as I'm now a proper consultancy not just a one man band? anything else?

Thanks in advance.

[Drewster]

Do you have a contract to supply resource... that might be outside....

Your "original" contract is what it is..... in or out depending on working practises blah blah....

You could possibly argue your supplying sub-cons is a good pointer... but "guarantee".....

[TheFaQQer]

I.e. does it "guarantee" that I'm out of IR35?

No - only your contract, your working practices and your company structure guarantee that you are outside IR35. Might help your defence, but it's no guarantee.

, do I avoid the 24 month rule as I'm now a proper consultancy not just a one man band?

No, because the 24 month rule relates to you as a person, nothing to do with your company.

[Wanderer]

I.e. does it "guarantee" that I'm out of IR35?, do I avoid the 24 month rule as I'm now a proper consultancy not just a one man band? anything else?

It seems that HMRC can say whatever they want so it seems that there's nothing certain in this life, not even taxes.

In my opinion, it could be a "silver bullet" pointer away from IR35 because you are running a business excercising your right of substitution not a one man band so called disguised employee.

[LisaContractorUmbrella]

The fact that you are supplying sub-contractors would be a good pointer but as others have said it would depend on your working practises as a whole. If your work schedule and your hours were dictated to you by your client and you used onsite canteen facilities, for example, these may be enough to outweigh the benefit, from an IR35 point of view, of the sub-contractors. HMR&C have moved the goalposts over the last couple of years and more and more factors are being taken into consideration when they review IR35 cases, for example, whether or not you have 'integrated' into the workforce - difficult to interpret or define and therefore could be a deciding factor.

[DrEvil]

Thanks for the responses. I'm pretty confident (as much as anyone can be) that I'm not caught by IR35 but thought this would help shift the balance even more in my favour.. Seems that theres nothing we can do to please HMRC

To clarify a point though I'm not exercising my substitution clause but supplying additional resources to a client in addition to me as a resource.

Do large consultancies who put people on client sites for years have the same issues with 24 mth rules and IR35 ?? I'm guessing not but cant see how the rule is different for them and for me and my small consultancy.

[TheFaQQer]

In my opinion, it could be a "silver bullet" pointer away from IR35 because you are running a business excercising your right of substitution not a one man band so called disguised employee.

From reading the original post again, this is providing additional resource, rather than a substitute.

[Moscow Mule]

From reading the original post again, this is providing additional resource, rather than a substitute.

Of course, renegotiating the original contract/schedule to say "supply two contractors at the following grades" or something similar would be a pretty good way of avoiding IR35.

[Wanderer]

From reading the original post again, this is providing additional resource, rather than a substitute.

Or another way to put it is that there is too much work for one contractor to do so he is providing a substitute as a subcontractor. Either way is good.

[TheFaQQer]

Do large consultancies who put people on client sites for years have the same issues with 24 mth rules and IR35 ?? I'm guessing not but cant see how the rule is different for them and for me and my small consultancy.

Sorry - missed this one.

24 month rule applies to every individual, so yes that applies to everyone regardless of what company they work through. There is no way round this - many large consultancies will pay an additional bonus to cover the tax liability for their consultants that are caught by the 24 month rule.

IR35 does not apply if you own 5% of the business or under, IIRC, so they don't get caught by that. It is also significantly easier to show that they are in business rather than disguised employees of the end-client as well.