Orange Genie: umbrella won't let me submit invoices.

[LisaContractorUmbrella]

I DIY everything. It doesn't take much time. Life is easy. We run very stright forward businesses. 1 or 2 revenue sources at a time, not many expenses and not much to worry about in terms of employees.

Therefore, I don't get the "easy life" motivation either.

OK but you don't have to get it - just accept that it's different strokes for different folks

[LisaContractorUmbrella]

Inside IR35 you may as well go umbrella. I wasn't arguiing the inside case. My point was not many are inside and HMRC don't appear to be having much of an impact with it so therefore the IR35 argument is usually not a great one for the pro's of umbrella use.

What do you base your argument on that not many people are inside IR35 Prozac?

[prozak]

What do you base your argument on that not many people are inside IR35 Prozac?

Better understanding of work practices and obligations of all parties involved. Things have definitely changed since 2001 when I first went contracting.

HMRC only doing 20 or so IR35 investigations out of 1.4 million freelancers last year.

And only 322 in total in the past 5 years.

[TestMangler]

What do you base your argument on that not many people are inside IR35 Prozac?

That's a very good question Lisa.

Everyone bases their assumptions on 'cases lost' by HMRC but that is only a tiny part of it.

I've met loads of contractors since IR35 was introduced who decided they were 'caught' for whatever reason and simply paid up (and still do). Poor accountants advice, poor agents practices etc etc, whatever, I don't know why they did it.

Also, I am sure there are also loads out there who have had the little brown letter from HMRC and decided they were caught themselves as they didn't have the safety net of insurance or experience or the wisdom of CUK to fall back on.

Just because you know your way around doesn't mean that everyone does.

If the only people who paid up for IR35 were the ones who lost high profile cases, i'm sure it would be struck off tomorrow.

[malvolio]

Inside IR35 you may as well go umbrella. I wasn't arguiing the inside case. My point was not many are inside and HMRC don't appear to be having much of an impact with it so therefore the IR35 argument is usually not a great one for the pro's of umbrella use.

Erm...

Inside IR35 and umbrella'd - 100% of your gross subject to PAYE and NICs (even if you don't see the Employer's NICs, your rate is effectviely cut to suit) plus the umbrellas fees

Inside IR35 and LtdCo - 95% of your gross subject to PAYE/NICs and no brolly fees.

I won't argue about people being inside IR35 when they probably aren't, but primarily Umbrellas are for people who don't want the hassle and don't mind paying for it. Personally I do and I don't. To each their own.

[TheFaQQer]

I've met loads of contractors since IR35 was introduced who decided they were 'caught' for whatever reason and simply paid up (and still do). Poor accountants advice, poor agents practices etc etc, whatever, I don't know why they did it.

A mate of mine asked his accountant, and the accountant was insistent that he should declare himself outside IR35 and fight it. Then the accountant found out that he could still spend 5% on expenses (which covered the accountancy fees) and did a U-turn to recommended he declare himself inside IR35 and just pay up.

[ASB]

Erm...

Inside IR35 and umbrella'd - 100% of your gross subject to PAYE and NICs (even if you don't see the Employer's NICs, your rate is effectviely cut to suit) plus the umbrellas fees

Inside IR35 and LtdCo - 95% of your gross subject to PAYE/NICs and no brolly fees.

I won't argue about people being inside IR35 when they probably aren't, but primarily Umbrellas are for people who don't want the hassle and don't mind paying for it. Personally I do and I don't. To each their own.

Accountancy costs v Brolly fees are probably pretty much adjacent. So the saving become at most the difference between CT and PAYE/NIC on 5%. This is likely to be in the region of 1% of turnover.

Quite a lot of people won't see value in that. If the 5% is spent on genuine expenses then that add about another 2.5% to the mix. There is also the possibility of a modest bonus through the FRS; for most this might add another 3% ish.

The possibly gain of ltd inside IR35 is likely to be between 1% and 6%. A lot of people quite obviously think that is a price worth paying and brollys aren't actually the spawn of satan (I've never used one and can't think of any circumstance I would).

Equally there is some limited overhead in running ones own ltd in time. I used to spend probably about 40-50 hours a years recording things, talking to accountant, getting end of year stuff ready, verifying tax calcs and all that sort of guff that you do to. I didn't mind doing it, but with a brolly I could perhaps have worked an hours overtime a week. There is about 2.5% back.

So, it could well be that the cost of an umbrella could very easily be -1.5% to 4%.

Irrespective of how much you postulate the voluntary nature of IR35 a lot of people do believe (possibly wrongly) they are caught; for them a brolly can well be a sensible alternative to an easier life - at a fairly limited cost for some peace of mind. As you say to each thier own, though at the end of the day a lot of people obviously see value for the brolly route.

[LisaContractorUmbrella]

That's a very good question Lisa.

Everyone bases their assumptions on 'cases lost' by HMRC but that is only a tiny part of it.

I've met loads of contractors since IR35 was introduced who decided they were 'caught' for whatever reason and simply paid up (and still do). Poor accountants advice, poor agents practices etc etc, whatever, I don't know why they did it.

Also, I am sure there are also loads out there who have had the little brown letter from HMRC and decided they were caught themselves as they didn't have the safety net of insurance or experience or the wisdom of CUK to fall back on.

Just because you know your way around doesn't mean that everyone does.

If the only people who paid up for IR35 were the ones who lost high profile cases, i'm sure it would be struck off tomorrow.

Thanks TM

The way I see it (rightly or wrongly) is that whether or not you are outside IR35 will ultimately be decided by HMR&C, not an accountant or advisor, and it is then up to you to argue with them if they come calling. This is HMR&C's own status indicator - HM Revenue & Customs:Employment Status Indicator - now you just have to ask yourself: do you feel lucky, well do you

[TestMangler]

Thanks TM

The way I see it (rightly or wrongly) is that whether or not you are outside IR35 will ultimately be decided by HMR&C, not an accountant or advisor, and it is then up to you to argue with them if they come calling. This is HMR&C's own status indicator - HM Revenue & Customs:Employment Status Indicator - now you just have to ask yourself: do you feel lucky, well do you

I feel lucky But I have a little brown envelope from HMRC saying they are no longer disputing my status (ok it's a few years old now, but the principle still applies). I fought the law and all that.......

[malvolio]

now you just have to ask yourself: do you feel lucky, well do you

Actually, given a detailed understanding of the case law and the indicators for being outside IR35, plus some very expert representation on hand should I ever need to defend my position, and working at a level where I am pretty much free to decide how I work, yes I do...

What is more, far be it for me to criticise the gurus of HMRC, but the ESI is asking questions that are not relevant to the discussion about the engagement. You are acting as an employee if you cannot genuinely demonstrate an absence of control OR an irreducible mutuliaty of obligaion OR a right to send a substitue to do the work. All else is irrelevant, it is merely used to assess the reality of those three conditions.

And if you want an expert view on your status, the last people to ask are HMRC. That's been standing advice for eleven years.