Escaping IR35

[agreen&pleasantland]

Your thoughts would be appreciated on whether I can escape IR35 with my next contract.

I have been doing an IR35 caught contract support role for 3 yrs (same desk, their PC, named resource on contract, etc). The company has now 'outsourced' my role to another company, which is offering me a 6 month contract to get the new service up and running. The role will be to set up the procedures, document and training / knowledge transfer to the people in the new company. I will be based from home with travel to the new company's site (>100miles away) and not the site I used to work at.

If I use my own equipment, put in clauses for substition and payment around clear deliverables, is this enough to get me out of IR35 even though I will be associated with the service I have previously been engaged in under IR35?

...and what if I still have to talk to / help out my old users on occasion?

[davisc02]

Why don't you just pay £100 to get your contract looked over by a professional. Save yourself any stress.

[Denny]

Your thoughts would be appreciated on whether I can escape IR35 with my next contract.

I have been doing an IR35 caught contract support role for 3 yrs (same desk, their PC, named resource on contract, etc). The company has now 'outsourced' my role to another company, which is offering me a 6 month contract to get the new service up and running. The role will be to set up the procedures, document and training / knowledge transfer to the people in the new company. I will be based from home with travel to the new company's site (>100miles away) and not the site I used to work at.

If I use my own equipment, put in clauses for substition and payment around clear deliverables, is this enough to get me out of IR35 even though I will be associated with the service I have previously been engaged in under IR35?

...and what if I still have to talk to / help out my old users on occasion?

A pointer for IR35 is whether you are operating under client control.

Even if you do have rights of substitution, move around a bit or work at home most critically is whether the client has the right to tell you how to work or how the work should be done.

You may work from home 5 days a week, but would your boss (whoops client) be legitimately able to tell you to work in the office instead? Or tell you what hours to keep? Can they tell you do fill in for someone off sick or do ad hoc bits of work that are not pre-agreed? Will they expect you to log on at a certain time at home to prove you are actually working and not skiving off, are you only able to work between Monday-Friday or do tell you to fill out a holiday sheet (which implies the client needs to find a replacement for you if you're away rather than you finding your own replacement). All of these are danger signals and pointers to IR35 inclusion.

In all honesty, the contract wording is vital, but the actual working conditions are just as important if not more so. Rights of substitution are also useless if you can't realistically exercise them as and when you choose, subject to agreement from the client over deliverable scheduling if a substitute is not available or trainable in time. Some contractors think that ROS inclusion in their contract is all that is necessary to be outside of IR35.

A real business tells the client how he/she will work, their work has a clear consultancy feel to it (tell them what they need to know, not what they want to hear) is explicitely set out at the start of the contract, is not passed ad hoc bits of work just to make up the hours, and can feel comfortable negotiating with their client about doing other bits of work for other clients when it is convenient to do that. Real businesses don't work from home either, they work out of their home office because they have the right to come and go as they please, work weekends if they choose but are responsible not to do so unless it is vital, and only visit the client site when it is necessary to get deliverables delivered and then go offsite again or only use a desk and computer provided if it is not expedient to go home and then go back again for two meetings that are 3 hours apart. Real businesses don't moan when their daily fee means 15 hours instead of 8 either. No good bleating to the EB about overtime pay or Saturday rates if you're a real business.

Oh....by the way, real businesses don't use the company canteen either or the squash courts or any other 'benefit in kind' even if the client suggests that you may. Real businesses act responsibility they don't try and keep their cake and eat it too by acting like a de facto permie.

The real pointer about all of the above is this: 'do you need permission, and if so, why do you, and will you get it? If you have to ask yourself any of these questions let alone be granted them then you will probably be more inside than outside of IR35.

The good news about all of this is that all contractors will have to work as real businesses soon otherwise the client will unwittingly find themselves hiring de facto employees with full employee rights, particularly if they stick around long enough.

By the way real businesses also refer to EBs as EBs not agencies. If I ran the world, and this forum (which is much tougher), I would ensure that anyone who referred to an EB as an agency would be automatically caught by IR35 - and serves them bloody well right too.

[agreen&pleasantland]

Thanks for your eloquent and comprehensive point Denny. I suspect, a minor % of my work will fall foul of 'being dictated to'. However, your point is somewhat at odds with a number of other comments I have read in recent postings about 'the majority of contracts being outside of IR35'.

Do I need to demonstrate that everthing in a contract is outside IR35 or just the vast majority?

[Denny]

Thanks for your eloquent and comprehensive point Denny. I suspect, a minor % of my work will fall foul of 'being dictated to'. However, your point is somewhat at odds with a number of other comments I have read in recent postings about 'the majority of contracts being outside of IR35'.

Do I need to demonstrate that everthing in a contract is outside IR35 or just the vast majority?

Contracts being outside of IR35 is not the same as actually being outside of IR35. Some contractors on here are incredibly niaive and believe everything their EB says when they claim that their contracts are 'IR35 friendly'. I guess it's human nature to believe what you want to believe is true.

Remember this when you read your contract terms and conditions - Gordo is not a man of words, but of actions. Having said that IR investigations are relatively few, but it's not worth the risk if you end up with a whoppa of a tax bill down the line because they've contacted your client and asked them what your actual working conditions were.

Even solicitors are not that helpful. There are loads that will fleece you for plenty to scan through your contract but they're not in the least bothered about what happens when you are on site. Roger Sinclair at Egos is worth contacting as he seems to know his stuff pretty well.

[malvolio]

Although case law and the 1250-to-3 win/lose ratio would seem to indicate that you are outside IR35 if in reality (and not just on paper) you have any one of the three key points covered off - a reasonably unfettered right of substitution (don't actually have to do it to prove it BTW), no Mutuality (you no work, you no charge, they have no work, you no get paid) and no Direction and Control (they tell you what they want to acheive, you do it however you see fit is good, they tell you what to do is bad). Using your own kit, location, all the peripheral stuff is minor, those are the three key ones. Add in financial risk (such as rework at your own expense) and you should be clear.

But get the contract reviewed to make sure there are no nasties hiding in the small print.

[Ruprect]

This is a good article for rule of thumb - though Mals comments/advice are good too.

http://www.contractoruk.com/news/001833.html

There used to be a questionairre on here too which would give you an indicator as to whether you're caught or not but I can't seem to find it.

Also join the PCG - 'free' legal advice (i.e. legal advice to members who have paid their subscription), and you can buy IR35 insurance from them too.

[pickle]

wheres the risk?

So many contractors I have worked with seem to be not sure about their IR35 status, so decide to "play it safe" by coughing up the extra cash.

Well, as far as I can tell, thats the wrong way of doing it. The way to "play it safe" is to join the PCG and get their insurance (or similar), stick a substitution clause in your contract and then carry on as a normal business. BUT make sure you put away that extra cash to one side, and if you do get an IR35 investigation (highly unlikley if they see you have insurance) and you do loose (even more unlikley) the WORST they can do (assuming you can resonably show that you thought you were outside of IR35 ) is to ask you to give them the extra money. Which you have put to one side, and would have given them anyway had you ticked the stupid box on your end of year returns.

Is it me or is this not a no brainer? Why do so many contractors still not get it?

[malvolio]

Is it me or is this not a no brainer? Why do so many contractors still not get it?

No, it's not just you, it is a no brainer. Just why something like 100,000 people are paying 15-20% more tax than they need to is a complete mystery to me as well.

[TheMonkey]

I play it dangerously. I'd rather have a fight than spend hours at a solicitor's. I tend to have a few small 4-5 hour jobs throughout the contract though and specify work to be done rather than them doing it on the contract.