IR35: umbrella best option?

[evilagent]

I have perused the relevant links here hunting out IR35 compliant issues, and think I may be caught by IR35 if I went the limited company route.

My contract, to provide Business Analysis services, gives the End User the option to terminate with 1 days notice in the first week (I require merely to arrive sober to avoid this), but then with 1 MONTHS notice thereafter.

One of the articles on IR35 suggests being dispensible, ie, not having that notice period supports being outside of IR35.
Additionally, although the contract pays lip-service to "substitution", in all actuality, I am being drafted in because of my particular skill-set.

Although, on the plus side, I do have some degree of independence, albeit under a Project Manager.

Is the 1-month notice period an IR35 noose?
ta very muchly.

EDIT: Parenthetically, I suppose I should elicit pointers to those who could look over the contract and give their views on it.

[Jessica@WhiteFieldTax]

One of the articles on IR35 suggests being dispensible, ie, not having that notice period supports being outside of IR35.
Additionally, although the contract pays lip-service to "substitution", in all actuality, I am being drafted in because of my particular skill-set.

How unique is your skill set?

The pendulum can swing the other way, away from substitution / personal service issues being a problem, if your skills are very specialist.

Think of David Beckham; if you contracted him to come and do a string of publicity appearances for your (hypothetical) brand you wouldn't accept a substitute, but does that automatically make him your employee?

In other words if substitution is iffy, and your work very specialist and skills/experience unique, approach it from the other direction, and argue that personal service is a forgone requirement of the agreement and at best neutral, maybe even positive for IR35 in showing that you are a specialist not part and parcel of client.

[cojak]

I'm a BA and I'm very much outside IR35.

But go right ahead if you think you are inside. But get someone professional to look at your contract, not some stranger of dubious provenance (unless they're a vendor) we can only give you generic advice based on experience.

[LisaContractorUmbrella]

Inside or outside IR35 should not necessarily be the determining factor in whether to work Ltd or Umbrella. If this is your first contract then using an umbrella is an easy way to get started as you don't have to worry about anything other than getting on with your contract; once you've decided contracting is for you then look into what's involved in running your own company and go from there. We have loads of newbies posting on here who have got in a complete pickle because they wanted to be outside IR35 but had no real understanding of the legislation and no real idea of what's involved in running a company so best advice is to do loads of research and then do what's best for you.

[IR35 Avoider]

Even if inside, your take-home will be higher with your own company than an umbrella.

Parasol would charge me £120 a month to be an umbrella employee, Crunch accounting charge me £71 a month for my company.

With a company, you can make a few thousand pounds a year profit on the flat-rate VAT scheme, which will obviously pay all your accounting fees a few times over.

As a company director you will have an annual earnings period for NI, if your work is intermittent or you do lots of short contracts this means you could pay less NI as a director than you would on the same total salary as an employee.

Edited to add: you can still take a small dividend if caught, bringing down the tax rate on that money compared to taking it as salary, which you would have to do with the umbrella.

[Craig at Nixon Williams]

Irrespective of the IR35 status of an indivual contract, in terms of tax efficiency you will be better off with a limited company than you would if you used an umbrella. In addition to the financial benfits, with a Ltd you are in control of the money that you earn (rather than it being paid into an entity that is not owned or controlled by you) and if you appoint a good accountant who can explain to you the process of running a company reasonably well (and hold your hand through the set-up process) then the extra admin shouldn't be much too worry about.

With regards to the determination of status for IR35, I would always reccomend that you have the contract reviewed by a suitably qualified specialist to give you piece of mind over how you are working - they may also be able to make reccomendations for changes to a contract to make it more 'IR35 friendly'.

[LisaContractorUmbrella]

And I would add Craig that changing a contract to make it 'more IR35 friendly' does nothing to alter the working practises of the contractor or the intentions of the end client and therefore should not be relied upon as defence in an IR35 investigation

I would also suggest that money is not always the reason why people chose Ltd over umbrella or vice versa - we employ many contractors who earn £600+ per day and I am sure that you have Ltd Co contractors earning £200 per day

[moggy]

Irrespective of the IR35 status of an indivual contract, in terms of tax efficiency you will be better off with a limited company than you would if you used an umbrella. In addition to the financial benfits, with a Ltd you are in control of the money that you earn (rather than it being paid into an entity that is not owned or controlled by you) and if you appoint a good accountant who can explain to you the process of running a company reasonably well (and hold your hand through the set-up process) then the extra admin shouldn't be much too worry about.

With regards to the determination of status for IR35, I would always reccomend that you have the contract reviewed by a suitably qualified specialist to give you piece of mind over how you are working - they may also be able to make reccomendations for changes to a contract to make it more 'IR35 friendly'.

Because accountants never run off with the money...

[northernladuk]

Notice is the very last things you want to be worrying about if you are looking at IR35. I suggest you read the guides to the right again and learn to use the search on the forum. We have discussed notice periods and IR35 ad nauseum.

Just get your account reviewed by a specialist such as QDOS rather than try and do it yourself. You can come unstuck even if you have good pointers like RoS. If you word it wrong it's worthless so get a professional to do it.