Working with AWR/IR35

[Andy Hallett]

Ive just googled fixed term contract and I sure as hell hope its not one of those!

I dont think it can be as there will be an agent.....from what I can gather HR at this client have said all contracts must be AWR compliant, therefore by default putting the contracts inside IR35 with the 'staff' benefits you get even if you dont want! Its a case of weighing up how much rate plus benefits is worth compared to the extra 20% tax.

Classic case of the client not understanding AWR. The agency will likely have done a comparator for you to tick a box. If you are a genuine contractor (you will be invoicing from your LTD company) and in business on your own account it does not apply.

If you fail the hypothetical comparator test then you have got a terrible rate.

[Wanderer]

I have been offered a contract that is AWR compliant and therefore inside IR35 as it will offer staff benefits such as paid holidays and bonus etc. There is no rewording option its sign or walk away.

AWR has nothing to do with IR35.

If the engagement is within the scope of the Agency Workers Regulations (as this one is) then the worker would certainly be caught by IR35 too. It's nonsense to say that the two are not connected.

[LisaContractorUmbrella]

If the engagement is within the scope of the Agency Workers Regulations (as this one is) then the worker would certainly be caught by IR35 too. It's nonsense to say that the two are not connected.

There is definitely a connection but it's the other way round - if the worker is in business on their own account i.e. outside IR35 then they are outside scope of the AWR. Saying that, however, if the contractor is to be treated as a permie in the workplace and is to receive all the benefits of permiedom then he can't realistically consider working outside IR35

[Swamp Thing]

There is definitely a connection but it's the other way round - if the worker is in business on their own account i.e. outside IR35 then they are outside scope of the AWR. Saying that, however, if the contractor is to be treated as a permie in the workplace and is to receive all the benefits of permiedom then he can't realistically consider working outside IR35

The challenge for the OP is whether or not the client is prepared to accommodate outside IR35 status. Most clients can't be bothered/don't understand the IR35 debate, they just don't want it to touch them. Meanwhile, the AWR came along in Sept 2011, which has dominated client thinking and the client choices as far as contracts are concerned are a) all temps have perm rights after 13 weeks, b) use agencies which operate the Swedish Derogation with their temps/contractors, c) continue to use properly worded upper contracts with agencies which recognise the fact that the contractor is in business on own account.

The worry is that clients can't be bothered with b) and c). They simply don't want to be the first AWR test case in the courts. That leaves a) which effectively puts contractor inside IR35 for that assignment. Depending on the day rate, the contractor then has to decide whether a deemed payment is worth the trouble, or walk away.

It may seem odd that some clients are moving in this direction, but I've found that clients make some arbitrary decisions about whether assignment terms are in/outside AWR. A common decision point is the day rate threshold. One client I worked for arbitrarily decided that anything below £300 a day automatically fell inside AWR (and by implication therefore, IR35). I saw that contractors with (arguably) specialised skills that would normally benefit from option c) above, found themselves increasingly drawn into a). Horrible thinking I'm afraid, but there it is. It wasn't helped by the client's late planning to implement AWR back in Sept 2011, and so they jumped on what they saw as the quickest solution for AWR compliance. They also weren't well advised by their recruitment MSP.

[LisaContractorUmbrella]

Think you're right SwampThing - AWR does seem to have muddied the IR35 waters even more - doesn't get any easier does it

[mmmBeer]

Think you're right SwampThing - AWR does seem to have muddied the IR35 waters even more - doesn't get any easier does it

Yep although there is no direct link supposedly, its impossible to get AWR benefits such as paid holiday and claim to be outside IR35, well you could try and chances are would get away with it but if caught then expect a big fine so depends on your appetite for risk.

I think ST summed it up really, I am going to be on the hook for 40% tax but 33 days holiday will negate half of that and other benefits may close the gap further. Its not going to be the most lucrative of contracts but other considerations such as work/life balance, security and skills/experience gained need to taken into account.

[Taita]

Yep although there is no direct link supposedly, its impossible to get AWR benefits such as paid holiday and claim to be outside IR35, well you could try and chances are would get away with it but if caught then expect a big fine so depends on your appetite for risk.

I think ST summed it up really, I am going to be on the hook for 40% tax but 33 days holiday will negate half of that and other benefits may close the gap further. Its not going to be the most lucrative of contracts but other considerations such as work/life balance, security and skills/experience gained need to taken into account.

Paid holiday = employee.....no further discussion will change that.

[Wanderer]

AWR does seem to have muddied the IR35 waters even more - doesn't get any easier does it

Actually, it's a good thing. If there is an engagement where the client wants IR35 style direction and control then they are going to have to abide by the AWR and pay holidays, benefits etc which is a bonus to the worker who would otherwise be languishing in an IR35 caught contract.

If the company wants to avoid the AWR and all it's complications then they have to stop and think about structuring the engagement as a proper B2B relationship which will ultimately help the contractor to avoid IR35.

I don't see the downside, everyone's a winner!

[LisaContractorUmbrella]

Actually, it's a good thing. If there is an engagement where the client wants IR35 style direction and control then they are going to have to abide by the AWR and pay holidays, benefits etc which is a bonus to the worker who would otherwise be languishing in an IR35 caught contract.

If the company wants to avoid the AWR and all it's complications then they have to stop and think about structuring the engagement as a proper B2B relationship which will ultimately help the contractor to avoid IR35.

I don't see the downside, everyone's a winner!

All true - what a positive little soul you are Wanderer

[mmmBeer]

Thanks for all repsonses on this thread, Im taking the contract

Now I have a decision to make on whether to go Agency PAYE or stick with my Lts Co and work inside IR35.....the calculators Ive used seem to think basic PAYE is a very slightly better take home and I wouldnt have the admin worries either. Is this the general consesus out there?