IR35 review

[SueEllen]

Sue raises an interest comment about the upper contract between agent and client which we very rarely get to see. I imagine it is mainly commercial and will not touch on working practices really. I can't see why your contract should match the agents one. It is a different relationship, but then we don't seem discuss the upper contract much.

I've seen some upper contracts and some clients insist certain clauses have to be put in contractors contracts. These clauses vary from client to client as you can't be bound by clauses you haven't seen.

Some involve working practices which are straight copies, while others like payment are fudged so the agency can try and hide the fact they are contracturally obliged to pay you within x days otherwise they could lose their contract if enough contractors complain.

[Zero Liability]

What exactly constitutes a disguised permie, though? From what I understood it mainly involves staff let go by a firm and then subsequently re-hired as contractors, or generally intended to keep the staff on as permanent but wanted to avoid the regulations and costs associated with permanent staff, and therefore chooses instead to deal with them as contractors.

The contract I am on relates to short term contract, with no intention of retaining any staff once it is over (although it is willing to offer other contracts, even concurrently), there is no prior affiliation with the firm and the work I am doing is not within its ordinary range of work.

At any rate, so the relevant client here is the agency's client, and not that client's client. I'll have to see what I can do about a CoA with them but I doubt they'd sign it.

[LisaContractorUmbrella]

What exactly constitutes a disguised permie, though? From what I understood it mainly involves staff let go by a firm and then subsequently re-hired as contractors, or generally intended to keep the staff on as permanent but wanted to avoid the regulations and costs associated with permanent staff, and therefore chooses instead to deal with them as contractors.

The contract I am on relates to short term contract, with no intention of retaining any staff once it is over (although it is willing to offer other contracts, even concurrently), there is no prior affiliation with the firm and the work I am doing is not within its ordinary range of work.

At any rate, so the relevant client here is the agency's client, and not that client's client. I'll have to see what I can do about a CoA with them but I doubt they'd sign it.

The scenario you describe was one of the reasons for IR35 being introduced but it has gone way beyond that now. The 3 main indicators for status are mutuality of obligation (are you obliged to accept work and is the agency obliged to offer it), supervision, direction and control (do you work under your own steam deciding what to do and when or do you have a line manager who structures your workload) and right of substitution (if you were unable to work could you send someone else in your place - do you know someone and would the client accept it or would that be down to the agency).

If you have no mutuality of obligation, no supervision direction and control and you do have an unfettered right of substitution you will be outside IR35

[TheFaQQer]

What exactly constitutes a disguised permie, though?

Someone who is presumed by the client and / or HMRC to be a permanent employee, just using a Ltd company as an avoidance measure.

So if you are treated by the client as an employee, then that's what HMRC will try to force.

Have a Google search for IR35 chronicles, which is a series of articles on another site about how a typical investigation may go.

[Zero Liability]

Someone who is presumed by the client and / or HMRC to be a permanent employee, just using a Ltd company as an avoidance measure.

So if you are treated by the client as an employee, then that's what HMRC will try to force.

Have a Google search for IR35 chronicles, which is a series of articles on another site about how a typical investigation may go.

Right, that makes sense. I've had a browse through several articles, which is what led me to get an IR35 review, since to be honest it all appears to be rather nebulous. I am hoping the review will provide clarity on the matter.

As far as I am aware, having concurrent contracts is a factor that may put one outside IR35, but if for instance I were to offer freelance proofreading services via the LTD company, would this also help?

Thanks to all for all the answers so far.

[LisaContractorUmbrella]

Right, that makes sense. I've had a browse through several articles, which is what led me to get an IR35 review.

I am also considering adding another stream of income to the business by offering freelance proofreading services - would this go further to placing my current engagement outside of IR35?

Each contract is considered separately so if you were doing all your hours under the terms of the first contract and then doing the proof-reading in your spare time it wouldn't help

[Daventry]

How about people working for the same client for years? I know of contractors that have been in the same client for 4-5 years. That seems like a disguised permie to me.

[northernladuk]

As far as I am aware, having concurrent contracts is a factor that may put one outside IR35, but if for instance I were to offer freelance proofreading services via the LTD company, would this also help?

No no no no. I don't know what you are reading but you are not getting it at all. IR35 is per contract. Concurrent contracts will meet the business rules and put you at less risk of getting investigated but when they land both contracts are looked at individually. Here is a starter for 10..

You and a permie are coding on a project, sitting next to each other in an office. You are in a B2b relationship to deliver that specific piece of work. Permie is doing it part of his job. One is paying normal NI/Tax, the other (you) isn't. HMRC thinks you should so is trying to classify you as a disguised permie so he can tax you so you must have a very different working arrangement to prove you are not. Examples are (trying to get the most important first)

MoO - When permie finishes on that project the company has an obligation to find him more work. You must not have this obligation. You leave.
Direction - Permie can be told to do anything the management require as they see fit. They must work exactly as they are told. You must not. You deliver what you were contracted to do and no more in your own way.
RoS - Permie is off sick or hols the company back fills for him. He cannot send a friend in to cover. You should have a RoS whereby you can send in a sub to do your work and continue to bill.
Regulation - Permie has lots of laws protecting him from instant/unfair dismissal, gardening leave, company benefits as a perk of the job. You do not. You turn up, bill, go home.
Holidays - Permis have holidays, you do not, you have periods you are unable to provide your service.

The list is endless and varies in impact with regard to IR35 but the important factor is that you do no act or look like an employee of the company. You are an external 3rd party. Remember whatever your contract says the working arrangements must be clear. Get on site and you do the same as the permie in any of the above and more then you have an issue you must deal with.

Hope I haven't just gone over everything you know and this demonstrates the basics of IR35. Insurances and review all help but it is up to you to deliver as a business ultimately.

[LisaContractorUmbrella]

How about people working for the same client for years? I know of contractors that have been in the same client for 4-5 years. That seems like a disguised permie to me.

I would agree - if you've worked at the same place, doing regular hours, for 4 or 5 years I don't really see how you can be anything other than integrated into the workforce - mind you there are many on here who would disagree with me

[northernladuk]

How about people working for the same client for years? I know of contractors that have been in the same client for 4-5 years. That seems like a disguised permie to me.

It is arguable and I would often err on the side of agreeing with you. From what I have seen with long term contractors they often slip in to lethargy and forget their relationship, direction comes in and so on so yes the dangers increase. JLJ partial loss was based on the fact he had been there so long they stopped bothering with the details in the contract and going through the motions so just became part and parcel of the organisation. It also becomes increasingly difficult to argue that the position is temporary and not enduring.

That said 3rd part providers can deliver to clients for years and years. The company might outsource work for ever as it isn't part of their main business and they don't want to deal with it so the actual length of time really shouldn't be an issue in it's self. It's the danger of the relationship between the client and contractor becoming grey. Keeping your wits about you and continuing to act like a business throughout the whole contract should keep you in the clear.