IR35 Confusion -

[jamesbrown]

Why does he need an IR35 lawyer? Client say inside. OP is struggling with how he pays himself.

I don’t think he needs anything, especially. But if he wants to talk to someone about IR35, perhaps with a view to talking to the client, it shouldn’t be an accountant.

[SueEllen]

Why does he need an IR35 lawyer? Client say inside. OP is struggling with how he pays himself.

To confirm he's inside.

[northernladuk]

To confirm he's inside.

Client has said he inside is so he's done. If he isn't now he will be in April when the client has to determine. What is going to gain by being the first person to potentially go legal on a clients determination? For what? 5 more months?

His whole business model is acting as a pseudo agent putting bums on seats. Client wanted inside bums on seats, it's what he's got. Nothing else to see here IMO.

Maybe what is missing is a break down of where this guy is at as his mish mash of explainations isn't giving much context.. So, in one of his previous threads he states...

I run a Ltd with 3 employees, Me 100% share holder, wife (nominal salary), Employee A (a REAL employee) I give him sick, holiday, pension, pay reviews, a set payment per month (he is contracted to me at 39 hours a week) - Plus he complains about pay etc like a real employee...

OK. I assume when he means contractacted to me he means contract of employment, and his wife isn't really an employee but apart from that it's pretty clear.

My contract with company A stipulates me and employee A by name and we both work on site (him 5 days a week, me 3 days a week),

Strike 1

but we are certainly "treated" like employees (which is ridiculous to not be) in terms of, treated on a personal level team meetings, set desks, the client likes to have 1-1's with each of us to ensure we are happy, we can use the staff canteen (subsidised but not paid for), we get invitied to team events (we pay for ourselves), we DON'T get invited to big christmas do's etc. We have to agree with the client days off, working times etc.

Strike 2

Work comes from a JIRA board and we do it how we think best (software development) but can set up meeting to discuss with the whole team the best method, we get listed as in the "team" in internal communications.

Strike 3

So if it was "just" me I'd say my contract is inside IR35 but because of Employee A I'm "thinking" not.

If the employee is acting like him then they are both inside. Just having an employee isn't enough. Might have been in business etc but that's long gone. The rest is explained above so.....

Game over.

There is also the fact that this is the third thread on exactly this, his first being in Sept 2019 ahead of the April 2020 change so he's had plenty of time to try get this right yet he still hasn't. I think he's struggling understanding the fundamentals of his engagement so really don't see how he can convince a judge, even lawyer'd up what he's supposed to be while trying to get his outside determination. All the information he's getting here is exactly the same as the Sept thread. Back then he also asks how payments work inside and he catagorically states he'll sack his employee and leave the country if he's inside (good luck hiding from the tribunal in Europe though). He's still asking how the payments work.

To know what his options are, stay and fight or shut up shop he needs to know how it affects his business. How on earth can he make a decision when he doesn't know how much it will cost him? So he needs to speak to an accountant to find out.. Once he's done that.. or even in parallel.. He needs to speak to an accountant. We don't know how he'll get paid inside, it's too complex for a bunch of contractors to work out.

That's why I think A) He doesn't need an IR35 lawyer.. He's f**ked himself already and B) He needs an accountant.

EDIT : And that's not even getting in to the risk to go from outside to inside.....

[pauljh]

Game over.

There is also the fact that this is the third thread on exactly this, his first being in Sept 2019 ahead of the April 2020 change so he's had plenty of time to try get this right yet he still hasn't. I think he's struggling understanding the fundamentals of his engagement so really don't see how he can convince a judge, even lawyer'd up what he's supposed to be while trying to get his outside determination. All the information he's getting here is exactly the same as the Sept thread. Back then he also asks how payments work inside and he catagorically states he'll sack his employee and leave the country if he's inside (good luck hiding from the tribunal in Europe though). He's still asking how the payments work.

To know what his options are, stay and fight or shut up shop he needs to know how it affects his business. How on earth can he make a decision when he doesn't know how much it will cost him? So he needs to speak to an accountant to find out.. Once he's done that.. or even in parallel.. He needs to speak to an accountant. We don't know how he'll get paid inside, it's too complex for a bunch of contractors to work out.

That's why I think A) He doesn't need an IR35 lawyer.. He's f**ked himself already and B) He needs an accountant.

EDIT : And that's not even getting in to the risk to go from outside to inside.....

I have had plenty of time, but unsure of the "to get it right" comment, what the client wants is tricky to amend (albeit I've been trying (for 2 years)))
The current "conclusion" is my contract (with the my named employees) will be inside BUT this won't effect the day rate/tax or salary I pay my employees. "I" am the only issue as such its looking like come April I'll be sitting back and just taking the cut off my employees (and not be on the contract at all), my accountant is still perplexed how part of a contract can be inside and part outside BUT that's what two different IR35 lawyer's are saying (its on a per person basis, NOT per contract).

Certainly not f**ked (is this facebook?), but the fact its too expensive in tax for me to bother working is an odd situation...

[LondonManc]

So your co is charging three consultants out at day rates and the contractors that you’ve engaged are deemed inside, along with yourself? The main sticking point as far as I can tell is that the client wants to see proof that the three of you are being paid under an inside position. Is that a fair summary? If so, then it’s not an inside issue because the contract is inside. Your other option is to take on another contractor to do your role.

[jamesbrown]

my accountant is still perplexed how part of a contract can be inside and part outside BUT that's what two different IR35 lawyer's are saying (its on a per person basis, NOT per contract)

This is why you shouldn't talk to accountants about IR35. The contract in question is a hypothetical contract. The real contract just helps to form it, and the WPs even more so. The hypothetical contract looks through all intermediaries and tries to establish the relationship between you, the individual, and the client to see whether that hypothetical contract looks like one of employment. Put differently, IR35 is not about one-person contracts or N-person contracts, but the hypothetical contract between an individual worker and a client.

[eek]

This is why you shouldn't talk to accountants about IR35. The contract in question is a hypothetical contract. The real contract just helps to form it, and the WPs even more so. The hypothetical contract looks through all intermediaries and tries to establish the relationship between you, the individual, and the client to see whether that hypothetical contract looks like one of employment. Put differently, IR35 is not about one-person contracts or N-person contracts, but the hypothetical contract between an individual worker and a client.

Those hypothetical contracts really only matter up to April though - surely once April rolls around the only thing that matters is the client's perception / desire and the desire of the client is for an easy life with inside IR35 contracts.

Which means the OP has only two options with this client - only use PAYE employees on that contract or walk away.

[WTFH]

I notice that he says he's been trying to make changes over 2+ years, so we've got between 1 and 4 people who have been working full-time on a single site for multiple years. The client says they are inside - which will apply from April, but that would imply that they have been inside all along.

Now, what does that mean for his business?
I think that means that, let's say he's invoicing £1,000 per person per day into the client.
In his current model, he gets £1,000 per day for himself, and let's say he takes 20% from each of the others, he gets £200 each, they get £800 each

HMRC are expecting that PAYE tax etc will be paid on £1,000 per person per day. They are currently getting tax on £800 for each of the contractors, and (at a guess based on minimum salary) £20 for him
So, they want PAYE on £4,000, but for the last 2+ years they've been getting PAYE on £2,420.

...or am I totally wrong there?

But int terms of running a business, if you're inside IR35, there's no point in having your own LTD - there's no profit.

[jamesbrown]

Those hypothetical contracts really only matter up to April though - surely once April rolls around the only thing that matters is the client's perception / desire and the desire of the client is for an easy life with inside IR35 contracts.

Which means the OP has only two options with this client - only use PAYE employees on that contract or walk away.

Yes in the sense that IR35 will be bypassed altogether by most clients and a policy decision made against PSCs. No in the sense that a tribunal judge faces the same decision if it gets that far (it’s just much less likely to get there). At tribunal, a judge will attempt to construct the hypothetical contract because that is how IR35 works. My point wasn’t broader than the accountant not understanding how it works.

[eek]

But int terms of running a business, if you're inside IR35, there's no point in having your own LTD - there's no profit.

I really did think we had covered all this back in March. In terms of running a consultancy - it's best to avoid any clients who deem you to be employees - it's just not worth the hassle.