Contract inside IR35 - can I work it as a sole trader instead?

[mybluesky]

Hi there,

I operate as a single person limited company.

If I feel that a particular contract puts me inside IR35, and, hard as I try, I am unable to change the terms and working conditions to put it outside IR35, can I offer to work the contract as a self-employed sole trader instead of putting it through the limited company, therefore removing any IR35 issues completely?

Thanks :-)

[TheFaQQer]

Nothing to stop you.

You'd need to register as self-employed with HMRC. And you'd need to convince the client / agency that you are a sole trader rather than an umbrella / Ltd.

And it's at that point that it will all go pear-shaped.

[The Agents View]

If you're through an agency, there aint no way no how that you're going to convince an agent to pay/engage you as a sole trader. I've never really bothered to look into why, but every agency I have worked for (which is 3) and every agency any of my friends have worked for, have refused to work with Sole traders - point blank, no exceptions. I believe (and don't quote me on this) that this is something to do with liability for PAYE tax being passed from Sole trader to agency if you don't bother to pay - As I say, its never caused me enough problems to bother checking out why - I just know I've never been able to do it!

[Sockpuppet]

I believe (and don't quote me on this) that this is something to do with liability for PAYE tax being passed from Sole trader to agency if you don't bother to pay - As I say, its never caused me enough problems to bother checking out why - I just know I've never been able to do it!

Bingo.

I suppose you could register as a sole trader and invoice your Ltd for the full value of the contract. Though not sure really what that would gain.

[Clare@InTouch]

Why not leave it within the company and up your wages to cover the value of the contract? Self employed won't save any liabilities, the NI is lower but then it's 100% taxed, as opposed to 95% through a limited.

What's your motivation for not wanting it to go through the limited?

[Scoobos]

Forgive me if you already know this, but...

You know you can just record it as income that is inside IR35, and still work through your limited right?

I think its far simpler than trying to find new engagement methods mid contract, and if anything it will work in your favour if you were ever investigated on future engagements. You've shown you're differentiating between ir35 scenarios and honest!

[Wanderer]

something to do with liability for PAYE tax being passed from Sole trader to agency if you don't bother to pay

That's my understanding too. If the worker does a runner then the business is left to foot the bill for tax/NI so agencies won't engage people in that way. Some direct clients may do, but the same problem applies to them.

[NotAllThere]

History lesson. Many contractors used to work as sole traders until the law came in passing liability onto agencies, thereby effectively forcing incorporation (or PAYE).

One of the lies about IR35 is that people incorporate as a tax dodge. No - they incorporate because there's no other way of being a contractor. (This was before brollies came about).