Public Sector IR35 New Requirement.
Hi all,
Apologies that my first post on here is a long one seeking advice but hopefully the answers that are given may not only help myself but will help other people who are in the same predicament.
I operate as an IT contractor developing software and my current contract is with a organisation in the public sector. As some of you will be aware public sector bodies are now requiring anyone considered 'off payroll' who operate through a limited company outside of IR35 to provide evidence that the contract is actually outside of IR35.
I have completed 2 months of a 6 month contract but the other day I received a letter from them stating that they believe my contract falls within IR35 and I have to provide evidence, either that I am outside IR35 or provide a projected amount of tax/NI I would pay if within IR35. I am contracted to them direct, there is no agency in between my limited company and the client.
Concerned by the letter I sent my contract to my accountant who has deemed it inside IR35. There are three clauses which show that the client has 'control' over my actions. The contract was created by the client (as I was direct) and I agreed to sign it, if I had contracted through a recruitment agency the contract would have been produced by the agency and would be airtight regarding IR35.
I find IR35 very confusing, on one hand I think I'm outside of it, I have different clients, provide my own equipment, provide my own training, have indemnity/liability insurance and have a business bank account.
On the other hand, I don't have any premises because I don't need premises and usually I need to be on site all the time due to the nature of my work. Some clients also require me to use their equipment due to network security reasons. These things don't look good for IR35.
It seems like IR35 is trying to be an all encompassing deterrent to tax avoidance but it is affecting small genuine businesses.
I know that IR35 status is quite hard to determine due to it's complexity and ambiguity. It seems more opinion based rather than legal criteria but I'd like to believe that I am not a 'disguised employee'. I am certainly not using a limited company to avoid tax/NI.
The purpose of this post is for advice on how I, and anyone else in the same situation, should proceed.
I see a few options:
1: Terminate my contract and stop all work for the client.
Although this will negate the need to provide evidence, my fear with this option is that the client will report me to HMRC anyway (for not being able to provide evidence) which may prompt an investigation. Something that I think I would come out from favourably but I simply don't want to to go through an investigation, who would?
2: Terminate the current contract, amend it to be IR35 compliant and sign it again (client willing).
Probably the most desirable option.
3: Terminate the contract, fulfil the remaining 4 months of the contract under an umbrella company.
I have considered contracting through an umbrella for sometime now (even before this IR35 issue). I don't actually enjoy the admin that goes with running a company and I am not too concerned with the drop in money that will arise from operating through an umbrella.
Is an umbrella a good option for IT contractors these days? With the recent BBC investigations into high paid consultants, the public sector is increasingly addressing the IR35 problem, perhaps it is only a matter of time before private companies will also be required to make sure they hire contractors that are on the correct side of IR35.
There will be a few of you on here in the same situation, how are you handling it? Have some of you simply left the contract early?
Many thanks for any help/advice that is offered.
Apologies that my first post on here is a long one seeking advice but hopefully the answers that are given may not only help myself but will help other people who are in the same predicament.
I operate as an IT contractor developing software and my current contract is with a organisation in the public sector. As some of you will be aware public sector bodies are now requiring anyone considered 'off payroll' who operate through a limited company outside of IR35 to provide evidence that the contract is actually outside of IR35.
I have completed 2 months of a 6 month contract but the other day I received a letter from them stating that they believe my contract falls within IR35 and I have to provide evidence, either that I am outside IR35 or provide a projected amount of tax/NI I would pay if within IR35. I am contracted to them direct, there is no agency in between my limited company and the client.
Concerned by the letter I sent my contract to my accountant who has deemed it inside IR35. There are three clauses which show that the client has 'control' over my actions. The contract was created by the client (as I was direct) and I agreed to sign it, if I had contracted through a recruitment agency the contract would have been produced by the agency and would be airtight regarding IR35.
I find IR35 very confusing, on one hand I think I'm outside of it, I have different clients, provide my own equipment, provide my own training, have indemnity/liability insurance and have a business bank account.
On the other hand, I don't have any premises because I don't need premises and usually I need to be on site all the time due to the nature of my work. Some clients also require me to use their equipment due to network security reasons. These things don't look good for IR35.
It seems like IR35 is trying to be an all encompassing deterrent to tax avoidance but it is affecting small genuine businesses.
I know that IR35 status is quite hard to determine due to it's complexity and ambiguity. It seems more opinion based rather than legal criteria but I'd like to believe that I am not a 'disguised employee'. I am certainly not using a limited company to avoid tax/NI.
The purpose of this post is for advice on how I, and anyone else in the same situation, should proceed.
I see a few options:
1: Terminate my contract and stop all work for the client.
Although this will negate the need to provide evidence, my fear with this option is that the client will report me to HMRC anyway (for not being able to provide evidence) which may prompt an investigation. Something that I think I would come out from favourably but I simply don't want to to go through an investigation, who would?
2: Terminate the current contract, amend it to be IR35 compliant and sign it again (client willing).
Probably the most desirable option.
3: Terminate the contract, fulfil the remaining 4 months of the contract under an umbrella company.
I have considered contracting through an umbrella for sometime now (even before this IR35 issue). I don't actually enjoy the admin that goes with running a company and I am not too concerned with the drop in money that will arise from operating through an umbrella.
Is an umbrella a good option for IT contractors these days? With the recent BBC investigations into high paid consultants, the public sector is increasingly addressing the IR35 problem, perhaps it is only a matter of time before private companies will also be required to make sure they hire contractors that are on the correct side of IR35.
There will be a few of you on here in the same situation, how are you handling it? Have some of you simply left the contract early?
Many thanks for any help/advice that is offered.
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