Outside IR35 now even harder to prove PGMOL ruling

[jamesbrown]

So are people working outside now (or with realistic prospect of working outside in the future) seeing this as the prompt to stop working that way, or just treating it as another bump in the road to think about along with everything else?

I refuse to work under Chapter 10, only Chapter 8, which practically means overseas clients only. As I've said earlier, the best you can do is to remain vigilant and retain evidence, as well as insure yourself against risks (i.e., legal expenses).

Contracting in the UK, as we've known it for the past couple of decades, has largely died already, and the upcoming budgets will probably dot a few more i's and cross some t's, but the need for flexible work and workers will always exist. Unfortunately, the direction of travel has been towards more pseudo-employments that don't especially benefit clients and certainly disadvantage workers who would otherwise engage B2B (umbrellas, FTCs etc.). I think many contractors wouldn't care too much about the eroding tax advantage of working outside, providing they could claim legitimate business expenses. One thing you cannot viably do with FTCs or umbrellas is travel to find the work.

[willendure]

Running your business properly is your main concern, particularly with the sums flying around people have had to pay. That's my opinion anyway and I'm sure someone will pop up and say us types that spend a lot of time on IR35 are just tin foil hat wearing loons. You'll probably get away with it but it's more by luck than design.

Lucky, yes. Or perhaps more that I have not been unlucky, as investigations are fairly rare.

But I appreciate what you are saying, and am ready to listen and learn. Are you able to provide a summary of your approach to IR35? What have you spent a lot of time on? How do you manage your contracts? How do you run your engagements to avoid supervision and control and so on? Any insight into what you are doing would be greatly appreciated.

[willendure]

Contracting in the UK, as we've known it for the past couple of decades, has largely died already, and the upcoming budgets will probably dot a few more i's and cross some t's, but the need for flexible work and workers will always exist. Unfortunately, the direction of travel has been towards more pseudo-employments that don't especially benefit clients and certainly disadvantage workers who would otherwise engage B2B (umbrellas, FTCs etc.). I think many contractors wouldn't care too much about the eroding tax advantage of working outside, providing they could claim legitimate business expenses. One thing you cannot viably do with FTCs or umbrellas is travel to find the work.

Whilst I don't have much optimisim about it, lets see this budget before we condem it. We've been an easy target for a while now, there isn't much meat left on this carcass for the vultures.

I agree though, the advantages of being incorporated are not really paying lower rates of taxation. For me it is:

1. Expenses. Profit = Income - Expense. Being in business has many expense besides occasional travel. Equipment, phones, internet, sofware, professional fees, rent...
2. The ability to retain profit in the business and use it to grow the business.
3. The ability to decide when to pay a dividend or when not to, based on circumstance, risk and success.

One way to resolve it might simply be to increase dividend tax to bring tax rates in line with employment. The downside to that is, it removes incentive for anyone to become an entrepeneur and small business and entrepeneurs are the lifeblood of our economy. They say one of the worst ways to invest some money both in terms of risk and taxation is to start a business! There has to be something to encourage those with the impulse to give it a go.

[willendure]

https://forums.contractoruk.com/acco...accountax.html

I see some replies here from QDos about their IR35 insurance. They claim to have lost 2 cases and won > 1000. They also say that they assess buyers of their insurance prior to selling it, so if there were weak cases they would not have been able to get the insurance in the first place. That seems like the right approach to me - happy to pay for the insurance if I also have convinced someone else that I have a good case before hand.

I also downloaded their working practices questionaire. Seems like its £45 or something to get it assessed, but its pretty obvious what the right and wrong answers are, so helpful as a guide. Overall I am pretty clearly not an employee going by that, but might be one or two weaker areas to think about.

jamesbrown Thanks for your comments about documenting things. I was thinking over the weekend about things I can document... Prior to getting the work I had to prepare a bid on it and negotiate details of spec and this was unpaid work. I also did 2 weeks extra work unpaid after failing to get sign off for a delivery. These are definitely good things to document and probably others too.

[jamesbrown]

jamesbrown Thanks for your comments about documenting things. I was thinking over the weekend about things I can document... Prior to getting the work I had to prepare a bid on it and negotiate details of spec and this was unpaid work. I also did 2 weeks extra work unpaid after failing to get sign off for a delivery. These are definitely good things to document and probably others too.

Sure. It's also the everyday stuff, evidence that you are indeed operating as a supplier and not akin to a temp resource. For example, e-mails that evidence the customer behaving like a customer and you behaving like a supplier and not the customer behaving like your employer, asking you personally to do XYZ and specifying how to do it, asking you do do things that are outside of the scope of agreed deliverables without a contract mod etc. etc. Any evidence of lack of D&C, MoO (FWIW) and lack of personal service, then stick it in the evidence tray.

[willendure]

In terms of working practices - we have a daily standup and we work in 2 week sprints where a product owner comes up with work that we do. These are not things imposed on me, they are things I opt to do in order to help coordinate my work. When I first started this contract it was a fixed scope project that I took on for a fixed fee. Things have changed gradually over time, which worries me because with it comes more possible elements of control. Sure I can say each sprint is a mini spec, accept work, implement, deliver cycle, but I am not sure if the tax inspector is going to accept that.

So I am going to push back on that and try and reformalize our relationship around larger pieces of work so that it is clearer that I take on full ownership of pieces of work and deliver results in a businesslike manner.

I read on ContractorUK that having a written procedure for RoS can help? That is a memo between contractor business and client that explains exactly what would happen in the event of RoS. Do you think this is actually worth doing (or can it backfire)?

I also read on here that having a written "Confirmation of Arrangements" is something that HMRC mostly will not accept:

https://www.contractoruk.com/news/00...y_letters.html

but doesn't seem to really conclude they are a bad idea either. I am thinking if I draw up some "Confirmation of Arrangements" with my client it may well be useful, since it is what they would refer to if HMRC ever came asking. Again, worth doing?

Under Labour, I feel like a peasant, watching the horizon for the approach of the Kings tax collectors, and hiding my daughters and fattened pig before their black cloacks and hats arrive into view.

[jamesbrown]

TBH, agile methodology is not a great place to start w/r to IR35, when strictly adopted, because it's quite opinionated about various relationships and the cadence of interactions and how they proceed. Others may argue differently, but I don't personally see how you can very clearly distinguish between contractors and permies when it's based on a strict agile methodology with very regular "client meetings" like daily standups. Sure, you can pick your own tasks and work them independently to your own timeframe, but the permies will be doing that too and it's a bit too much like a conveyer belt. I wouldn't personally feel comfortable delivering in that sort of environment and trying to remain outside IR35.

Regarding CoAs and other such documents that add some colour to the contract, I wouldn't necessarily say they are completely useless, but they only help if they truly reflect the actual working practices and will be discarded otherwise, just like the written contractual terms.

In my view, you have FFP work that is performed independently to spec/deliverables that are agreed upfront with occasional client meetings at one end of the spectrum and, at the other, you have T&M work with a strictly agreed and enforced methodology, like agile with daily standups and permies on the same team doing similar things. Once you get into the second order stuff of "oh, but I can still decide how to write my own code", you are in trouble because permies will be afforded a degree of independence too and, ultimately, IR35 is all about distinguishing your working practices as different from permies.

[jamesbrown]

Also, I appreciate that there are (at least, notionally) important differences in liabilities etc. (maybe, perhaps, probably) between Chapter 8 and Chapter 10, but the underlying principles of what constitutes an employment-like relationship are identical, which is why I am not making that distinction very much.

[willendure]

TBH, agile methodology is not a great place to start w/r to IR35, when strictly adopted, because it's quite opinionated about various relationships and the cadence of interactions and how they proceed. Others may argue differently, but I don't personally see how you can very clearly distinguish between contractors and permies when it's based on a strict agile methodology with very regular "client meetings" like daily standups. Sure, you can pick your own tasks and work them independently to your own timeframe, but the permies will be doing that too and it's a bit too much like a conveyer belt. I wouldn't personally feel comfortable delivering in that sort of environment and trying to remain outside IR35.

Regarding CoAs and other such documents that add some colour to the contract, I wouldn't necessarily say they are completely useless, but they only help if they truly reflect the actual working practices and will be discarded otherwise, just like the written contractual terms.

In my view, you have FFP work that is performed independently to spec/deliverables that are agreed upfront with occasional client meetings at one end of the spectrum and, at the other, you have T&M work with a strictly agreed and enforced methodology, like agile with daily standups and permies on the same team doing similar things. Once you get into the second order stuff of "oh, but I can still decide how to write my own code", you are in trouble because permies will be afforded a degree of independence too and, ultimately, IR35 is all about distinguishing your working practices as different from permies.

To be clear, my intention is going to be to get a good CoA that makes the outside status clear AND reflects reality, and acts as a reference point when permies start trying to undermine things. Fortunately, the CEO is a smart guy and understands this and it is with him that my contract is being negotiated.

Yeah, its a spectrum, and not the first time anyone has said I am on a spectrum! (We're all on the spectrum, thats why they call it a spectrum mate). But joking asside, I started at the good end of the spectrum and lately things have drifted off a bit, and I appreciate you pointing that out because I need to counter that drift. My proposal is actually going to be that this will be better for contractor and client, as mostly the scrum stuff is badly run and contributing to a lack of direction for the project. I also find that working on ever smaller pieces is really inneficient, much better if I can focus on the bigger picture and schedule work myself in different areas for longer, to cut down on the context switching. Ultimately deciding what they want up-front is going to force them to think harder about what they want and that is a good thing because they made a lot of lazy and bad decisions due to "agile" already.

[m0n1k3r]

TBH, agile methodology is not a great place to start w/r to IR35, when strictly adopted, because it's quite opinionated about various relationships and the cadence of interactions and how they proceed. Others may argue differently, but I don't personally see how you can very clearly distinguish between contractors and permies when it's based on a strict agile methodology with very regular "client meetings" like daily standups. Sure, you can pick your own tasks and work them independently to your own timeframe, but the permies will be doing that too and it's a bit too much like a conveyer belt. I wouldn't personally feel comfortable delivering in that sort of environment and trying to remain outside IR35.

Regarding CoAs and other such documents that add some colour to the contract, I wouldn't necessarily say they are completely useless, but they only help if they truly reflect the actual working practices and will be discarded otherwise, just like the written contractual terms.

In my view, you have FFP work that is performed independently to spec/deliverables that are agreed upfront with occasional client meetings at one end of the spectrum and, at the other, you have T&M work with a strictly agreed and enforced methodology, like agile with daily standups and permies on the same team doing similar things. Once you get into the second order stuff of "oh, but I can still decide how to write my own code", you are in trouble because permies will be afforded a degree of independence too and, ultimately, IR35 is all about distinguishing your working practices as different from permies.

Germany has regulations along the same ideas as IR35, but implemented differently. Agencies providing staff that will be under the management and control of the client must be licensed and pay an annual license fee. They must also have a lot of capital to safeguard their ability to keep paying wages. The fines are very high. VW put all freelance (as in "outside IR35") staff in teams entirely made up of freelancers and in a separate building so as to not risk a mixup. They never even got to see the perm & temp staff. The same approach could possibly work in the UK too.