Inside IR35 - Redundancy?

[monkeyboy]

This seems to be a case of them using you as an employ to work at customer sites.

This isn't legal question but are you aware of the ammount you employer is paid for your services and does your salary reflect this rate minus the taxes.

If you are not working are they obliged to pay you a salary.


I did this for a short time for a frien ie they used my company as there contracting vehicle It was a complete pain as I then had to start doing monthly tax returns etc for no real benifit to me. I'm out side IR35 anyway.

But basically do you have a contract of emplyment with your employer that states salary times of work etc?

The expences bit seems a bit off as well.

My advice is to get out and go contracting and forget about them. Redundancy will only be available if they get rid of you and thats where the question of obligation come into play. Also if the are just taking a cut from your rate ie handling fee and the rest reflects your earning minus tax its a bit off to ask for any redundancy. Where would the money come from.

Having done this for a friend I would never recomend this type of relationship they felt ripped off by Me and IR and I had loads more paper work for little return and no ability to make a profit. Plus contractural relationship was not defined .

[Mordac]

Denny thanks for your reply.

I agree with your points about me being the contractors 'substitute' and not the actual contractor. All I need to do now is find someone to retroactively insure my employer against IR35 infringement. As my employer said that they would make me redundant if they wouldn't be liable for potentially evading IR35.

The only way you can "infringe" IR35 is to pay yourself dividends if your contract is inside IR35. You didn't read my previous reply, obviously. Your employer is either an idiot or he is taking you for one. IR35 has no affect whatsoever on redundancy or vice versa. Unless you are being paid dividends which are directly derived from the work done on your contract you are unaffected by IR35. Can I suggest you show your employer some of these replies.

[Lucifer Box]

Denny thanks for your reply.

I agree with your points about me being the contractors 'substitute' and not the actual contractor. All I need to do now is find someone to retroactively insure my employer against IR35 infringement. As my employer said that they would make me redundant if they wouldn't be liable for potentially evading IR35.

But the effect of IR35 is to "deem" you to be an employee and to tax you accordingly. But you are an employee so even if it applied, which it doesn't, it would make no difference. Both you and your employers are highly confused. Can they not clear this up by talking to their accountants?

Or are your employers trying to evade their tax liabilities in some way by paying you gross, cash in hand or as some sort of self employed sole trader or the like?

[jwinters]

I don't get it. You are a permie employee being paid a salary. In which case, it doesn't matter that you work on your employer's client sites - in owner managed business terminology, you are the contractor's 'substitute' not the actual contractor. Therefore, you are an employee consultant and therefore IR35 has no relevance to you at all.

[...snip...] Your employers (business owners) would be under IR35 scrutiny not you and would themselves be outside IR35 or very likely to be because they are exercising their full rights of substitution by putting you on the client site instead of working there themselves. [...snip...]

Denny thanks for your reply.

I agree with your points about me being the contractors 'substitute' and not the actual contractor. All I need to do now is find someone to retroactively insure my employer against IR35 infringement. As my employer said that they would make me redundant if they wouldn't be liable for potentially evading IR35.

[Denny]

Ir35 Not Relevant

I don't get it. You are a permie employee being paid a salary. In which case, it doesn't matter that you work on your employer's client sites - in owner managed business terminology, you are the contractor's 'substitute' not the actual contractor. Therefore, you are an employee consultant and therefore IR35 has no relevance to you at all.

Like any other employee you pay full tax on all your income, past the tax free threshhold applicable to all employees but have deducted from your pay only PAYE and employees NI contributions. The contractor (your employers) also pay employers NI and employees NI if they are employed by their company as Directors. Your employers (business owners) would be under IR35 scrutiny not you and would themselves be outside IR35 or very likely to be because they are exercising their full rights of substitution by putting you on the client site instead of working there themselves. As their employee it makes no difference if you are working on your employer's client site for a fixed term either, because you and your employer has MOO (Mutuality of Obligation) whereby they have to provide you with work and you have to work the stipulated hours they require. This is very unlike the working arrangement between contractors and the client. So, if your employer's lose the gig with a client, you don't. They would be obliged to find you work elsewhere even if it means they don't make money whilst you are doing it. Of course, if that goes on too long you could be made redundant, but that's a different issue and you are unlikely to get compensation unless you've been with the company for over a year.

This forum is not going to help you, unless, of course, you are being paid gross as a freelance sub-contractor, and it doesn't seem to me that you are. Likewise, it is highly inappropriate for your employers to be discussing IR35 issues with you at all regarding their own relationship with the client, as this simply does not affect you at all.

[Denny]

Boo

[jwinters]

It sounds like you are a paid employee of the company just like any other permie. Just because the company you work for does contract work doesnt mean you are a contractor. In your case IR35 is irrelavent as it doesnt apply to permanent employees.

DaveB,

My employer tells me that the work I do at another companies site falls under IR35. ie. There is a service contract between my employer and company x. For the past 3 months I've been going to company x to work on various things to sort out their network, etc.. I complete my timesheet and get signoff from company x. My employer then invoices company x for said amount.

My empoyer takes the total amount of the invoice as inside IR35 and thus can only get it out of the company as PAYE. They are unwilling to give me TAX free redundancy upto 30K because they think they can only pay it out as PAYE and don't want to be liable for the TAX.

[IR35 Avoider]

I presume your contract of employment with the company specifies that they have to turn x% of the fees you bring in into salary for you?

If not, i.e. things are a bit informal, then instead of paying you salary with your final fees they could make you a tax-free payment. I don't think redundancy (which is a term with a strict legal meaning) has anything to do with whether they can do this - as long as you are not contractually entitled to a payoff on leaving, up to 30K is tax-free. (Anything you are legally entitled to is not tax-free.)

[tim123]

The contracting company has through instruction from their accountant
deemed my work to fall inside IR35 and for the last two years been happily
giving the IR 49% of the invoiced amount. 49% = 11% Employer NI then
giving me the rest to me as PAYE ie. 8% employee NI + 27-30% TAX.

If you're paying 11 of gross as ERNI then the contracting co is doing the calcs wrong.

tim

[DaveB]

It sounds like you are a paid employee of the company just like any other permie. Just because the company you work for does contract work doesnt mean you are a contractor. In your case IR35 is irrelavent as it doesnt apply to permanent employees.

As far as redundancy goes you have no right to it if you leave volunterily. If the company decides it no longer requires your services you might be entitled to something, it depends on your contract of employment with them.

You can read all about employee rights following redundancy here and work out what you might get here

Generally speaking the legal minimum is 1 weeks pay, to a maximum of £290 pw, per year of employment subject to you having been employed for a minimum of two years and an £8,700 maximum payment.

[Mordac]

What does you contract of employment say? Not many contracts entitle you to redundancy if you decide to leave. IR35 is not relevant here. You might be inside as far as paying more tax is concerned, but that doesn't buy you any employment rights (yes, we know it's unfair, but now you know why we all think Gordon Brown is a c**t).
If you are going to think in terms of redundancy and rights, perhaps contracting isn't for you. Trust me, it can get way worse than this...

[jwinters]

Greetings all,

I had a look around the forum and couldn't find any answers to my question
specifically so here goes.

A bit of history before the question. (or just skip to _QUESTION_ section)

I've been working (employee) for an IT contracting company for over 2
years now. I am not a company director and am not the only employee.
During those 2 years I've been placed/contracted out to 3 different
companies. The contracts weren't reviewed for IR35 compliance and the last
contract wasn't more than a short email and verbal confirmation.

The contracting company has through instruction from their accountant
deemed my work to fall inside IR35 and for the last two years been happily
giving the IR 49% of the invoiced amount. 49% = 11% Employer NI then
giving me the rest to me as PAYE ie. 8% employee NI + 27-30% TAX.

Needless to say giving half of my potential earnings to the IR is less
than ideal. They also don't allow me to expense ANYTHING. Since my 3rd
contract is coming to a close next week I will be leaving my contracting
company and looking for better alternatives.

As I do not wish to employed by them anymore I've asked about the
possibilities of redundancy. It just so happens this coincides with the
termination of my current placement.

_QUESTION_:

So my question is: As an employee of a company that is contracting me out
and deeming that income is inside IR35, do I have the right to paid a
redundancy payment. If so will that redundancy payment have to be paid out
in the form of PAYE or will the contracting company be required to pre-tax
the payment before giving it to me?

Many Thanks,
Jason