Newbie concerned about IR35

[goldilockz]

Hi SueEllen and Louisa,

Thanks for your responses. I'm feeling a bit less like the HMRC are going to knock my door down in anger now!

With regards to arranging for someone else to do the work, I could certainly ask the agency I am 'engaged with' to provide a letter or a clause detailing this in my contract. I don't think there would ever be an instance in which this is required, but for the purposes of IR35, perhaps it would be necessary.

With regards to the computer and journals, the end client has provided access to these for the duration of my contract. I pay for an 'office' during working hours but that is my only expense, and I wouldn't even consider it an expense as it's working from a friend's conservatory and doesn't cost a great deal.

Wondering though if it is worth taking out IR35 tax enquiry insurance just in case or if it wouldn't be worthwhile.

Thanks again for your help!

[SueEllen]

Factors to help yourself point away from this:

- can you send a substitute or pass on some work to perhaps another freelancer writer to do on behalf of your company for the end client? [Not really. I am in touch with other writers who are in the same situation as me, but can't imagine a situation where I'd be able to ask them to step in for me, or vice versa. I could ask one of my friends who is a freelancer with her own limited company, but I'm not sure this is what HMRC would be after.

Red removed because it's annoying. Multi-quote is easy to learn.

If your client is happy for anyone to do the work with the relevant skills as long as you sort it out then you are covered. There are actual arguments about what this means specifically but in general if you don't have to do the work yourself but can get someone you employ/sub-contract to do it for you, then you are covered.

- do you have ultimate control over what you do and how you do it? Yes, I suppose so. I have clients who provide me with work but this is something I am able to negotiate, and the hours I do and where I work is up to me, as long as I complete the work!

Good.

- are there any obligations for work; during, in between and in the future? Not really. I work on one piece at a time. For example, the project I am working on just now is estimated to run until May. When this finishes, I will get a different project to work on, which may take a couple of weeks or a few months. It will be with a different client but within the same agency, so the contract will remain the same.

Good

- plus does your company have a financial risk, have to provide all equipment, insurances, pay for all your training, advertise, etc None of this. I need no equipment other than a computer and access to journals, but have no business expenses at all.

Who pays for the journals? Who pays for your computer? How do you keep up to date in your field? Do the employees at the client get sent to training courses and you don't?

[Louisa@AardvarkAccounting]

You don't need all of the factors to help you point away from employment. You only need one of the three but the more you have the better!

If you have a friend who also is a freelancer with her own Ltd Co, that's a plus. You don't actually have to send a substitute. But you need to make sure that you would have the 'right' to send a replacement, in which the end client would not be able to refuse; providing they had the appropriate skills to do the work. If you think realistically this is feasible, you might want to get a letter between your Ltd Co and the end client to confirm this.

With control the strongest part is 'how' you do the work. If you determine the method, as you have the specialist skills with very little/no supervision, that's great. Try to keep a diary or notes of times where you have exercised this control.

Finally, with the obligations, this can be the hardest factor to argue. But if you've already got either factors above which are strong, you're onto a winner!

[goldilockz]

Hi everyone,

Thanks so much for your responses, so much very useful info here!

Mark, I agree. I am frustrated that I was getting only 57% of my estimated income as take home pay via the umbrella company: they had so many other expenses that it barely seemed worth it as I'd moved from a job that paid more or less the same. As a limited company OUTSIDE IR35, I would be getting about £1500 a month extra, but not inside it. I want to ensure there is as little ambiguity as possible in my business operations so that I couldn't be accused of being inside IR35. It's very difficult for a newbie though!

Louisa@AardvarkAccounting: This is really useful, thank you. I want to make sure, as I said above, that I am operating as a business on my own account. I don't have any employees and am the sole person in the business, as a writer. The answers to the questions you posed (which were very helpful by the way!) are in red below.

Factors to help yourself point away from this:

- can you send a substitute or pass on some work to perhaps another freelancer writer to do on behalf of your company for the end client? Not really. I am in touch with other writers who are in the same situation as me, but can't imagine a situation where I'd be able to ask them to step in for me, or vice versa. I could ask one of my friends who is a freelancer with her own limited company, but I'm not sure this is what HMRC would be after.
- do you have ultimate control over what you do and how you do it? Yes, I suppose so. I have clients who provide me with work but this is something I am able to negotiate, and the hours I do and where I work is up to me, as long as I complete the work!
- are there any obligations for work; during, in between and in the future? Not really. I work on one piece at a time. For example, the project I am working on just now is estimated to run until May. When this finishes, I will get a different project to work on, which may take a couple of weeks or a few months. It will be with a different client but within the same agency, so the contract will remain the same.
- plus does your company have a financial risk, have to provide all equipment, insurances, pay for all your training, advertise, etc None of this. I need no equipment other than a computer and access to journals, but have no business expenses at all.

[MarkAnon]

Umbrella company? - NO

Definately not use umbrella company. I looked into this and went down the Ltd route.... seems they take a huge chunk of your hard-earned and do very little else.

[jmo21]

Just with my pedant hat on.

Like you've got any other type of hat!

[Louisa@AardvarkAccounting]

My accountant wouldn't be my first port of call for IR35 issues to be honest....

Maybe not all accountants... But most have been exposed to reviewing endless contracts and discussing working practices with clients until they're blue in the face

But if you've got IR35 cover with another provider or an 'expert' who'll be covering any taxes for you, I'd check with them too

[northernladuk]

As you've already said, it's more about what actually happens day-to-day with your end client.

Therefore even if your contract fails then make sure you are at least working like contractor and 'in business on your own account'.

You need to think if someone came into the office and looked at you, do you think they'd automatically see you have the same relationship as an 'employee/employer relationship'?

Factors to help yourself point away from this:

- can you send a substitute or pass on some work to perhaps another freelancer writer to do on behalf of your company for the end client?
- do you have ultimate control over what you do and how you do it?
- are there any obligations for work; during, in between and in the future?
- plus does your company have a financial risk, have to provide all equipment, insurances, pay for all your training, advertise, etc

These should be discussed in depth with an accountant, they can go through what can be done with each of the three factors to help you if in fact you are an 'independant contractor'.

My accountant wouldn't be my first port of call for IR35 issues to be honest....

[Louisa@AardvarkAccounting]

As you've already said, it's more about what actually happens day-to-day with your end client.

Therefore even if your contract fails then make sure you are at least working like contractor and 'in business on your own account'.

You need to think if someone came into the office and looked at you, do you think they'd automatically see you have the same relationship as an 'employee/employer relationship'?

Factors to help yourself point away from this:

- can you send a substitute or pass on some work to perhaps another freelancer writer to do on behalf of your company for the end client?
- do you have ultimate control over what you do and how you do it?
- are there any obligations for work; during, in between and in the future?
- plus does your company have a financial risk, have to provide all equipment, insurances, pay for all your training, advertise, etc

These should be discussed in depth with an accountant, they can go through what can be done with each of the three factors to help you if in fact you are an 'independant contractor'.

[LondonManc]

I'd suggest that if your contract involves significant expenses and you're going to be inside IR35 then you try and negotiate either a better rate or that the client picks up the expenses (if they're expecting you to stay away or know you cannot daily commute to their site for example).

[northernladuk]

Just with my pedant hat on. Try avoid words like 'employed' and instead use 'engaged'. It really muddies the waters and is pretty key when you are talking about IR35. You will be employed by the Umbrella if you start with them so you will be confusing employed on the gig and employed by the Umbrella etc... If you get the terminology absolutely correct many complications should disappear.

But what everyone else says. I went Umbrella for my first gig to find my feet and it was a much smoother introduction than thrashing around and putting myself at risk. It's only one gig in a long career so I wouldn't be overly worried about grabbing every penny in your first gig. Don't let the umbrella rip you off of course but using that model just to start isn't a really problem.

If you are worried your umbrella is pulling the wool over your eyes speak to Lucy at ContractorUmbrella. They have a great reputation, they spend a lot of time representing contractors in various areas and run the All Umbrellas Are Equal setup.

[Cirrus]

- If I had more than one client and took on some extra work, would this make me more likely to be operating outside of IR35 as far as HMRC are concerned?

No. IR35 is on a contract-by-contract basis

- If my contract was unable to be amended accordingly and I had to operate my business within IR35, is it really worth having a limited company? Would I be better off continuing via the umbrella company?

No. IR35 is not something somebody can assess for you - apart from the Revenue. Hundreds of people will give you their opinions but they are either i) people who don't actually know, or ii) people who know a bit but whose livelihoods depend on telling you things that suit them.

Unless you are silly you stand little chance of being investigated and that investigation succeeding against you.

[jamesbrown]

IR35 is assessed for each contract separately, so having multiple contracts won't render each of the individual contracts outside. It may help at the very margins w/r to demonstrating that you're in business on your own account, but I only mention this for completeness. The answer is no.

If you're inside IR35 on all contracts, there isn't much point in having a company, given the hassle/costs and inability to claim T&S expenses. Better to stick with an umbrella now, especially if you're just starting out.

[SueEllen]

1. Don't put your name in posts or any other information that can identify you. These threads are easily found from the internet.

2. IR35 is on a contract per contract basis. So while your main individual contract is within IR35 your other contracts may not be.

3. Yes you are right it is based on your working practices.

4. More info click on "IR35 /S660/ BN66" under CUK Navigation this way ----->

[goldilockz]

Hi everyone,

I am brand new to the forums and contracting and was hoping you could help please.

In a nutshell, I am a freelance writer and left my FT job in October 2016 to set up as a contractor. The client I am currently contracted under does not have the ability to hire permanent members of staff for whatever reasons, so I was given the option by the agency who recruited me to be employed via either an Umbrella company or to set up my own limited company. I initially opted for the former, and for the first few months was paid via an umbrella. I noticed that my take home pay was significantly lower than expected, around £600 less per month, I believe due to Employer's NI. I then decided to go for the limited company option, and have set up my company in the last week.

I am currently contracted through a recruitment agency, who provided my contract, pays me and who deals with the client at the other end. I had an IR35 expert look at the contract and it failed as it looks too much like I could be a permanent employee. I have asked them if the contract could be amended, but even if it can, I believe the working practises are more important in this case, and admittedly, I could be deemed to be working in much the same was a permanent employee, particularly as I currently only produce work for one client at the moment (I work for them approx 40 hours a week). My questions are:

- If I had more than one client and took on some extra work, would this make me more likely to be operating outside of IR35 as far as HMRC are concerned?

- If my contract was unable to be amended accordingly and I had to operate my business within IR35, is it really worth having a limited company? Would I be better off continuing via the umbrella company?

Thank you in advance for your help and apologies for my ignorance, I'm very new to all of this!

Goldi