Freelancer... Do I need an IR35 contract review?

[WordIsBond]

Original post:

I'm switching to a limited company

[mudskipper]

Really hate to bump an old thread but my accountants have asked for my IR35 status again after one of their regular reviews of my accounts. They are also partnered with Qdos who offer a contract/working practices review. As people have previously said in this thread I'm 90% sure it doesn't apply to me and don't really want to pay £120 for nothing. But should I do it so that it's not in the back of my mind anymore?

If you are a sole trader, ir35 does not apply.

[WordIsBond]

Do you have tax investigation insurance? It should cover VAT inspections as well.

[Alan @ BroomeAffinity]

If you’re satisfied you’re outside ir35, and by that I mean you’ve done the due diligence on the working practices, tell your accountants you’re outside. If you’re unsure get a review. Could be £120 well spent.

[SoleTrader]

Really hate to bump an old thread but my accountants have asked for my IR35 status again after one of their regular reviews of my accounts. They are also partnered with Qdos who offer a contract/working practices review. As people have previously said in this thread I'm 90% sure it doesn't apply to me and don't really want to pay £120 for nothing. But should I do it so that it's not in the back of my mind anymore?

[SoleTrader]

WHS. The OP didn't give much detail. If you're a "freelancer" in the sense that you work in your own office/home and deliver a whole project for a fixed fee, then you shouldn't have anything to worry about even if it is one client. OTOH if you're a bum on a seat on a client's site charging per hour/day, then having multiple clients doesn't get you out of it necessarily.

As for the contract review, I would imagine that as it's a freelancer's contract and not a "contractor's" contract then it probably won't cover the sorts of things the IR35 reviewers are looking for, and that makes a review pretty meaningless if not impossible.

Yep, to clarify I am working from home and charging per hour. My thoughts exactly, I think it's my accountants trying to get some commission from a contract review.

[VectraMan]

To me, freelancer and contractor are two of the many names that we call ourselves and I see no distinction. I'm not sure that making a distinction helps anyone (Divide and conquer?)

WHS. The OP didn't give much detail. If you're a "freelancer" in the sense that you work in your own office/home and deliver a whole project for a fixed fee, then you shouldn't have anything to worry about even if it is one client. OTOH if you're a bum on a seat on a client's site charging per hour/day, then having multiple clients doesn't get you out of it necessarily.

As for the contract review, I would imagine that as it's a freelancer's contract and not a "contractor's" contract then it probably won't cover the sorts of things the IR35 reviewers are looking for, and that makes a review pretty meaningless if not impossible.

[fidot]

To me, freelancer and contractor are two of the many names that we call ourselves and I see no distinction. I'm not sure that making a distinction helps anyone (Divide and conquer?)

[Alan @ BroomeAffinity]

In principle, yes, there's nothing to stop a painter and decorator being a disguised employee of their end client. Some of the HMRC examples use construction workers (CIS applies first though). Practically speaking, their contracts would need to last for more than a few days to be worth pursuing. In other words, it will be practically irrelevant for many of them. BTW, a sole trader can also be a deemed employee for tax purposes, just not under IR35, and the liability for ErNI would rest with the employer in that case.

Edit to note that CIS would be considered first (by the client), then IR35 if CIS isn't applicable (by the contractor).

Before focussing on the contractor sector, HMRC had a right go at the construction industry, trying to move as many subcontractors to employees using effectively the same tests as with contractors now. Has to be said that they had more success with them and I remember many CIS guys getting converted in one fell swoop. Obviously there were no intermediaries but the principles were the same. From memory anyone who wished to remain a subbie had to be paid by "measure" as opposed hourly. That seemed to satisfy HMRC.

[jamesbrown]

Out of interest then James does this mean that if my decorator friend, who currently trades as a sole trader, were to trade through a LTD like a lot of the trades around here, then he should be considering IR35?

In principle, yes, there's nothing to stop a painter and decorator being a disguised employee of their end client. Some of the HMRC examples use construction workers (CIS applies first though). Practically speaking, their contracts would need to last for more than a few days to be worth pursuing. In other words, it will be practically irrelevant for many of them. BTW, a sole trader can also be a deemed employee for tax purposes, just not under IR35, and the liability for ErNI would rest with the employer in that case.

Edit to note that CIS would be considered first (by the client), then IR35 if CIS isn't applicable (by the contractor).

[gables]

In the sense that he falls within the scope of the legislation, yes.

If he's working with end customers (I.e. the general public) his chances of being inside are next to nil - but, if he started to sub contract to a big decorating firm then he'd need to be more cautious.

Yeah he's mainly with general public so agree next to nil. Given the number of IT contractors who don't know about IR35 (and it's pretty key for us), I just wonder how many of the other trades, who I know deal with larger organisations, who have a LTD even consider IR35. I'm pretty sure he wouldn't.

[vwdan]

Out of interest then James does this mean that if my decorator friend, who currently trades as a sole trader, were to trade through a LTD like a lot of the trades around here, then he should be considering IR35?

In the sense that he falls within the scope of the legislation, yes.

If he's working with end customers (I.e. the general public) his chances of being inside are next to nil - but, if he started to sub contract to a big decorating firm then he'd need to be more cautious.

[gables]

The Intermediaries legislation applies when you're working through an intermediary and the legislative preconditions are met. If you're working through a company (an intermediary) and you meet the preconditions (you almost certainly do, such as owning > 5% of the share capital) then, yes, you need to ascertain whether each contract, separately, is deemed inside or outside. That being said, if your business model is to sell products or services to multiple clients and YourCo is largely dictating the terms under which those products or services are sold, it's quite unlikely that your contracts would be deemed inside. However, this is purely speculation, and it would make sense to have them checked and to ensure that the working practices are inline. Never heard of Hello Bonsai, but there's little point in having a contract template reviewed repeatedly (or at all) if it has already been reviewed. The same would apply to the IPSE contract templates, for example. Working practices are key though.

Out of interest then James does this mean that if my decorator friend, who currently trades as a sole trader, were to trade through a LTD like a lot of the trades around here, then he should be considering IR35?

[jamesbrown]

The Intermediaries legislation applies when you're working through an intermediary and the legislative preconditions are met. If you're working through a company (an intermediary) and you meet the preconditions (you almost certainly do, such as owning > 5% of the share capital) then, yes, you need to ascertain whether each contract, separately, is deemed inside or outside. That being said, if your business model is to sell products or services to multiple clients and YourCo is largely dictating the terms under which those products or services are sold, it's quite unlikely that your contracts would be deemed inside. However, this is purely speculation, and it would make sense to have them checked and to ensure that the working practices are inline. Never heard of Hello Bonsai, but there's little point in having a contract template reviewed repeatedly (or at all) if it has already been reviewed. The same would apply to the IPSE contract templates, for example. Working practices are key though.

[SoleTrader]

One of the differences between a freelancer and a contractor to me is working on multiple projects for multiple clients, rather than being tied to a 6/12 month contract.

I'm switching to a limited company and I currently have a handful of clients who come back to me with work, some have been on and off for 18 months. I have been working for a new client for about a month, which I expect to be similar in that it will be ongoing. And I also have some work for an existing client planned.

So unlike a contractor I don't sign a contract, my clients sign my contract. So I should be 'outside IR35' surely? But for the sake of £50+vat and peace of mind I'll get my own contract reviewed (which I get from Hello Bonsai).