Reply to: IR35 - Inside/Outside/Service Company/How much/why?

[northernladuk]

My "understanding" was the big consultancies pushed for IR35 so they could get rid of Personal Service Companies (i.e. one man bands), but if I become a "big consultancy" that is currently "small" then I join the evil circle and love IR35 to get rid of my one man band competitors...

That explains so much.....

To be honest I am making assumptions about your business model here and that you are operating in much the same we do as PSC's so I could have it all wrong. I don't think I've got it wrong about your understanding of the differences between us and proper consultancies work, but it's been known.

[pauljh]

But going forward it will be the role that is assessed. If deemed inside they will only engage on a PAYE or umbrella solution. It's the wrong type of contract for you.

I do still think you are not understanding the difference between the way a proper consultancy is engaged and you body shopping in to roles HMRC think should be perm. They are worlds apart. The way they work is the silver bullet. The way you work isn't.

I've worked for many consultancies, and yes they have Statements of Work (Project X for 12 months at a day rate of £x per day). They NEVER bid and get the work based on previous work (we have Project XY can you do it please?) As said I work in a very niche market where there at best 4 consultancy firms in the whole of the UK who do this work (and I've worked for them all as a contractor and/or permy).

The definition of "is it like a permy job" is so ambigious its ridiculous, as we are all human beings and can "at a high" level do anything anyone else can.

I can't see how if Mr X Ltd is on site for 30 days how he can be different (outside IR35) compared to Mr Permy who is there for 30 days (except Mr Permy has more protection and benefits (excluding "maybe" money))

In summary everyone writes code, its just how much tax we give to HMRC and who in the middle takes a share (for doing very little)..

My "understanding" was the big consultancies pushed for IR35 so they could get rid of Personal Service Companies (i.e. one man bands), but if I become a "big consultancy" that is currently "small" then I join the evil circle and love IR35 to get rid of my one man band competitors...


So can you explain "The way they work is the silver bullet. The way you work isn't" in literal terms and not head line bullet points like "Statement of Work", "Bid for contracts", etc??

As at a top level, they send someone in for "x" amount of days to do task, I send someone in for "x" amount of days to do task, permy goes in for "x" amount of days to do task and stays until they quit.

[northernladuk]

Having worked for many consultancies (as a permy), there is no difference, the only difference (IMHO) is how many people, who do nothing, get a cut of your day rate.

So IR35 only applies to personal service companies 'defined' as "a personal service company is a limited company that typically has a sole director, the contractor, who owns most or all of the shares.". So IBM/Consultancies/my 33K all don't fall inside IR35 at all.....

But going forward it will be the role that is assessed. If deemed inside they will only engage on a PAYE or umbrella solution. It's the wrong type of contract for you.

I do still think you are not understanding the difference between the way a proper consultancy is engaged and you body shopping in to roles HMRC think should be perm. They are worlds apart. The way they work is the silver bullet. The way you work isn't.

[pauljh]

Depends if they are a proper consultancy or just body shopping some poor sod and paying him peanuts.

Having worked for many consultancies (as a permy), there is no difference, the only difference (IMHO) is how many people, who do nothing, get a cut of your day rate.

So IR35 only applies to personal service companies 'defined' as "a personal service company is a limited company that typically has a sole director, the contractor, who owns most or all of the shares.". So IBM/Consultancies/my 33K all don't fall inside IR35 at all.....

[northernladuk]

Ahh that's good to know and helps, so no consultancy firm will be impacted then?, Where is this 5% specified for IR35?

Depends if they are a proper consultancy or just body shopping some poor sod and paying him peanuts.

[pauljh]

Not disagreeing but the 33k guy would never
have been inside ir35 before assuming he/she doesn't hold at least 5% of the shares in the limited company.

Ahh that's good to know and helps, so no consultancy firm will be impacted then?, Where is this 5% specified for IR35?

[fidot]

Surely that 33k is providing a personal service and is therefore bound by the same rules as you? It's on the role, not the way he's remunerated by you surely?

Not disagreeing but the 33k guy would never
have been inside ir35 before assuming he/she doesn't hold at least 5% of the shares in the limited company.

[cosmic]

Ok lets assume worst case I have "bod" who I pay 10k a year and charge him out at £1000 a day (inside IR35) so the client pays PAYE/NI on £1000 a day (in his name as he's providing a personal service albeit via my Ltd). Won't his Tax account look very odd?, he'll have paid a lot more tax than what he actually took home? I'm exaggerating the figures here..

As others noted if inside ir35 it's no good through ltd. Ltd is there when you do out of ir35.

Also you are confusing two things. IBM have suppliers on a B2B contract deal that is bid on. It's not through some one man consultancy. Consultancies do the same and send out consultants once they win bids.

Getting day rates compared to project cost and you taking the hit if it goes over or they don't pay is something else.

What you need to do is go into a b2b contract. Bid on it say 30k for the project and pay the contractor on daily rate. That would have nothing to do with ir35 but between you and contractor would dependant on working practice, control and contract.

[ShandyDrinker]

True in theory but doesn't work in practice. None of the agents will allow LTD's as an option. It opens them to unneccesary risk. There are no good reasons to go via your LTD and plenty of reasons not to.

Here is a paragraph from The FaQQers FAQ and it's been covered in many posts since.

Hard to disagree with the above. From everything I've read they are making it so convoluted to continue using the ltd that brolly will be the only way to go.

Good FAQ from The FaQQer.

[northernladuk]

If you are doing that then there is no other benefit him working for you above you creaming him.

If it's via an agency then it's likely the won't pay the Ltd anyway as I've already said and your employee will receive the money directly.

I don't know the numbers or managing employees so you'd have to ask your accountant but your model doesn't work if he is going inside.

[pauljh]

Surely that 33k is providing a personal service and is therefore bound by the same rules as you? It's on the role, not the way he's remunerated by you surely?

Ok lets assume worst case I have "bod" who I pay 10k a year and charge him out at £1000 a day (inside IR35) so the client pays PAYE/NI on £1000 a day (in his name as he's providing a personal service albeit via my Ltd). Won't his Tax account look very odd?, he'll have paid a lot more tax than what he actually took home? I'm exaggerating the figures here..

[northernladuk]

I'm hoping the FAQqer will see his way to creating the same thread for April 2020. I'll make it a sticky if he does.

I seriously hope so. Looking at the couple of threads started this week we are seriously going to need it!!

[cojak]

True in theory but doesn't work in practice. None of the agents will allow LTD's as an option. It opens them to unneccesary risk. There are no good reasons to go via your LTD and plenty of reasons not to.

Here is a paragraph from The FaQQers FAQ and it's been covered in many posts since.

I'm hoping the FAQqer will see his way to creating the same thread for April 2020. I'll make it a sticky if he does.

[northernladuk]

I agree my view of IR35 keeps changing and I've read a lot and just re-read again. So my "conclusion" is

My 33K person I can send anywhere at any rate and "he" and that contract will never be inside IR35.

Where as a contract I take (which states me by name or implies its just me) I "may" be inside IR35 (subject to substitution clause (and how real they are), MOO, termination period, history with client).

So I don't need to worry about my 33K'er and only need to worry about my conduct with clients??

Surely that 33k is providing a personal service and is therefore bound by the same rules as you? It's on the role, not the way he's remunerated by you surely?

[pauljh]

Again, you've completely misunderstood IR35. It's not on the company, it's on you and your taxes. In your example substitute IBM for Your LTD and also IBM employee for you. No correlation whatsoever so the whole post is invalid.

You've also missed the comments I've made about the type of contract. IBM will have a big overarching supplier contract. You have one to supply personal services. Couldn't be more different.

Yes IR35 has an impact on your expenses and pension but they have nothing to do with the determination of your status so irrelevant.

I'd do some more reading. Start with the guides on your right.

I agree my view of IR35 keeps changing and I've read a lot and just re-read again. So my "conclusion" is

My 33K person I can send anywhere at any rate and "he" and that contract will never be inside IR35.

Where as a contract I take (which states me by name or implies its just me) I "may" be inside IR35 (subject to substitution clause (and how real they are), MOO, termination period, history with client).

So I don't need to worry about my 33K'er and only need to worry about my conduct with clients??