Will I be caught by IR35 in this situation?

[Wanderer]

If I am to get a small job come in, (such as a HTML email creation) which may only be a few hours work that I can do at home, do I have to have a contract in place for such a small job? I understand for the purposes of IR35 it is preferable to have a contract in place but is it a legal issue where you need one for each little job? Or do you need just one contract with each client you work for?

The original spirit of IR35 was that if you were a high earning city banker or TV presenter working as a permie who quit their permie job Friday and continued the job as a LTD company contractor on Monday then structure their tax affairs to avoid paying large amounts of tax.

As malvolio says, each contract would be judged on it's merits in an investigation but I don't think they are going to bother investigating someone who has worked with multiple clients. They would be pretty hard pressed to argue that you were a "disguised permanent employee" if you did (say) 20 different jobs in a year. No, what they are after is the big fish - the ones who take on a contract and work for 3 years with a single client as a 9-5 worker.

Firstly, No permie would work on the basis of a week's work here and there. There is no mutuality of obligation and that's the silver bullet against IR35.

Secondly, make sure the contract with the client makes it clear that your company will do the job (not you personally). ie you could subcontract it out (to India if you wanted to). Right of substitution, that's an IR35 silver bullet too.

Thirdly, they don't dictate where, when and how you do the work. They spec it, you quote for it and do it when and how you want. There is no control so that's a sliver bullet too.

Fourthly, if you give them a quote to do a piece of work at a fixed price, supply your own equipment and work from home then you have an even stronger case. Get it done early, you make a profit. Mess it up and you make a loss. That's a strong IR35 pointer.

It sounds to me like the IR35 specialist company doesn't quite understand how you will be working from your limited explanation. I don't think you have anything to worry about... If it bothers you then phone them back and explain in detail, dropping in the points I mentioned above (presuming they reflect the way you will work). They will then understand that you are outside IR35.

[malvolio]

If you are planning to do lots of smaller pieces of work for one client, why don't you sign a general contract between you and then a schedule for each piece of work? The schedule could include just the piece of work to do and the sum you will charge them.

WHS. Think and operate like a business.

Anyway, you're not listening. The reason there are no clear cut answers on IR35 is becuase there aren't any, every case is different. If you read the guide I suggested you read, you will understand that each individual contract is potentially an IR35 situation. Given the way you plan to work, I suggest it is probably not worth worrying about the miniscule chance of getting caught out. NEvertheless, read up on it and learn the criteria (as a starter for 10, try reading The Potted Guide to IR35 | Contractor Accountants )

For the immediate future, for you current ex-employer you are inside IR35 so pay yourself accordingly for that piece of work only. If you then have some other clients, even concurrently with this one, you probably aren't for those contracts. If you go back to your current people later, then you almost certainly aren't. If you get this work direct, rather than through an agency, IR35 becomes merely an irritating irrelevnace.

The whole point is that you must not let IR35 influcence everything you do. Run your business the best way you can to suit you, not the sodding taxman.

[dynamicsaxcontractor]

So I spoke to my company and have informed them that I will be going through my Limited Company. They said thats fine and have agreed to a daily rate much more than my current salary whether its in or out of IR35.

I also spoke with a IR35 specialist company, roughly outlining my situation with regards to going back to work at my current place of work as a contractor and they said its very unlikely I will be outside IR35 here, as it is the sole reason the legislation was brought about. Thats fine for me, but will this be the case everytime I go back to this company? or will each contract be looked at individually?

If I am to get a small job come in, (such as a HTML email creation) which may only be a few hours work that I can do at home, do I have to have a contract in place for such a small job? I understand for the purposes of IR35 it is preferable to have a contract in place but is it a legal issue where you need one for each little job? Or do you need just one contract with each client you work for?

If you are planning to do lots of smaller pieces of work for one client, why don't you sign a general contract between you and then a schedule for each piece of work? The schedule could include just the piece of work to do and the sum you will charge them.

[heyindy]

So I spoke to my company and have informed them that I will be going through my Limited Company. They said thats fine and have agreed to a daily rate much more than my current salary whether its in or out of IR35.

I also spoke with a IR35 specialist company, roughly outlining my situation with regards to going back to work at my current place of work as a contractor and they said its very unlikely I will be outside IR35 here, as it is the sole reason the legislation was brought about. Thats fine for me, but will this be the case everytime I go back to this company? or will each contract be looked at individually?

If I am to get a small job come in, (such as a HTML email creation) which may only be a few hours work that I can do at home, do I have to have a contract in place for such a small job? I understand for the purposes of IR35 it is preferable to have a contract in place but is it a legal issue where you need one for each little job? Or do you need just one contract with each client you work for?

[malvolio]

So the general idea is you continue to do the same job for the same people at much the same rate through their payroll. In other words you've given up all your employee rights, pensions, sick pay, holidays, blah-di-blah for the illusion of being a contractor.

Sure you've thought this through properly?

As a minimum, go to www.pcg.org.uk and download their Guide to Freelancing. It will answer a lot of your basic questions.

[lje]

It's quite possible that they will not extend your leaving date but will have you working as a temp on their payroll. Although this is unusual in IT it is not an unusual way for consulting companies to work outside of the IT area.

As others have mentioned make sure that your 'temp' rate is higher than your permie rate. Also, if you are going through their PAYE then you don't need to worry about IR35, as national insurance and tax will be paid on all of your income.

[Wanderer]

I am about to embark on a life of freelance as a web designer, and my first freelance gig looks like it will be with my current employer. (I am in the last 2 weeks of my notice period currently). They are a marketing agency and often use freelancers, and yet the dinance director has said I may need to join their payroll for the duration of the contract which I expect to only last from around 2 weeks to a month.

If you are on their payroll then you are pretty much a permie at the company and you will pay IR35 caught rates of Tax and NI. They may as well extend your leaving date. I'd be willing to bet that they want you to work for the same permie salary but as a contractor so you have none of the permie benefits? Don't stand for this, when you are a freelancer you charge much higher rates to cover sick, holidays, pension, unemployment, etc, etc.

Roll up as bold as brass and tell them you are forming a limited company and will trade through that. Get your contract reviewed by one of the big players and make sure it reflects your new freelance status as a business (including the "right of substitution", ie the right to subcontract some of the job if you see fit).

My opinion is that there is no point fretting about the IR35 status of a 2-4 week contract. For IR35 you need to consider Substitution, control and mutuality of obligation. If you have these then you have a very strong case for being outside. For a 4 week contract - who cares. It's so short that the amount of tax will be small anyway.

If you are going direct with your ex-employer and other clients then you will have to draft your own contracts. I'd recommend that you join the PCG, they can sort you out with a company, contract drafts, accountancy, contract reviews etc in one package and get you kick started. I don't like spending money up front but I've found out the hard way that bumbling along without getting professional advice can cost you an awful lot in tax in the long run...

[heyindy]

Thanks all. You've been a great help already. I'm sure I will be using this forum a lot more regularly due to my new lifestyle!

[Qdos Contractor]

If there is a significant gap between when you leave as an employee and come back as a contractor and if the 'role' is different and if you do work like a genuine contractor then you might be ok. Going back to a previous employer is always going to be tricky though and HMRC will definitely jump on the fact if you're subject to an enquiry.

If you're looking at contracts completely unconnected to your last place, IR35 will depend on the written contract and, more importantly, your actual working practices. There is loads of information all over the internet about the specific criteria and things to watch out for. Some of it is rubbish though, so you're better off speaking to an expert.

[heyindy]

Thanks guys. I am learning everyday. I guess they want me to stay on the payroll as they want me to extend my leave date, which to be honest I'm not having.

So in the future whenever I am to return to this place to do a 2 week stint will my contract always be generally considered inside ir35? How about when I contract at other agencies or places of work? Is it all down to the way my contract is worded?

I will get on the phone to my accountant today but want to find out as much as possible off my own back.

[TykeMerc]

It's a Friday perm to Monday contractor situation, it would be pretty tricky to argue you're outside of IR35.

That being said in this situation if there's no agency involved there's nothing to stop you doing this work as a Sole Trader then IR35 becomes completely irrelevant.

[northernladuk]

Hi all,

Forgive me if I have missed an obvious post somewhere, in which case please can the mods merge this with that or point me in the right direction.

I am about to embark on a life of freelance as a web designer, and my first freelance gig looks like it will be with my current employer. (I am in the last 2 weeks of my notice period currently). They are a marketing agency and often use freelancers, and yet the dinance director has said I may need to join their payroll for the duration of the contract which I expect to only last from around 2 weeks to a month.

Now I plan on working with many different clients, from home and thorugh various agencies respectively. So if I was to contract at my current place of work doing exactly the same thing, would I be caught by IR35?

Forgive me for my ignorance as I really am a newbie at this whole thing. Any advice would be greatly appreciated.

It is very likely you will yes. You are doing a permie job as a contractor therefore you are a hidden permie which is what IR35 is all about. You could try reducing the risk by negotiating clauses in your contract for right of substitution etc (you will have a contract won't you??) and make sure you are not tied by working times etc etc but it is going to be down to your working practices but you got a job on to go from working and being seen as a permie to working like a contractor. Thats one open minded manager you are going to have to have.

How can you be a contractor and be on the payroll? You have to invoice him surely?

Read up on IR 35. Plenty of links around and questions in these forums to help.

[heyindy]

Hi all,

Forgive me if I have missed an obvious post somewhere, in which case please can the mods merge this with that or point me in the right direction.

I am about to embark on a life of freelance as a web designer, and my first freelance gig looks like it will be with my current employer. (I am in the last 2 weeks of my notice period currently). They are a marketing agency and often use freelancers, and yet the dinance director has said I may need to join their payroll for the duration of the contract which I expect to only last from around 2 weeks to a month.

Now I plan on working with many different clients, from home and thorugh various agencies respectively. So if I was to contract at my current place of work doing exactly the same thing, would I be caught by IR35?

Forgive me for my ignorance as I really am a newbie at this whole thing. Any advice would be greatly appreciated.