Reply to: ir35 jitters

[normalbloke]

What about holiday pay, travel allowances, statutory sick pay, long-term sick pay, possible car allowances, pensions funds, training expenses, desktop hardware, applications licences, assorted insurances, stationery, payroll advice, employers NICs....?

I don't think that would cost me an additional 30K personally.

I can buy the 'on the bench weeks' factor,(but I have been lucky and have had the opportunity to work over 45 weeks per year for 13 years I have been in the contracting game). I'd much rather take contracts at 43ph than a permie job at 43K financially, but thats my view and I accept others have different ways of looking at it.

[Fred Bloggs]

FWIW, I think that salary/1000 = hourly rate is a pretty fair benchmark. I work my finances out on a 44 week working year and that forumla always seems about right to me.

[Wanderer]

People who have been in business for a while, have a decent war chest/skill set and understand the ups and downs of contracting may think it's a bit conservative but it kind of comes down to, "if you need to ask" then that is the formula.

[malvolio]

"£43k pa is £43 an hour".... I must be missing something obvious here, but can someone take me through the mechanics of how this figure is calculated please? 37.5 hour week @ £43ph = £1612.5 pw . Say one works for 45 weeks a year, that grosses to £72,562.5...

What about holiday pay, travel allowances, statutory sick pay, long-term sick pay, possible car allowances, pensions funds, training expenses, desktop hardware, applications licences, assorted insurances, stationery, payroll advice, employers NICs....?

The formula holds if you are trying to compare what someone on £45k a year actually costs to employ and map that to what a freelance needs to hit the same net take-home with a comparable package.

[Old Greg]

"£43k pa is £43 an hour".... I must be missing something obvious here, but can someone take me through the mechanics of how this figure is calculated please? 37.5 hour week @ £43ph = £1612.5 pw . Say one works for 45 weeks a year, that grosses to £72,562.5...

I've never really bought this formula, but it is based on the assumption that you will not work 45 weeks per year. I worked 42 to 45 weeks for the 1st 3 years of my contracting career, but am heading for 25 weeks in my 4th because the recession has severely restricted demand for my services.

[normalbloke]

Permie v contract rate

"£43k pa is £43 an hour".... I must be missing something obvious here, but can someone take me through the mechanics of how this figure is calculated please? 37.5 hour week @ £43ph = £1612.5 pw . Say one works for 45 weeks a year, that grosses to £72,562.5...

[Old Greg]

Base on 42-44 weeks per year x 5 x day rate. Use a pareto range of 5% on each side.



Investigation is going to be random. Expected percentage of a pull is considered to be 1 in every 5 to 7 years. The period they will pull you for is normally a quarter. If within that quarter something shows up they can do 7 years.

Basically, think of it as a form of gambling. If you're contract is in IR35, you could call it outside and take the chance or you could play it safe and always call a contract inside regardless.

... and join PCG so you get some legal representation if you do get investigated, and make sure you have the money put by to pay back if you have to. There is a view that IR35 has been highly effective because of the number of contractors who have been scared away from the Ltd + minimum wage + dividends ( + income splitting with spouse) model, but not effective in terms of 'catching people'.

[MarillionFan]

dowh - thought my rate was big-time. My old formula was 2000 hrs = 1 year (which perhaps explains my ex-contractor status :-)) ... and now reading discouraging things about 'Brooksons' as well.

Oh well, I've still (better-rate) interviews lined-up for next week, and my only commitment sofa is paying for the LTD-Co, and agreeing to be called by HSBC on monday re: business account ... mmmm

Base on 42-44 weeks per year x 5 x day rate. Use a pareto range of 5% on each side.

I heard they only investigate for ir35 if there's some reason to. Therefore if I keep my head down its unlikely.

Investigation is going to be random. Expected percentage of a pull is considered to be 1 in every 5 to 7 years. The period they will pull you for is normally a quarter. If within that quarter something shows up they can do 7 years.

Basically, think of it as a form of gambling. If you're contract is in IR35, you could call it outside and take the chance or you could play it safe and always call a contract inside regardless.

[malvolio]

I heard they only investigate for ir35 if there's some reason to. Therefore if I keep my head down its unlikely.

They will investigate if there is an irregularity or a discrepancy between various forms, or if you are routinely late filing returns or have to correct VAT returns. Or if you name comes out of the hat - they look to check 5 or so companies a week anyway. And you don't get investigated for IR35, you get investigated for errors as above, or for a VAT records check or a PAYE compliance or half a dozen other things that may turn into an IR35 check if you are a one man band

So keep things accurate and on time (another reason to use a good accountant), but it only lessens the risk. Simply keeping you your head down is not a particularly safe strategy!

[richard101]

I heard they only investigate for ir35 if there's some reason to. Therefore if I keep my head down its unlikely.

[Wanderer]

Regarding IR35 compliance, get specialist advice; even under IR35 you still make better money as a Ltd than you do with an umbrella so his advice would appear to be suspect (to be kind...)

Agreed. Don't make the mistake of presuming you are IR35 caught, get some unbiased professional advice and trade outside if at all possible. Normally, I'd suggest that you trade outside IR35 and plead ignorance IF you ever got investigated but as you've been told that you are probably IR35 caught, you will have a bit of a fight to establish facts that point to being outside. IF you get investigated and it's a borderline case then all you will have to do is pay up the tax you avoided. I don't see that they can charge penalties because it's such a grey area and no one could be truly certain of their IR35 status.

dowh - thought my rate was big-time

Ahh, 43k = 43/hour * 7.5 hr day = 322 / day. That's close enough for our measurements.

[Clare@InTouch]

IR35 is determined by the working conditions, not the written contract (although of course it helps if the match!). If you cannot get the contract changed but it's not correct then you could look into a Confirmation of Arrangements letter. Check out the Qdos website, they have a template there.

As for Brooksons - if you're worried at all just get a second opinion. Most firms won't charge you for a chat, and some will review your contract free of charge too.

[Fred Bloggs]

... and now reading discouraging things about 'Brooksons' as well.

I believe you should avoid all the ex-MSC providers who morphed into "accountants". I believe you may get better service far cheaper from a long time established accountancy practice.

[craig1]

Hi All
Agency says: "btw our Contracts are NOT IR35 friendly - in that our clients being large legal companies wouldn't buy anything 'dodgy' like having a substitute-contractor potentially turn up in your place"

Point them to the freebie PCG contract template and specifically the substitution clause (2.3) that says you can send substitutes but the client can reject them. The "security" bit of that handily covers compliance issues that law firms have to deal with.

See A05-01 here for the freebie draft

It's a bottle by the agency who won't push the client on these things, especially if they see a big-name law firm.

[richard101]

dowh - thought my rate was big-time. My old formula was 2000 hrs = 1 year (which perhaps explains my ex-contractor status :-)) ... and now reading discouraging things about 'Brooksons' as well.

Oh well, I've still (better-rate) interviews lined-up for next week, and my only commitment sofa is paying for the LTD-Co, and agreeing to be called by HSBC on monday re: business account ... mmmm