Reply to: Contract review says I'm inside IR35 - colleagues working as outside

[eek]

You have your answer. Time to either suck it up or work. Nothing else to do here.

No time to make a large pension contribution and find something else in 3 months time.....

[northernladuk]

It's very difficult for me to know how to renegotiate the contract. B&C gave me the impression there was nothing I could do. What the client really wants are permanent employees, the contractors are just filling the gaps and doing whatever work the permies would be doing.

To be honest, if B&C say you are screwed then there is no point discussing it any further. They will have worked with you if there was some wiggle room. If they gave you an outright no then it can't be any clearer. You also covered the whole situation in that last sentence. No way that situation could be outside IR35.

You have your answer. Time to either suck it up or work. Nothing else to do here.

[javadude]

One thing I've found is that client written contracts can be written by HR who don't understand how contractors are really working in the organisation. They know the rules that are applied to employees and assume that contractors adhere to those rules and work in the same way, but that's not necessarily the case. I've worked in a company where I'm more self-managing, decide how I work, not attending/invited to corporate meetings, work from home more, keep different hours etc etc. HR probably wouldn't like it as I wasn't following employee rules but I wasn't an employee and the business contacts were happy with how I was providing the service.

[LisaContractorUmbrella]

I think that getting a contract re-written to reflect working practices that are not a reality is simply asking for trouble

[stek]

The contract is the first thing HMRC will look at in an enquiry. If, for instance, your working practices were all fine but you had a dodgy agency contract with a fettered RoS, HMRC would undoubtedly focus on that. It would make things quite difficult - despite the reality of the situation being compliant.

Conversely then, if you contract was reviewed as inside, and your treated as a pemie in practice (as in this case) then all is fine and in fact, working practices don't matter?

[DirtyDog]

Perhaps a good reason for not getting a contract professionally reviewed?

It's catch-22 - if HMRC come calling and find you inside and you didn't do any due diligence, then they will probably hammer you for deliberate evasion and add on penalties.

[Qdos Contractor]

This is why I'm starting to think the whole contract review thing is a load of old bollocks.

For example, you get it reviewed, it's all fine you're outside but when you get on site you are treated like an employee and you are quite clearly inside. How can the contract reviewer know how you will be treated on site? If the culture is contractors are temporary premies, then it doesn't matter what the contract says or that it was passed outside IR35.

So if all that matter is working practises ten sure;y it doesn't matter what the contract says to a large extent, more how you draw the lines when actually on site. I'm sure most of us here would if faced with this would either lay the law down or walk rather that toe the premie line. Isn't this the main diver as we why we do this?

Of course if it's the free three one with Qdos, fine use it, but at the end of the day it's all worthless if 'Mr Line Manager' turns out to be 'Mr Micro-Manager'.

The contract is the first thing HMRC will look at in an enquiry. If, for instance, your working practices were all fine but you had a dodgy agency contract with a fettered RoS, HMRC would undoubtedly focus on that. It would make things quite difficult - despite the reality of the situation being compliant.

[stek]

This is why I'm starting to think the whole contract review thing is a load of old bollocks.

For example, you get it reviewed, it's all fine you're outside but when you get on site you are treated like an employee and you are quite clearly inside. How can the contract reviewer know how you will be treated on site? If the culture is contractors are temporary premies, then it doesn't matter what the contract says or that it was passed outside IR35.

So if all that matter is working practises ten sure;y it doesn't matter what the contract says to a large extent, more how you draw the lines when actually on site. I'm sure most of us here would if faced with this would either lay the law down or walk rather that toe the premie line. Isn't this the main diver as we why we do this?

Of course if it's the free three one with Qdos, fine use it, but at the end of the day it's all worthless if 'Mr Line Manager' turns out to be 'Mr Micro-Manager'.

[BjornMorg]

Read what you've written there - "based on working practices I'm clearly inside IR35 ... I could try to get my contract re-written..." Even if you copied your friend's contracts word for word, it would make no difference - it's the working practices that count if you are investigated. Based on the working practices, B&C's expert opinion is that you would be caught by IR35.


You have a choice here. You either declare yourself inside IR35 and pay the tax and NI, or you declare yourself outside IR35, don't pay the tax and NI and hope that you get away with not being investigated. If you are investigated, and it's found that you took expert advice and then ignored it, I wouldn't be surprised to see HMRC apply penalties for tax evasion - you know you shouldn't do it, but decided it was worth the risk, so you deserve the punishment if it comes.


If you're worried people will think you are crazy, why tell them? It's none of their business how you operate your business.

If you declare yourself inside IR35, then you are absolutely doing the right thing. You can sleep soundly, and (if you go in for schadenfreude) know that if they get investigated they are in for a reaming.

My last permie gig, I was surrounded by contractors who had been in the game for a while - out of the team of six or seven, one always declared himself inside IR35 and all the rest didn't. No-one seemed to think that he was crazy - his advice from his accountant (note, not an IR35 specialist!) was to declare himself inside and pay the additional tax and NI. I've always suspected that it was less hassle for the accountant who advised him to do it that way, though - once he found out that the accountancy bill would come out of the 5% expenses, he changed tack and advised him to be inside!


If you are really upset by it, you could try to explain to the client that you need an increase to cover your additional taxes, but expect that to fall on deaf ears - the client doesn't care how you run your business. Alternatively, leave the contract and find an outside IR35 one and fill your boots.

With regard the investigation risk, probably best not to put the B&C invoice through the books.

[malvolio]

It's very difficult for me to know how to renegotiate the contract. B&C gave me the impression there was nothing I could do. What the client really wants are permanent employees, the contractors are just filling the gaps and doing whatever work the permies would be doing.

To an extent it rather depends on what you are doing for a living; there are many roles where you can't exercise enough independence of action to be safely outside IR35. Probably not even worth trying with the current gig; but as I said earlier, if you are earning what you need then live with it BUT next time out you now know what you are looking for and how much you want to earn. Consider it an investment in the future...

[Posie]

You are making a potentially expensive mistake here.

Like lots of posters said - don't renegotiate the contract, renegoatiate the working practices and then the contract to formalise those.

This is a fundamental part of responsible LTD company contracting. It will come up again and again.

Working inside IR35 via a LTD is the worst of both worlds. May as well just go umbrella and save the hassle.

It's very difficult for me to know how to renegotiate the contract. B&C gave me the impression there was nothing I could do. What the client really wants are permanent employees, the contractors are just filling the gaps and doing whatever work the permies would be doing.

[Posie]

Thanks everyone for your supplies. I guess rather than feeling hard done by I should be relieved that right from my first contract I know what the situation is and won't have any nasty surprises down the line. A lot of the contractors I'll be working with would have been told by their agency that they are outside IR35 and will quite happily have believed them.

B&C by the way said that basically all my working practices are inside IR35! I will be doing exactly the same as a permanent employee. I don't really understand why the clients are all signing contracts saying that they would accept a substitute when in reality I'm sure they wouldn't!

'Supplies'?! I meant replies!!

[Kanye]

Thanks everyone for your supplies. I guess rather than feeling hard done by I should be relieved that right from my first contract I know what the situation is and won't have any nasty surprises down the line. A lot of the contractors I'll be working with would have been told by their agency that they are outside IR35 and will quite happily have believed them.

B&C by the way said that basically all my working practices are inside IR35! I will be doing exactly the same as a permanent employee. I don't really understand why the clients are all signing contracts saying that they would accept a substitute when in reality I'm sure they wouldn't!

You are making a potentially expensive mistake here.

Like lots of posters said - don't renegotiate the contract, renegoatiate the working practices and then the contract to formalise those.

This is a fundamental part of responsible LTD company contracting. It will come up again and again.

Working inside IR35 via a LTD is the worst of both worlds. May as well just go umbrella and save the hassle.

[Posie]

Thanks everyone for your supplies. I guess rather than feeling hard done by I should be relieved that right from my first contract I know what the situation is and won't have any nasty surprises down the line. A lot of the contractors I'll be working with would have been told by their agency that they are outside IR35 and will quite happily have believed them.

B&C by the way said that basically all my working practices are inside IR35! I will be doing exactly the same as a permanent employee. I don't really understand why the clients are all signing contracts saying that they would accept a substitute when in reality I'm sure they wouldn't!

[GB9]

The OP should also remember that if their WPs are within IR35, there is a fair chance his/her colleagues are too. And that if asked, the client would say so. And just because agencies have provided a compliant contract it doesn't mean the upper contract reflect them.
So OP, don't get down about it, learn from the experience.