Reply to: Checklist for IR35 exemption working conditions

[contractsurfer]

[QUOTE=Denny]IR35 exemption safety

[QUOTE]

Good debate but . . . the relationship Denny is seeking simply isn't compatible with what most clients require. The reality is that the vast majority of clients want a contractor who will act as an employee i.e. they 'fit-in' with a team of permies, will be flexible and can be directed to do whatever is required by the line manager or PM and even encourage team bonding by joining colleagues for lunch in the staff canteen.

Clients usually don't want the arms-length relationship you describe - that's often why they don't use large consulting companies. They like the control!

So unless you are up-front with the client and inform them of your intended approach (e.g. working from remote office) then you're not being entirely honest and are not likely to get extensions.

IMHO its better for my business to be caught by IR35 and get extensions rather than dissappointing clients and continuingly moving to a new contracts. For me the former approach is more profitable.

[ratewhore]

Billy,

I would say you have to take a risk based approach. How much risk are you exposing yourself to by providing your services in the way you do. Personally, I think there is far too much over-analysing going on here but you have to make your own mind up based on your risk appetite.

[Billy Pilgrim]

If you're hourly paid then you are not acting as a real business and you shouldn't be billing the client for time taken off site to eat whether it's in the staff restaurant or not.

Just joking about charging for the dinner hour.....I'm bloody starving tonight mind you

However I am effectively charging my time (sorry the time of the consultant carrying out work on behalf of MyCo) by the hour...is this not a time and materials basis ?? A lot of consultancies do this...so why not MyCo ???

I was going to charge per day -- but the client themselves has told me to bill in two hour chunks - which is how they bill the end client

Am I causing trouble for myself here ????

[Denny]

Tell that to a plumber, electrician, decorator etc.

They tend to operate either as employees of a company or they are Self Assessed freelancers (not owner managed). Plus they work for a fixed fee most often than not.

Totally irrelevant to hourly paid IT contractors.

[Denny]

My point is that the client's project procedures that need to be followed should not impact whether you are a viewed as a real business.

If for example part of your role involves training, then there is a requirement for you to be on site at a time dictated by the client and you cannot send an unqualified numpty in your place. This doesn't mean your are instantly inside IR35 does it.

As for salary, deemed salary is based on the revenue on a contract by contract basis. The fact that you have multiple contracts (sequentially or in parallel) should mean that you are outside of IR35 anyway.

I'm not saying this is the case I'm just winging about the whole situation.

*wanders of for a quiet cry in the corner.

Your first point: if there is a requirement for you to be on site to carry out a clear deliverable and it can't be carried out from your own premises, than this shouldn't make any difference. Following project procedures doesn't make any differerence either or even using the end-client letterhead. The problem kicks in if you are on site because you are expected to be supervised for your hours, are told how to do the work and the work you are actually doing at a particular time could just as easily be done from elsewhere - report writing and so on.

Your second point: In any one tax year a sequential spread of contracts would not help you at all. Each contract is deemed on it's own merits for IR35 purposes. The fact you've done 3 full time contracts in one year which disallowed you to work in parallel for other clients whilst carrying out their own work, for example, would make no difference at all.

[Denny]

One of the suppliers at my current site is a global company with a turnover in excess of $5bln and over 20,000 employees, so no one would ever argue that they are not a 'real' business. According to the OP all consultants/developers on site would would be deemed employees of the client?

1. The supplier invoices based on hours (not days) worked
2. The guys on site have to be approved (CV/profile reviewed) i.e. we're not paying £x per hour to train some graduate.
3. They all use the staff canteen
4. Certain key personel have to be on site (and working the same hours as the client) during various phases of the project.
5. They work on client owned systems accessed via client machines.
6. They fill in timesheets.

This is common on large scale projects but certainly doesn't mean that they are deemed employees of the end client.

You really don't get it do you! Of course big end-client organisations use pools of consultants etc from larger companies and are paid in salary and take advantage of the staff canteen etc. But that's the point: they are not contractors, they are employees of the contractor and their work terms and conditions often demand that they fit into the end-client culture as much as possible, as if they were actually working for them and not their own consultancy. These consultants are the contractor's substitutes not the contractor.

This is very different from freelancers (or owner managed businesses, if you use your own limited). We are the contractor and therefore, it is vital to be as detached from the end-client, as per my spec list (and the IR criteria I listed later) not to fall foul of potential IR35 inclusion.

[Pondlife]

7. They are paid in salary.

Argh, that be where you're wrong. They may well be deemed employees (and will probably be subject to TUPE in the event that the client wishes to terminate/change contracts with the supplier). However, Gordon doesn't care either way because they are all salaried employees paying NI and income tax at "market average" rates

My point is that the client's project procedures that need to be followed should not impact whether you are a viewed as a real business.

If for example part of your role involves training, then there is a requirement for you to be on site at a time dictated by the client and you cannot send an unqualified numpty in your place. This doesn't mean your are instantly inside IR35 does it.

As for salary, deemed salary is based on the revenue on a contract by contract basis. The fact that you have multiple contracts (sequentially or in parallel) should mean that you are outside of IR35 anyway.

I'm not saying this is the case I'm just winging about the whole situation.

*wanders of for a quiet cry in the corner.

[Mordac]

Argh, that be where you're wrong. They may well be deemed employees (and will probably be subject to TUPE in the event that the client wishes to terminate/change contracts with the supplier). However, Gordon doesn't care either way because they are all salaried employees paying NI and income tax at "market average" rates.

Yep, thems the rules. The people at the top can pay themselves huge divis based on the efforts of others but the individual freelancer cannot. Tough.

Dim Prawn
pp G Brownstuff.

[boredsenseless]

Denny,

I don't necessarily agree with everything you write but I'm glad you write it as it opens up a discussion whereby everyone can put across their views, the people on here without their own view can read them all and decide what they believe.

Also sometimes I learn something I didb't know I needed to know.

I'll quit crawling now and get on with general sniping and whinging again!

[Emperor Dalek]

Tell that to a plumber, electrician, decorator etc.

Barristers, surgeons.....

[XLMonkey]

One of the suppliers at my current site is a global company with a turnover in excess of $5bln and over 20,000 employees, so no one would ever argue that they are not a 'real' business. According to the OP all consultants/developers on site would would be deemed employees of the client?

1. The supplier invoices based on hours (not days) worked
2. The guys on site have to be approved (CV/profile reviewed) i.e. we're not paying £x per hour to train some graduate.
3. They all use the staff canteen
4. Certain key personel have to be on site (and working the same hours as the client) during various phases of the project.
5. They work on client owned systems accessed via client machines.
6. They fill in timesheets.

This is common on large scale projects but certainly doesn't mean that they are deemed employees of the end client.

Argh, that be where you're wrong. They may well be deemed employees (and will probably be subject to TUPE in the event that the client wishes to terminate/change contracts with the supplier). However, Gordon doesn't care either way because they are all salaried employees paying NI and income tax at "market average" rates.

[swamp]

One of the suppliers at my current site is a global company with a turnover in excess of $5bln and over 20,000 employees, so no one would ever argue that they are not a 'real' business. According to the OP all consultants/developers on site would would be deemed employees of the client?

1. The supplier invoices based on hours (not days) worked
2. The guys on site have to be approved (CV/profile reviewed) i.e. we're not paying £x per hour to train some graduate.
3. They all use the staff canteen
4. Certain key personel have to be on site (and working the same hours as the client) during various phases of the project.
5. They work on client owned systems accessed via client machines.
6. They fill in timesheets.

This is common on large scale projects but certainly doesn't mean that they are deemed employees of the end client.

7. They are paid in salary.

[ratewhore]

Now, don't be bitter. I'm just trying to put things straight. I'm sure there are more contractors on here to agree with me, than those who have contradicted the advice on this thread.

Look at the IR criteria for real business practices, and you will see that I'm right.

Employee if answering YES to those below:

Do they have to do the work themselves?
Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
Can they work a set amount of hours?
Can someone move them from task to task?
Are they paid by the hour, week, or month?
Can they get overtime pay or bonus payment?

If the answer is 'Yes' to all of the following questions, it will usually mean that the worker is self-employed:

Can they hire someone to do the work or engage helpers at their own expense?
Do they risk their own money?
Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
Do they agree to do a job for a fixed price regardless of how long the job may take?
Can they decide what work to do, how and when to do the work and where to provide the services?
Do they regularly work for a number of different people?
Do they have to correct unsatisfactory work in their own time and at their own expense?

Most contractors in IT do not seem to fall in the bottom band, it seems to me. Therefore, you need to ensure that you generate IR35 exempt conditions to match the contract terms you have with the EB.

It's not bitterness at all as I happen to agree with (some of) what you say. However, what you say regularly does not match the reality of life for many contractors here and if they try to follow this advice they don't get the gig.

There is a problem but it's a much bigger problem than simply saying 'you're a pseudo-employee not a real business' so change your working conditions...

[Pondlife]

One of the suppliers at my current site is a global company with a turnover in excess of $5bln and over 20,000 employees, so no one would ever argue that they are not a 'real' business. According to the OP all consultants/developers on site would would be deemed employees of the client?

1. The supplier invoices based on hours (not days) worked
2. The guys on site have to be approved (CV/profile reviewed) i.e. we're not paying £x per hour to train some graduate.
3. They all use the staff canteen
4. Certain key personel have to be on site (and working the same hours as the client) during various phases of the project.
5. They work on client owned systems accessed via client machines.
6. They fill in timesheets.

This is common on large scale projects but certainly doesn't mean that they are deemed employees of the end client.

[DaveB]

Tell that to a plumber, electrician, decorator etc.

Not strictly true. Most of them will have an hourly rate they use to produce estimates but the customer rarely if ever sees that.

Those I know that do quote labout costs usually quote for a day or half day rate, not hourly.

The customer just gets the final cost for the job or the bill at the end of it with a break down of the work carried out.