Reply to: Freelance work on the side

[TheCyclingProgrammer]

It struck me yesterday that D&C can easily be circumvented by a simple agreement of the form:

1. I give you the work.
2. You decide how you're going to do it.

And voila ! Outside IR35.

In theory, it should be this simple, but the more boxes you tick in terms of being outside IR35, the easier it is for your legal representatives (IPSE/QDOS/Whoever) to tell HMRC to take a running jump if they ever open an enquiry.

[Lance]

Why is it illegal if declared?

The suggestion I was alluding to was not declaring it. Which is illegal but very low risk in the circumstances. Perhaps I wasn't clear. But that was not my advice (which was stick it on SA).

[northernladyuk]

If you're friend is a perm at company B, and company A are willing to write cheques directly to your friend (not via agency or to a LTD company), then the chances of getting caught for tax evasion are really slim. Company A or your friend would have to be investigated and the larger Company A is the harder it would be find anything. Most companies don't get investigated to that level of detail unless they go bust

I've seen plenty do it and never seen one caught. This is not advice just spelling out the risk. It is illegal but unless it's hundreds of thousands nobody will go to prison for it.

As for IR35... forget it..... Just declare as extra income self-assessment.

Why is it illegal if declared?

[lucyclarityumbrella]

and why would a brolly be cheaper than simply putting it into the correct line on the SA form?

Just an alternative if the end client won't operate with a sole trader for any reason.

[Lance]

There is always an alternative

and why would a brolly be cheaper than simply putting it into the correct line on the SA form?

no offence intended but I cannot see a few bits and pieces of freelance work need a full umbrella, or a LTD when there is a full-time permie job consuming all (most) of the available tax allowances.

[MattZani]

Which one? Your friend will need to check the new contract.

either one

[lucyclarityumbrella]

Is that really worth the cost of a LTD and accountancy fees? I suggest not, or it's very borderline.

There is always an alternative

[MattZani]

Thanks for the replies

Might be worth saying that when I said agency I didn't mean "recruitment agency"...I meant the other type of agencies (creative/marketing/digital agencies).

Situation for my friend would be:

- He leaves permie job at company A
- He joins company B as a permie 9-5
- Does bits and bobs (work for company A) for the agency at night/weekends
- Company A wouldn't even know that my friend is the one who does the work

[Lance]

Not quite.

There is a grey area if the client employes permies who are also skilled professionals who do the same role as you as they will also do the work the way they want as frequently managers wouldn't have the knowledge to do D&C in the work they do.

Therefore to distinguish you from them, you need a schedule of work.

IR35 is a bit academic. OP's friend will be perm at company B, paying PAYE and full NICs (most likely).
Running a LTD will save the tax on the £5k dividend allowance only. Is that really worth the cost of a LTD and accountancy fees? I suggest not, or it's very borderline.

[Lance]

A friend of mine is a permie for company A but is about to leave (notice handed in) to join company B for another permie role. Company A and B are not competitors and do not even operate in the same industry.

Company A outsources work to an agency. Is it possible/legal for my friend to engage with the agency and do work for company A on a freelance basis? Nothing is mentioned in the employment contract.

If you're friend is a perm at company B, and company A are willing to write cheques directly to your friend (not via agency or to a LTD company), then the chances of getting caught for tax evasion are really slim. Company A or your friend would have to be investigated and the larger Company A is the harder it would be find anything. Most companies don't get investigated to that level of detail unless they go bust

I've seen plenty do it and never seen one caught. This is not advice just spelling out the risk. It is illegal but unless it's hundreds of thousands nobody will go to prison for it.

As for IR35... forget it..... Just declare as extra income self-assessment.

[SueEllen]

It struck me yesterday that D&C can easily be circumvented by a simple agreement of the form:

1. I give you the work.
2. You decide how you're going to do it.

And voila ! Outside IR35.

Not quite.

There is a grey area if the client employes permies who are also skilled professionals who do the same role as you as they will also do the work the way they want as frequently managers wouldn't have the knowledge to do D&C in the work they do.

Therefore to distinguish you from them, you need a schedule of work.

[radish2008]

I disagree. The freelancer may be picking up discrete deliverable based work in which case there is no reason IR35 applies. AFAIK Friday to Monday is not in itself a determinant of employment status. It may however be a flag to HMRC.

If the freelancer is instead picking up some BAU work - perhaps covering holidays - then that probably changes things.

It struck me yesterday that D&C can easily be circumvented by a simple agreement of the form:

1. I give you the work.
2. You decide how you're going to do it.

And voila ! Outside IR35.

[northernladyuk]

Classic Friday to Monday contractor scenario by the sounds of it

I disagree. The freelancer may be picking up discrete deliverable based work in which case there is no reason IR35 applies. AFAIK Friday to Monday is not in itself a determinant of employment status. It may however be a flag to HMRC.

If the freelancer is instead picking up some BAU work - perhaps covering holidays - then that probably changes things.

[mudskipper]

Nothing is mentioned in the employment contract.

Which one? Your friend will need to check the new contract.

[TheCyclingProgrammer]

If it's only going to be part-time, and may not last too long, AND there are no significant liability concerns (either because of the type of work or the relationship), it may not even be worth incorporating. It might be easiest to just do it as self-employed, which would leave IR35 out of the picture.

I'd agree but if its through an agency there's a high chance they won't contract with somebody who is self-employed. May have to go through the umbrella route.