Reply to: Any reason not to consult on the side for a while?

[WordIsBond]

Thing is, with the permie role, the company I work for is now part of a much larger company with lots of red tape, the pressure has ramped down significantly vs what it used to be and has been this way for about a year. Great for allowing personal growth but not exactly a challenging environment. It's much more project work now and less "my server is melting/on fire" calls.

For those declaring a contract with OP's current employer as absolutely inside IR35, take a deep breath, slow down, and read the above.

OP, if I'm in your place and really wanting to make the jump, I'm proposing two contracts with your employer.

Contract #1: This is a monthly retainer in which you agree to provide up to X hours a month for those "my server is melting" calls. This is inside IR35. Pay yourself a salary and make your pension contributions out of this one.

Contract #2: This is what has changed since you became an employee. It's not what you were hired to do, anyway. But the thing is, you wanted to go independent, but you are willing to do projects for them as an independent contractor. You agree a rate, general terms in the contract, and an attached schedule of work -- listing the projects you are going to complete. You can add to the schedule of work if you complete the existing projects, they want you to do more, and you agree to them.

HMRC comes along and you DON'T say, "I got a contract on the side and decided to go independent, so they changed me to a contractor." You DO say, "I wanted to go into business for myself. They asked me to stick around and provide support on a part time basis, and I'm operating that contract inside IR35. They also had some defined projects they wanted me to do, so we agreed terms and defined the projects."

Join IPSE, and probably buy TLC35 from QDOS. If you have the right contract and a signed Confirmation of Working Agreements, they'll cover you.

The fact that the work has become a lot of projects makes it easier for you to split it between inside IR35 and outside, and doing so probably makes it less likely you'll have trouble. The very act of doing that tells them things HAVE changed, and it also tells them you know what you are about.

It sounds like they have been bought by an American company? If so, and you can sign contracts with the American parent, that could help, too.

[Burns]

It really depends on the situation. Yes it is possible to be outside if you take up a different gig that is advertised and you can detach yourself from what you do now and apply yourself as a new entity to the new gig. The way the OP put it though indicates just changing the remuneration method while carrying on doing the same thing. Yes there is quite an assumption there but that's how I, and I assume DaveB read it. There is either a need for a contractor or not. To make one for an employee is just a sham.

Oh yeah, I'm under no illusions, it would be a very far stretch for me NOT to be inside IR35 if I decided to go perm->contractor over a weekend. Hopefully I'd be able to ramp up work that is outside IR35 fairly quickly though to make up for that.

[DaveB]

And if the working practices are outside then he will be deemed outside.

HMRC : Why did you stop being a permie on Friday and become a contractor on Monday?

You : I got a couple of gigs on the side and decided to go freelance.

HMRC : So if you hadn't done that you'd still be here doing this job as a permie?

You : Yes.

HMRC : You're inside IR35.

[northernladuk]

And if the working practices are outside then he will be deemed outside.

Many contractors can't act like anything but an employee even after a few different clients, let alone walking back in to the same place and sitting at the same desk. Very very unlikely the working practices will be able to change enough and stay changed to defend against an investigation.

[cojak]

And if the working practices are outside then he will be deemed outside.

It's a very special employee who isn't under contractual D&C.

If the contract changes but they are still expected to ask for time off, attend company town halls, expect the company to pay for their training, etc, it may be difficult to persuade HMRC that they aren't a disguised employee.

I certainly wouldn't like to stand up to an investigation on the back of it...

[MrButton]

HMRC will look through the contract and go straight for working practices.

And if the working practices are outside then he will be deemed outside.

[DaveB]

Understood. But for arguments sake:

It’s possible that he is a permie with working practices wholly outside (except substitution)?

Or doing a different piece of work/gig?

Or working practices change to being wholly outside?

I know in practice it’s likely you’ll be inside. And you’ll be an easy target for HMRC to investigate.

Doesn't matter. If they were a permie on Friday and return as a contractor on Monday doing a job that they would otherwise have done as a permie, even if it was not the same one they were doing before, then they are caught. HMRC will look through the contract and go straight for working practices.

[northernladuk]

Understood. But for arguments sake:

It’s possible that he is a permie with working practices wholly outside (except substitution)?

Or doing a different piece of work/gig?

Or working practices change to being wholly outside?

I know in practice it’s likely you’ll be inside. And you’ll be an easy target for HMRC to investigate.

It really depends on the situation. Yes it is possible to be outside if you take up a different gig that is advertised and you can detach yourself from what you do now and apply yourself as a new entity to the new gig. The way the OP put it though indicates just changing the remuneration method while carrying on doing the same thing. Yes there is quite an assumption there but that's how I, and I assume DaveB read it. There is either a need for a contractor or not. To make one for an employee is just a sham.

[MrButton]

IR35 was brought in to address Friday to Monday contracting so tell us why not.

Understood. But for arguments sake:

It’s possible that he is a permie with working practices wholly outside (except substitution)?

Or doing a different piece of work/gig?

Or working practices change to being wholly outside?

I know in practice it’s likely you’ll be inside. And you’ll be an easy target for HMRC to investigate.

[DaveB]

Why?

Because that is what IR35 was specifically intended to address. It was supposed ot prevent employers dodging their liabilities by firing permies on a Friday and bringing them back as contractors on Monday.

The fact that HMRC has seen fit to use it to try and extract extra tax from contractors is in large part the cause of the confusion today.

https://www.contractorcalculator.co....t_is_ir35.aspx

Why was IR35 introduced by the government?

IR35 was introduced to tackle the problem of ‘disguised employment’. This is where organisations engage workers on a self-employed basis and usually through an intermediary, rather than on an employment contract, so they become disguised employees.

This can save the engaging organisation a significant amount of cash as they no longer have to pay employers’ NICs, and it also means they do not have to offer any employment rights or benefits.

A common example is the ‘Friday to Monday’ phenomenon. That is when an employee leaves employment with their employer on a Friday only to return to the same role in the same office on the Monday, only engaged as a contractor or consultant trading through a personal services company and paying much less tax.

[northernladuk]

Why?

IR35 was brought in to address Friday to Monday contracting so tell us why not.

[MrButton]

Just remember that if you switch from permie to contractor with your current employer you will be firmly inside IR35.

Why?

[DaveB]

Thanks for the advice everybody. I think I'll go ahead with it alongside permiedom for a while to build up that war chest then if it takes off I'll broach with the current employer about going contractor with them and see if they'd look at replacing me instead.

Just remember that if you switch from permie to contractor with your current employer you will be firmly inside IR35.

[Burns]

Thanks for the advice everybody. I think I'll go ahead with it alongside permiedom for a while to build up that war chest then if it takes off I'll broach with the current employer about going contractor with them and see if they'd look at replacing me instead.

[WordIsBond]

The issue is that it's very Americanised now and over there people tend to be brought on initially as "contractors" with ambitions on becoming permies.

There are a LOT over there who go perm to contract, and it won't be a surprise to most Americans if you look into it.

The tax benefits of going independent in the US aren't quite as significant as over here, and a lot of American firms have really good employee benefits packages. Employee health cover, especially, is a big factor.

But there is still a strong streak of independence, be your own man, etc, in the American psyche, and a lot of people strike out on their own and become consultants / contractors. It's the independence and freedom that appeals so strongly on that side of the pond.