Reply to: Moving to contracting- need your brain power!!

[malvolio]

One other note of caution, to you and others...

A key IR35 cased is meandering through the courts at the moment. It has now been sent back to the FTT level for e-assessment, since the High Court has said, in a precedent setting ruling, that you must not rely on just one of the key indicators but should fully assess all three in combination. Which is not what many - including a couple of magic bullet salesmen - think.

On the bright side they also said that HMRC's interpretation of MOO, that it is present if payment is made for work done, is completely wrong (as some of us have been saying for years) meaning inter alia that CEST is also wrong and needs a significant update.

[northernladuk]

Exactly, hence why I am here learning.

I think I will look to use an umbrella for this contract and create a limited company for everything else.

It is difficult to convey understanding in short online exchanges but I am okay on most things but I was not really sure regarding this particular issue that I faced. Normal assignments outside of one with my previous employer should (in theory) be easier to navigate!!

I am sure I will have other questions and issues which I hope you will be able to assist me on, as I am sure other people have assisted you all on as you went through your journeys.

Thanks all.

Have a good read of the First Timers guides on the right and have a long peruse of the IR35 links. Many are a tad out of date now the responsibility has shifted to the fee payer but there should be plenty about the nuances of IR35. The three main pillars being D&C, MoO (or lack of) and RoS and then all the stuff about attending CLIENT site and having client emails and so on which are small indicators at best. Think about big consultancies, they are often on site with client emails etc.

There is also the permie mentality which needs changing but no guides on that really. The people you will be working for are NOT your employers, they are your clients. You could argue that point but better to avoid terms like employer while you get your head around the game. This will be much simpler when you've cut ties with your old employer and can't fall in to bad habits.

If you are going to run a true micro consultancy then non of this will be an issue. If you are going to just be a bod doing stuff for clients then it's very important. You now need to learn to become a contractor. Having IT Skills doesn't cut it. The permies have that, you now need to think and act like a business and bring other skills forward. Hitting the ground running, managing client expectations, managing your contracts and finances properly, knowing and managing the risks that come with contracting (bench time, no rights etc) and so on. The IT stuff is secondary, anyone can do that.

[jojingles]

You need to be concerned you mention 'employers premises' and the fact you think that as well as having a company mail are much to do with IR35. You also seem to be forgetting where the determination comes from.

You need to be a lot more clued up before you hit the contracting world.

Exactly, hence why I am here learning.

I think I will look to use an umbrella for this contract and create a limited company for everything else.

It is difficult to convey understanding in short online exchanges but I am okay on most things but I was not really sure regarding this particular issue that I faced. Normal assignments outside of one with my previous employer should (in theory) be easier to navigate!!

I am sure I will have other questions and issues which I hope you will be able to assist me on, as I am sure other people have assisted you all on as you went through your journeys.

Thanks all.

[northernladuk]

Thank you. I am starting to understand the journey I am going to go on!!!

If I consider this contract inside IR35 then does anything really matter such as if I work at an employers premises or what have you? I assume not, rather than try to stay on the outside I may as well just keep going as I am and act like an employee for this contract. Have a company email etc. etc.

Obviously for anything other than this contract when using my limited company I would not but if it is in IR35 do I need to be concerned with anything?

You need to be concerned you mention 'employers premises' and the fact you think that as well as having a company mail are much to do with IR35. You also seem to be forgetting where the determination comes from.

You need to be a lot more clued up before you hit the contracting world.

[malvolio]

why even bother with an umbrella?
Just go part-time. That's what we're talking about here so what benefit id there in over-complicating it?

Fair point. Rather depends on whether the client wants to pay him out of BaU costs via the payroll or some kind of project budget, and whether or not someone wants to show a headcount reduction

That said, chances are they haven't even considered where the money is coming from...

[Lance]

If it's inside IR35 then there's absolutely zero point (or benefit) is using YourCo. Go with a brolly and keep this work and any new stuff entirely separate.

You may now be realising you have a steep learning curve, there are lots more issues than just IR35 to consider. As I've said to others in the past, you are taking on a new job, that of being a contractor: what skills you use at work actually to earn money are irrelevant. You have to make a serious mental adjustment in your thinking; commercially, for example, we are now your competitors...

There are good guides around, on this site, at IPSE.CO.UK and several of the better accountants. Study them. Get a good accountant (check out the sticky thread in the accounting board for suggestions) and above all, remember KISS - Keep It Simple and Straightforward. Not doing so can get expensive!

why even bother with an umbrella?
Just go part-time. That's what we're talking about here so what benefit id there in over-complicating it?

[ladymuck]

Thank you. I am starting to understand the journey I am going to go on!!!

If I consider this contract inside IR35 then does anything really matter such as if I work at an employers premises or what have you? I assume not, rather than try to stay on the outside I may as well just keep going as I am and act like an employee for this contract. Have a company email etc. etc.

Obviously for anything other than this contract when using my limited company I would not but if it is in IR35 do I need to be concerned with anything?

Inside IR35 is employment without any benefits so take everything the firm gives you and spend as little of your own money as you possibly can

[jojingles]

If it's inside IR35 then there's absolutely zero point (or benefit) is using YourCo. Go with a brolly and keep this work and any new stuff entirely separate.

You may now be realising you have a steep learning curve, there are lots more issues than just IR35 to consider. As I've said to others in the past, you are taking on a new job, that of being a contractor: what skills you use at work actually to earn money are irrelevant. You have to make a serious mental adjustment in your thinking; commercially, for example, we are now your competitors...

There are good guides around, on this site, at IPSE.CO.UK and several of the better accountants. Study them. Get a good accountant (check out the sticky thread in the accounting board for suggestions) and above all, remember KISS - Keep It Simple and Straightforward. Not doing so can get expensive!

Thank you. I am starting to understand the journey I am going to go on!!!

If I consider this contract inside IR35 then does anything really matter such as if I work at an employers premises or what have you? I assume not, rather than try to stay on the outside I may as well just keep going as I am and act like an employee for this contract. Have a company email etc. etc.

Obviously for anything other than this contract when using my limited company I would not but if it is in IR35 do I need to be concerned with anything?

[malvolio]

Thank you for responses, I can see where you are coming from.

The other way is just to accept that this contract is within IR35 and continue to develop my business through my limited company as any new contracts would then be on an outside IR35 basis.

If I did this would it be worth using an umbrella or just deal with it all within the limited company.

Thanks again for your time, it's a minefield and just trying to get my head round it all.

If it's inside IR35 then there's absolutely zero point (or benefit) is using YourCo. Go with a brolly and keep this work and any new stuff entirely separate.

You may now be realising you have a steep learning curve, there are lots more issues than just IR35 to consider. As I've said to others in the past, you are taking on a new job, that of being a contractor: what skills you use at work actually to earn money are irrelevant. You have to make a serious mental adjustment in your thinking; commercially, for example, we are now your competitors...

There are good guides around, on this site, at IPSE.CO.UK and several of the better accountants. Study them. Get a good accountant (check out the sticky thread in the accounting board for suggestions) and above all, remember KISS - Keep It Simple and Straightforward. Not doing so can get expensive!

[jamesbrown]

If I did this would it be worth using an umbrella or just deal with it all within the limited company.

It depends whether the Fee Payer is willing to pay YourCo, having first applied a deemed payment. If they are, then you have that choice and can then take the money from YourCo through whichever route you choose (dividends, PAYE) without further deduction of tax. Obviously, if they aren't willing, it's a non-starter. Regardless, using an umbrella is not a bad option and you may consider salary sacrificing that income (or some of it) to your pension.

[jojingles]

But HMRC won't see that. They will see you continuing to do what you are doing but on a more adhoc basis. And they won't be far wrong.



They will be treating you exactly as they did before, so D&C will play. They will expect you to do the work as you are the only person that can do it so MoO will be there from them and they will not accept a substitute as they want you as you are so integral. Your level of seniority doesn't help either. The best way to start this is to actually apply a dose or reality and not try make this something it isn't. You are leaving but they want you to carry on doing what you were doing before which is IR35 in a nutshell. The Friday to Monday contractor is a phrase, it's not literal. You will be doing the same stuff you did before, either part time or full time. You leave, and the next time you do the same thing you would have done anyway is as a contractor so you are effectively Friday to Monday.



You will have to train them in your time at your cost and that person goes in and do the job so you underestimate what is required and the fact you say the reality is you will be doing all the work blows your own argument.

Just get them to up the rate and go via a brolly and all this goes away.

Thank you for responses, I can see where you are coming from.

The other way is just to accept that this contract is within IR35 and continue to develop my business through my limited company as any new contracts would then be on an outside IR35 basis.

If I did this would it be worth using an umbrella or just deal with it all within the limited company.

Thanks again for your time, it's a minefield and just trying to get my head round it all.

[jamesbrown]

I am leaving the business, this is my decision and I want to go in a different direction.

So then, leave the business and go in a different direction.

or go from a Friday to Monday contractor

We hear your words, but we see your reality.

Otoh, if the supply chain above YourCo is responsible for IR35, the risk is largely on that supply chain. I suppose there's a chance that HMRC may see (and succeed in arguing) your role in colluding with a false assessment and allow the liability to additionally fall on YourCo, as it can when fraud is involved.

[northernladuk]

The bold part is my interpretation of my role within the business. I am leaving the business, this is my decision and I want to go in a different direction. I want to start up a small business consultancy working for businesses that are local to me. The contract with them is to get me started on my journey and to assist them in any way I can due to our relationship.

But HMRC won't see that. They will see you continuing to do what you are doing but on a more adhoc basis. And they won't be far wrong.

They will not be directing me or controlling what I do, the MOO is the concern with a retainer but we have had the conversation around this and we are all aligned that it will be a hands off relationship.

The intention is definately not to work only for them or go from a Friday to Monday contractor.

They will be treating you exactly as they did before, so D&C will play. They will expect you to do the work as you are the only person that can do it so MoO will be there from them and they will not accept a substitute as they want you as you are so integral. Your level of seniority doesn't help either. The best way to start this is to actually apply a dose or reality and not try make this something it isn't. You are leaving but they want you to carry on doing what you were doing before which is IR35 in a nutshell. The Friday to Monday contractor is a phrase, it's not literal. You will be doing the same stuff you did before, either part time or full time. You leave, and the next time you do the same thing you would have done anyway is as a contractor so you are effectively Friday to Monday.

The right of substitution element will exist as they are only interested in the outcome, some of this I can train to other people if required but in reality I will be doing the work.

You will have to train them in your time at your cost and that person goes in and do the job so you underestimate what is required and the fact you say the reality is you will be doing all the work blows your own argument.

Just get them to up the rate and go via a brolly and all this goes away.

[jojingles]

IR35 is on a contract by contract basis, in combinations with working practices. I can't see how for the same client, if one contract were to be within IR35 (i.e. the contract would be employment in the absence of your ltd co), how the others could not be.

Therefore, you need your retainer to be a proper consultancy contract, and all contracts, including working practices, are outside IR35.

I agree which is why I am concerned with a retainer, but people must have contracts to look after systems or process in a business but on a contract for services basis. I am just looking for how best to structure this.

Any help is appreciated!

[jojingles]

I can't see how this can even begin to be outside IR35. You are working for your old employer so are a Friday to Monday Contractor which is exactly what IR35 was designed for. Not a chance your working practices be outside in the environment you are talking about. Just from your description you fail D&C, MoO and there can't be RoS as per the bold bit. You'll be so part and parcel it just won't be true either.

You can't document something that isn't, and even if you managed to document it the working practices will be vastly different. There are some example in large orgs where this could be possible, say working in a completely different area of the business etc but leaving and carrying on the same activities? No chance.

The bold part is my interpretation of my role within the business. I am leaving the business, this is my decision and I want to go in a different direction. I want to start up a small business consultancy working for businesses that are local to me. The contract with them is to get me started on my journey and to assist them in any way I can due to our relationship.

They will not be directing me or controlling what I do, the MOO is the concern with a retainer but we have had the conversation around this and we are all aligned that it will be a hands off relationship. The right of substitution element will exist as they are only interested in the outcome, some of this I can train to other people if required but in reality I will be doing the work.

The intention is definately not to work only for them or go from a Friday to Monday contractor.