Reply to: From Permanent To Contract

[London75]

You also can't judge success of IR35 on the court wins or the estimate of cost to administer. What you can't total is the number of people who go PAYE out of fear or hoping for an easy life.

For every 10 new contracters, I bet 6 or 7 go straight to a brolly for a while just to get started and have an easy life, after a year probably half of those will go limited (I'm guessing here but that feels right from experience with friends etc).

I know I went brolly for a three months while I found my feet even though I'm far from caught by IR35. In hindsight that was stupid but I was, and still am, new to the contracting game. Even now, I sometimes wonder if life would be easier going PAYE with my own company, then I remember all the extra cash! When you factor in the clampdown on self cert mortgages, it's maybe irrelevant how many they've caught, it's how many they've deterred.

[d000hg]

Correct, there'll be no vote from me until they put scrapping IR35 in the manifesto.

Maybe they're trying to think up a viable alternative... scrapping IR35 is all well and good but despite the mess they made of it, it exists for a reason. Fixing the underlying problem that self-employed individuals are pushed into setting up companies is the right solution, not trying to fix the tax inconsistencies such a situation generates.

[Fred Bloggs]

If that were true, then they would have no qualms in stating categorically that they would scrap IR35.

Of course, that might actually require (gosh) some kind of statement from Cameron about what they WILL do rather than the usual mantra of what they WON'T do.

In the past, shadow chancellors (possibly Let win?) said that they would scrap IR35, but that's no longer the party line.

Correct, there'll be no vote from me until they put scrapping IR35 in the manifesto.

[TheFaQQer]

The great bit snot Goblin and his mad clan will not be around for very much longer so go for it.

Do you really think that the Tories take any notice of IR35 when it takes more money to administer it than it takes in new tax revenue. They will just let it whither and die. There are much more important things to bet getting on with like keeping the country from going bankrupt.

If that were true, then they would have no qualms in stating categorically that they would scrap IR35.

Of course, that might actually require (gosh) some kind of statement from Cameron about what they WILL do rather than the usual mantra of what they WON'T do.

In the past, shadow chancellors (possibly Let win?) said that they would scrap IR35, but that's no longer the party line.

[worzelGummidge]

The great bit snot Goblin and his mad clan will not be around for very much longer so go for it.

Do you really think that the Tories take any notice of IR35 when it takes more money to administer it than it takes in new tax revenue. They will just let it whither and die. There are much more important things to bet getting on with like keeping the country from going bankrupt.

[TheFaQQer]

As far as I know the fact that your first contract is within IR35 and your second isn't wouldn't open you up for an investigation - but then I'm far from an expert.

It shouldn't, but nobody really knows the criteria that HMRC use when deciding whether to investigate or not!

There are plenty of examples of people who do work inside of IR35 and outside at the same time - IIRC, directors of the PCG are an example, as they are outside IR35 for their main work, but inside for work they do for the PCG.

[lje]

Hi everyone...newbie here!

Just wondering what everyone else would choose to do if they don't increase the rate by 20%. Would you stay and contract inside IR35, or leave and get more money? If i stayed, would i be more likely to get investigated when i move to a different contract and declare i'm outside?

Any advice / comments would be much appreciated.

The_Oracle.

You need to weigh up other factors in addition to the ones you mentioned. Is your current employment much closer to home? How likely are they to cancel the contract? How long will they take to pay? How financially secure is your current company and the agency you have the alternative opportunity with?

If they won't give you the extra 20% then you'll need to look at your income levels and all of the other factors and come up with the right answer for you. I wouldn't contract outside of IR35 if I was staying at a company where I was currently a permie. If I went back to a company I used to be permie at then I would treat it differently but keeping your role and changing to contracting is IR35 caught IMHO.

As far as I know the fact that your first contract is within IR35 and your second isn't wouldn't open you up for an investigation - but then I'm far from an expert.

[d000hg]

I'm inclined to agree. If you had the contractor mindset you wouldn't be thinking about marking up 20% to sover IR35 risk. You'd be thinking about marking up £200% because of your ready-made company knowledge.

200% on top of the increase from perm -> contract rates? Yeah, that's a great mindset. If you want to spend a lot of time out of work. If he's that valuable to his current employer they'll offer him a 50% raise on his current salary.

Besides the question seemed to be about the choice between an inside or outside IR35 contract if the net profit is equivalent. I can't see why knowing you're inside IR35 is a problem - for one thing you know you don't need to worry about being caught out - unless it offends you to pay more tax and not be a 'proper' contractor

[thunderlizard]

I'm inclined to agree. If you had the contractor mindset you wouldn't be thinking about marking up 20% to sover IR35 risk. You'd be thinking about marking up £200% because of your ready-made company knowledge.

[Halcyon]

funnily enough I remember the day that the post you are replying to was made. It was nice and warm.

you are not a contractor, you do not have the right mindset. Negotiate your pay-rise and enjoy your paid holidays and sick days. Sorry.

[The_Oracle]

Hello Msg Board

Hi everyone...newbie here!

Sorry to dig up an old thread, but i used the Search and found a post similar to my situation.

I'm currently in a perm role, which i reasonably enjoy although there are lots of things that annoy me. I went for an interview recently, and now i have a contract offer. The rate is ok, and based on the formula i've seen floating around (annual perm salary/1000 * hrs per day) is better than what my permie job pays. The work is perhaps less interesting than what i'm doing now, but assuming i'm outside IR35, i'd take home a lot more £s....so i'm very tempted.

When i hand in my notice, i'd like to think my firm will want me to stay and make a counter offer, which could be:

• Remain a permie and get a pay rise. But this would need to be huge to match a contract rate, so unlikely.
• Let me switch to a contract. My role / hours will be identical, so from reading this thread, it looks like i'll be inside IR35. According to the calculators, i'd need to bump up the rate by about 20% to make up for the extra tax i'd pay for being inside IR35. Does that sound about right? 20% is a lot, but there will be no agency taking a cut....so not sure if the firm will pay up.

If they did offer the contract at +20%, then it takes money out of the equation, and i need to weigh up the 2 roles based on the type of work, experience, environment, learning opportunities, etc.

Just wondering what everyone else would choose to do if they don't increase the rate by 20%. Would you stay and contract inside IR35, or leave and get more money? If i stayed, would i be more likely to get investigated when i move to a different contract and declare i'm outside?

Any advice / comments would be much appreciated.

The_Oracle.

[shoes]

Like most things implemented by this government IR35 is an utter mess. Many people are confused by what constitutes a 'disguised employee' versus a consultant. The rules themselves are perhaps purposefully vague to prevent contractors who are 'disguised employees' from simply doing what they need to to put themselves outside IR35. The reality has been that the vagueness of the rules has in fact worked in the contractors favour, since the rules are so open to interpretation that most contracts can be reasonably claimed to be outside IR35. Therefore in my view it is a more pragmatic and hassle free approach to declare yourself outside IR35 if it seems reasonable to do so. I cannot think of a situation where it would NOT be reasonable to do so. We are in business on our own account, run our ltd cos, pay employers NI, we are at risk of having our contract terminated with no notice, typically work on a per project basis, pay for our own training, sick days, holidays.

Don't give this idiotic government any more of your money than you absolutely have to. They will waste it on some incompetent implementation of some hair brained 'social justice' based leftie claptrap nonsense. Like IR35.

[malvolio]

If you work for the same company doing broadly the same things, you are IR35 caught, it's that simple. Only if you were doing a significantly different role would you be able to demosntrate enough separation between old and new to justify a non-IR35 status; that, or take on a completely free-standing project with some degree of financial risk. Even then you might have problems.


If you want to go contract and be safely outside IR35, you have to step away from your ex-employer and that means stepping off the cliff. Given you seem to want to do it in a nice, confortable, low-impact kind of way, your only real option is to accept this one is IR35 caught, pay the taxes and use the time set up your own company, learn how the contracting market works and source your next contract - which you could then probably do as a non-IR35. You chances of doing it any other way are slim to say the least.

[gazelm]

But go back to my first post in this thread and read it again. PCG insurance is not there to get you out of IR35; if your position is untenable, the experts the insurenace pays for will advise you to pay the tax. And speaking as someone who has a reasonable grasp of the realities of the legislation, you will be fully and firmly caught by IR35.

So you have two choices, use an umbrella and pay full PAYE and NICs as their employee, or get your own company and pay full PAYE and NICs in line with the IR35 regulations. That's it, pure and simple. Anything else is evasion, not avoidance, since you are deliberately mis-stating your tax position.

Contracting is not a game. We have enough cowboys screwing it for the honest ones. Don't add to their number.

So where can we draw the line between contractor and disguised employee?
If I go back to the company after leaving, at some indeterminate point in the future, and I happen to be given the same desk and report to the man who was my manager in years gone by, does that necessarily mean that I'm a disguised employee?

What if I go back and get a different desk, still reporting to the same person?

What if I go back and get a different desk and work in the same department for a different person?

I don't want to stay there indefinitely, either as a contractor or permie.
I'm not doing this purely to try to evade tax - I actually want to run my own business.
I've handed in my notice, so as of the end of my notice period, I am no longer an employee of this company.
If they happen to need someone to do a piece of work for them and they come up with an acceptable offer, and I then end up working in an area that I've worked in before, then as far as I'm concerned it's just another contract job.
If it happens immediately after I leave permanent employment, then that's just convenient - I don't believe it should affect my status as a contractor.

I suppose what I'm asking is, as I have no real experience of IR35, is if I am going to work for the same company for some period of time (it's still an if, not a when) then what do I need to do to ensure that I'm not in IR35?
Is informing my former colleagues that I'm a contractor one of those things?
Does that really matter? As a previous poster said, is anyone really going to go and interview my former colleagues if I ge investigated?

[malvolio]

No, not at all.

All PCG members' cases were supported using the same insurance as any other member gets. No cases were refused, none were "selected", no member is refused representation. It is a measure of the PCG's success in helping people understand IR35 that all cases were won, but you cannot exptrapolate from there that that PCG only fights winnable cases.

It might be relevant to note that, unlike the PCG, a lot of providers only insure contracts they think they can win: PCG insures all members equally and unconditionally.

But my original point is that you should not simply join the PCG and then blindly ignore IR35. One day we may get a case which is blatantly not winnable, and it will be interesting to see what advice is given.