Reply to: Outside IR35 now even harder to prove PGMOL ruling

[willendure]

Contracting in the UK, as we've known it for the past couple of decades, has largely died already, and the upcoming budgets will probably dot a few more i's and cross some t's, but the need for flexible work and workers will always exist. Unfortunately, the direction of travel has been towards more pseudo-employments that don't especially benefit clients and certainly disadvantage workers who would otherwise engage B2B (umbrellas, FTCs etc.). I think many contractors wouldn't care too much about the eroding tax advantage of working outside, providing they could claim legitimate business expenses. One thing you cannot viably do with FTCs or umbrellas is travel to find the work.

Whilst I don't have much optimisim about it, lets see this budget before we condem it. We've been an easy target for a while now, there isn't much meat left on this carcass for the vultures.

I agree though, the advantages of being incorporated are not really paying lower rates of taxation. For me it is:

1. Expenses. Profit = Income - Expense. Being in business has many expense besides occasional travel. Equipment, phones, internet, sofware, professional fees, rent...
2. The ability to retain profit in the business and use it to grow the business.
3. The ability to decide when to pay a dividend or when not to, based on circumstance, risk and success.

One way to resolve it might simply be to increase dividend tax to bring tax rates in line with employment. The downside to that is, it removes incentive for anyone to become an entrepeneur and small business and entrepeneurs are the lifeblood of our economy. They say one of the worst ways to invest some money both in terms of risk and taxation is to start a business! There has to be something to encourage those with the impulse to give it a go.

[willendure]

Running your business properly is your main concern, particularly with the sums flying around people have had to pay. That's my opinion anyway and I'm sure someone will pop up and say us types that spend a lot of time on IR35 are just tin foil hat wearing loons. You'll probably get away with it but it's more by luck than design.

Lucky, yes. Or perhaps more that I have not been unlucky, as investigations are fairly rare.

But I appreciate what you are saying, and am ready to listen and learn. Are you able to provide a summary of your approach to IR35? What have you spent a lot of time on? How do you manage your contracts? How do you run your engagements to avoid supervision and control and so on? Any insight into what you are doing would be greatly appreciated.

[jamesbrown]

So are people working outside now (or with realistic prospect of working outside in the future) seeing this as the prompt to stop working that way, or just treating it as another bump in the road to think about along with everything else?

I refuse to work under Chapter 10, only Chapter 8, which practically means overseas clients only. As I've said earlier, the best you can do is to remain vigilant and retain evidence, as well as insure yourself against risks (i.e., legal expenses).

Contracting in the UK, as we've known it for the past couple of decades, has largely died already, and the upcoming budgets will probably dot a few more i's and cross some t's, but the need for flexible work and workers will always exist. Unfortunately, the direction of travel has been towards more pseudo-employments that don't especially benefit clients and certainly disadvantage workers who would otherwise engage B2B (umbrellas, FTCs etc.). I think many contractors wouldn't care too much about the eroding tax advantage of working outside, providing they could claim legitimate business expenses. One thing you cannot viably do with FTCs or umbrellas is travel to find the work.

[Ketto]

Does feel like the end of the road is coming…. Have been reliably able to get outside gigs since the new rules came in so will be interesting to see if clients react negatively to this.

[malvolio]

So are people working outside now (or with realistic prospect of working outside in the future) seeing this as the prompt to stop working that way, or just treating it as another bump in the road to think about along with everything else?

The direction of travel (given recent cases, the close ties between Labour and the unions and Brown's paper on what is a worker) leads this pessimist to think that contracting is dead for us one man bands. Even if you are outside the provisions of IR35, it won't be long before your relationship with your client is indistinguishable from that of an employee - except you probably won't have all the same rights and privileges.

Welcome to socialism, chaps.

[Ketto]

So are people working outside now (or with realistic prospect of working outside in the future) seeing this as the prompt to stop working that way, or just treating it as another bump in the road to think about along with everything else?

[Ketto]

Yeah i’d mostly agree. The investigation cover is an absolute must have. The tax cover is more of a comfort blanket which i take because it ‘may’ prove useful and even if it doesn’t end up being that it’s only a few hundred quid a year extra.

It has always occurred to me that if the engagement circumstances are such that HMRC can convince a tribunal it’s inside then the insurer will also likely have sufficient grounds to claim the insurance is invalid, if so inclined.

[jamesbrown]

Tax loss insurance: generally worthless (or its worth is very hard to predict because, on the one hand, some providers might welcome the opportunity to prove its value but, on the other, they have tremendous latitude to not pay out).
Legal expenses cover: always worthwhile, because that is an unavoidable cost of investigation.

[Ketto]

I was wondering what the get out clause would be...

Do they give you an up front assessment of the "Prospect of Success" clause? I mean do they review your contract and ask about the reality of your working relationship and so on, and then say either Yes/No this insurance is valid. Otherwise you could take the insurance with no idea of whether it is worth buying.

Thanks Zigenare for the Kingsbridge recommendation.

Yes, section 8 applies to my current situation.

QDOS is:

Reasonable prospects of achieving a
satisfactory outcome exist if:

a) On the balance of probabilities, there is
a 51% or greater chance of successfully
pursuing or defending a claim; and
b) The benefits likely to be obtained by
proceeding with the claim justify the
likely costs.

[northernladuk]

Been contracting since 2001. Mostly I have just been too busy working to have time to even think about it..

For me that's the completely the wrong attitude. Nothing more annoying that a tickbox IR35 contractor.It's fundamental to what you do. Paying IR35 lipservice is what started some of the investigations. The work stuff is easy, everyone, even perms can do that. Running your business properly is your main concern, particularly with the sums flying around people have had to pay. That's my opinion anyway and I'm sure someone will pop up and say us types that spend a lot of time on IR35 are just tin foil hat wearing loons. You'll probably get away with it but it's more by luck than design.

I looked it up and it looks like they provide cover and do a status review as a package, which makes sense to me. Do you know if the insurance they sell you after the review is then guaranteed to be valid (assuming nothing changes that would affect the review)?

No it isn't. You can destroy your own status by acting like a perm. Going to xmas does, falling in to part and parcel, letting the client direct you and all sorts. When the do a reasonble chance of success check and you've failed to act like a business they'll can it. So back to the comments above, take some responsibility and then you should be OK.

[willendure]

With reference to "IR35" Insurance I can recommend "Kingsbridge" and their "IR35 Protect Policy" they were very helpful in organising everything I needed.

I looked it up and it looks like they provide cover and do a status review as a package, which makes sense to me. Do you know if the insurance they sell you after the review is then guaranteed to be valid (assuming nothing changes that would affect the review)?

[willendure]

I've got to ask though, how come you don't know this when you've been on the forums since 2015? Insurance was almost mandatory in the old days.

Been contracting since 2001. Mostly I have just been too busy working to have time to even think about it.

I do actually have insurance that will pay towards the costs of an investigation - the standard insurance that comes with an IPSE subscription and also covers jury service.

Only worrying now because of the new Labour government and uncertainty about where this is all going. Also had my contract reviewed professionaly recently and it came back as a weak case for being outside, with recommendations for strengthening it. I actually think my case is much stronger in reality than is reflected in the contract, so asking the hiring manager to issue an updated one that takes account of all the recomendations.

[willendure]

The gotcha here is most (I believe) will have a 'Prospect of Success' clause. If there is little no not prospect of you winning they won't cover it. Who knows what that really means though. If you've put yourself inside or not carried out the proper diligence then it's not worth the paper it's written on. Bad news for your average tickbox IR35 contractor or those ones that don't give a jot about it all thinking the insurance will cover them. If the worst comes to the worst they could be in for a nasty surprise.

I was wondering what the get out clause would be...

Do they give you an up front assessment of the "Prospect of Success" clause? I mean do they review your contract and ask about the reality of your working relationship and so on, and then say either Yes/No this insurance is valid. Otherwise you could take the insurance with no idea of whether it is worth buying.

Thanks Zigenare for the Kingsbridge recommendation.

Yes, section 8 applies to my current situation.

[Zigenare]

With reference to "IR35" Insurance I can recommend "Kingsbridge" and their "IR35 Protect Policy" they were very helpful in organising everything I needed.

[northernladuk]

You can get insurance that would cover the extra tax they would make you pay? Is it expensive to get this insurance?

Firstly the only time that a contractor has the responsibility and liability for IR35 is where the original ‘Chapter 8’ IR35 rules apply -- where their PSC is engaged by a “small company” or a company based wholly overseas with no UK presence. If that is the case then yes you could can (and should) get insurance that covers you.
You would have to check the small print of the policy but the big providers do say they things like 'IR35 insurance provides indemnity for the insured against the representation costs in defending IR35 compliance activity from HMRC, as well as the tax/NIC liabilities, penalties, and interest found to be owed as a result of such activity.'

The gotcha here is most (I believe) will have a 'Prospect of Success' clause. If there is little no not prospect of you winning they won't cover it. Who knows what that really means though. If you've put yourself inside or not carried out the proper diligence then it's not worth the paper it's written on. Bad news for your average tickbox IR35 contractor or those ones that don't give a jot about it all thinking the insurance will cover them. If the worst comes to the worst they could be in for a nasty surprise.

It could be an interesting discussion around how the prospect of success has changed bearing in mind the ruling we are discussing, Ros being a sham and all the other things that have eroded the success over time. What cases will they actually take on nowadays?

The rest of the time the liability sits with the client so the contractor wouldn't be liable. I've lost track of the discussion but it's about now someone might mention contracts that pass the liability to the contractor but I don't know what the outcome of that discussion is. I guess there is one benefit to being inside that I don't have to understand it for now :|

I've got to ask though, how come you don't know this when you've been on the forums since 2015? Insurance was almost mandatory in the old days.