Reply to: New contract - new set-up

[OwlHoot]

Of the famous ones...Things like submiting their contracts to the IR for IR35 status review (NEVER EVER DO THIS!).

I just had a brainwave - What's to stop a contractor submitting a blatently IR35 _proof_ but fictitious contract to the IR for review, and do the same regularly every few months?!

You're not obliged to take up the work. So provided you don't fib and tell the IR you've actually worked under the terms of these contracts you'd be in the clear; but possibly, after seeing a few such contracts, some Hector clerk might click on a "don't bother IR35-reviewing this guy - they seem to always find IR35-proof contracts" box on your file

[Bagpuss]

Can you shed any more light as to which companies have lost IR35 reviews and why they were self-inflicted? I've been searching the PCG formus but not having much luck.

Of the famous ones...Things like submiting their contracts to the IR for IR35 status review (NEVER EVER DO THIS!). One defended himself in court and one another didn't have a written contract. Vaguely remember one being an ex employee of the company he contracted at (fri permie, monday contractor) and another being on site for several years (although many won cases have been). I know this is vague but I can't be arsed to search.

[Lucifer Box]

Try posting the question in the PCG forum. They will be far more likely to help you identify who the two cases that were not successful are (assuming those two are happy to be identified).

[paulb567]

(two of which were largely self-inflicted, BTW)

Can you shed any more light as to which companies have lost IR35 reviews and why they were self-inflicted? I've been searching the PCG formus but not having much luck.

[malvolio]

Yeah, you have to wonder at the logic. 1100-odd PCG members for two years each to get three wins (two of which were largely self-inflicted, BTW) against a rule change to tax composites paying dividends at the same rate as employees.

Still, keep it quiet, they may not have thought of it.

[Bagpuss]

Indeed! I guess many of the bigger brollies that have IR35 "solutions" also carry a fair amount of anti IR35 measures e.g. contracts, legal reviews, insurance etc. Makes it difficult for Hector to attack when you also consider the volume of the individual composite companies. Would need a class case and when you consider the HMCR track record.....

Surely it makes it easier?!

[freshblue]

What is not clear is why the Revenue think that composites - which are clearly there merely to avoid paying tax - are apparently exempted from IR35 investigation whereas proper one man businesses are being chased merely for following the rules for limited companies. Go figure.

Indeed! I guess many of the bigger brollies that have IR35 "solutions" also carry a fair amount of anti IR35 measures e.g. contracts, legal reviews, insurance etc. Makes it difficult for Hector to attack when you also consider the volume of the individual composite companies. Would need a class case and when you consider the HMCR track record.....

[malvolio]

There are flavours of brolly. One is where you work for them and they pay you as an employee, so clearly IR35 doesn't apply anyway. Another is where you are sort of partial shareholder, so you get a base wage plus dividends in proportion to your income - otherwise a big composite company - so you may or may not be IR35-able, just like anyone else. There are other smaller variants of that theme of course.

What is not clear is why the Revenue think that composites - which are clearly there merely to avoid paying tax - are apparently exempted from IR35 investigation whereas proper one man businesses are being chased merely for following the rules for limited companies. Go figure.

[Ansel]

How can using an umbrella protect you from IR35? IR35 gets you taxed as an employee. Using an umbrella gets you taxed as an employee.

It's like shooting yourself in the head to protect yourself from accidental death.

I found this on the PCG website....
Will an umbrella company protect me from IR35?
No. Many agents believe working through an umbrella company in itself will protect you from
IR35. IR35 status is determined by your working relationship with the agent and client and the
contracts these relationships are based upon. Therefore, IR35 applies in the same way to
umbrella companies as it does to limited companies

[Lucifer Box]

Would you say old timers i.e. the more experienced contractors, are not likely to use umbrellas (cos they're supposedly wiser)?

Pretty much. In my view, there is only one real genuine good use for an umbrella vs a Ltd and that is if you intend to be contracting for a very short time only before heading back to permiedom (a few months, say).

There are possibly also arguments if you are not a permanent UK resident and want to do things "by the book" but, then again, you could just disappear back home without paying any tax at all if you were that way inclined.

[malvolio]

No. The simple answer is that some people cannot see a sensible reason to pay someone else to manage your money for you. It's not like we have complicated businesses or anything. If the whole point of freelancing is to be independent, why start by chaining yourself to someone else's business?

[NoddY]

Would you say old timers i.e. the more experienced contractors, are not likely to use umbrellas (cos they're supposedly wiser)?

This is because they like to do their accounts in guineas, crowns and farthings.

[Ansel]

Would you say old timers i.e. the more experienced contractors, are not likely to use umbrellas (cos they're supposedly wiser)?

[malvolio]

Awww... you guessed.

[Ansel]

Thanks for all your help.
A lot of contractors (on this site) seem to be anti-umbrella.

With a fair number of you contractors on this site I'd take that as the general opinion, so why are so many contractors with umbrellas? Are they just lazy a**ses?