Reply to: IR35 - Tell Me What to Do!

[hairymouse]

Contracting life may not exist as you know it now in 5 months. I'd be taking that job in a heartbeat.

I'm not even sure it exists as we once knew it now, much less in 5 months. The market is already unrecognisable, and not in a good way.

[DeludedKitten]

Problem is you're comparing perm with contracting outside. Which is fine if you are confident you will still be able to secure outside gigs post April. If you can't and end up inside, all the advantages you outline will disappear.

I'm on £700/day, split divs with spouse etc so perm at £100k would be a major pay cut. But I'm still going after a circa £100k perm job I turned down previously because the world isn't going to be what it was.anymore.

It's also comparing £550 a day for lots of days of the year against the permie salary that you'll get whether there is work for you to do or not.

I've not had a sniff of a contract in six months now, so £100k is a big increase on the £590 that I was charging my last client.

[TygerTyger]

Contracting life may not exist as you know it now in 5 months. I'd be taking that job in a heartbeat.

Snap - would jump at 100k

I'm in similar position to others on this thread - similar rates and situation with split dividends with spouse, child benefit etc.

Getting offered top 60-65k ish to go perm. Think staying contracting and accepting the upcoming bumpy ride and future umbrella/PAYE hit is probably more appropriate for me currently but at 80k basic I'd flip over I think.

[northernladuk]

Contracting life may not exist as you know it now in 5 months. I'd be taking that job in a heartbeat.

[EvilGazebo]

I'm in a similar position, received a 100K perm offer which I've turned down as I really like contracting life(for now).

Running the numbers, the perm offer is financially lower than a 550 per day contractor salary. I have kids and my spouse doesn't work which allows me to put her as shareholder, so the situation might be different to yours, but this is how I calculated it:
* Current setup allows us to qualify for the 30% child care discount. Perm role of £100k disqualifies us - loss of roughly 3k a year.
* Current setup allows us to to avoid the HICBC. Perm role of £100k disqualifies us - loss of £1800 a year.
* UK doesn't allow perm to deduct commute cost, so effectively a loss of £2k a year off my net.
* The remaining company funds can be put towards pension (my perm offer was 5%) and increasing my war chest(already approaching 4 months on the side, which is more than the 2-3 months offered in perm).

Just my 2c.

N.

Problem is you're comparing perm with contracting outside. Which is fine if you are confident you will still be able to secure outside gigs post April. If you can't and end up inside, all the advantages you outline will disappear.

I'm on £700/day, split divs with spouse etc so perm at £100k would be a major pay cut. But I'm still going after a circa £100k perm job I turned down previously because the world isn't going to be what it was.anymore.

[NCo]

Contracy - Perm transition

Thank you for the replies all - that's helpful.

It's not a vast, vast difference in take-home, especially when consider the confusing IR35 burden is lifted, but I think it's enough to tip the balance i.e.: added income of contractor versus reduced security.

One added question:

1. If my current client decided to blanket assess their contractors as inside IR35, which I fear they will, and I was to accept and continue, if HMRC came knocking for period outside IR35, would QDOS IR35 cover still apply? Or would I have essentially voided the policy as I have undermined any potential defence by subsequently accepting the role as inside? Suspect the latter...



I'm surprised you're thinking like that with the numbers involved - presumably your reasoning is more than just numbers? On my current £500 p/d, if I found job locally, £70-80k would be about the tipping point for me to accept permanent long-term. I'd have thought £100k plus bonus with holiday, sick pay and permie benefits is ultimately the same if not higher take-home...?!

I'm in a similar position, received a 100K perm offer which I've turned down as I really like contracting life(for now).

Running the numbers, the perm offer is financially lower than a 550 per day contractor salary. I have kids and my spouse doesn't work which allows me to put her as shareholder, so the situation might be different to yours, but this is how I calculated it:
* Current setup allows us to qualify for the 30% child care discount. Perm role of £100k disqualifies us - loss of roughly 3k a year.
* Current setup allows us to to avoid the HICBC. Perm role of £100k disqualifies us - loss of £1800 a year.
* UK doesn't allow perm to deduct commute cost, so effectively a loss of £2k a year off my net.
* The remaining company funds can be put towards pension (my perm offer was 5%) and increasing my war chest(already approaching 4 months on the side, which is more than the 2-3 months offered in perm).

Just my 2c.

N.

[fiisch]

Thank you for the replies all - that's helpful.

It's not a vast, vast difference in take-home, especially when consider the confusing IR35 burden is lifted, but I think it's enough to tip the balance i.e.: added income of contractor versus reduced security.

One added question:

1. If my current client decided to blanket assess their contractors as inside IR35, which I fear they will, and I was to accept and continue, if HMRC came knocking for period outside IR35, would QDOS IR35 cover still apply? Or would I have essentially voided the policy as I have undermined any potential defence by subsequently accepting the role as inside? Suspect the latter...

My situation is pretty similar to yours, but Im on 550/day locally, and have 3 kids, Mrs who doesnt work as its not worth it due to childcare costs (She was a teacher)

So Im about to accept a permie role at £100k plus bonus. Its still a drop in take home, but my hope/intention is to do this for 18 months then go back contracting if its still viable, Im sure it will be

I'm surprised you're thinking like that with the numbers involved - presumably your reasoning is more than just numbers? On my current £500 p/d, if I found job locally, £70-80k would be about the tipping point for me to accept permanent long-term. I'd have thought £100k plus bonus with holiday, sick pay and permie benefits is ultimately the same if not higher take-home...?!

[JoJoGabor]

My situation is pretty similar to yours, but Im on 550/day locally, and have 3 kids, Mrs who doesnt work as its not worth it due to childcare costs (She was a teacher)

So Im about to accept a permie role at £100k plus bonus. Its still a drop in take home, but my hope/intention is to do this for 18 months then go back contracting if its still viable, Im sure it will be

[Manic]

<Snip>

In terms of differences in take home between contracting and permie, the former might give you 75% of gross invoices at the expense of potential enquiry and administration. Umbrella (compliant) or permie, around 65%.

Ask yourself if the 10% is worth it.

Unless you have high expenses such as travel/rent/hotels, and/or you income split (Income below child benefit threshold, utilise spouses 7.5% band) where the difference will be more profound.

[webberg]

Relying on the terms of a contract that does not reflect the role and how you and your client approach working practices, is foolish.

IR35 tests work on the facts of the role and if there is a conflict between the actualite and the words, the facts always win.

A substitution clause without teeth or any practical way it could be exercised, is useless and will be rejected as influential in any dispute that reaches a Tribunal.

Your client may decide to "blanket IT35" for any number of reasons, all of which boil down to how much getting it wrong may cost them. You might therefore expect them to go "safe" for a period, perhaps until they see how HMRC react to their 2020/21 returns - say late 2021. After that they may cautiously start hiring contractors again - who knows.

I would say therefore:

Regard this turmoil as a 24/30 month issue and if that means being permie for that period in a job you like and a commute you can handle, suck it up and re-evaluate at the end of the period.

If you want to stay contracting, go and get bespoke advice.

In terms of differences in take home between contracting and permie, the former might give you 75% of gross invoices at the expense of potential enquiry and administration. Umbrella (compliant) or permie, around 65%.

Ask yourself if the 10% is worth it.

[DeludedKitten]

2. If there is a determination of inside IR35 and you elected not to operate in this manner, would you work your notice (any implications of this?) or walk immediately?

On the assumption that your contract is IR35-friendly then if there is a blanket determination that you are inside then clearly the contract is wrong because the right of substitution is not reflected in reality, or there is more direction and control than in the contract, or there is an obligation to offer and accept work. Those are three pretty fundamental clauses in the contract to break, so you'd have good reasons to walk out.

That said, the determination is yours until April (assuming the legislation is eventually introduced and passed, which it will be). You could just ride it out until February, get the notice in so that you still get paid before April, and maximise the income that way. Then you just potentially have the stampede of everyone doing the same thing to fight against.

[Bluebird]

I've been in a similar position to you when IR35 was not an issue ( well not much ).

I found the stress of worrying about contracts and renewals etc too much when I had a wife and two children who needed me.

Sickness & Holidays meant a drop in income.

I was much more relaxed with a permie role.

I then ventured back into contracting when there was sufficient funds built up to mean that the worry was mitigated.

It's about quality of life for me.

[Grasser73]

I would definitely hold-off on another wife.

[dx4100]

[Paralytic]

What would suity do?