Umbrella to Limited with the same client

[Old Greg]

The end client wants a contractor and not an employee because it's cheaper for them (unless your contractor rate is hiked).

Seriously? I would stick to taxation, my friend.

[Lance]

First, your status for IR35 depends on the job being done, not necessarily who you are doing it for or through what legal label is applied (PSC, umbrella, etc). I recommend that the first port of call is to have the role evaluated for IR35 status, bearing in mind that the end client will be responsible for making that assessment for any contract that spans April 2020.

At risk of being pedantic, the changes in April 2020 aren't a fact yet. They are merely a suggestion/brainfart/desire by the chancellor. The finance bill for April 2019 hasn't even been passed into law yet. And who knows who'll be chancellor by the next budget (it might be John McDonnell).

It's probable that the change will come but false to say the end client is responsible for determining the status of a contract that ends after April 2020.

/pedantry

[Tractorboy]

Thank you for taking your time to answer.

The advise to evaluate the role for IR35 status is sound but I would have to do it regardless, even if I was changing the end client. My question was specifically if there are any extra risks when staying with the same end client while changing the status.

Third, HMRC systems are becoming much more adept at isolating "at risk" instances. We know that they have started asking employers for lists of contractors v employees and who has moved from one to the other. I cannot see that decreasing. I can see reporting requirements on end clients becoming more onerous as HMRC seeks to bring the 90% of "non compliant" contractors to heel. So I would agree that the chance of an enquiry immediately upon moving is low, but it is increasing.

Well I guess it does not affect me as from the end client perspective I have never been their employee. I doubt the end client is even aware that I am with an umbrella rather than limited like the rest of the contractors on site

[webberg]

A few observations.

First, your status for IR35 depends on the job being done, not necessarily who you are doing it for or through what legal label is applied (PSC, umbrella, etc). I recommend that the first port of call is to have the role evaluated for IR35 status, bearing in mind that the end client will be responsible for making that assessment for any contract that spans April 2020.

Second, your tax status generally is not yours to choose. It is determined by facts and circumstances. Even HMRC are unable to make a definitive determination which is why many are decided in Court. Therefore unless your chosen intermediary is fully up to speed with what you do, how and where you do it, who you report to and why, etc, you are leaving yourself (and perhaps the end client and intermediary) at risk.

Third, HMRC systems are becoming much more adept at isolating "at risk" instances. We know that they have started asking employers for lists of contractors v employees and who has moved from one to the other. I cannot see that decreasing. I can see reporting requirements on end clients becoming more onerous as HMRC seeks to bring the 90% of "non compliant" contractors to heel. So I would agree that the chance of an enquiry immediately upon moving is low, but it is increasing.

Fourth, choose carefully who you take advice from here. All the parties in the equation have some form of motivation and these are not always aligned with yours.

The end client wants a contractor and not an employee because it's cheaper for them (unless your contractor rate is hiked).

The intermediary entity (umbrella, bookkeeping firm for PSC, agency, recruiter) has an interest in earning maximum fee from end client and/or you.

So who is working for you?

How can you ensure that you are getting independent, unbiased advice?

This can be difficult.

There are firms who offer IR35 status reviews - again though, some have connections with intermediaries so be sure to ask.

There are firms who have tax expertise but perhaps limited knowledge of contractors/IR35. There are some who have the required mix and many post/advertise here. Again, ask about connections in order to be sure that they work for you.

There are trade bodies and similar who can help, such as IPSE.

There are signs that some unions are starting to take a real interest here as well.

Be aware that whichever route and decision you make, nothing in this space is risk free and that risk (in my opinion) increases over time as HMRC seek more compliance, there is a drift in the duties of the job away from contract terms.

In short - do your due diligence and make sure that somebody is in your corner and is prepared to stay there for the duration.

The downside of course is perhaps a higher immediate cost but probably a lower long term cost.

[northernladuk]

I know switching from permanent employment to Limited in the same work place is a big no but what does this forum think about going from umbrella to limited while with same end client?

My umbrella accountants think it is ok as they claim I've always been a contractor and going umbrella was my own choice which is different from permanent employment but I suspect they are biased?

Please help

You'd obviously have to make sure you get your contract IR35 checked as you would for any gig via a LTD. If the contract you are on fails and is inside then no, it's not really a good idea to go brolly.

Assuming the role is outside then there should be no problems at all.

Best to do at renewal time as you'd need a new contract with your LTD not brolly etc...

[lucyclarityumbrella]

Highly doubt it will make any difference, we have contractors that have done just the same with no issues

[mike67]

Legally you can probably do it and I doubt the client would care that much. However, it probably increases your IR35 risk if you do so (assuming you are out of scope).

When you work through an umbrella company, you are being supplied as a specific named individual to the client, ie the umbrella company could not randomly decide to send someone else to do the work. That means that there is a strong element of personal service, ie you are the one doing the work. When you work through a limited company (out of scope), your company is entering into a contract with the client to deliver services which just happen to be provided by you (but where you could - in theory - send anyone else to do the work).

In the (probably unlikely) case that HMRC did an IR35 investigation of you, one of the key things they would look to demonstrate is personal service. If you were previously specifically supplied as a named individual, it would strengthen their argument that nothing has really changed other than the way you are supplied and hence you should be in scope for IR35.

I would only advise switching from umbrella to limited when moving to a new client or perhaps if you could move to providing significantly different services to the same client, just doing the same "job" on Friday as an brolly contractor and on Monday as a limited would be more risky. Whether the risk is worthwhile for the increased take home you get is something you will have to decide.

[WTFH]

I know switching from permanent employment to Limited in the same work place is a big no but what does this forum think about going from umbrella to limited while with same end client?

My umbrella accountants think it is ok as they claim I've always been a contractor and going umbrella was my own choice which is different from permanent employment but I suspect they are biased?

Please help

If the umbrella company are happy for you to switch (check your contract, and ask them if there are any clauses in their contract with the client that might affect it), then the next thing will be that you'll need to explain it to your end client, then if they are OK with it, you'll need to set up your company and draw up a contract between your company and the end client.

[Tractorboy]

I know switching from permanent employment to Limited in the same work place is a big no but what does this forum think about going from umbrella to limited while with same end client?

My umbrella accountants think it is ok as they claim I've always been a contractor and going umbrella was my own choice which is different from permanent employment but I suspect they are biased?

Please help