Contractors' Questions: Any risk to freelancing for my client 9-to-5?

Contractor’s Question: My freelance IT career started well with a company in London but about 8 months in I covered for a full-time techie’s holiday and from then on, I effectively worked there 9-to-5, despite still being a contractor.

Today, a year later, I’m in a separate wing of the company and work for the original departments, albeit under a new manager in the separate wing, still 9-to-5. I’m also still technically freelance, but the manager never pays me fully or promptly and when I’ve mentioned joining the payroll (to get regular and full pay and to regularise my status), he said senior management sees it as “too complicated.”

I feel like I’m their employee but don’t want to rock the boat, as I like the work; the people and the location. Yet I don’t want to be treated unfairly anymore and dread getting into trouble with HMRC over my status.

Expert’s Answer: Despite your fondness for the company, it sounds like they are a bit of nightmare! From the limited details provided, it would appear that you are working (and treated) like an employee of your client; you have stated that yourself. In terms of your risk from HMRC, a lot will depend on how you are operating.

If you are working as a self-employed sole trader then, while you are responsible for paying tax and NI, the responsibility of your tax status rests with your engager. If HMRC were to look at the arrangement and decide you were a ‘disguised employee’ while being a sole trader, any resultant liabilities (i.e. employer’s NI) would be payable by your engager, not you.

However, if you are operating through your own limited company, then IR35 could come into play. This sets the responsibility for determining your status – and for footing the bill if you get it wrong – firmly at your door.

At the moment, your client is definitely having their cake and eating it. It’s a bit of a dangerous game to play from their perspective as demonstrated in the Tilson case, where a contractor successfully claimed employment rights from his client. Prima facie, there appears to be similarities between this case and your circumstances in terms of you being directed and controlled by your client.

The expert was Seb Maley, a director of Qdos Consulting, an IR35 advisory for freelance and contract professionals.

Thursday 14th April 2016