IR35 - Inside/Outside/Service Company/How much/why?

**Paralytic** · 23 September 2019, 14:43

As you say, "You" don't have an IR35 status and each individual contract you have is assessed in its own right and you could have two concurrent contracts, one found to be inside IR35 and the other outside.

But if a client assesses your contract inside, all you can do is appeal to them. Do you think they've be open for you to persuade them otherwise? How much do they need you? Would you be willing to walk?

**ShandyDrinker** · 23 September 2019, 14:43

Surprised about the QDOS approach.

My take on it is that while the contract may be outside of IR35, if the client deems that you can't provide a substitute, no matter whether you could in principle, it is probably game over. That is why CEST and the loaded wording in the substitution questions is such an issue.

If, by virtue of the contract clauses and work practices, you can ultimately provide a substitute and the likes of QDOS, B&C, etc give an outside IR35 assessment, then I would suggest discussing with your client. As you're only working part time for them, put your case as to why the contract is outside.

Ultimately, as with many of us over the coming months you're going to be faced with the following choices:

Ask them to properly consider the contract as outside IR35 per any assessments from QDOS, B&C, etc. It may be necessary to tighten up the contract to include deliverables OR
If they won't consider 1 and assess as outside then terminate the contract OR
Work inside IR35 via your Ltd or Umbrella

**northernladuk** · 23 September 2019, 15:18

Originally posted by pauljh View Post

What is my IR35 status?
1. Have one client at £550 a day in central London since April – Outside IR35

I think you've just answered your own question there.

2. Previous to that had a different client for 2 ½ years (in central London) – Outside IR35

Irrelevant but 2 year rule will have kicked in for at least half a year of that and your current gig depending on 40% rule.

3. I have a permy job ASWELL, for another company for 2-3 days a week (Salaried, PAYE, NI, opted out of company pension)

Irrelevant

4. I don’t draw a salary from my Ltd

Irrelevant

5. Only drew 9k dividends since April

Irrelevant

6. I have very high expenses (travel, accommodation, computer hardware (for separate project not related to a client – think R&D (which I’ve occasionally had contractors in to help with))

Irrelevant

7. I have two employees (not including myself)

Used to be useful under the old Business Entity Tests but on it's own it no longer is. It depends on your contract arrangements with your client

a. One unpaid (£0k salary) on performance only (marketing director)

Irrelevant

b. One is a permy on 33k per year

Could be useful as backup defense but not to your IR35 status

8. My 33k permy could substitute for me (excluding domain knowledge) to some degree (it’s a very very niche technology set)

So not really then. The client can refuse him if he is not equally skilled and he can't sub if he's already on with the client in the future as you indicated but anyway it's not that relevant

9. My 33k permy may be coming to work with my current Client also (at a reduced day rate)

This could be your silver bullet depending on how you deal with it contractually. Comes to fill a bum on seat role then not really. Comes as part of your business in a SoW type approach then you are golden.

Surely I’m a service company and with that set up far far outside IR35 (I appreciate it’s on a per contract basis) My contract with my current client is very open without defined hours.

What makes you think that? Nothing you've said so far indicated your status.

Clients next project (where myself and my 33k permy may be on) is a 2-3 year project, but we are generally expected to be in the office 9ish to 6ish due to meetings, involvement with other team members (permys), security and to be “seen”.

Not an issue.

Current client is getting nervous and has hinted that all contractors (me included) will be deemed inside IR35 come April.

So you know your future status as well as the one you are in now (although questionable now looking at all that)
You have to consider the implications of you thinking you are outside now, the client saying you are inside and HMRC taking an interest in the work you thought you were outside for. I suspect you need to do a lot more reading about IR35 in general and particularly what is coming and the implications of going inside with a current client. Not the best place to be.
You should be OK if you've a brand new piece of work not related to the old one but if it's in a similar role, just the next project, it could be sweaty.

Surprised about the QDOS approach.

I'd imagine that is because he's splurged all this information, most of which is irrelevant, and QDOS don't have the time or inclination to give free advice when there is some education to be done at the same time. If he pays for a contract check and working practices check I am sure they would have been much more useful.

I have TLC35 insurance with QDOS, but on phoning them they weren’t very helpful and said talk to my accountant. My accountant isn’t sure and is looking into it (Gorilla)

Start reading up on IR35. Many links to the right and once you are done there check the internet.

**pauljh** · 23 September 2019, 15:40

Originally posted by ShandyDrinker View Post

Surprised about the QDOS approach.

My take on it is that while the contract may be outside of IR35, if the client deems that you can't provide a substitute, no matter whether you could in principle, it is probably game over. That is why CEST and the loaded wording in the substitution questions is such an issue.

If, by virtue of the contract clauses and work practices, you can ultimately provide a substitute and the likes of QDOS, B&C, etc give an outside IR35 assessment, then I would suggest discussing with your client. As you're only working part time for them, put your case as to why the contract is outside.

Ultimately, as with many of us over the coming months you're going to be faced with the following choices:

Ask them to properly consider the contract as outside IR35 per any assessments from QDOS, B&C, etc. It may be necessary to tighten up the contract to include deliverables OR
If they won't consider 1 and assess as outside then terminate the contract OR
Work inside IR35 via your Ltd or Umbrella

Thanks for replying, if worse case (i can't afford to terminate as then wouldn't be able to pay my 33k permy)

If "Work inside IR35 via your Ltd or Umbrella" this happens, how does tax work?, does my client pay me into my personal account (as I'm "deemed" employee) and so I bypass my company account?, or does it go into my company account and then I draw it out WITHOUT having to worry about VAT/Corporation/Dividend tax - If so how on earth do I make that balance???

**pauljh** · 23 September 2019, 15:44

My main concern is how do service companies I know (i.e. consultant companies I've worked for) not have to worry about this?

I know companies that have 6 employees, charge client's X,Y,Z and then salary pay their 6 employee's, whats the difference between them and me?? Even if they supply one "bod" to the same place for 2+ years they aren't worried (or even considering IR35)?

I've read a lot on IR35 and to find particulars about things I thought were relevant (which apparently aren't) was non conclusive!

Originally posted by northernladuk View Post

I think you've just answered your own question there.

Irrelevant but 2 year rule will have kicked in for at least half a year of that and your current gig depending on 40% rule.
Irrelevant
Irrelevant
Irrelevant

Irrelevant

Used to be useful under the old Business Entity Tests but on it's own it no longer is. It depends on your contract arrangements with your client

Irrelevant

Could be useful as backup defense but not to your IR35 status

So not really then. The client can refuse him if he is not equally skilled and he can't sub if he's already on with the client in the future as you indicated but anyway it's not that relevant

This could be your silver bullet depending on how you deal with it contractually. Comes to fill a bum on seat role then not really. Comes as part of your business in a SoW type approach then you are golden.

What makes you think that? Nothing you've said so far indicated your status.

Not an issue.

So you know your future status as well as the one you are in now (although questionable now looking at all that)
You have to consider the implications of you thinking you are outside now, the client saying you are inside and HMRC taking an interest in the work you thought you were outside for. I suspect you need to do a lot more reading about IR35 in general and particularly what is coming and the implications of going inside with a current client. Not the best place to be.
You should be OK if you've a brand new piece of work not related to the old one but if it's in a similar role, just the next project, it could be sweaty.

I'd imagine that is because he's splurged all this information, most of which is irrelevant, and QDOS don't have the time or inclination to give free advice when there is some education to be done at the same time. If he pays for a contract check and working practices check I am sure they would have been much more useful.

I have TLC35 insurance with QDOS, but on phoning them they weren’t very helpful and said talk to my accountant. My accountant isn’t sure and is looking into it (Gorilla)

Start reading up on IR35. Many links to the right and once you are done there check the internet.

**northernladuk** · 23 September 2019, 15:47

Originally posted by pauljh View Post

Thanks for replying, if worse case (i can't afford to terminate as then wouldn't be able to pay my 33k permy)

But if your client deems your role as inside when you thought it was outside previously you could have a problem on your hands

If "Work inside IR35 via your Ltd or Umbrella" this happens, how does tax work?, does my client pay me into my personal account (as I'm "deemed" employee) and so I bypass my company account?, or does it go into my company account and then I draw it out WITHOUT having to worry about VAT/Corporation/Dividend tax - If so how on earth do I make that balance???

No. You are employed via a brolly. They have the contract with your agent/client. They pay the brolly who in turn deduct all your taxes and PAYE and pay you like an employee. The other option is the agent can do your PAYE for you.

You won't need your LTD anymore in this set up.

**northernladuk** · 23 September 2019, 15:51

Originally posted by pauljh View Post

My main concern is how do service companies I know (i.e. consultant companies I've worked for) not have to worry about this?

I know companies that have 6 employees, charge client's X,Y,Z and then salary pay their 6 employee's, whats the difference between them and me?? Even if they supply one "bod" to the same place for 2+ years they aren't worried (or even considering IR35)?

I've read a lot on IR35 and to find particulars about things I thought were relevant (which apparently aren't) was non conclusive!

It's all down to the way you are engaged. Being via an agency means you are a personal services company just carrying out a role the client has. This is the crux of IR35 as HMRC believes most of us are doing work like a permie so should be taxed like a permie.

Service companies and consultancies offer a service, not a bum on seat per day. They can do it in different methods, usually fixed price and go through a different process to us. They would be classed as suppliers and have to deal with clients preferred suppliers lists etc. They have to (generally) bid for work and then deliver it. They way the deliver it, offsite, no D&C, fix at their own cost and so on is vastly different than a bum on seat contractor so they are outside.

The supplying bod thing is going to bite some consultancies, and again, is down to the way they are engaged but if they've got greedy and filled a slot at the client normally done by a permie they could come under the spotlight. Many consultancies start off supplying a service and then slip in to body shopping so they need to be careful if they are.

**ShandyDrinker** · 23 September 2019, 17:13

Originally posted by northernladuk View Post

But if your client deems your role as inside when you thought it was outside previously you could have a problem on your hands

No. You are employed via a brolly. They have the contract with your agent/client. They pay the brolly who in turn deduct all your taxes and PAYE and pay you like an employee. The other option is the agent can do your PAYE for you.

You won't need your LTD anymore in this set up.

Agree with most of the above apart from the highlighted part. I'm pretty sure you can still work via your LTD although I am unsure of precisely how it would work.

What I would say is that if inside IR35, for simplicity it is most definitely worthwhile considering a brolly.

Again as with many come April 2020, I am weighing up whether if outside IR35 roles completely evaporate, it is worthwhile continuing with a LTD or not.

**cosmic** · 23 September 2019, 19:13

Originally posted by ShandyDrinker View Post

Agree with most of the above apart from the highlighted part. I'm pretty sure you can still work via your LTD although I am unsure of precisely how it would work.

What I would say is that if inside IR35, for simplicity it is most definitely worthwhile considering a brolly.

Again as with many come April 2020, I am weighing up whether if outside IR35 roles completely evaporate, it is worthwhile continuing with a LTD or not.

Yes you can. You pay the tax. Client pays you on full. You get corp subs which covers expenses but going through ltd is best if you have mixed engagement in and out of scope.

Can IR35 contractors still work through a limited company? | Crunch

IR35 - Inside/Outside/Service Company/How much/why?