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  1. #11

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    Quote Originally Posted by The Spartan View Post
    I found the whole IR35 issue a bit of a put off being a first timer
    You had to make the one comment that could drag me into it....

    Last year HMRC made 22 (approx) IR35 investigations out of 1.4 MILLION freelancers.
    The year before was 12. Over 5 years it is 322.

    IR35 is the fear factor that a lot of umbrella companies use and the most irrelevent reason for going with one.

    If that is your single reason then ensure your contract and work practices comply. Join the PCG. go LTD.

  2. #12

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    Quote Originally Posted by malvolio View Post
    Just on that one point, because of that fear people are paying around £250m a year in taxes and NICs that are almost certainly not due.

    By all means use an umbrella for convenience or security or simplicity, which they provide in spades, but these days IR35 is sufficiently well undertood that it is actually a pretty lame reason.
    So what is the best way to ensure you are outside of IR35? is it at contract level?

  3. #13

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    Quote Originally Posted by prozak View Post
    IR35 is the fear factor that a lot of umbrella companies use and the most irrelevent reason for going with one.

    If that is your single reason then ensure your contract and work practices comply. Join the PCG. go LTD.
    Thanks for the advice I'll definitely give it more consideration now

  4. #14

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    Quote Originally Posted by The Spartan View Post
    So what is the best way to ensure you are outside of IR35? is it at contract level?
    It's more to do with how you work, although it's helpful if the contract backs that up. With IR35 investigations they will look at three main factors:

    1. Personal Service - if the contract requires you specifically then it is a contract of service and therefore a pointer toward employment. If you can send a substitute then it is a contract for services which cannot then be seen as employment. This is often deemed the strongest argument against IR35, providing it is a genuine right and not merely an ability to offer a substitute.

    2. Control - this covers how, when and where the work is carried out. If you have reasonable autonomy over the work to be done then you would be more likely to be seen as a contractor. If you are told what to do and how to do it, and are expected to work set times for a set fee, it is more indicative of employment.

    3. Lack of Mutuality of Obligation (MOO) - this relates to whether you are obliged to carry out the work and whether the client is obliged to offer you work, and also whether you are obliged to carry out work outside the scope of the contract. This applies not only after the current contract finishes, but within the current contract itself. MOO is the most difficult one of the three factors to prove, although the MBF Design case in January 2011 was won by the taxpayer with heavy emphasis on this point.

    Then you look for supporting factors, things that would support the notion of you genuinely being in business on your own compared to being a disguised employee (notice period, own tools, website, insurances etc). Get your contract reviewed by a specialist, that way they can put all this into context for you and talk you through how your working conditions compare.

    Even if you're inside IR35 a limited company can still work out more tax efficient as you can benefit from flat rate VAT, plus only 95% of your income is salary compared to 100% through a brolly.

  5. #15

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    Quote Originally Posted by The Spartan View Post
    So what is the best way to ensure you are outside of IR35? is it at contract level?
    Can I tell him to go read the guides on the right hand side, paricularly the 3rd line down that says IR35??

    First rule about running a LTD is that YOU are running it and you have to research it for yourself. Everyone else can't run it for you
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  6. #16

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    Quote Originally Posted by Clare@InTouch View Post
    Even if you're inside IR35 a limited company can still work out more tax efficient as you can benefit from flat rate VAT, plus only 95% of your income is salary compared to 100% through a brolly.
    Ah right I was under the impression earnings inside of IR35 were more or less the same as using an umbrella company. Most of my work will come via agencies as I work in I.T. so generally the contracts are drawn up by them.

  7. #17

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    Quote Originally Posted by northernladuk View Post
    Can I tell him to go read the guides on the right hand side, paricularly the 3rd line down that says IR35??

    First rule about running a LTD is that YOU are running it and you have to research it for yourself. Everyone else can't run it for you
    A very fair point indeed, I've had a look at it but it's not exactly straightforward

  8. #18

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    Quote Originally Posted by The Spartan View Post
    A very fair point indeed, I've had a look at it but it's not exactly straightforward
    Google "the Potted Guide to IR35". It's actually very simple.
    Blog? What blog...?

  9. #19

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    Quote Originally Posted by The Spartan View Post
    Ah right I was under the impression earnings inside of IR35 were more or less the same as using an umbrella company. Most of my work will come via agencies as I work in I.T. so generally the contracts are drawn up by them.
    Agency contracts are quite standard, but some are much, much better than others as far as wording goes. The PCG have a great contract template that you can download that shows the 'ideal' type of wording you'd be looking for. That being said, it's not worth the paper it's written on if it's not genuine.

    Call a few accountants and ask them to do an income comparison that shows Limited vs IR35 vs Umbrella. Then you'll see exactly how much it could save you, and whether it's worth the extra admin involved. Obviously the more you earn the greater the disparity will be.

  10. #20

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    Quote Originally Posted by The Spartan View Post
    A very fair point indeed, I've had a look at it but it's not exactly straightforward
    Indeed but 1.4 million of us have had a go at understanding. To what level they did is a different question altogether. Just have a go at researching first and then we will quite happily answer your questions.

    Also get someone like QDOS to review your contract. They take much of the leg work out of it for you.
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