IR 35 and contract duration

**LisaContractorUmbrella** · 5 July 2012, 12:24

Originally posted by contractor55 View Post

Hi

Depending on my contract I either change contracts/companies within 18 months or sometimes every 2-3 years. With regards to IR35 which is worst? I know the investigation can start with anything which is not my question but I`m more interested in the length of contracts/ number of clients ? If you change contracts/ companies and never stay more than say 2years with a single company is there any worry with IR35?

Thanks

Yes, the worry with IR35 is that your working practises put you inside - length of contract taken in isolation is unlikely to put you inside if in all other respects you are operating as a business rather than an employee

**Clare@InTouch** · 5 July 2012, 12:29

As Lisa said - contract duration is not a deciding factor. You could have a three month contract that was inside IR35 and a 3 year one that was outside. It all depends on what you actually do on a day to day basis.

**northernladuk** · 5 July 2012, 12:32

Originally posted by LisaContractorUmbrella View Post

Yes, the worry with IR35 is that your working practises put you inside - length of contract taken in isolation is unlikely to put you inside if in all other respects you are operating as a business rather than an employee

WLS but after working with a couple of guys that are entrenched in clients many of them have taken their eye off the ball and are firmly in IMO. Droping the term client and using 'us', generic contracts and so on make them look more like permies that some permies. You have to be as diligent two years in as you did first day... maybe even more so.

But as said.. length of contract means little to nothing if all important factors are in place.

**BlasterBates** · 5 July 2012, 12:50

Lets put it this way the longer you stay the more you get trusted and become more like a permie. There is one court case where the judge decided on 50-50 ruling i.e. for the first half of the contract he was a contractor and the second half a disguised permie. I forget how long, but I don't think 2 years would necessarily be excessive. I think the contractor in question had been there for 5 or 6 years.

A general rule of thumb would be stay for the duration of the project you were hired for and then move on, once you're not really assigned to a specific project that's where you run a real risk.

**malvolio** · 5 July 2012, 13:22

Originally posted by BlasterBates View Post

Lets put it this way the longer you stay the more you get trusted and become more like a permie. There is one court case where the judge decided on 50-50 ruling i.e. for the first half of the contract he was a contractor and the second half a disguised permie. I forget how long, but I don't think 2 years would necessarily be excessive. I think the contractor in question had been there for 5 or 6 years.

A general rule of thumb would be stay for the duration of the project you were hired for and then move on, once you're not really assigned to a specific project that's where you run a real risk.

That was because he went from project deliverables to doing what ever was passed to him, so he failed the D&C element. MOO and RoS were also weak enough not to make a difference either way. The judgement was very clear that he had ceased to be an independent supplier and become part and parcel of the organisation. Which was a bit of a shame, but his renewed contract did accurately reflect the reality, just not inthe way he thought it did.

As long as you have a genuine schedule of things to be done and can decide how you do them, then all else being equal you should be OK.

**northernladuk** · 5 July 2012, 13:23

WBBS

and another thing that bothers me about long roles that isn't actually discussed in relation to IR35 but surely has to be or will be an issue...

I think you need to be wary of the type of role you are doing as well. If, for example, you take a Service Transition as part of a the clients transition team you do a defined piece of work. All well and good. They extend you and give you another one, hmm ok and 2 years down the line you have have done 4 or 5 transitions along side the perm team. To me that is an enduring role and you become a company resource which should be a huge red flag. It isn't covered by any of the questions or IR35 tests per se but surely if it can be proved you are in an enduring role for which permies have left and been recruited in the time you have been there I cannot see how you can be anything but a hidden permie. Working in completely different areas of the same client would be the only way to stay safe.

I would guess the same could be said for PM's developers and so on. Once you are naturally chosen for the next piece of work because you are a bum on a seat you are in trouble regardless if your contract dictates the deliverables for the next stage.

**SarahL2012** · 6 July 2012, 08:58

Originally posted by northernladuk View Post

WBBS

and another thing that bothers me about long roles that isn't actually discussed in relation to IR35 but surely has to be or will be an issue...

I think you need to be wary of the type of role you are doing as well. If, for example, you take a Service Transition as part of a the clients transition team you do a defined piece of work. All well and good. They extend you and give you another one, hmm ok and 2 years down the line you have have done 4 or 5 transitions along side the perm team. To me that is an enduring role and you become a company resource which should be a huge red flag. It isn't covered by any of the questions or IR35 tests per se but surely if it can be proved you are in an enduring role for which permies have left and been recruited in the time you have been there I cannot see how you can be anything but a hidden permie. Working in completely different areas of the same client would be the only way to stay safe.

I would guess the same could be said for PM's developers and so on. Once you are naturally chosen for the next piece of work because you are a bum on a seat you are in trouble regardless if your contract dictates the deliverables for the next stage.

I agree - I think the longer you are there the more likely you are to become 'part & parcel' of the client's organisation. And longer contracts also give HMRC more £ to go after if you are investigated.

**BlasterBates** · 6 July 2012, 09:19

There's a similar rule in Germany and my accountant said the rule of thumb was about 2 years, after that there would be a big question mark about why you're not then a permie.

**BolshieBastard** · 6 July 2012, 09:32

Have a look at HMRC's big IR35 wins and its clear staying at a client for years on end is a big factor in being determined as a 'disguised employee.' (I know one contractor who has been at the same client for over 13 years!) True, this is generally contractors who have stayed with one client for many renewals and the original deliverable has long gone but the risk is there imo.

For shorter stays say 2 or 3 years, I am now very wary of staying in one place more than 2 years since the deliverables are rarely defined at the outset as taking that long.

Other factors of course come into play and HMRC are devious bastards.

IR 35 and contract duration