Does an IR35 contract 'red flag' my company?

[matty]

Hi all. This is a follow up to my post about current permco offering my a short contract while they're still finding a replacement. It's still not my preference and I may still manage to get out of it without burning bridges. But if I do end up doing it, I will of course assume it is IR35 and therefore pay tax etc on that basis (I am going to go ltd straight away as that is how I intend to continue after this short oddity).

However, I've been talking to a few people already contracting and they seem to believe I could be risking automatically 'red flagging' my company in some way to taxman. eg: even if I then move on to perfectly legitimate outside-35 contracts I run the risk of being under more scrutiny because of that first one.

Is this a reasonable bit of advice, or a load of rubbish?

[SueEllen]

The truth is no one knows.

The best thing you can do for yourself is ensure that every single one of your contracts from now on is properly reviewed to make sure all the clauses make sense and also make it clear that the contract is a B2B one, that way IR35 clearly won't apply on a contract level.

On a working practices level you need to use your common sense. So make sure you understand about Health and Safety, Security, Equality and Discrimination as following client procedures for these doesn't put you inside IR35. However make sure the paperwork you sign doesn't state that you are an employee. Also when in doubt for example over travel policies ask yourself do other contractors/service providers get offered these. If they don't then you refuse them.

In addition sign up for IPSE+ membership or get insurance from QDOS* before you start your next company year and submit last years accounts.

If you search on here via Google the few posters who admit to having IR35 investigations have found their cases quietly dropped due to having IPSE membership.

*Choose which one will give you the most benefits as neither of them have lost cases.

[matty]

I haven't finished perm yet and haven't even set up the ltd co. So what I'm grappling with is whether I should just not accept the contract with current permco (nothing agreed yet) due to the risk, or whether it's fairly 'safe' to go ahead with it as long as I pay the right tax etc for this one? I'm starting to feel like I would be a lot safer to decline their offer and avoid the risk of someone looking at it as 'well you started your so called business this way, so we'll assume your further contracts are likely to be suspect'...?

[northernladuk]

IMO drop the perm Co gig, cut ties and start properly. Don't 'play' contractors from the start.

[matty]

Yeah thought you'd say that NLUK lol! Same answer I got from everyone I know who's already contracting! So... decision made, I'm dropping permco as per notice I've already given them.

Agree I need to start as I mean to go on!

[NibblyPig]

IMO drop the perm Co gig, cut ties and start properly. Don't 'play' contractors from the start.

Disagree so much.

It's hard to get started out contracting - you have your big notice period, you have to set up your LTD, your business bank account, sort your finances out, learn how to invoice, read contracts, contract review, etc. etc.

The absolute easiest way is to quit and then offer to come back as a contractor. It's what I did and it helped immensely. When my contract ran out, I was all set to look for another one, I had everything geared up to go, stuff ironed out, and plenty of confidence.

Some recruiters are put off by wannabe contractors, when I first tried to go contracting recruiters would literally hang up on me when they discovered I wasn't a contractor already. They pretty much assumed I was clueless and wasting their time. It was pretty rough.

If you have a contract on your CV then it will help immensely to show you're not wasting anyone's time. Some recruiters ask for your LTD (or other company) details straight up, so if you don't have everything set up they may just bin your CV. I believe my current gig they asked me for LTD name, VAT number, company reg. no, certificates of liability etc. as part of the process of setting up the interview, possibly for that reason but who knows.

[northernladuk]

Agents aren't stupid. A gig at his last employer.. They'll see though that no problems. And he wont be a contractor. He's a disguised employee not gaining any of the skills that would have stopped a recruiter putting the phone down. He'll still be as bigger risk as the next newbie.

[NibblyPig]

Agents aren't stupid. A gig at his last employer.. They'll see though that no problems. And he wont be a contractor. He's a disguised employee not gaining any of the skills that would have stopped a recruiter putting the phone down. He'll still be as bigger risk as the next newbie.

There's a bit of a difference, the agent is looking for someone that is actually serious, rather than someone who has nothing set up and no idea what they're doing and is looking for contracts that will work with their 6 week notice period.

One or two agents asked me about contracting at the same place that I worked at. I said I left to go contracting and they needed me to come back, so I did for a 3 months or so, as a contractor. I worked within IR35 and dutifully paid the required tax and NI. They were happy when I said I had an LTD, accountant, all my insurances, flat rate registration, could start immediately etc. because they instantly knew I was serious and the rest is history.

I don't see the harm, and it's a free gig that sets you up to go. There certainly shouldn't be any IR35 related issues provided you review your future contracts and purchase any necessary insurances. And work that one within IR35 of course.

If you're loaded and are happy to jump into the deep end then fair enough, hopefully the market for OP's skills is good enough that agents won't bin CVs for trivial reasons.

[northernladuk]

There's a bit of a difference, the agent is looking for someone that is actually serious, rather than someone who has nothing set up and no idea what they're doing and is looking for contracts that will work with their 6 week notice period.

Right and someone serious is just altering their pay structure at their perm employer... I don't think so. Going it easy at your previous employer would indicate otherwise if anything.

One or two agents asked me about contracting at the same place that I worked at. I said I left to go contracting and they needed me to come back, so I did for a 3 months or so, as a contractor. I worked within IR35 and dutifully paid the required tax and NI. They were happy when I said I had an LTD, accountant, all my insurances, flat rate registration, could start immediately etc. because they instantly knew I was serious and the rest is history.

Again... Nothing in that story indicates serious. All the stuff you mention can be set up in a few days. The fact they questioned it indicates it's not a good thing.

I don't see the harm, and it's a free gig that sets you up to go. There certainly shouldn't be any IR35 related issues provided you review your future contracts and purchase any necessary insurances. And work that one within IR35 of course.

So leave and get a lot more lucrative one that's outside. That's what someone that is serious would do. Not stay and hang on to mummy's apron tails.

If you're loaded and are happy to jump into the deep end then fair enough, hopefully the market for OP's skills is good enough that agents won't bin CVs for trivial reasons.

Thats what someone serious would do.. You getting me yet?

[SueEllen]

@Nibblypig I get asked if I have my own limited company and I've been contracting for years.

I also randomly get asked about different insurances, bank account and occasionally, where credit checks are required, about my accountant.

Agents just ask you that so if you are selected you can start asap.