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Freelancer... Do I need an IR35 contract review?

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    Freelancer... Do I need an IR35 contract review?

    One of the differences between a freelancer and a contractor to me is working on multiple projects for multiple clients, rather than being tied to a 6/12 month contract.

    I'm switching to a limited company and I currently have a handful of clients who come back to me with work, some have been on and off for 18 months. I have been working for a new client for about a month, which I expect to be similar in that it will be ongoing. And I also have some work for an existing client planned.

    So unlike a contractor I don't sign a contract, my clients sign my contract. So I should be 'outside IR35' surely? But for the sake of £50+vat and peace of mind I'll get my own contract reviewed (which I get from Hello Bonsai).

    #2
    The Intermediaries legislation applies when you're working through an intermediary and the legislative preconditions are met. If you're working through a company (an intermediary) and you meet the preconditions (you almost certainly do, such as owning > 5% of the share capital) then, yes, you need to ascertain whether each contract, separately, is deemed inside or outside. That being said, if your business model is to sell products or services to multiple clients and YourCo is largely dictating the terms under which those products or services are sold, it's quite unlikely that your contracts would be deemed inside. However, this is purely speculation, and it would make sense to have them checked and to ensure that the working practices are inline. Never heard of Hello Bonsai, but there's little point in having a contract template reviewed repeatedly (or at all) if it has already been reviewed. The same would apply to the IPSE contract templates, for example. Working practices are key though.

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      #3
      Originally posted by jamesbrown View Post
      The Intermediaries legislation applies when you're working through an intermediary and the legislative preconditions are met. If you're working through a company (an intermediary) and you meet the preconditions (you almost certainly do, such as owning > 5% of the share capital) then, yes, you need to ascertain whether each contract, separately, is deemed inside or outside. That being said, if your business model is to sell products or services to multiple clients and YourCo is largely dictating the terms under which those products or services are sold, it's quite unlikely that your contracts would be deemed inside. However, this is purely speculation, and it would make sense to have them checked and to ensure that the working practices are inline. Never heard of Hello Bonsai, but there's little point in having a contract template reviewed repeatedly (or at all) if it has already been reviewed. The same would apply to the IPSE contract templates, for example. Working practices are key though.
      Out of interest then James does this mean that if my decorator friend, who currently trades as a sole trader, were to trade through a LTD like a lot of the trades around here, then he should be considering IR35?

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        #4
        Originally posted by gables View Post
        Out of interest then James does this mean that if my decorator friend, who currently trades as a sole trader, were to trade through a LTD like a lot of the trades around here, then he should be considering IR35?
        In the sense that he falls within the scope of the legislation, yes.

        If he's working with end customers (I.e. the general public) his chances of being inside are next to nil - but, if he started to sub contract to a big decorating firm then he'd need to be more cautious.

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          #5
          Originally posted by vwdan View Post
          In the sense that he falls within the scope of the legislation, yes.

          If he's working with end customers (I.e. the general public) his chances of being inside are next to nil - but, if he started to sub contract to a big decorating firm then he'd need to be more cautious.
          Yeah he's mainly with general public so agree next to nil. Given the number of IT contractors who don't know about IR35 (and it's pretty key for us), I just wonder how many of the other trades, who I know deal with larger organisations, who have a LTD even consider IR35. I'm pretty sure he wouldn't.

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            #6
            Originally posted by gables View Post
            Out of interest then James does this mean that if my decorator friend, who currently trades as a sole trader, were to trade through a LTD like a lot of the trades around here, then he should be considering IR35?
            In principle, yes, there's nothing to stop a painter and decorator being a disguised employee of their end client. Some of the HMRC examples use construction workers (CIS applies first though). Practically speaking, their contracts would need to last for more than a few days to be worth pursuing. In other words, it will be practically irrelevant for many of them. BTW, a sole trader can also be a deemed employee for tax purposes, just not under IR35, and the liability for ErNI would rest with the employer in that case.

            Edit to note that CIS would be considered first (by the client), then IR35 if CIS isn't applicable (by the contractor).
            Last edited by jamesbrown; 14 April 2017, 09:06.

            Comment


              #7
              Originally posted by jamesbrown View Post
              In principle, yes, there's nothing to stop a painter and decorator being a disguised employee of their end client. Some of the HMRC examples use construction workers (CIS applies first though). Practically speaking, their contracts would need to last for more than a few days to be worth pursuing. In other words, it will be practically irrelevant for many of them. BTW, a sole trader can also be a deemed employee for tax purposes, just not under IR35, and the liability for ErNI would rest with the employer in that case.

              Edit to note that CIS would be considered first (by the client), then IR35 if CIS isn't applicable (by the contractor).
              Before focussing on the contractor sector, HMRC had a right go at the construction industry, trying to move as many subcontractors to employees using effectively the same tests as with contractors now. Has to be said that they had more success with them and I remember many CIS guys getting converted in one fell swoop. Obviously there were no intermediaries but the principles were the same. From memory anyone who wished to remain a subbie had to be paid by "measure" as opposed hourly. That seemed to satisfy HMRC.

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                #8
                To me, freelancer and contractor are two of the many names that we call ourselves and I see no distinction. I'm not sure that making a distinction helps anyone (Divide and conquer?)

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                  #9
                  Originally posted by fidot View Post
                  To me, freelancer and contractor are two of the many names that we call ourselves and I see no distinction. I'm not sure that making a distinction helps anyone (Divide and conquer?)
                  WHS. The OP didn't give much detail. If you're a "freelancer" in the sense that you work in your own office/home and deliver a whole project for a fixed fee, then you shouldn't have anything to worry about even if it is one client. OTOH if you're a bum on a seat on a client's site charging per hour/day, then having multiple clients doesn't get you out of it necessarily.

                  As for the contract review, I would imagine that as it's a freelancer's contract and not a "contractor's" contract then it probably won't cover the sorts of things the IR35 reviewers are looking for, and that makes a review pretty meaningless if not impossible.
                  Will work inside IR35. Or for food.

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                    #10
                    Originally posted by VectraMan View Post
                    WHS. The OP didn't give much detail. If you're a "freelancer" in the sense that you work in your own office/home and deliver a whole project for a fixed fee, then you shouldn't have anything to worry about even if it is one client. OTOH if you're a bum on a seat on a client's site charging per hour/day, then having multiple clients doesn't get you out of it necessarily.

                    As for the contract review, I would imagine that as it's a freelancer's contract and not a "contractor's" contract then it probably won't cover the sorts of things the IR35 reviewers are looking for, and that makes a review pretty meaningless if not impossible.
                    Yep, to clarify I am working from home and charging per hour. My thoughts exactly, I think it's my accountants trying to get some commission from a contract review.

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