General Advice On IR35

[themistry]

Hi guys,

I've been reading the articles on the main site and searching the forums for posts and have a few questions.

I understand that basically, if I form a Ltd company to act as an intermediary, practically any contract I get will fall under IR35, which I assume is the same for everyone here.

So, how is it the main recommendation is still to continue taking a small/average wage and the rest as dividends? I thought IR35 was meant to stop this practice? Is it simply a case of do it till you are caught, or more likely am I missing something a little more fine grained?

Thanks for any advice and/or links to relevant info

TM

[Nixon Williams]

I understand that basically, if I form a Ltd company to act as an intermediary, practically any contract I get will fall under IR35, which I assume is the same for everyone here.

Not true - each contract and the way that you work and interact with the client is what matters.

[Cowboy Bob]

I understand that basically, if I form a Ltd company to act as an intermediary, practically any contract I get will fall under IR35, which I assume is the same for everyone here.

That is not correct. There are 2 main pointers towards IR35 status and if at least one of them is in place then you are likely to win any investigation:-

1) Mutuality of Obligation - If there is no work for you do you go home and not get paid, or do you turn up and get paid anyway?
2) Direction and Control - Does the client tell you precisely what to do, or do they give you a set of requirements and let you get on with it?

If you answer yes to the former points in the above two questions, you are not inside IR35.

[boredsenseless]

That is not correct. There are 2 main pointers towards IR35 status and if at least one of them is in place then you are likely to win any investigation:-

1) Mutuality of Obligation - If there is no work for you do you go home and not get paid, or do you turn up and get paid anyway?
2) Direction and Control - Does the client tell you precisely what to do, or do they give you a set of requirements and let you get on with it?

If you answer yes to the former points in the above two questions, you are not inside IR35.

Not strictly true but it is a very good indicator the actual test for IR35 is so undefined even HMRC do not understand it.

[Sockpuppet]

That is not correct. There are 2 main pointers towards IR35 status and if at least one of them is in place then you are likely to win any investigation:-

1) Mutuality of Obligation - If there is no work for you do you go home and not get paid, or do you turn up and get paid anyway?
2) Direction and Control - Does the client tell you precisely what to do, or do they give you a set of requirements and let you get on with it?

If you answer yes to the former points in the above two questions, you are not inside IR35.

Surely thats yes to the former in point one and yes to the latter in point two

[themistry]

Thanks for all the responses guys.

So, with a better understanding of how to test when you fall inside or outside of IR35, who is it that actually deems if you are inside or outside IR35?

Does the contractor decide this themselves and act accordingly (i.e. low salary high dividends)? Does everyone just act like they fall inside IR35 until they are caught not to be?

Any help appreciated.

Kind regards
TM

[Cowboy Bob]

Surely thats yes to the former in point one and yes to the latter in point two

Oops, yes, I see you spotted the deliberate mistake

[Cowboy Bob]

Does the contractor decide this themselves and act accordingly (i.e. low salary high dividends)? Does everyone just act like they fall inside IR35 until they are caught not to be?

Personally, I make sure that my contract and working conditions are outside of the IR35 regulations, and then act accordingly.

I get my contracts reviewed by a set of specialist contract lawyers (Bauer & Cottrell - excellent BTW). As for working conditions, well I'd just turn it down if it was obvious that the conditions were not IR35 compatible - it's usually easy to tell if you ask the right questions in the "have you got any questions?" phase of the interview. Any kind of dress code for contractors sends up a big red flag with me for example.

[Mervalous]

Personally, I make sure that my contract and working conditions are outside of the IR35 regulations, and then act accordingly.

I get my contracts reviewed by a set of specialist contract lawyers (Bauer & Cottrell - excellent BTW). As for working conditions, well I'd just turn it down if it was obvious that the conditions were not IR35 compatible - it's usually easy to tell if you ask the right questions in the "have you got any questions?" phase of the interview. Any kind of dress code for contractors sends up a big red flag with me for example.

So you would not expect a dress code? I thought that would be expected for a lot of contracting jobs, like big lawyers etc etc (not being a lawyer but at the firm).
And ask what questions? Im new and not starting contracting till Jan/Feb so need to get as much info as poss

[malvolio]

It's been answered, very recently. Go search for MOO, D&C and RoS and you should find my turgid prose.

Dress code, BTW is a no-no. If you haven't got the wit to turn up dressed appropriately (which by default is slightly better than the client's permie staff) then you're in the wrong job. Wear the whistle on day one and work from there.