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Confused - IR35 unfriendly contract..advantage of agency?

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    Confused - IR35 unfriendly contract..advantage of agency?

    Hi all,
    I've just got my first contract, I was introduced to it through a friend so am going direct with the client - no agency. As it is my first contract I agreed on a slightly lower than market rate with the client.

    I was going to go through a composite company to start off with, but they can no longer act for me as the contract falls within IR35 and the client say they will not change the contract to make it IR35 friendly as it is their standard...

    The client's response to me is that other contractors they have avoided IR35 by signing the contract with an agency in between.

    They say that if I decide to do that then I would have to take a hit on the agency's margin as they aren't prepared to raise my rate.

    If the client's contract isn't IR35 friendly, what difference does it make if it is signed with the agency first instead of directly with my Limited comp/ umbrella comp?

    Is the difference in the wording of the contract I will have agreed with the agency?

    If this does works / other people do it then I would consider it as I would probably be better off than being within IR35 (even though I found the contract and secured it myself without the help of an agent!)

    Any opinions would be appreciated! Thanks.

    #2
    Quick answer

    That's cr*p from start to finish. Someone somewhere has no idea what they're talking about. Check out my other answer to the Dutch gentleman in this thread then see how much applies.

    If you can do it wthout an agency, and as a proper supplier (after all, you found the work and agreed the terms) it will be difficult to pin you for IR35, depsite anything the contract says. It's the reality that matters, not the paperwork.

    But hiding under an umbrella/composite would almost certainly wipe out that advantage, so bite the bullet and sort out your own Ltd Co - it's not all that difficult.

    Comment


      #3
      Re: Quick answer

      To be honest, I thing you’re a bit stuck. You believe this work fails IR35. The client contract reflects this and they won’t change it. You could probably get an agency to give you a contract that looks better from an IR35 point of view, but since the real arrangement with the client will not change it would still fail IR35. You’d just be getting a false sense of security.

      P.S. Wether you go direct or through an agency has no influence on your IR35 status.

      Comment


        #4
        Re: Quick answer

        Can't see how you can defend yourself at all with this one against IR35.
        The IR ask the client (and they will), "Is he a disguised employee ?".
        Customer says "Yes."

        End of story.
        Doesn't matter how you shout (or how you arrange the paperwork), the IR will listen to your client ...

        Unfortunately, the customer is king. Always has been, always will be.

        Comment


          #5
          Re: Quick answer

          Thanks for all your replies. It makes things a lot clearer for me!

          Comment


            #6
            Re: Quick answer

            Probably if it seems clear you have the wrong end of the stick. Nothing about IR35 is clear.

            Quite correct the IR will try to depend on anything that makes you seem caught, that means the contract, if it is as bad as you say. However, Malvolio is quite correct that it is strictly the reality that counts and even the IR themselves say that when it suits them. Having an agency in between makes no difference at all, waste of 15%.

            What it really comes down to is the extent to which you are prepared to defend your status. The sensible thing would be to make up your own mind on the reality of the situation, not the contract, to ensure you retain any evidence that backs up your case, eg that you had to supply your own equipment, you did not have same overtime terms as employees etc, and to take out suitable insurance. The shout99 fair35 insurance is only about £150 quid.

            With insurance, and assuming your case is not so totally daft as to incurr penalties (I think this has never happened yet) proceeding on the basis you are not caught has no downside whatever over assuming you are caught and paying up. You may well come out much better off.

            PS Since it is very nearly April it hardly matters whether you are caught or not this year, either way, the tax difference on two weeks earnings is zero to trivial. As far as any real money is concerned you have more than a year to decide what you want to do. There is no obligation to pay tax on deemed salary for the coming year before 19th April 2006.

            Comment


              #7
              Re: Quick answer

              What I meant is that it’s made it clear for me that having an agency, or indeed any other entity doesn’t affect my IR35 status.

              The client saying to me that the other contractors had got round it by doing that had confused me and I wasn’t sure how that had worked for them! Obviously he doesn’t know either!

              Pointers to my situation being an employee - the contract stipulates place of work, who I answer to, hours I work and the rate of pay per day. I will be given free lunch like the rest of the employees.
              Pointers to not being an employee – No guarantee of extension beyond 6 months, no doubt if there are gym facilities I’ll be excluded from using them, exclusion from staff parties, I would possibly have a different pass from the permanent staff, I will be getting professional indemnity insurance, paying for my own training, no disciplinary procedures defined in the contract…

              I definitely agree that IR35 is far from clear!

              Thanks for helping me decide not to get in touch with their agency and thereby saving me the commission! Also the point of not having to pay tax on deemed salary til end of next financial year is helpful.

              Comment

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