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Risk

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    Risk

    It seems ( to me anyway ) that the main defence against IR35 is the aspect of risk. i.e. how much risk you as a business are undertaking in the endeavour.

    Given this, is it not time for contractors to pay up-front "finders fees" to agents so we can sever our relationship with them earlier. We could charge the rate which the agent would get so we wouldn't neccesarily(sp) be out of pocket but we'd be taking on a big chunk of risk...

    Obviously it would be better to not have to deal with agents at all but you'll run into them sooner or later

    Thoughts?

    #2
    Not wishing to sidetrack, but why should low risk be an IR35 pointer?It is a responsibility of a director to reduce risk to the company.
    There are any number of manufacturers out there who have sole supplier status with retailers, just as there are lots of tradesmen who are on retainers etc.
    I am not qualified to give the above advice!

    The original point and click interface by
    Smith and Wesson.

    Step back, have a think and adjust my own own attitude from time to time

    Comment


      #3
      Originally posted by The Lone Gunman
      Not wishing to sidetrack, but why should low risk be an IR35 pointer?It is a responsibility of a director to reduce risk to the company.
      There are any number of manufacturers out there who have sole supplier status with retailers, just as there are lots of tradesmen who are on retainers etc.
      Risk i don't think is the issue, guaranteed payments are. i.e. having a low risk i.e. pay up front for 20 days work to be called down at agreed times is okay, actually it may be a nightmare from a resource point of view, but there is no risk to payment (you may of course have to refund some of the 20 days if they aren't all used).

      The issue come with guarantees i.e. I'll pay you £400 a day, you just turn up, and if we have nothing for you you can still be paid. Thats when you start the IR35 pointers twitching, but even that isn't enough if other factors are favourable.

      Comment


        #4
        Originally posted by The Lone Gunman
        Not wishing to sidetrack, but why should low risk be an IR35 pointer?It is a responsibility of a director to reduce risk to the company.
        There are any number of manufacturers out there who have sole supplier status with retailers, just as there are lots of tradesmen who are on retainers etc.

        Because small businesses generally have to spend money to make money. If you're effectively an 'employee' the amount of money you speculate to get yourself the next role/job is fairly small - limited to expenditure on phone calls, a bit of travelling etc. You may not have an income while this is going on, but you don't have to take out a bank loan to buy stock or pay for a publicity campaign for example. How likely is the average contractor to go under due to cash flow problems?
        It's my opinion and I'm entitled to it. www.areyoupopular.mobi

        Comment


          #5
          Originally posted by boredsenseless
          Risk i don't think is the issue, guaranteed payments are. i.e. having a low risk i.e. pay up front for 20 days work to be called down at agreed times is okay, actually it may be a nightmare from a resource point of view, but there is no risk to payment (you may of course have to refund some of the 20 days if they aren't all used).

          The issue come with guarantees i.e. I'll pay you £400 a day, you just turn up, and if we have nothing for you you can still be paid. Thats when you start the IR35 pointers twitching, but even that isn't enough if other factors are favourable.
          As I asked someone else yesterday: What is the difference between someone selling 1800 widgets at 400 each and me selling 1800 days at 400 each?

          IR35 and risk is all about perception and the revenues view point is deliberately set to only look at the employment aspect, even then only the aspects that suit them.
          I am not qualified to give the above advice!

          The original point and click interface by
          Smith and Wesson.

          Step back, have a think and adjust my own own attitude from time to time

          Comment


            #6
            Originally posted by oraclesmith
            Because small businesses generally have to spend money to make money. If you're effectively an 'employee' the amount of money you speculate to get yourself the next role/job is fairly small - limited to expenditure on phone calls, a bit of travelling etc. You may not have an income while this is going on, but you don't have to take out a bank loan to buy stock or pay for a publicity campaign for example. How likely is the average contractor to go under due to cash flow problems?
            Just because my industry sector is cheap to enter and is naturally low risk as far as cash flow is concerned does not make the IR viewpoint right.
            Most contractors who fail do so because of cash flow. Contracts end and they can't find another. No cash flow, bang goes the business.

            There are lots of businesses out there that have garaunteed sales. M&S enter into exclusive deals with their suppliers as do Harrods. They buy all that can be produced. Farmers are tied to spurmarkets.

            IR35 is just wrong.
            I am not qualified to give the above advice!

            The original point and click interface by
            Smith and Wesson.

            Step back, have a think and adjust my own own attitude from time to time

            Comment


              #7
              Originally posted by The Lone Gunman
              As I asked someone else yesterday: What is the difference between someone selling 1800 widgets at 400 each and me selling 1800 days at 400 each?
              They have to buy the widgets first. They also have to put out enough advertising to persuade a customer to buy them from you and not some much bigger contractor who's bought the same make of widgets but a bit cheaper.
              It's my opinion and I'm entitled to it. www.areyoupopular.mobi

              Comment


                #8
                Originally posted by oraclesmith
                They have to buy the widgets first. They also have to put out enough advertising to persuade a customer to buy them from you and not some much bigger contractor who's bought the same make of widgets but a bit cheaper.
                They do not necessarily have to buy the widgets, they could make them to order, nor do they have to invest in materials.
                I know a woman whose business is producing jumpers. she knits to order. She gets the wool once a pattern has been decided.
                Just 1 example from millions. She is effectively doing what I do, she just knows how long the jumper will take to produce.
                As a metaphor, my client does not know how big the jumper is nor what the design is nor how many he wants.
                I am not qualified to give the above advice!

                The original point and click interface by
                Smith and Wesson.

                Step back, have a think and adjust my own own attitude from time to time

                Comment


                  #9
                  Originally posted by The Lone Gunman
                  Most contractors who fail do so because of cash flow. Contracts end and they can't find another. No cash flow, bang goes the business.
                  But it's their personal cash flow - eg. meeting the mortgage etc, not the limited company's. A lot of small businesses are started whilst the director is in full time employment elsewhere. For a typical IT contractor, the limited is necessarily a vehicle for their employment so it's not surprising the HMRC are after us.

                  I'm not saying that IR35 is right, but I think it's wrong not to make an effort to be a real IT services business. There are many contractors out there whos limited's are effectively run by their accountants and who haven't a clue as to how to run a proper company. They come into contracting as a means of higher paid employment and use their limited as a method of being paid more - they have no intention of building it into something bigger.

                  In order to understand the situation with IR35 and HMRC, it's necessary to look at the distinction between permanent employees (and nothing's that permanent nowadays) and contractors performing the same role.
                  It's my opinion and I'm entitled to it. www.areyoupopular.mobi

                  Comment


                    #10
                    Originally posted by oraclesmith
                    ...they have no intention of building it into something bigger.
                    How do you prove this intent ?

                    I'm pretty much in the situation you describe, I've set up a limited company to go contracting to increase my effective pay. I'm not trying to avoid tax but I'd be stupid to not take advantage of legal opportunities to do so.

                    I'd like to think that I could build my ltd company into something more than a vehicle for my PAYE and I'm certainly investigating this but It's difficult to do this and still find time to earn money. Then Gordo come along and wants to clobber me....

                    Comment

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