Employee

[marcoaltieri]

Hi,

I'm from Italy and for 6 months I worked for a UK company as a contractor (IT Consultant). At the end of the 6 months contract, the same company offered me a permanent position, I accepted the offer and now I'm an employee.

The accountancy company that helped me to set up the limited company and now is supposed to help me with all the other legal duties asked me to pay taxes as I worked always as an employee.

This is what they have written to me in the last email:

"The main issue is that whilst you worked from home for the majority of the assignment, you are unable to demonstrate that you were not being treated like an employee as you have now accepted a permanent position with the client. The fact that you will be advising the client on a different product as an employee is not a sufficient difference, as the nature of the role will be the same as when you were a contractor.

As a contractor you should be able to clearly demonstrate that you are not working in the capacity of an employee, as if you are doing the same or similar role to an employee HMRC would state that you should pay tax like an employee.

If you can provide further evidence which contradicts the above then we will happily review it for you. However, please note, that we are unable to change the outcome of your IR35 review merely on your instruction without further information to support your working practices. Brookson has always supported compliant working and wish to continue to do so.

Please let me know your thoughts or if you have any questions."


Is it true that, just because I have been hired by the same company, I cannot demonstrate that I wasn't working as an employee ?
What further evidence should I provide ?
As I already told them:
It's difficult to understand why HMRC would argue that I have been treated like an employee even if:
1) I had no benefits
2) I used my laptop, printers, mobile phone, etc...
3) I had to pay for expenses like travel tickets
4) the contract could be closed (and indeed it was) just because one project finished
5) I had visibility only on a few projects and I didn't know most of the employees of company.

I'm paying this consultancy company 150 pounds per month and I think that it's not doing its job. For example they tried to persuade me that it wasn't necessary to ask for VAT because my expected annual turnover was 70-75k. It was a very wrong advice: with the flat VAT now I can receive 20% and pay only 13,5% (this "advice" would had cost more than 5000 pounds!)

Thank you
Marco

[VectraMan]

Welcome to IR35. "Sufficient difference" is the key phrase. It's going to be hard to argue that your working practices were significantly different from that of an employee if you subsequently joined the company as an employee working in more or less the same way. Just like if you'd left employment to return as a contractor the next day.

[northernladuk]

Firstly you need to read up on IR35. The aspects you picked in your list are pointers but not the important ones. You need to check you contract for client control, mutality of obligation, substitution.
They are much more important as they deal with how you are dealt with by the client. You can still being your own laptop in but still be under client control so your working practice is much more of a pointer. To be fair any contract that goes to permie or comes from permie to contract with the same client looks suss as the client will still treat you the same. There are links to the right hand side and there have been many posts in the past for IR35 so have a dig about and see if you contract matches the requirements mentioned above.

[Greg@CapitalCity]

Cookie cutter

Its a cookie cutter response. If you want to know your IR35 status, don't ask an accountant - they won't know - its a matter of employment law, not tax! Get a specialist involved - a few we deal with are;
(1) Egos.co.uk
(2) Bauer and Cottrell;
(3) Qdos Consulting

Good luck!

[Pacciae]

Tryout Qdos as they do the best deal on the market for checking contracts or Accountax Accountax - IR35, TAX, NIC and Employment Status Consultants these guys are the ones who are winning the IR35 cases in court at the moment.

[Old Greg]

To get philosophical about this, this is 'backward causation': Retrocausality - Wikipedia, the free encyclopedia

They are saying that your acceptance in the present of a job effects the past, meaning that in the past you were an employee. It is a nonsense, and is the flaw in movies like Terminator - time travel to the past to change something that means that you were never born so could have never travelled to the past...

Anyway, I digress. Ask your accountant whether they are unable to review a contract while it is still current, because they cannot accurately predict whether that person will take an employed position at the end of the contract, thereby making them a disguised employee in what will then be the past. Whoops, digressed again.

So, join PCG for their legal representation cover and cross your fingers like the rest of us.

In bocca al lupo!

OG

[LisaContractorUmbrella]

Was your contract not reviewed by the accountancy firm when then assignment began? If so what was their verdict? If not then how did they advise you to structure your company? Were you advised to draw a salary and dividends or just a PAYE salary? A contractor accountancy firm should have advised you of all of this.

Also, is the job you're doing now as a permanent employee the same as you were doing as a contractor? Did your original contract have a right of substitution, did you set your own schedule, were there any potential financial risks for you, were you paid on a project by project basis rather than a daily or hourly rate? There are lots of questions to be answered here - to just decide that your contract was inside IR35 based upon the fact that you were subsequently taken on as a permanent employee is not correct.

[Wanderer]

The accountancy company that helped me to set up the limited company and now is supposed to help me with all the other legal duties asked me to pay taxes as I worked always as an employee.

Did they initially review your contract and find it outside IR35? If so then they can shut up and do your accounts the way you told them to do them (small salary and dividends outside IR35).

If you still have money retained in the company tell them to apply for ESC-C16 for you so you can take it as a capital gain and pay even less tax on it.

For example they tried to persuade me that it wasn't necessary to ask for VAT because my expected annual turnover was 70-75k. It was a very wrong advice: with the flat VAT now I can receive 20% and pay only 13,5% (this "advice" would had cost more than 5000 pounds!)

I agree that they appear to have advised you poorly. There is virtually nothing for you to do to get registering for VAT and the FRS would have been money for nothing for you unless you paid out a lot of money (~13% of turnover or more) in VATed expenses. Of course it makes more work for the accountant so maybe that's why they couldn't be bothered.

I would ask for an alternative person to review the accounts and get you the answer that you want. If they flatly refuse to deal with your accounts the way you instruct them then sack them and get a new accountant. They work for you, not the other way around.

[NotAllThere]

Brookson have been mentioned on these forums before. They used to be an MSC company. The important point is that if you are the director of the ltd company, it is ultimately your responsibility to decide if a contract was in or out of IR35. Your accountancy company can only advise. They must carry out your instruction (unless it's actually illegal). Tell Brookson that you have read their advice, don't agree, and that you want them to work out the tax liability for you being outside of IR35.

You run your company, not Brookson.

In my view, IR35 depends on the contract. Not whether you become an employee of the client later. Do note, however, that if you have had only one contract, you cannot claim travel and subsistence expenses for a temporary work place.

[krytonsheep]

70-75k. It was a very wrong advice: with the flat VAT now I can receive 20% and pay only 13,5% (this "advice" would had cost more than 5000 pounds!

That's not quite right, you pay 13.5% (includes 1% first year discount) on your gross turnover.
For example:
You earn 70k + 14k for 20% VAT = total of £84k
You have to pay 13.5% of 84k = £11,340
---
Total made being on FRS = 14k - 11340 = £2660.