How does IR35 really work for IT contractors in financial companies?

[anddrew]

Hello,

I work as a permanent software engineer in a bank in London City.
There are many contractors who work in our department and who do similar work as me. And I know there are lots of IT contractors working in London banks, hedge funds and trading companies.

I am wondering how they all make themselves IR35 compliant?

They all work in the place of the employer, on the equipment of the employer, their contracts are on certain period (and not on the work to be done) and they cannot be replaced by another person. They also normally extend their contracts for one-two years. So it seems all of these contractors look much more like employed rather than self employed.

So how is it going - are IT contractors actually not using the advantage of IR35 or they all endanger themselves to be investigated and fined?

I am asking because I am planning to become a contractor and if not using the IR35 advantage then it seems not worth it.

[jmo21]

- some may use an umbrella company, therefore ir35 does not apply
- some may use a ltd and simply declare inside ir35 (I've only met one guy who does this)
- others will use a ltd, and they are in scope for ir35

For those last guys, it's all about your working practices, and to a lesser extent, the actual contract.

Some have different levels of insurance to cover them in the event of being caught, some will worry about getting caught, others will be more cavalier about it.

Did I miss anything?

[northernladuk]

Have you read the guides first or is this another spoon feeding thread?

[anddrew]

- some may use an umbrella company, therefore ir35 does not apply
- some may use a ltd and simply declare inside ir35 (I've only met one guy who does this)
- others will use a ltd, and they are in scope for ir35

For those last guys, it's all about your working practices, and to a lesser extent, the actual contract.

Some have different levels of insurance to cover them in the ent of being caught, some will worry about getting caught, others will be more cavalier about it.

Did I miss anything?

Hi, thanks for your response.
Well, still I don't exactly understand the situation.
If inside IR35 or in Umbrella there is no any advantage of being contractor. Same money. What is all the hassle then for? Contractor job is harder to find, much easier to loose.

Seems to me there should be something here. Either the banks/hedge funds prepare contracts to be IR35-compliant and in case of investigation take the side of their contractors or these investigations are so rear that in practice they will never catch you.

Otherwise I don't understand incentives of people to contract in financial IT.

[Yehudi]

Hi, thanks for your response.
Well, still I don't exactly understand the situation.
If inside IR35 or in Umbrella there is no any advantage of being contractor. Same money. What is all the hassle then for? Contractor job is harder to find, much easier to loose.

Seems to me there should be something here. Either the banks/hedge funds prepare contracts to be IR35-compliant and in case of investigation take the side of their contractors or these investigations are so rear that in practice they will never catch you.

Otherwise I don't understand incentives of people to contract in financial IT.

What is your basis for the statements in red? I don't think I know of any permie who does my job and gets the same money as me. And I have seen employees fired while contractors are kept - it all depends on the situation.

[jmo21]

Hi, thanks for your response.
Well, still I don't exactly understand the situation.
If inside IR35 or in Umbrella there is no any advantage of being contractor. Same money. What is all the hassle then for? Contractor job is harder to find, much easier to loose.

Seems to me there should be something here. Either the banks/hedge funds prepare contracts to be IR35-compliant and in case of investigation take the side of their contractors or these investigations are so rear that in practice they will never catch you.

Otherwise I don't understand incentives of people to contract in financial IT.

Assuming caught (or declaring yourself) within IR35, or using an umbrella, contractors still get paid vastly more per day then a similar permanent member of staff (in most cases).

Also, it's not just about money. Contractors prefer the freedom contracting gives them, varied projects, less politics to worry about amongst other things.

The tax advantages are also clear if outside IR35 using a ltd.

[northernladuk]

Hi, thanks for your response.
Well, still I don't exactly understand the situation.
If inside IR35 or in Umbrella there is no any advantage of being contractor. Same money. What is all the hassle then for? Contractor job is harder to find, much easier to loose.

Seems to me there should be something here. Either the banks/hedge funds prepare contracts to be IR35-compliant and in case of investigation take the side of their contractors or these investigations are so rear that in practice they will never catch you.

Otherwise I don't understand incentives of people to contract in financial IT.

You are still not reading the guides. How can you begin to understand the difference when you don't understand the basics of one of them. The guides will send you to calulators where you can input the values inside/outside/umbrella and permie which will show you the difference. Once you have read some of the guides you will then start to understand the mechanics which will also answer your question.

You have to do a bit of work here.

[The Spartan]

Have you read the guides first or is this another spoon feeding thread?

You are the spoon that feeds them lol

[Support Monkey]

What is your basis for the statements in red? I don't think I know of any permie who does my job and gets the same money as me. And I have seen employees fired while contractors are kept - it all depends on the situation.

Got to agree with that, if i had a pound for everytime someone says to me "contracting is not secure" in actual fact i find it to be the opposite, I have never had to worry about redundancy while contracting

[kmge]

Hello,

I am wondering how they all make themselves IR35 compliant?

They all work in the place of the employer, on the equipment of the employer, their contracts are on certain period (and not on the work to be done) and they cannot be replaced by another person. They also normally extend their contracts for one-two years. So it seems all of these contractors look much more like employed rather than self employed.

I work in a Bank, yes I use their equipment because I have to, it's the rules. My contract ranges with each extension. It depends on the project I'm asked to join (last one four months, this one five). I can substitute if I can find someone with comparable skills, because that's in my contract. There is no one else at the Bank who can do what I do or has the same skill set as me.

It's all about the contract and the relationship you have with your Client. Each contract has been negotiated and the rate agreed once the scope was defined. I have a set deliverable and am at financial risk if I do not deliver. I am not employed by the Bank