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DeanMadden
17th May 2012, 07:27
Hi, I'm looking to switch from permanent to contracting in a couple of months.

After reading the latest 'guidance' on IR35, it looks to me that they want to treat most contractors as within IR35. So if we presume I get a contract that is within IR35, what is the best way of working? Is it still best to work as a limited company and pay an accountant or is it better to work under an umbrella company, or any other options?

Thanks,
Dean

cojak
17th May 2012, 08:18
Don't presume anything.

HMRC are just rubbing their hands at newbies attitudes to IR35.*

It all depends on the contract and working conditions.

If you don't want the 'hassle' of IR35 just go through and umbrella. If you want a little more money in your pocket and control over your own finances, use an accountant - just tell them you want to work inside IR35. They'll think you a bit strange but they'll handle it for you.

Any other way of working is probably a bit scammy. Do your research and don't be fooled by the '85%+ take home' flimflam.

(*mind you, it might not be a bad thing for experienced contractors if more money goes into HMRC's coffers and it keeps them off our backs).

DeanMadden
17th May 2012, 08:25
Thanks for the advice. I don't mind the 'hassle' of IR35 and would obviously want to work outside of it. What I'm concerned about is if I work outside of IR35, and then am investigated and deemed to be 'inside IR35', and then have to pay back the extra tax. In this case would it have been better off starting with a different model?

Or do the advantages of a limited company (expenses, vat, etc?) outweigh the potential issues?

Clare@InTouch
17th May 2012, 09:27
Thanks for the advice. I don't mind the 'hassle' of IR35 and would obviously want to work outside of it. What I'm concerned about is if I work outside of IR35, and then am investigated and deemed to be 'inside IR35', and then have to pay back the extra tax. In this case would it have been better off starting with a different model?

Or do the advantages of a limited company (expenses, vat, etc?) outweigh the potential issues?

You could look into IR35 insurance and PCG membership. I believe there are various levels of each that offer various levels of insurance/reassurance.

If you get your contracts reviewed, and take steps to ensure you 'act like a contractor', then you can prove to any HMRC Inspector that you've done all you could to ensure your status was correct. That will offer good evidence to a Court as well as showing due care & attention, thus minimising any penalties.

Keep a diary with notes of what you do, get confirmation letters in place with each client, and just keep IR35 in mind during your contracts. Don't go to staff parties or act like a permie.

If you're still not 100% comfy, then either work inside of IR35, or hedge your bets - take say 50% of your income as salary. That way, if you're found to be inside the extra tax charged won't be as massive as if you'd ignored IR35 entirely.

TheFaQQer
17th May 2012, 14:02
Is it still best to work as a limited company and pay an accountant or is it better to work under an umbrella company, or any other options?

Ltd is better:


You can make a little bit on being on flat rate VAT
You can still expense 5%
You are in control of what happens
There is one less link in the chain to disappear with your money
If you find another role which is outside IR35, then you are already set up and ready to go

DeanMadden
17th May 2012, 14:09
Thanks all. Joining the PCG looks like a good move, and sticking to a limited company with accountant too.

ThomserveBAS
17th May 2012, 20:46
There is a potential I will be in the same situation very shortly, I served notice on my company on Monday with the sole intention of becoming a contractor. They are in a bit of a situation now as they need me on one of the projects as I am the only person with the knowledge, and they can't recruit for that knowledge, as it's all in my head :facepalm:

When asked what they could do to "keep me" I bluntly told them to offer me a contract, but hadn't considered the implications of IR35 on this move.

If they do offer me a contract, I will have to work through an agency as they don't allow directly employed contractors - no idea if this would mean that I am then technically working for another employer, certainly feels like uncertain territory.

TheFaQQer
17th May 2012, 20:51
If they do offer me a contract, I will have to work through an agency as they don't allow directly employed contractors - no idea if this would mean that I am then technically working for another employer, certainly feels like uncertain territory.

No, you're still going to be caught for IR35.

The guy I took over my last permie job for (which isn't too far from where you are based) left, he tried the same thing - and was told pretty sharpish to do one.

You can still go contract, but you'll be IR35 caught in your case, so just make sure you factor that into your daily rate.

cojak
17th May 2012, 20:53
Sorry, but you are deemed a 'Friday/Monday' contractor (as in Friday a permie, Monday a contractor), the very reason why IR35 was put in place.

You will definitely be inside IR35.

ThomserveBAS
17th May 2012, 21:00
So running my rate through the IR35 calculator, if operating as "inside IR35" then it is still a healthy increase over being a permie - so on a personal level, if a contractor is happy to work inside of IR35 - is there anything intrinsically wrong with that? Will working inside of IR35 attract HMRC attention in the future any more than somebody who operates entirely outside of IR35?

TheFaQQer
17th May 2012, 21:04
So running my rate through the IR35 calculator, if operating as "inside IR35" then it is still a healthy increase over being a permie - so on a personal level, if a contractor is happy to work inside of IR35 - is there anything intrinsically wrong with that?

No. Just make sure that you cost it correctly, including your expenses, unpaid holiday and sick pay etc. Factor in your taxes correctly or you'll be in trouble.


Will working inside of IR35 attract HMRC attention in the future any more than somebody who operates entirely outside of IR35?

I don't know, but I would expect HMRC to ask what is different between the two contracts which makes you confident that you are outside IR35 on the new role.

ThomserveBAS
17th May 2012, 21:07
Cool - thanks.

Apologies to the O/P for the uber-threadjacking :D

TheFaQQer
17th May 2012, 21:15
Cool - thanks.

Apologies to the O/P for the uber-threadjacking :D

It's a CUK tradition. Someone will be along to ask you if you know how to bleed the radiators, or like gladiator movies.

Someone else will no doubt ask how Burnley can afford to have more than one contractor.....

ThomserveBAS
17th May 2012, 21:35
Someone else will no doubt ask how Burnley can afford to have more than one contractor.....

There's worse things to be said about Burnley in all fairness :laugh

Wanderer
18th May 2012, 07:18
They are in a bit of a situation now as they need me on one of the projects as I am the only person with the knowledge, and they can't recruit for that knowledge, as it's all in my head :facepalm:

Why don't you just ask for a big payrise and stay on as a permie. Wouldn't be a bad thing with today's contracting market being so tight.

If you want to go contracting then you've got to make a clean break of it. This Friday permie, Monday contractor gives us all a bad image.

Contreras
18th May 2012, 09:41
Sorry, but you are deemed a 'Friday/Monday' contractor (as in Friday a permie, Monday a contractor), the very reason why IR35 was put in place.

You will definitely be inside IR35.

Playing devil's advocate I would say that's not necessarily so.

Definitely an IR35 target yes, but it's the working practices that finally determine IR35 status.

Also HMRC are not going to discover the ex-employer relationship until they ask to see the contract(s), which AIUI can only be done once an IR35 enquiry is instigated. With decent legal representation (e.g. PCG+) so that you won't get tripped up dealing with HMRC directly, then I think it has the potential to go either way.

Anyway I think the advice should be to stay as permie (perhaps under new contract terms) unless the OP can negotiate radically different working conditions, such as: WFH, decide your own hours, no "line manager", clearly defined deliverable(s).

northernladuk
18th May 2012, 09:54
Playing devil's advocate I would say that's not necessarily so.

Definitely an IR35 target yes, but it's the working practices that finally determine IR35 status.

Also HMRC are not going to discover the ex-employer relationship until they ask to see the contract(s), which AIUI can only be done once an IR35 enquiry is instigated. With decent legal representation (e.g. PCG+) so that you won't get tripped up dealing with HMRC directly, then I think it has the potential to go either way.

Anyway I think the advice should be to stay as permie (perhaps under new contract terms) unless the OP can negotiate radically different working conditions, such as: WFH, decide your own hours, no "line manager", clearly defined deliverable(s).

I think Cojak hits the nail on the head for many reasons, one of which is never mentioned is the fact that from Friday to Monday you cannot learn how to be a business and understand the true concepts of your contract. Would that person on Monday understand his MOO and be able to supply a sub. His mentality alone should put him inside IR35 but that cannot be judged. No way does that person think and act as if he was a business and agressively defend is out of IR35 status.

Obviously many other factors but I still think she put it perfectly.

TheFaQQer
18th May 2012, 10:03
I think Cojak hits the nail on the head for many reasons, one of which is never mentioned is the fact that from Friday to Monday you cannot learn how to be a business and understand the true concepts of your contract. Would that person on Monday understand his MOO and be able to supply a sub. His mentality alone should put him inside IR35 but that cannot be judged. No way does that person think and act as if he was a business and agressively defend is out of IR35 status.

Obviously many other factors but I still think she put it perfectly.

I concur.

Add in the fact that an employer is unlikely to change how they think of you, and the chances of defending an investigation are nil.

Contreras
18th May 2012, 11:05
I concur.

Add in the fact that an employer is unlikely to change how they think of you, and the chances of defending an investigation are nil.

Well yes I agree actually... it's unfair (and somewhat patronising, imho) to assume that the OP can't grasp the B2B relationship, but from the employer's POV the fact they are insisting on going via an agency says enough.

northernladuk
18th May 2012, 12:50
Well yes I agree actually... it's unfair (and somewhat patronising, imho) to assume that the OP can't grasp the B2B relationship, but from the employer's POV the fact they are insisting on going via an agency says enough.

Enough for what?

LisaContractorUmbrella
18th May 2012, 15:05
Playing devil's advocate I would say that's not necessarily so.

Definitely an IR35 target yes, but it's the working practices that finally determine IR35 status.

Also HMRC are not going to discover the ex-employer relationship until they ask to see the contract(s), which AIUI can only be done once an IR35 enquiry is instigated. With decent legal representation (e.g. PCG+) so that you won't get tripped up dealing with HMRC directly, then I think it has the potential to go either way.

Anyway I think the advice should be to stay as permie (perhaps under new contract terms) unless the OP can negotiate radically different working conditions, such as: WFH, decide your own hours, no "line manager", clearly defined deliverable(s).

Absolutely is necessarily so, I don't care what your relationship is with the devil! There is no way an integrated, permanent member of staff can transform to an outside IR35 contractor between Friday and Monday - you couldn't get a more clear cut example of deemed employment

ThomserveBAS
18th May 2012, 19:55
Oops! Seem to have caused a bit of a stir in here :(

Anyway, after the day I had at work today, all offers are off the table, and I'll be out of there at the first opportunity (which is likely to be very soon).

cojak
18th May 2012, 20:23
Never mind - it happens to us all.

:)

BolshieBastard
25th May 2012, 07:40
Oops! Seem to have caused a bit of a stir in here :(

Anyway, after the day I had at work today, all offers are off the table, and I'll be out of there at the first opportunity (which is likely to be very soon).

C'mon, dish the dirty! :spank: