Home Based engineer going contracting

[jimmies]

Good Morning,

I've been reading lots about the inside/outside ir35 issues and I'm looking for some pointers

I'm currently an engineer that is based from home (miles from the office) that covers the north of England. It look like the company are going to get us to be contractors.

I will be working across many different sites in the north and will be expected to provide my own car (they will pay mileage), basic tools and complete and pay for training as required by the job to stay up-to-date.

This sounds like to me to be in and out of ir35....but if I'm classed as in, it seems that I will have a large expense with regards the car and training....which would require the company to offer a large daily rate to make it worth my while compared to be a permie.

Also the contract is initially just for 12 months 37 hours a week

any advise would be great

cheers

[stek]

Definitely caught by IR35, no doubt at all,

[malvolio]

Agreed - this scenario is precisely what IR35 is meant to combat.

Look at it this way - you are giving up job security, employement protection law, pension rights, sick pay, holiday pay, training and free equipment, plus the possibility of not being paid for some time after you do the work. Your employer is giving up the liability for you and the cost of Employers NICs (13.8% of your gross salary that you will now have to pay) and gaining the right to let you go with no notice at any time.

So why do you suppose they want you to go contract? IR35, for all its many faults, is primarily retained in order to prevent false incorporation such as this one, either because you want to gain a tax advantage or because the employer wants to save significant overheads.

You will almost certainly fail any test of being in business on your own account so will be caught by IR35 meaning, at best, keeping no more than 65% of your gross.

[LisaContractorUmbrella]

Agree. You should be looking for a substantial uplift in what you are currently paid - if they want you to do it for the same money I'd decline politely and start looking for something else.

[Old Greg]

Have a look at Contractor Calculator - Your Expert Guide to Contracting. For UK Contractors, Freelancers, and Consultants if you haven't already done so to see how much IR35 will cost you.

But before we all say definitely inside IR35 (and I agree it is almost definitely inside), here is what the Business Entity Test says, which describes not your IR35 status, but HMRC's view of your risk level.

Test
Has the current end client engaged you:
 on PAYE employment terms
 within the 12 months which ended on the last 31 March
 with no major changes to your working arrangements?
If you are doing the same work, the answer to this question is Yes.
Working at a different location does not count as a major change.
If you were working for a company that is connected to the current end client,
that counts as working for the current end client. For example, if the two
companies are part of the same group.
Evidence
We will be able to check your employment history on our systems.
Score
Score Minus 15 points if your answer is Yes

I would think that if you have a Right of Substitution and actually send a substitute (20 points), you can pull together enough points elsewhere to get you low risk. However, your new client may forbid use of a subbie (you could always ask now if you can use a subbie to cover holidays) in which case, inside IR35 it is - but only for the first 12 months + any part year up to 31 March, if I read it correctly.

[Andrew@Wisteria]

If you are inside IR35, suggest negotiating for a rise as indicated above, similar to the NIC savings the company will be making, also may want to register for VAT on the flat rate scheme to increase your income.

Finally you would still be better off usually (as Ltd co) then as an employee as you can claim travel expenses, pension, 5% allowance etc. vs. profits.

Andrew

[Old Greg]

A final thought...

Given that you are paying for your own training and may have one or two other pointers, get QDOS to review your contract and see if they will provide IR35 insurance.

[jimmies]

cheers for the advice

I figured I would fall into ir35.....but it also seems silly that I cannot claim relief on the training element. Is there any issues with my current employer paying for my training when I'm a contractor? As they will be able to be tax efficient with the cost.....I could them negotiate a lower daily rate

[Old Greg]

cheers for the advice

I figured I would fall into ir35.....but it also seems silly that I cannot claim relief on the training element. Is there any issues with my current employer paying for my training when I'm a contractor? As they will be able to be tax efficient with the cost.....I could them negotiate a lower daily rate

Or instead of taking advice from people here, talk to QDOS.

[Bacchus]

I could them negotiate a lower daily rate

... I think we also need to talk about contract negotiation!