Contracting/IR35 woes - first time arrangement

[Befuddled88]

So I have secured a great role on an IT project via an agency. I am working in a Consultant capacity and there's several others in my team who have incorporated their companies having completed IR35 checks successfully.

The difficulty with me, is that I went through an agent (whereas the others didn't). My contract with the agent is a 'temporary workers' contract and having just completed an IR35 review, I was informed this would mean I would not be in scope of IR35 and therefore I wouldn't be able to incorporate and be 'outside' IR35. She mentioned this was because my arrangements were to be paid via PAYE (although the agents assured me they allow incorporated companies to invoice them).

I had been assured by the agents that this would not be an issue and they have many others on the same contract that have incorporated companies and were seen as 'outside' IR35. I know for certain my working practices would be seen as falling outside of IR35 having completed a review of these (and I was assured this by the more senior contractors here, which are either of highly experienced IT contractor status, or lawyers).

Do I need to get my contract with the agency amended? Or could a temporary workers contract still allow me to incorporate and be outside IR35? Alternatively, are there any steps I could take?

Stupidly I went ahead and agreed to my accountants having read the original review incorrectly. I read 'outside of IR35' and assumed she meant it in a positive way.

Really appreciate any help - I'm feeling very young and naive with all this!

[Clare@InTouch]

Being outside of IR35 is a good thing, but it only matters if you're trading through a limited company. If not, and you're going through an umbrella or being paid under PAYE by the agency, then it doesn't matter.

I would recommend you go back to the agency and ask if you can simply incorporate a limited company. They should have a totally different contract they provide to people who are Limited.

Your IR35 position will depend on what happens in practice, which is something you'll only really know when you actually start work. With the best will in the world it's not something your colleagues can assure you of in my view, as it's not them doing your role.

[craig1]

If you're being paid via PAYE then you're an employee. End of the subject really. You're not in scope of IR35 because you're an employee and IR35 doesn't relate to employees as it's all about intermediaries.

If you did manage to get your contract changed to contractual terms via your own limited company and try to say you're outside of IR35 then HMRC have a very easy case to show that you were an employee doing some work and now you're trying to evade (sic) tax by moving to a self-employed model. It's about as nailed-down shut a case as they'd ever have, especially given that that was one of the main reasons for bringing in IR35.

Unfortunately, I believe that you're just going to have to treat it as a learning point, either bear with it for the contract duration or leave. Next time, make it clear to agencies that you're contracting via your limited company.

[Clare@InTouch]

If you're being paid via PAYE then you're an employee. End of the subject really. You're not in scope of IR35 because you're an employee and IR35 doesn't relate to employees as it's all about intermediaries.

If you did manage to get your contract changed to contractual terms via your own limited company and try to say you're outside of IR35 then HMRC have a very easy case to show that you were an employee doing some work and now you're trying to evade (sic) tax by moving to a self-employed model. It's about as nailed-down shut a case as they'd ever have, especially given that that was one of the main reasons for bringing in IR35.

Unfortunately, I believe that you're just going to have to treat it as a learning point, either bear with it for the contract duration or leave. Next time, make it clear to agencies that you're contracting via your limited company.

I don't agree with the IR35 status bit - if he was a proper employee who then went limited I would agree, but he got a contract and was put on agency PAYE which is different. I don't see an issue with him moving to a limited company because he's never been employed by the end client. Assuming he can argue outside on the basis of what he actually does of course, and there was no prior relationship before the start of this new role.

[Bellona]

If you're being paid via PAYE then you're an employee. End of the subject really. You're not in scope of IR35 because you're an employee and IR35 doesn't relate to employees as it's all about intermediaries.

Unfortunately, I believe that you're just going to have to treat it as a learning point, either bear with it for the contract duration or leave. Next time, make it clear to agencies that you're contracting via your limited company.

+1.

[Befuddled88]

If you're being paid via PAYE then you're an employee. End of the subject really. You're not in scope of IR35 because you're an employee and IR35 doesn't relate to employees as it's all about intermediaries.

If you did manage to get your contract changed to contractual terms via your own limited company and try to say you're outside of IR35 then HMRC have a very easy case to show that you were an employee doing some work and now you're trying to evade (sic) tax by moving to a self-employed model. It's about as nailed-down shut a case as they'd ever have, especially given that that was one of the main reasons for bringing in IR35.

Unfortunately, I believe that you're just going to have to treat it as a learning point, either bear with it for the contract duration or leave. Next time, make it clear to agencies that you're contracting via your limited company.

I understand what you're saying, but at the same time the agency offered me the opportunity to invoice/be paid via an incorporated company. This was something I was informed the day before joining - that I could be paid via a company and not PAYE. Although this isn't specified in the agreement, they say many others they pay go via this route with no issues.

I have never been paid so far via my agents, nor are my working arrangements of a working employer-employee relationship.

[Befuddled88]

If you're being paid via PAYE then you're an employee. End of the subject really. You're not in scope of IR35 because you're an employee and IR35 doesn't relate to employees as it's all about intermediaries.

If you did manage to get your contract changed to contractual terms via your own limited company and try to say you're outside of IR35 then HMRC have a very easy case to show that you were an employee doing some work and now you're trying to evade (sic) tax by moving to a self-employed model. It's about as nailed-down shut a case as they'd ever have, especially given that that was one of the main reasons for bringing in IR35.

Unfortunately, I believe that you're just going to have to treat it as a learning point, either bear with it for the contract duration or leave. Next time, make it clear to agencies that you're contracting via your limited company.

I have never been paid via the agency yet, nor have I previously engaged with the agency.

The day before I started the contract I spoke with the recruiter and he confirmed that I would be able to be paid via an incorporated company, and that many others they recruit have done so - without needing to amend the agreement.

I am so confused. I feel the recruiters almost told me this to sell the position, as they haven't been particularly forthcoming.

[DirtyDog]

So I have secured a great role on an IT project via an agency. I am working in a Consultant capacity and there's several others in my team who have incorporated their companies having completed IR35 checks successfully.

What checks? Who did them? There is nothing to stop you having a Ltd company, regardless of IR35 status.

The difficulty with me, is that I went through an agent (whereas the others didn't).

Many contractors do. This in itself is not an IR35 pointer.

My contract with the agent is a 'temporary workers' contract and having just completed an IR35 review, I was informed this would mean I would not be in scope of IR35 and therefore I wouldn't be able to incorporate and be 'outside' IR35.

Now I'm confused. You aren't in the scope of IR35, so you can't be outside IR35? Who did the review? On what basis did they decide that the contract and working practices indicate that you would be inside / outside IR35? Sounds like there is some confusion her about what you are doing and where you want to be. Have a read of the first timers guides over on the right hand side.

She mentioned this was because my arrangements were to be paid via PAYE (although the agents assured me they allow incorporated companies to invoice them).

OK - so who is paying you via PAYE? If you are on the agency payroll, then IR35 is an irrelevance. Whether the contract would put you inside or out is a moot point - if you are an employee of someone, then they dictate how you are paid.

I had been assured by the agents that this would not be an issue and they have many others on the same contract that have incorporated companies and were seen as 'outside' IR35.

So find out where the confusion is coming from - if someone is paying you via PAYE then IR35 does not apply.

I know for certain my working practices would be seen as falling outside of IR35 having completed a review of these (and I was assured this by the more senior contractors here, which are either of highly experienced IT contractor status, or lawyers).

As long as they work for HMRC, then you can be certain they are right. If they don't, then all they are offering is an opinion. Some contractors I know who have been contracting for quite some time have absolutely no knowledge of IR35, and the concept of having a contract reviewed is alien to many.

Do I need to get my contract with the agency amended? Or could a temporary workers contract still allow me to incorporate and be outside IR35? Alternatively, are there any steps I could take?

You need to sort out where this PAYE idea has come from. Is it in the agency contract? If so, then yes, you need to deal with the agency. If the client is paying you PAYE then it's a client issue.

One thing to be very careful of from here is that you might now be in the unfortunate position of gifting HMRC the impression that at some stage, someone in the chain saw you as an employee, so trying to argue that you aren't may now be harder.

Stupidly I went ahead and agreed to my accountants having read the original review incorrectly. I read 'outside of IR35' and assumed she meant it in a positive way.

Not operating via PAYE and being outside of IR35 is a positive thing. Being paid PAYE makes IR35 an irrelevance, rather than being outside.

[craig1]

I don't agree with the IR35 status bit - if he was a proper employee who then went limited I would agree, but he got a contract and was put on agency PAYE which is different. I don't see an issue with him moving to a limited company because he's never been employed by the end client. Assuming he can argue outside on the basis of what he actually does of course, and there was no prior relationship before the start of this new role.

It sounded in the description as if the OP were "employed" via a FTC or zero-hours contract as a temporary worker rather than any other sort of deal. Legally, there's no difference between a FTC, zero-hours or full-time employee, they're all employees. I may be wrong on this, and I would be happy to be proven wrong, but I'm not sure I am.

Also, I thought the only way you could pay PAYE to a non-employee is if you were providing payroll services on behalf of another company... again, this is speaking (typing) from a position of partial knowledge.

[Clare@InTouch]

It sounded in the description as if the OP were "employed" via a FTC or zero-hours contract as a temporary worker rather than any other sort of deal. Legally, there's no difference between a FTC, zero-hours or full-time employee, they're all employees. I may be wrong on this, and I would be happy to be proven wrong, but I'm not sure I am.

Also, I thought the only way you pay PAYE to a non-employee was if you were providing payroll services on behalf of another company... again, this is speaking (typing) from a position of partial knowledge.

The OP's post is a bit fuzzy to really know I think, I just interpret it in a different way than you so we might both be right!