From Permanent to Contractor for the same company IR35 From Permanent to Contractor for the same company IR35
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  1. #1

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    Good afternoon,

    I've been a permanent member of a company for 2 years but I am ready to jump to a contract role.

    it has been offered me the opportunity of become a contractor for the same company where I am working now. As I have read in the internet and this forum this is a clear of case where IR35 applies.
    My question is: What effective ways do I have to be outside IR35 when I am working for the same company?.

    This company is quite flexible with the contract and they are quite happy if I modify the most important sections of it.

    My ideas to avoid the IR35 are:

    -Buy the software that I use everyday so the company don't have to provide it.
    -Invoicing at the end of the month by job completed not by hours, describing the activities that I have done on that job.
    -Trying to find other small jobs for other clients.
    -Creating my company webpage, with the intention of getting new small jobs (of course my main client will be my current company)
    -To make clear in the contract that in case that myself cannot complete the work another person can finish it for me...

    Applying these "solutions":
    What are the probabilities to avoid an IR35 investigation?
    In the case HMRC starts an investigation. What is the probability that they fine me?

    Thank you,

  2. #2

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    Quote Originally Posted by duckevlc View Post
    Good afternoon,

    I've been a permanent member of a company for 2 years but I am ready to jump to a contract role.

    it has been offered me the opportunity of become a contractor for the same company where I am working now. As I have read in the internet and this forum this is a clear of case where IR35 applies.
    My question is: What effective ways do I have to be outside IR35 when I am working for the same company?.

    This company is quite flexible with the contract and they are quite happy if I modify the most important sections of it.

    My ideas to avoid the IR35 are:

    -Buy the software that I use everyday so the company don't have to provide it.
    -Invoicing at the end of the month by job completed not by hours, describing the activities that I have done on that job.
    -Trying to find other small jobs for other clients.
    -Creating my company webpage, with the intention of getting new small jobs (of course my main client will be my current company)
    -To make clear in the contract that in case that myself cannot complete the work another person can finish it for me...

    Applying these "solutions":
    What are the probabilities to avoid an IR35 investigation?
    In the case HMRC starts an investigation. What is the probability that they fine me?

    Thank you,
    Clearly a sockie. Sorry.

    If you've read the boards, you will know going from Friday perm to Monday contractor with the same company is a virtual slam dunk for HMRC. Also, if your former permie employer is happy to be 'flexible' with the contract, they lay themselves open for being liable for the tax and NI that should have been deducted from you at source.

    Must try harder.

  3. #3

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    Quote Originally Posted by washed up contractor View Post
    Clearly a sockie. Sorry.

    If you've read the boards, you will know going from Friday perm to Monday contractor with the same company is a virtual slam dunk for HMRC. Also, if your former permie employer is happy to be 'flexible' with the contract, they lay themselves open for being liable for the tax and NI that should have been deducted from you at source.

    Must try harder.
    Yes But I have read that it doesn't mean that you are automatically inside. What are the effective ways to avoid it? If they exist of course...

    Thanks
    Last edited by Contractor UK; 13th May 2018 at 21:09.

  4. #4

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    Almost every sentence in your post points out that you don't understand IR35, so as a first step I would recommend you read more and try to understand it better, before moving to contracting.

    No, working for the same company doesn't automatically put you inside IR35, doing the same job for the same company - does, but that is not what your post suggests. If that is indeed the case, no amount of "fidgeting" will save you in case of an IR35 investigation.

    All of your "strategies" are more or less pointless if the actual working practices put you inside IR35

    The only surefire way to avoid IR35 investigation is to stay perm or treat all of your contracts as inside IR35.

  5. #5

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    That all sounds fine, go for it

  6. #6

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    Quote Originally Posted by sal View Post
    Almost every sentence in your post points out that you don't understand IR35, so as a first step I would recommend you read more and try to understand it better, before moving to contracting.

    No, working for the same company doesn't automatically put you inside IR35, doing the same job for the same company - does, but that is not what your post suggests. If that is indeed the case, no amount of "fidgeting" will save you in case of an IR35 investigation.

    All of your "strategies" are more or less pointless if the actual working practices put you inside IR35

    The only surefire way to avoid IR35 investigation is to stay perm or treat all of your contracts as inside IR35.
    So that means that you can never return to the same company and do the same job because you will be caught. Doesn't it matter if you return working for them as a formal company and have other clients and your way of operate is different as the way that you were as a permanent member?

    Thanks,

  7. #7

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    Quote Originally Posted by duckevlc View Post
    So that means that you can never return to the same company and do the same job because you will be caught. Doesn't it matter if you return working for them as a formal company and have other clients and your way of operate is different as the way that you were as a permanent member?

    Thanks,
    You can work for a former company as a contractor. You can even start on the Monday after leaving - but you need to know some things:

    Firstly, this is EXACTLY what IR35 came about to stop. Like, literally, this is what they want people not to do. If you ever wanted to wave an "Investigate me" banner, this is the way to do it.

    Secondly, you've got to have a full grasp of what IR35 means and how to be so far outside it that there's not even the slightest question.

    The problem is, your first post doesn't even come close to that. Your ideas are fluff and minor pointers, with no meat whatsoever. I've done it (albeit not Fri-Mon, but not far off) - but I had the following going for me:

    1. Very specific project deliverables. Get in, do X, get out.
    2. Short term projects, delivered in amongst other stuff.
    3. Complete control over delivery. Turned up, did it, told them what I'd done (basically)
    4. Totally ad-hoc. No overarching contract or agreement.

    I wouldn't do it with anything less and I certainly would do it full time.
    Last edited by vwdan; 11th May 2018 at 15:33.

  8. #8

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    Quote Originally Posted by duckevlc View Post
    Applying these "solutions":
    What are the probabilities to avoid an IR35 investigation?
    In the case HMRC starts an investigation. What is the probability that they fine me?
    1. Most likely you will not be investigated.
    2. If you are investigated, most likely you will lose and the penalties will be high, higher than for most who lose.

    If you want to go back to the same company, you probably need to do one or more of the following:
    1. Completely different role.
    2. Do fixed-price work where you agree a price up front for a job and that's what you are paid no matter how long it takes.
    3. Leave for six months or more and do something else before coming back.

    Note that IR35 is on a per-contract basis and you can have more than one contract with the same client. You could split out some tasks into separate contracts that you give a fixed-price quote. Those would be outside IR35. Everything else would be inside. You pay salary, NI, and pension contributions from the inside IR35 funds, you pay dividends on the proceeds of the fixed price jobs and any other small contracts you get elsewhere.

    How much are they offering you as a contract rate compared to your salary? Needs to be a lot more. They are saving: employer NI, pension contributions, holiday pay, sick pay, maternity/paternity pay, benefits expenses, etc, etc. All that comes out of your company when you are a contractor.

  9. #9

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    Quote Originally Posted by duckevlc View Post
    So that means that you can never return to the same company and do the same job because you will be caught. Doesn't it matter if you return working for them as a formal company and have other clients and your way of operate is different as the way that you were as a permanent member?

    Thanks,
    You can go back as a contractor of course, you only have to pay the appropriate amount of tax - as inside IR35, since this is the exact same scenario IR35 was introduced in the first place - to stop the trend for employers and employees to use ltd. solely to lower their tax bill.

    Since IR35 is per contract basis it doesn't matter how many other clients you have, the contract where you are going to do the same tasks for the same company that you were doing as a permie a week ago is going to be inside IR35 and no amount of contract wording or apparent change of work practices will help you.

    Be honest with yourself - why are you doing this change from perm to contractor for the same role? The answer is most likely for more money, not because you want to start/run your own business.

  10. #10

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    Quote Originally Posted by sal View Post
    You can go back as a contractor of course, you only have to pay the appropriate amount of tax - as inside IR35, since this is the exact same scenario IR35 was introduced in the first place - to stop the trend for employers and employees to use ltd. solely to lower their tax bill.

    Since IR35 is per contract basis it doesn't matter how many other clients you have, the contract where you are going to do the same tasks for the same company that you were doing as a permie a week ago is going to be inside IR35 and no amount of contract wording or apparent change of work practices will help you.

    Be honest with yourself - why are you doing this change from perm to contractor for the same role? The answer is most likely for more money, not because you want to start/run your own business.

    The way I see it you have two options:

    1. Start contracting treat it as outside IR35 but know that if you *are* inside IR35
    2. Start contracting and treat it as inside IR35 pay the appropriate tax.

    With both options you will still be better off than as perm, with option one you're really taking a risk though.


    I had a *similar* situation back in 2014 Except I was given an option: Redundancy or TUPE over to the company that development was being outsourced to.. Instead I decided to start contracting for one of my employers Joint ventures, a different legal entity - a separate company in its own right. I wouldn't risk going back to the same company doing an even slightly similar job without considering it to be inside IR35.

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