Hiring contractors and avoiding HMRC investigations

**northernladuk** · 26 July 2018, 08:03

Originally posted by Jerrymouse1968 View Post

Im completely baffled by this whole area. I completely understand MOO, control and supervision and all the rules around being a genuine freelancer.

You'll be the first then. I don't think anyone really does.

I think you are being far too cautious here and not fully understanding everything as you state. You are hiring expert resource that isn't available at the client to deliver a clearly defined piece of work. With the right contract (QDOS and IPSE have templates) I can't see why HMRC would have a problem with this if you do it properly. It's what possibly every IT department in the country does so why do you think you can't. I don't think the problem is HMRC in this case.

Why do you think you will get fined for using contractors?

**NotAllThere** · 26 July 2018, 08:04

Are you working in the private or public sector?

But your understanding is woefully inadequate. If you take on a contracteer who is paid through an umbrella company, IR35 simply does not apply. If you are private sector and take on a contractor who has a ltd. co., IR35 isn't (currently) your problem.

**TheCyclingProgrammer** · 26 July 2018, 08:29

Have you considered hiring contractors/freelancers and then just treating them like a supplier in a B2B relationship instead of an employee?

**malvolio** · 26 July 2018, 09:11

Originally posted by TheCyclingProgrammer View Post

Have you considered hiring contractors/freelancers and then just treating them like a supplier in a B2B relationship instead of an employee?

Yes, this is the correct solution and its how I get the work I do these days.

Do basic due diligence on your potential supplier's history and experience, of course. Then give your temporary resources a clear statement of what you want them to deliver in the form of a specific purchase order with equally clear payment Ts&Cs and saying nothing at all about who is to deliver the work other than the resource's Limited Company. Do that and you (and they) can safely ignore IR35. And a lot of contractors will bite your hand off to get a deal like that.

And, as you have discovered, don't ask agencies for advice. They are not in the business of resource management. Most of them don't understand their own business, much less yours, and the people that do won't talk to you, leaving all that to the ex-sporting goods salesmen on the front desk.

**mudskipper** · 26 July 2018, 09:54

I agree - hire freelancers and treat them like freelancers rather than employees.

It's a win/win.

See IPSE's guide for advice on making it work

https://www.ipse.co.uk/resource/flex...economy--.html

**m0n1k3r** · 27 July 2018, 21:03

Originally posted by Jerrymouse1968 View Post

Im completely baffled by this whole area. I completely understand MOO, control and supervision and all the rules around being a genuine freelancer.

Because we do not engage with workers in this way and because I do not want to risk any HMRC fines I am only hiring PAYE developers but these are like unicorns it appears.

The UK is quite unusual among European countries in that the customer (e.g. you) rarely ever gets fined in the case of disguised employment. Almost the entire burden is on the suppliers (e.g. the freelancers).

One thing to bear in mind though is that the term "worker" actually has a specific meaning - temporary staff under PAYE or through a temporary work agency. They are people under the command & control of you, so they are not independent freelancers.

In countries such as Germany, the penalties are stiff and applies to both the customer and the supplier. For that reason, German contract sites such as gulp.de (it's not available in English) makes a very clear distinction between "jobs" ('worker' - temporary PAYE staff) and "projects" (freelancers, who receive contracts with defined deliverables, specific services etc).

The term 'contractor' can unfortunately mean both.

When the agencies keep pushing me on my reasons for dismissing sole traders, people with limited companies and umbrella companies, I explain anyone looking at the IR35 regulations or HMRC online test would clearly see we are not treating people like freelancers.

Are you sure? If you hire junior developers, then your managers might have to tell them how to program and how to do their jobs. If you engage with more senior developers, then you most likely hire them because of their experience, knowledge and insight into a specific field, and few people or nobody within your organisation is able to tell them precisely how to do their jobs. They qualify as freelancers, regardless of whether they work in teams with other freelancers or permanent staff or alone.

So am I the only person in the UK having this issue? Am I missing something ? I spoke to one agency and the legal team who actually said "oh dont worry we get around the HMRC by having wording in contract and just warning clients and contractors about this area !!!!!!!) Another young recruiter said he had to ask his boss what PAYE was

Can anyone shed light on this area as feel I am going nuts, meantime the IT directors are so mad at me as I cant find them staff !!

Where can I find regular

You won't be able to for the simple facts that (a) agencies tend to favour either long-term permanent roles or short-term contract roles for those with limited companies, and (b) the tax code in the UK still makes it easier to draw a high income with minimum taxes for those with limited companies, although that is gradually being eroded away, causing more and more developers to consider working under PAYE.

The remedy is to forget about the agencies and their bias, and instead post job adverts where it makes sense, and to consider perhaps adding an item or two about deliverables and accountabilities to the contracts you provide.

**Jerrymouse1968** · 30 July 2018, 10:15

Thanks

Thanks all

Yes agree, hiring people and having a clear agreement of how they should work with us is the solution but my issue is the hiring managers will continue to treat them as part of the team.

The are not specialists, they are developers who sit alongside our employee developers and work as part of agile methodology so each person chooses what they will work on that day and their work is heavily supervised.

They are given work each day, not a brief with a dedline so again, we control the work and how and when its done

We cannot allow them have other clients or take holidays during a sprint, this is a business need so goes against the freewill issue. We would rarely allow them substitute and its takes around 6 weeks to get up to speed with our platforms and network so pointless.

Ignore me using the term IR35, I know its only public sector etc I am just referring to the overall online HMRC questions they ask and the general premise around freelancers.

thanks for advice

**malvolio** · 30 July 2018, 10:39

Originally posted by Jerrymouse1968 View Post

Thanks all

Yes agree, hiring people and having a clear agreement of how they should work with us is the solution but my issue is the hiring managers will continue to treat them as part of the team.

The are not specialists, they are developers who sit alongside our employee developers and work as part of agile methodology so each person chooses what they will work on that day and their work is heavily supervised.

They are given work each day, not a brief with a dedline so again, we control the work and how and when its done

We cannot allow them have other clients or take holidays during a sprint, this is a business need so goes against the freewill issue. We would rarely allow them substitute and its takes around 6 weeks to get up to speed with our platforms and network so pointless.

Ignore me using the term IR35, I know its only public sector etc I am just referring to the overall online HMRC questions they ask and the general premise around freelancers.

thanks for advice

Advice which you are not taking...

Your temporary workers are firmly and inescapably caught by IR35. If you are not giving them appropriate contracts and ensuring they are either through an umbrella or, if through their Ltd Co, paying in accordance with IR35's provisions then you may get a call from HMRC. You may anyway, since HMRC are looking closely at the whole marketplace. IF that scares you, don't use temporary staff.

Or. of course, you take them on under FTC conditions which avoids all such problems, other than finding people to hire.

You can of course take on temporary staff with a clear statement of work that will put them outside IR35 and still delivers what you need. But first you will have to look at your business model, your approach to using contractors and what it is you are trying to achieve.

**Jerrymouse1968** · 30 July 2018, 11:08

Originally posted by malvolio View Post

Advice which you are not taking...

er I called HMRC and that is the advice they gave so not sure why you phrase your response in this way

I can lie and pretend they are freelancers and hope HMRC dont check up on us (given we are a global well know media company, it wont be long) but we would rather act in accordance with HMRC guidelines. Whats wrong with that?

Hiring contractors and avoiding HMRC investigations