My ClientCo is a major financial institution that hires a large number of contractors including myself. While there is a lot of concern about IR35, my manager is open to discussing potential proposals to legitimately fall outside of IR35.
Situation today
I currently only come into the office 1 week a month. The rest of the time, I work remotely from wherever I wish - starting & finishing whenever I wish (I work on the basis of getting the job done and am trusted to do so). My contract is time-based - is GBP X per day for 6 months.
That said, I still fear falling inside of IR35 due to lack of substitution & an argument could be made I’m no different from a remote employee.
Proposal
I’m thinking of approaching management to propose 2 or 3 contractors in the team club together to form a new LTD (NewLTD) which would apply to become a Preferred Supplier to ClientCo - essentially a consulting outfit. Our contracts would be worded on a fixed price deliverable basis and NewLTD would hire a FT employee who would need to be security cleared to work at ClientCo too. There would be no additional charge to ClientCo for work done by the FT employee as it would be covered under the new contract with NewLTD but allow us to legitimately exercise substitution. For example: FT resource would come into the office to write up and deliver a report to line manager. This would be an actual report that is normally created by myself and other contractors so would not be a sham document or exercise. If each contractor in NewLTD works from home one a month - they could individually exercise substitution by leveraging the NewLTD FT resource.
The intention would be to very quickly expand NewLTD with other contractors at other Financial services Clients to expand our revenue base and legitimately show HMRC that this is a real consulting business, delivering work to multiple clients using a mix of contractors who are also directors of the company but also FT employees who are actually doing work also under these contracts (not to mention getting trained up as part of the process).
Considerations
- Contract risk. Will need to be selective in who becomes a Director of NewLTD to minimise litigation / commercial risk (eg if director takes on a fixed price contract they are unable to deliver on - happens all the time in consulting world)
- Financial & reporting risk. My accountant has advised segregated bank accounts and individual P&L could be setup for each Director / Client contract but aggregated reporting would be provided to HMRC for NewLTD as a whole.
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What are your thoughts? Would this work? Any other considerations? Has anyone already done something similar with a client?
Sent from my iPhone using Contractor UK Forum
Situation today
I currently only come into the office 1 week a month. The rest of the time, I work remotely from wherever I wish - starting & finishing whenever I wish (I work on the basis of getting the job done and am trusted to do so). My contract is time-based - is GBP X per day for 6 months.
That said, I still fear falling inside of IR35 due to lack of substitution & an argument could be made I’m no different from a remote employee.
Proposal
I’m thinking of approaching management to propose 2 or 3 contractors in the team club together to form a new LTD (NewLTD) which would apply to become a Preferred Supplier to ClientCo - essentially a consulting outfit. Our contracts would be worded on a fixed price deliverable basis and NewLTD would hire a FT employee who would need to be security cleared to work at ClientCo too. There would be no additional charge to ClientCo for work done by the FT employee as it would be covered under the new contract with NewLTD but allow us to legitimately exercise substitution. For example: FT resource would come into the office to write up and deliver a report to line manager. This would be an actual report that is normally created by myself and other contractors so would not be a sham document or exercise. If each contractor in NewLTD works from home one a month - they could individually exercise substitution by leveraging the NewLTD FT resource.
The intention would be to very quickly expand NewLTD with other contractors at other Financial services Clients to expand our revenue base and legitimately show HMRC that this is a real consulting business, delivering work to multiple clients using a mix of contractors who are also directors of the company but also FT employees who are actually doing work also under these contracts (not to mention getting trained up as part of the process).
Considerations
- Contract risk. Will need to be selective in who becomes a Director of NewLTD to minimise litigation / commercial risk (eg if director takes on a fixed price contract they are unable to deliver on - happens all the time in consulting world)
- Financial & reporting risk. My accountant has advised segregated bank accounts and individual P&L could be setup for each Director / Client contract but aggregated reporting would be provided to HMRC for NewLTD as a whole.
——-
What are your thoughts? Would this work? Any other considerations? Has anyone already done something similar with a client?
Sent from my iPhone using Contractor UK Forum
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