Contracting within IR35 Contracting within IR35
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  1. #1

    Nervous Newbie

    DeanMadden has no reputation


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    Default Contracting within IR35

    Hi, I'm looking to switch from permanent to contracting in a couple of months.

    After reading the latest 'guidance' on IR35, it looks to me that they want to treat most contractors as within IR35. So if we presume I get a contract that is within IR35, what is the best way of working? Is it still best to work as a limited company and pay an accountant or is it better to work under an umbrella company, or any other options?

    Thanks,
    Dean

  2. #2

    Some things in Moderation

    cojak is always on top

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    Don't presume anything.

    HMRC are just rubbing their hands at newbies attitudes to IR35.*

    It all depends on the contract and working conditions.

    If you don't want the 'hassle' of IR35 just go through and umbrella. If you want a little more money in your pocket and control over your own finances, use an accountant - just tell them you want to work inside IR35. They'll think you a bit strange but they'll handle it for you.

    Any other way of working is probably a bit scammy. Do your research and don't be fooled by the '85%+ take home' flimflam.

    (*mind you, it might not be a bad thing for experienced contractors if more money goes into HMRC's coffers and it keeps them off our backs).
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  3. #3

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    Thanks for the advice. I don't mind the 'hassle' of IR35 and would obviously want to work outside of it. What I'm concerned about is if I work outside of IR35, and then am investigated and deemed to be 'inside IR35', and then have to pay back the extra tax. In this case would it have been better off starting with a different model?

    Or do the advantages of a limited company (expenses, vat, etc?) outweigh the potential issues?

  4. #4

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    Clare@InTouch is a permanent contractor

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    Quote Originally Posted by DeanMadden View Post
    Thanks for the advice. I don't mind the 'hassle' of IR35 and would obviously want to work outside of it. What I'm concerned about is if I work outside of IR35, and then am investigated and deemed to be 'inside IR35', and then have to pay back the extra tax. In this case would it have been better off starting with a different model?

    Or do the advantages of a limited company (expenses, vat, etc?) outweigh the potential issues?
    You could look into IR35 insurance and PCG membership. I believe there are various levels of each that offer various levels of insurance/reassurance.

    If you get your contracts reviewed, and take steps to ensure you 'act like a contractor', then you can prove to any HMRC Inspector that you've done all you could to ensure your status was correct. That will offer good evidence to a Court as well as showing due care & attention, thus minimising any penalties.

    Keep a diary with notes of what you do, get confirmation letters in place with each client, and just keep IR35 in mind during your contracts. Don't go to staff parties or act like a permie.

    If you're still not 100% comfy, then either work inside of IR35, or hedge your bets - take say 50% of your income as salary. That way, if you're found to be inside the extra tax charged won't be as massive as if you'd ignored IR35 entirely.

  5. #5

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    TheFaQQer is a fount of knowledge

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    Quote Originally Posted by DeanMadden View Post
    Is it still best to work as a limited company and pay an accountant or is it better to work under an umbrella company, or any other options?
    Ltd is better:

    • You can make a little bit on being on flat rate VAT
    • You can still expense 5%
    • You are in control of what happens
    • There is one less link in the chain to disappear with your money
    • If you find another role which is outside IR35, then you are already set up and ready to go
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  6. #6

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    Thanks all. Joining the PCG looks like a good move, and sticking to a limited company with accountant too.

  7. #7

    Should post faster

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    There is a potential I will be in the same situation very shortly, I served notice on my company on Monday with the sole intention of becoming a contractor. They are in a bit of a situation now as they need me on one of the projects as I am the only person with the knowledge, and they can't recruit for that knowledge, as it's all in my head

    When asked what they could do to "keep me" I bluntly told them to offer me a contract, but hadn't considered the implications of IR35 on this move.

    If they do offer me a contract, I will have to work through an agency as they don't allow directly employed contractors - no idea if this would mean that I am then technically working for another employer, certainly feels like uncertain territory.

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    Quote Originally Posted by ThomserveBAS View Post
    If they do offer me a contract, I will have to work through an agency as they don't allow directly employed contractors - no idea if this would mean that I am then technically working for another employer, certainly feels like uncertain territory.
    No, you're still going to be caught for IR35.

    The guy I took over my last permie job for (which isn't too far from where you are based) left, he tried the same thing - and was told pretty sharpish to do one.

    You can still go contract, but you'll be IR35 caught in your case, so just make sure you factor that into your daily rate.
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  9. #9

    Some things in Moderation

    cojak is always on top

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    Sorry, but you are deemed a 'Friday/Monday' contractor (as in Friday a permie, Monday a contractor), the very reason why IR35 was put in place.

    You will definitely be inside IR35.
    "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
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  10. #10

    Should post faster

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    So running my rate through the IR35 calculator, if operating as "inside IR35" then it is still a healthy increase over being a permie - so on a personal level, if a contractor is happy to work inside of IR35 - is there anything intrinsically wrong with that? Will working inside of IR35 attract HMRC attention in the future any more than somebody who operates entirely outside of IR35?

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