confused by IR35(9 Posts)
I've been on maternity for a year and decided not to return to my employer at the end of that period - June 2015. My goal was to start up my own consultancy working on interim projects for companies looking for short term resource in my field.
I had a chat with my previous employer and they mentioned they had an interim resource issue and could I help. I said no to a temporary employment contract but said I could help on a specific project for them as a consultant, told them my availability and daily rates and they accepted. So all good.
I've set up a limited company but am really worried about IR35 and whether I would be vulnerable to being penalised.
My plan is to approach other companies for business but my only guaranteed client so far is my ex employer.
They will be supplying me with a company laptop (as I will be working on projects that require access to their company network so my own laptop wouldn't be allowed to be connected) but I will be working from home. I have no obligations to them beyond this fixed contract and vice versa.
Can anyone give me some guidance on this?
As long as you have evidence you are trying to work for more than one company you should be fine.
Do a new contract for each project. Make it very clear that each project is separate, quoted for specifically. Return any borrowed equipment at the end of each project.
There is guidance on hmrcs website here
Thank you everyone. I looked on a couple of sites and they all talked about having a substition clause - ie that I could send someone to do the job in my place. But that seems very strange to me - I'm a one person company so I would be sending a competitor into a role if I did that. And I've been chosen to work on this contract because of my skill set.
Substitution is one of the biggest factors, another important factor being the level of control and supervision you'd be working under.
IR35 is on a contract by contract basis, so having other contracts or having evidence of trying to find other contracts is pretty lame and not enough to escape IR35, if this contract fails on substitution and control criteria. Such factors would only be useful if this contract was borderline and then you can argue the superficial factors could push it over to escape.
Substitution and control ARE the important factors aiming to distinguish a person working like an employee (caught) as opposed to a genuine business (escaped). Substitution doesn't necessarily mean having another worker on your payroll, it more commonly means being able to subcontract the work to someone else if necessary, i.e. providing a substitute worker from an agency etc. Control is just that. If you are subject to regular/close supervision and told what to do and when to do it, that's akin to employment. Whereas if you are relatively free to do the work when you want and how you want, as part of a "project", the only criteria meeting quality standards and overall project timescales, that's more like a true business to business relationship, i.e. escape IR35.
If just trying to get other contracts or having other contracts was the "golden bullet" way to escape IR35, everyone would do it. Sadly, it's not that easy!
I've emailed the client to discuss adding the substitution clause in the contract. I suspect I will be told no as I know they wouldn't want me to send someone into the business in my stead even if thats a theoretical risk. Ultimately, they have hired me for this because of my skillset and knowledge of the business so its me specifically they would want on the project.
In terms of control - I think I'm broadly ok with this. I've told them which days I will be working and the hours that I will be available on the project and I'm not obliged to attend various meetings that would be an absolute must if I was an employee of the business (although I will obviously try to accomodate where I can on an adhoc case by case basis). I'm in overall charge of a project area although will obviously be working closely with stakeholders from the business so I guess th HMRC could take that as being under the clients control.
Just as another question if thats ok - I have spoken to an accountant who is setting up the ltd company / VAT aspets etc and discussed IR35 with them. They seemed fairly relaxed about it and said that they think tax changes being brought in will negate IR35 so potentially it won't be an issue from April 2016. Does that sound accurate to people here? They talked about a blanket tax on ltd company director dividends.
No, there are no plans to eliminate or water down IR35 - all that's being said is to make it more clear as to who is or isn't caught by it.
The 7.5% dividend tax applies to all limited companies, so isn't really anything to do with IR35, and anyway, the tax/nic burden under IR35 is a lot more than 7.5%.
So, basically, IR35 is here to stay and needs to be taken seriously.
Thanks again kjwh.
Your post has made me think about the accountant I am using (currently they have set up the company house details and working on the VAT side). However, I'm not feeling very comfortable with them as they have very much played down the IR35 aspect although they are maintaining this is their bread and butter area. But as you have said, I've not found any evidence of IR35 disappearing or becoming irrelevent on my research so far (limited to google but still...).
It may be time for a rethink here. I just dont want to get shafted further down the line by something that I haven;t provisioned for.
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