Can anyone explain IR35 please?(15 Posts)
I have my own consultancy with several clients. Have been told by a client I would need to go on this. I don't really understand it.
It's a set of rules you have to follow if you work for a client through an intermediary such as a limited company or agency.
I can tell you the rules are changing quite dramatically come the new tax year. Are your clients in the public sector??
Is this a public sector client? Virtually all public sector consulting/contracting work will be caught under IR35 from April. If so, what will happen is that your client will deduct tax/NIC from your invoices "as if" you were their employee, so it basically removes your ability to claim tax relief on travel & subsistence expenses etc and stops you using the low salary/high dividend method of withdrawing profits on your public sector income.
It only really applies if you only plan on working with one company I believe. So you pay the same amount of tax as someone employed by the company, rather than the basic 20% on profits as a self employed person. If you have multiple clients I don't think it applies to you. Do you have an accountant you can check with?
The 'employing' body has to assess you using a tool provided by HMRC which, surprise surprise, is weighted and structured such that a great many people will end up assessing as being in IR35. The short answer is no one really knows (HMRC included) exactly what is going to happen - much more fun to just leave it to the last minute!
Thanks for the various explanations.
Yes, Pollyanna9 & badbadbunny it is a public sector client.
NSEA I have several other clients, this is only Public Sector one.
I have asked my accountant but didn't really understand his answer.
Even though I already pay NI through my limited company, it seems I am going to be stuck with this ...
You need to read this site and maybe join them www.ipse.co.uk
Me and DH are both Contractors through our own limited company, which gives us a lot of protection from IR35 as we have different clients. We are also careful to choose our own hours and use our own phones and laptops which I understand helps too. Being 2 of us gives us added protection.
However, Public sector agencies are under pressure to close what is seen as a loophole when they use the same contractor for years and they really should be employed - this means that anyone working for this type of client will get hit.
We also have IR35 insurance so if HMRC investigates us and we are found to have been working " illegally" we are protected.
Many of our friends are Contractors and nobody wants to work for the govt, despite the high day rate they pay
Have you done a risk assessment? The HMRC tools hasn't been issued yet but all the public contracts that I work on have sent out a paper early version.
It only really applies if you only plan on working with one company I believe. not true at all
My company had a 2 year IR35 investigation in 2012/4 as Danny Alexander launched it for public sector contracts and we had to joy of being a test case. I believe it cost the country over a million and resulted in no contracts being deemed to fall under ir35.
It only really applies if you only plan on working with one company I believe.
Sorry, but that isn't one of the "tests" used by HMRC at all. It's quite possible, and something I've seen, for a company to have one contract caught by IR35 at the same time as another concurrent contract being outside it.
Moreover, the new public sector rules coming in April 17 effectively mean that all PS contractors are caught by IR35 because HMRC put the onus on the PS end to ensure all their contractors/consultants comply with IR35 and they're in no position to vet each contract/contractor, so are blanketing the application of IR35 by deducting tax/nic themselves and some are simply refusing to use contractors with their own limited companies.
This is going to have a huge impact on PS, all the contractors we know just won't work for them - DH turned down a very lucrative offer recently.
They pay well and the contracts are generally long term so previously sought after but not anymore
Not only have the Monitor caps seen most NHS Trusts who previously took on Ltd Co contractors now setting these roles as fixed terms at fairly poor rates of pay, but the IR35 now meaning that travel and subsistence costs have also lain waste to my plans (now my children are getting a bit older) to look at roles further afield. So now I can't do that either.
The cross-over into commercial settings seems almost impossible as they don't seem to 'count' the NHS experience (unless you're very technical and thus a server stack is a server stack whatever organisation it's sitting in).
I'm disappointed (but unsurprised) by the complete lack of readiness of 99% of agencies. They were poleaxed by the Monitor caps, waiting until the axe fell (at the Trust I was working at at the time, 22 contractors didn't have their contracts renewed and we let go all at the same time).
I don't want to cream money from the public purse, but the work that I do and many like me, is specialised and often these organisations don't have these staff in permanent roles to draw upon and the flexibility previously afforded to them is now gone.
Obviously in the past there were extortionate rates paid out to contractors that were completely unacceptable however take that up with whoever signed off on paying an IT contractor £1000 a day to roll out some software, don't blame the person doing that job role. I just want a decent rate that takes account of me managing my entire business myself, not causing the organisation to have to manage my payroll, tax and NIC, and which takes account of the transient nature of the work. This is an innovation and growth killer, it's utterly short-sighted and will do more harm than good. All that was needed to manage excessive spend on contractors was for the organisations (like the NHS was) to be tasked with setting fair capped rates, that's all. Hare-brained approach as usual.
This might help. I've turned down a PS contract - no longer worth it.
DH was out for a drink with a group of Contractors last night.
They were saying that PS comtract rates will have to double to make them worthwhile so ultimately it will cost the public much more.
They all said they wouldn't touch one unless it was double their usual ( high) dayrate and the Recruiters are saying that even though PS rates tend to be higher anyway there is evidence that they are going up.
Whole thing is ridiculous
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