IR35

[Raspberry123]

Has anyone got their head around the IR35 changes? I am a contractor / consultant and wondered if there is some kind of free IR35 checker online? Many thanks

Me and DH are Contractors, I’m responsible for our contracts so know a bit about this
There is a checker online with HMRC called CEST but it’s basically designed so that most people should be inside IR35 - amazing hey?
DH has 12 month contract via a 3rd party outside IR35 but left his previous one as they said that on renewal he would have to go inside it. My contacts are never likely to be inside IR35
The main change has been that the onus is now on the employer to check so they are super careful and if in doubt they say you are inside to cover themselves
We know a lot of contractors (IT) and most say they will never work inside it, it’s completely unfair- the downsides of employment with none of the advantages. Fortunately it seems that it’s still more than possible if you’ve for the right set up, one of the major things seems to be around substitution.
Hope that helps

My husband is a contractor and we are waiting to see what happens as it seems a lot of companies would go straight to being inside IR35 to play it safe, but that would lead to rates going up as in the area my husband works in there is a lot of demand already. For us it's still beneficial compared being a permy but he won't earn as much as much much more goes to the tax man and we don't have the benifits of having his own company. We are looking at ways to provide fixed contract or changing the business completely to offer a product but that's a long way off

I've just started a new contract (public sector) outside IR35 but pretty much everyone I know who has completed the HMRC online checker comes out inside.

It'll be interesting to see the impact. My previous job had a lot of contractors and they're still waiting to see what the company will decide and whether they'll be renewed.

I had a full IR35 investigation in 2014- a national test case- how lucky was I.

I just used the CEST tool and fall outside IR35. I cant see why a genuine contractor would fall under IR35

Thanks I will try the HMRC CEST tool and check contract wording more carefully!

DH works as a Contractor for HMRC. They agree he is outside IR35
According to the tool he isn’t!
Having said that CEST is multiple choice and “none of the above” isn’t an option, but it’s the most accurate answer to some questions in our case.

If you are a genuine contractor, ie the position is project based and it is not a position that would always exist then you will be outside IR35. The purpose is to stop people being disguised contractors who are essentially employees but pay less tax.

Main thing they look for is that you aren’t managing anyone. You cannot have anyone directly reporting to you as a contractor but you can lead the project. Bit of a grey area but important to HMRC. The other big thing is the position cannot be a position that always exists in the company. For example, you are there to put a new ERP system in, once it’s in you are no longer needed.

The rules for IR35 have not changed. The only thing that changed is that if you are caught, the employer pays the tax owed rather than the contractor. This is usually thousands. If you are found in IR35 now then you were always in (while in that contract).

The checker is good as HMRC will stand by the results so if it says you are outside and you have answered truthfully then they cannot change their minds and suddenly find you in.

I was worried about IR35 so took a perm job 2.5 years ago. My agency was giving conflicting info.

My LTD company was originally dormant but has been closed 2 years now. Does anyone know what the chances are of HMRC now opening an investigation?

@MadFrog2020 pretty much zero. Unless someone reported you to HMRC and backed it up with some cast iron evidence, I can’t see HMRC investigating.

To investigate you they would need to reopen your company and unless you owe hundreds of thousands or more it’s just not worth their time. Tends to only happen for massive VAT dodgers

Thanks BlueLily89. I checked and it’s only been actually closed for 1.5 years. It was dormant for longer than I thought.

Unfortunately no, I don’t earn too much so definitely not in that league. I may be panicking over nothing and I’m furious that I was told it was the best way to work on that public sector contract. Many of us were pushed into opening LTD companies.

I paid all the tax as advised by my accountant and nothing was flagged when I closed the company so hopefully that’s that. I feel very sorry for individuals who do get caught out in similar scenarios though.

It used to happen quite a lot especially for NHS bank staff. Then they got pushed into umbrella companies where they did dodgy loans so no tax was paid. It was technically legal but it has now been deemed tax evasion and has been made retrospectively illegal so all these poor people who were following accountants advice are now faced with crazy tax bills.

You will be fine even if your company had been closed a day, they will not want to go through the hassle of reopening it. HMRC have a team whose job it is is to stop companies closing when they owe money. This is because it takes so much time and money to get it reopened so as they didn’t stop you closing it you are fine.

Thanks again BlueLily89, that’s really useful to know.

Sorry for derailing your thread Raspberry123.

I'm planning to go freelance next financial year (have done it previously) and ir35 is causing me a substantial headache. The standard in our industry is that freelancers plug resourcing gaps and therefore rarely work on a defined project basis. However, we do operate without MOO, complete control over the how/where/when of doing the work and the right to substitute ourselves.

I'm fairly sure my current employer will want to send me some work, but worried it's too much of a risk. I've also noticed that our new contract for engaging PSCs has a clause that says the PSC will be liable for any breach of IR35 and must hold insurance against this. It seems against the spirit of the new legislation to shift liability to the PSC and like it wouldn't stand up in court?

I'm not sure about getting insurance against IR35 breaches. A quick quote suggested it would cost £400 per year, but I imagine it would be extremely difficult to get a claim through if you needed it... seems like a racket!

I’m not sure about insurance but gut feeling would be you would struggle to claim if found inside. But I don’t know for sure.

If you do genuinely have complete control over working hours and location and can genuinely substitute then you should be fine. This needs to be backed up with evidence, not just written in the contract. In terms of freelancers, you are sort of project based in HMRC terms. So you are only needed temporarily to fill a heavy workload then you will no longer get work. Only time this becomes grey is if they are trying to hire new staff and need contractors while looking. This could fall into IR35 and would need a IR35 lawyer to check it.

Hope that makes sense

I’m not sure how a contract can say that the contractor is responsible for IR35 checking when the new HMRC guidelines clearly say that the client is, but I’m not a legal expert so maybe they can
Anyone considering/ is already contracting I recommend joining IPSE. We also have insurance via them that covers is in case of any HMRC investigation, although (touch wood) we haven’t had to use it so I can’t say how good it is

In leaving IPSE in June after nearly 20 years, one of the early members and on their now defunct CC for several years.

The organisation is not fit for purpose anymore. IR35 insurance becomes defunct once the changes come in so I’m closing down my old limited to draw a line under it.

Just set up a new limited and will contract through that with no need for IPSE insurance.

My current contract comes to an end on 31 Jan.

I'm a Project Manager so definitely project based but still come inside IR35 according to CEST.

That being said it would be easy for clients to demonstrate that it is really outside of IR35 if they would move to a statement of work/deliverables basis rather than just a bog standard period of time basis.

However because they can't be arsed to do this and/or have caught the IR35 fear they are pretty much all offering either inside IR35 or FTC.

Both of which are shit options IMO. I think I may just try and go back to being perm but it will be a real nightmare trying to acclimitise to the reduction in income which is going to be about £3k a month

A decent substitute clause will get a pass from Cest

Hi,

I've been contracting for 12 years via my ltd - have switched over to fixed term PAYE contracts for the last few years because of public sector changes to IR35.

Company still live however now looking at closing to avoid any chance of retro IR35 investigation, however are most ex contractors now looking at umbrellas as an alternative or are most going PAYE?

Our experience is that most are still finding contracts outside (often PS)
It is possible if the contract is worded correctly, usually via a 3rd party.

I’m currently in a contract until end of May - contracting to the French arm of a global consultancy doing work in the UK but the uknoffice is no where in the contract chain.

In this case the agency is the party to make the determination but they will go on the word of the French consultancy who say “it35, que? No comprendo” to mix French and Spanish!

So I’m outside and the contract itself is definitely outside.

Hopefully I’ll get a extension for phase 2.

The issue is with the BIG Users of contracts - the Canary Wharf banks and gsk - the ones that have used cj tract labour to keep employees off the books.

They are blanketing everyone inside (and they probably are in reality)

I’m an SAP finance specialist - I’ve rarely worked on sites with more than one or two contractors.

Those clients seem, at the moment, to be making proper determination

Either way, I’ve done the math.

As long as you don’t have to live away and incur travel and accommodation, in my field at least. I’m still better off contract ir35 caught than I am permie so long as I can find 8 months on every 12 working. And in 20 years, I’ve only been benched six weeks so I’ll back myself

That's what I'm Finding hard to understand whether I should continue via ltd or use an umbrella- I do normally have to travel/ stay over for a couple of days a week.

For me PAYE is a lot less as the perm salary is nowhere near the contractor day rate.

Most contracts in the Public Sector ( NHS) are now inside IR35 as a blanket decision very very few outside.

Are these contracts direct with the PS?
We have found that where the PS are using a 3rd party and the contracts are carefully worded they are still outside
Where a 3rd party company (such as Public Sector Resourcing) ate involved just as admin then they seem to be going inside on renewal but where the agency has the contract but then sub it they seem to be staying outside.