Is this IR35?

ManicMum

Hello

If my husband takes a job for 6-12 months, setting himself up as a limited company, but working at the same place every day - is that IR35?

if so, I can not see how any of similar contractors make any money out of self-employment. In his field, hourly rates can range from £12 to £26 hour. If you're paying IR35 tax, what is the point?

thanks

KateBob

ManicMum wrote: »

Hello

If my husband takes a job for 6-12 months, setting himself up as a limited company, but working at the same place every day - is that IR35?

if so, I can not see how any of similar contractors make any money out of self-employment. In his field, hourly rates can range from £12 to £26 hour. If you're paying IR35 tax, what is the point?

thanks

IR35 was designed to prevent people disguising employment as a payment to a company and therefore benefiting from reduced tax rates.
If not we could all set up companies to have pay into.

If he is working solely for one company on a set contract/hours set by the other party then he will be hard pressed to prove he doesn't fall under IR35 legislation but the rules are horribly complicated.

scheming_gypsy

Although contracts can be manipulated to put you outside IR35... They really need to be agreed that you can act like a self employed person; ie send somebody in your place, work from home, use your own equipment etc etc.
There are ways to get around it but it's all a risk depending on if you get audited and how much they check up etc etc.. Which is why i stick with my umbrella company instead

ManicMum

the work would be obtained through an employment agency and contract with them but he would be working at same place every day. Would be using own tools but couldn't substitute anybody else to do the work or work from home (as it's practical work).

If he uses an umbrella company to receive his pay through, does that exempt him from IR35 then?

cheers for advice.

chrismac1

The three main tests are:

1. Direction and control - does he take direct orders from the client, does he work set hours dictated by client, and so on?
2. Ongoing relationship - can either party suspend the contract and go off doing something else? This one has cost HMRC a lot of cases, don't know why they bring cases where the client has stood down the contractor for 4 weeks due to low workload but they do it, suppose it's not their own money they are chucking away.
3. Substitution clause - you already seem to know about, not a showstopper though.

Lesser tests are own tools, commercial risk and so on. But IR35 cases are not about ticking boxes, which I suspect is the main reason HMRC lose so many of them. They are about forming an overall commercial judgement about the true nature of the relationship in place between the parties.

Note also that various IR35 cases have gone badly for the contractor because the head contract with the ultimate client did not properly line up with the contractor's contract with the agency. So merely putting another commercial step into the process, such as an umbrella company, changes nothing except adding extra cost.

agrinnall

chrismac1 wrote: »

So merely putting another commercial step into the process, such as an umbrella company, changes nothing except adding extra cost.

But unless the contractor is claiming large amounts of unwarranted expenses through the umbrella company then surely there's not a huge amount for HMRC to gain by attempting to prosecute under IR35, given that the bulk of the money received from the client will have been paid out to the contracter under normal PAYE rules.

antrobus

Yes, in general principle IR35 is an anti-avoidance measure, which HMRC can choose to apply if they think there's anything in it for them. For most people who are obliged to go down the self-incorporation route, need the money they're earning to live on, and draw the bulk of it out as salary taxed under PAYE, IR35 is really neither here nor there. Personally (and I will emphasise personally) I have taken no account of IR35 whatsoever and just carried on as normal.

SteProud

ManicMum wrote: »

Hello

If my husband takes a job for 6-12 months, setting himself up as a limited company, but working at the same place every day - is that IR35?

if so, I can not see how any of similar contractors make any money out of self-employment. In his field, hourly rates can range from £12 to £26 hour. If you're paying IR35 tax, what is the point?

thanks

I work for a specialist contractor accountant and an umbrella company so I'm not impartial but IR35 is a bit more complicated then that.

The link below gives a decent analogy of how IR35 works but in practice it is not a very clear piece of legislation.

If your husbands accountant is a specialist for contractors they may be able to do an IR35 review for you as part of their regular fee.

http://www.clearskyaccounting.co.uk/ir35.htm

Some contractors who are deemed to be inside IR35 will choose to work via an umbrella company instead. if the umbrella company is operating correctly with a full over-arching contract of employment then IR35 is irrelavent as you become an employee of the umbrella company and are taxed accordingly.

SteProud

Note also that various IR35 cases have gone badly for the contractor because the head contract with the ultimate client did not properly line up with the contractor's contract with the agency. So merely putting another commercial step into the process, such as an umbrella company, changes nothing except adding extra cost.[/QUOTE]

This is not correct.

Those caught by IR35 might choose to work via an umbrella because they become an employee of the umbrella company and as a result IR35 is irrelevant.

SteProud

ManicMum wrote: »

the work would be obtained through an employment agency and contract with them but he would be working at same place every day. Would be using own tools but couldn't substitute anybody else to do the work or work from home (as it's practical work).

If he uses an umbrella company to receive his pay through, does that exempt him from IR35 then?

cheers for advice.

yes it does

SteProud

agrinnall wrote: »

But unless the contractor is claiming large amounts of unwarranted expenses through the umbrella company then surely there's not a huge amount for HMRC to gain by attempting to prosecute under IR35, given that the bulk of the money received from the client will have been paid out to the contracter under normal PAYE rules.

If you work via an umbrella company that is doing things properly IR35 is irrelavent as you are an employee of the umbrella company.