Ir35

JackHill

Hello all,

I am looking for some information to help my brother out so I thought I would ask you guys. Its regarding whether he can be considered outside IR35.

My brother has set up a limited company. He has got a contract with a recruitment agency to do professional IT work. The recruitment agency have got him a job at a major retail chain on a 12 month contract. So basically he works in the retails HQ, uses there equipment but then his company invoices the recruitment agency and they pay him 28 days in arrears. I presume the recruitment agency then invoice the major retailer for an extortionate amount and pay his company and keep a healthy profit.

He uses the major retailers equipment and is required to work on their premises.
His contract states he does have the right to substituation but in practise is not the case.
He is employed for one specific project only.
He is paid a daily rate.
He has public indemnity insurance and public liability insurance.
His work is specialized.
His company and place of work are England.
This is his first and currently only contract. He plans only to do this contract for 12 month period.
The contract can be cut short if the project finishes early but he will not receive the full 12 month worth, only his daily fee for the days he worked.

Basically is he caught in IR35 or not. Any advice appreciated.

Kind regards

Jack Hill

KiKi

I'd say yes, IR35 applies. He'd have been an employee of the company if it weren't for the fact that he works through a limited company at the moment, and he's the sole owner (presumably) of the limited company.

http://www.hmrc.gov.uk/ir35/occupations.htm
http://www.hmrc.gov.uk/leaflets/guide_limitcomp.htm

HTH
KiKi

agrinnall

I'd agree with KiKi, the situation sounds very much like mine was when IR35 was introduced (except that I'd been contracting at the same place for several years by then) and I switched from paying a small salary and the rest in dividends to salary only. That meant I took home less money than before, but because the daily rate was well in excess of what I would have been paid for permanent employment I still came out ahead. I'm sure there will be posters who will argue that IR35 is dead and should just be ignored, but I was prepared to pay the extra tax and not have to worry about possible investigations, penalties and court battles in the future.

Jemma130

Maybe get him to have a look at whether he would pass or fail the IR35 business entity test - http://shop.qdosconsulting.com/freelancer/guides/news/2012/06/26/would-you-fail-the-ir35-business-test-

It is only meant to act as a guide for freelancers, but it could help to determine his IR35 status. He should also have his contracts professionally reviewed from an IR35 perspective, to be extra sure.

browneyedbazzi

There are a few free IR35 online tests that he could take and he should really try a few of those and if possible get some professional advice...I certainly wouldn't want my defence to HMRC to be 'some people on a web forum said....' if something went wrong.

I know a few IT contractors in similar situations who manage to stay outside IR35 but it's a bit of a tightrope to walk!

princessdon

I have to agree with getting advice if *close* to the wind. From my limited knowledge I'd say there is a chance he is inside in fact on the face it looks very much like it.

Lot of money without someone checking the contract who knows their stuff.