If a company classifies you as inside IR35 does this mean that you are classed as their employee?

autoeng68

With the new IR35 rules coming in at the beginning of April a lot of companies are classifying contractors as "inside IR35" to protect themselves from IR35.
According to HMRC if you are classified as inside IR35 you are effectively an employee of that company. If that is the case how are they then able to avoid giving you the same benefits eg sick pay, pension etc?

Marcon

autoeng68 said:

With the new IR35 rules coming in at the beginning of April a lot of companies are classifying contractors as "inside IR35" to protect themselves from IR35.
According to HMRC if you are classified as inside IR35 you are effectively an employee of that company. If that is the case how are they then able to avoid giving you the same benefits eg sick pay, pension etc?

 Read this and you'll see that isn't quite was they are saying: https://www.gov.uk/guidance/understanding-off-payroll-working-ir35

autoeng68

Still not clear to me?
It says:-

"The rules apply if a worker provides their services to a client through an intermediary, but would be classed as an employee if they were contracted directly."

So for a contract that has been determined as inside IR35, the company that you are working for has decided that you are the same as their own staff and you are an "employee" and you are not "self employed".

I have worked for many years "outside IR35" and have been "self-employed" and therefore i am responsible for my own sick pay, pension etc. If i am now being classed as "employed" then there must be an employer who is responsible for providing those benefits. I'd assume that is the company that i am working for as they are determining the status?

Marcon

autoeng68 said:

Still not clear to me?
It says:-

"The rules apply if a worker provides their services to a client through an intermediary, but would be classed as an employee if they were contracted directly."

So for a contract that has been determined as inside IR35, the company that you are working for has decided that you are the same as their own staff and you are an "employee" and you are not "self employed".

I have worked for many years "outside IR35" and have been "self-employed" and therefore i am responsible for my own sick pay, pension etc. If i am now being classed as "employed" then there must be an employer who is responsible for providing those benefits. I'd assume that is the company that i am working for as they are determining the status?

But they are not contracted directly. It is the use of an intermediary that means they are not truly an 'employee'. 

If you are genuinely self employed (not providing services through an intermediary), then IR35 doesn't apply.

autoeng68

Then is the intermediary considered to be the employer? in my case this would usually be an employment agency and if that was the case would they therefore not be responsible for sick pay, pension etc?

Marcon

autoeng68 said:

Then is the intermediary considered to be the employer? in my case this would usually be an employment agency and if that was the case would they therefore not be responsible for sick pay, pension etc?

Probably not. Best guidance I could find for you is here: https://www.litrg.org.uk/tax-guides/employment/am-i-employed-self-employed-both-or-neither

deedee71

autoeng68 said:

Still not clear to me?
It says:-

"The rules apply if a worker provides their services to a client through an intermediary, but would be classed as an employee if they were contracted directly."

So for a contract that has been determined as inside IR35, the company that you are working for has decided that you are the same as their own staff and you are an "employee" and you are not "self employed".

You would be a deemed "worker" which is not the same as an employee.  

I went through these upcoming changes when they were applied in the public sector a few years ago.  It's a nightmare and unless you think you can push the end client into re-examining their status determination it's just something you'll have to accept.

If you go umbrella you'll have their fees, both employer and employee NI, tax and the apprenticeship levy deducted from your day rate.

autoeng68

So as i understand it if you take an "inside IR35" position then:-

• You have to pay the same tax and NI as the permanent employees and can no longer have "self employed" status
• You have no employer and therefore no employment rights

Anyone "inside IR35" will therefore be cheaper to employ, and the employing company will not have to give them any benefits (holiday pay, pension etc)
Call me cynical, but i can see lots of companies creating "inside IR35" positions in the not too distant future as they can employ people cheaply and dont have to give them any benefits!
Also not surprised that this situation is being introduced by the current Government!

Potbellypig

autoeng68 said:

With the new IR35 rules coming in at the beginning of April a lot of companies are classifying contractors as "inside IR35" to protect themselves from IR35.
According to HMRC if you are classified as inside IR35 you are effectively an employee of that company. If that is the case how are they then able to avoid giving you the same benefits eg sick pay, pension etc?

 The end client basically gets the say and the fines for anyone who is inside but claims to be outside. So most of the end clients are just saying you're inside because it means sod all to them really. Especially the big companies. I've seen first hand over the past 18 months many people trying and failing to convince them they are outside. I'm lucky right now in that I've been told I am definitely outside and that won't change, but I'm pretty sceptical all the same.The game has completely dropped out of the one-man-band Ltd company route.

To answer your question, you won't get an answer which you like...

autoeng68

I'm not trying to get an answer i like, i'm just trying to get an answer.
Seems to me the situation where you work as an employee, and are taxed as an employee, but dont have any employee rights is a situation that's been seriously overlooked with this new legislation which is why i'm struggling to believe thats actually the case.
I totally agree these changes to IR35 will mean no one can be working for a big company and still be self employed. The fact that a Tory government (who are meant to help and support self employed) have brought this in is just outrageous!

Marcon

autoeng68 said:

I'm not trying to get an answer i like, i'm just trying to get an answer.
Seems to me the situation where you work as an employee, and are taxed as an employee, but dont have any employee rights is a situation that's been seriously overlooked with this new legislation which is why i'm struggling to believe thats actually the case.
I totally agree these changes to IR35 will mean no one can be working for a big company and still be self employed. The fact that a Tory government (who are meant to help and support self employed) have brought this in is just outrageous!

You've completely misunderstood what IR35 is about.