IR35 sole trader

Grumpy_chap

Ignore the blame on any political party for IR35 - it was first here in Y2K and grown though successive Governments since.  Campaigns by certain Journalists for self employed to receive state support in the same way as employees undermine arguments against IR35.

As for the the OP's update, there seem to be some inconsistencies in what is stated - it may well be that the end Client ABC Ltd are simply unaware how IR35 functions and made mistakes.

The OP is working on a sole-trader basis for ABC.
Can the OP confirm they are not VAT-registered?  I suspect they are not and it would add complexity if they are.
The OP provides services as a Construction Site Supervisor
There is no agency involved, no UC, only the OP and ABC Ltd.
The OP receives a PO for "X" task and submits an invoice for "X" task on a monthly basis.
ABC Ltd pay OP against the invoice, but after deducting payroll taxes which indicates that ABC Ltd have determined the OP's engagement as being inside-IR35.

For the OP, changing invoicing from monthly to weekly, so below the £4,159 threshold for higher rate tax would not avoid higher rate tax being applied on a progressive basis.  The threshold monthly is worked out from the annual threshold £50,270 spread over 12 months.  The threshold weekly is £50,270 spread over 52 weeks = £967 per week.

The OP needs to understand how ABC Ltd consider the engagement to work and also whether ABC Ltd have undertaken an IR35 status determination.  IR35 is irrelevant if ABC Ltd consider that the OP is an employee on FTC, but then the OP would not need to issue invoices...

It is possible that ABC Ltd have defaulted to an inside-IR35 determination thinking that is the least risk option for ABC Ltd.  If that is the case, ABC Ltd also need to understand the liabilities that they would assume.

Before speaking with ABC Ltd, the OP should seek to understand their own assessment of whether the work is inside-IR35 or outside-IR35.  There are some indicators either way.  The OP may chose to use the HMRC CEST tool which is available online.  As the OP does not operate through an intermediary (own Ltd Co), I understand that IR35 cannot apply but the OP would use the tool to confirm that they are self-employed for the work.

billybonds4

Thank you once again GC.

I can confirm I am not VAT registered.

To add to this. I have not worked in this Tax year other than a short job for ABC of two weeks. I received a PO and was only stopped 20% on cis basis.
I then was off work for 1 month. Then then for the payment in question. I worked for 22 days. This was paid inside of IR35.

Neither jobs have any form of contract. I have no guarantee of any further work from ABC. Though I have now started a new job which will run 8 weeks for ABC.
I have no obligation to stay duration. And no restraint from going and working for another company.

Grumpy_chap

It certainly sounds like you are outside IR35. 

Can't have an 'employee like ' system where you work 2 weeks then nothing 4 weeks then a few weeks.

The critical thing in the assessment will be the right of substitution, even if that situation never arises 

billybonds4

Grumpy_chap said:

It certainly sounds like you are outside IR35. 

Can't have an 'employee like ' system where you work 2 weeks then nothing 4 weeks then a few weeks.

The critical thing in the assessment will be the right of substitution, even if that situation never arises 

I think I understand right of substitution. 

I am employed as a site supervisor/manager, bit can be replaced/laid off instantly. There are a number of other people who are not on payroll who run ABC sites. Some float around sites as cover or to assist. Sometimes they may be swapped around. I know for a fact one of the guys is still employed on a CIS basis and he has worked for them several years. Like me he has no contract and is free to walk at anytime. Yet there are others who have worked for ABC for several years who have been forced into IR35 with no escape. Though those guys run huge projects that run for up to a year. They have challenged the company unsuccessfully. But obviously their situations are quite different.
Generally one of the line managers will email or call me nearing hand over of a site and ask if I am available for another job. I have no obligation to accept.

I have done the HMRC IR35 cest questions. And it came back I was inside. But obviously the cest is very black and white.

I have challenged accounts. They just fobbed me off and said speak to my accountant.

I'm not really sure how to word this or present my objections with any evidential support?

GC. You've been a legend!!
Thanks to all you guys!

Grumpy_chap

billybonds4 said:

I have done the HMRC IR35 cest questions. And it came back I was inside. But obviously the cest is very black and white.

The whole idea of IR35 is that an individual is taxed like an employee where an "employer-employee-like relationship exists". 
If you are working 4 weeks, then there is no work, then there is some, that is clearly not "employment-like". 
To be "employment-like", the Client would need to offer you other work through the void periods, preparing RAMS, undertaking safety inspections at other sites, etc., etc.

I ran through a CEST based on what I assume and understand your position to be from the extent of this thread.

I suspect that the issue is you have never sent a substitute because it has not happened but the Client does not have the right to reject a substitute (who you would have to pay).  Accordingly, you would be self-employed for tax purposes for this work.

billybonds4

GC.

I couldn't send a replacement. That wouldn't be accepted. But they could lay me off instantly if they wished. As could I simply not turn up tomorrow. Obviously that would end our relationship.

But gaps between jobs will be the norm.
I'm in a grey area aren't I. I'd say the chips are stacked against me?

billybonds4

The other thing I should of added. If for what ever reason I don't make it in. eh today and rail strikes. I don't get paid!

DullGreyGuy

Grumpy_chap said:

It certainly sounds like you are outside IR35. 

Can't have an 'employee like ' system where you work 2 weeks then nothing 4 weeks then a few weeks.

The critical thing in the assessment will be the right of substitution, even if that situation never arises 

You can, that would be a zero hour contract, however the OP is self employed and so IR35 isnt even a question, it only applies to people operating via their own LTD

billybonds4

DullGreyGuy said:

Grumpy_chap said:

It certainly sounds like you are outside IR35. 

Can't have an 'employee like ' system where you work 2 weeks then nothing 4 weeks then a few weeks.

The critical thing in the assessment will be the right of substitution, even if that situation never arises 

You can, that would be a zero hour contract, however the OP is self employed and so IR35 isnt even a question, it only applies to people operating via their own LTD

According to the wording from HMRC. It doesn't just apply to somebody operating under a ltd co. It can be UC or individual. I guess where an individual is concerned, it's more defining the circumstances. As there is no contract  and gaps between new jobs, be it as little as a few days in some cases unpaid. That surely does not constitute being the same as payroll employment?.

Thanks for input.

DullGreyGuy

billybonds4 said:

DullGreyGuy said:

Grumpy_chap said:

It certainly sounds like you are outside IR35. 

Can't have an 'employee like ' system where you work 2 weeks then nothing 4 weeks then a few weeks.

The critical thing in the assessment will be the right of substitution, even if that situation never arises 

You can, that would be a zero hour contract, however the OP is self employed and so IR35 isnt even a question, it only applies to people operating via their own LTD

According to the wording from HMRC. It doesn't just apply to somebody operating under a ltd co. It can be UC or individual. I guess where an individual is concerned, it's more defining the circumstances. As there is no contract  and gaps between new jobs, be it as little as a few days in some cases unpaid. That surely does not constitute being the same as payroll employment?.

Thanks for input.

If you google "does IR35 apply to sole traders" every single website (namely those providing accountancy or advice to contractors) states it doesn't. 

Even https://www.gov.uk/government/publications/off-payroll-working-rules-communication-resources/know-the-facts-for-contractors-off-payroll-working-rules-ir35 states:

The off-payroll working rules are designed to ensure individuals working like employees but through their own limited company (often known as a ‘personal service company’ or ‘PSC’), or other intermediary, pay broadly the same Income Tax and National Insurance contributions (NICs) as individuals who are directly employed. These rules are commonly known as ‘IR35’.

So a direct sole trader, as per the OP, will not be in scope of IR35. If they are going via a dodgy umbrella company like the old NMW + Loan types then they are not a sole trader any more anyway but can be caught up