Jump to a ltd company

monkey-fingers

All 3 of those scenarios are Inside IR35 in my opinion. And it appears, quite a few on this thread.
Might be worth asking in the Contractors Reddit. I'm pretty sure they'd agree with me.

DoctorStrange

Fedcas65 said:

DoctorStrange said:

Fedcas65 said:

monkey-fingers said:

Fedcas65 said:

monkey-fingers said:

Sorry, I missed one of the points you asked.

Yes, it takes a couple of weeks for the VAT number to come through. It's not an issue - you can issue invoices without VAT and then backdate them and send new ones once you have a VAT number.

Many outside IR35 contracts are setup like Business to Business (B2B). This means they're often paid monthly, and 30 days in arrears from invoicing. So if you started on the 1st January, you could well find that if you invoice on 31st January that you don't get paid until a few days into March!

I think you're thinking that these outside IR35 jobs are like getting a normal job, but with some risk and well-paid. It's not like that at all.

And talking about dividends.... the way most Ltds work is that you pay yourself a small untaxed wage (£12,500 or whatever your tax code is). The rest of the money your Ltd company takes is taxed at up to 25% in corporation tax. So even if you leave the money in the Ltd company and don't take any dividends, you'll still pay this.

Dividend tax is currently 8.5%, although it goes up to 10.5% in April. That's for the first £37,770. Then it's 33.75% above (shortly to be 35.75%)

Here: I'll give you some basic numbers which don't include any pension contributions.

£500 day rate for 220 days per annum.
Company income: £110,000

I'll assume £3000 in expenses
£12,500 in wages (as above)
£1,126 in employers NI

Company profit: £93,373
Corporation tax: £20,994

The company now has £72,379 to pay out.
You'll actually pay £14,959 in Dividend tax after that.

Giving you a total take home of £57,420 + £12,500 = £70k-ish.

The way you were looking at it on the other thread was thinking like PAYE and you've missed a pile of other things like employers NI and expenses.

You're about £5k a year better off doing it the above way ^

About the kind of job, is it a legal requirement or just what you believe it should be the line of work?
I mean, are you saying that if there is an employee doing a certain job, then the company can't hire a contractor outside IR35 for the same job?
What if he's assigned to that for a certain percentage of his time?

I've seen many contractors along the way, but I've never questioned how they worked there, despite they were doing almost all my tasks.
Though I've seen partners (companies hired by employer) doing something slightly different, and they had their own clients, so that's a bit different but I could have done it too if I had the same client list...
This conversation becomes a bit redundant when it comes to tasks and responsibilities...
I also don't think that you need to deliver what you contract on in IT, you're not delivering a project like the drawing of a house etc, there is an immense grocery list usually and I'm absolutely sure that it will never be in the contract, it's just impossible to put everything there, plus there will be many blockers along the way, which usually require a contract extension, the hire of other contractors or even employees, and probably more often than not, the entire project fails.

At some point I considered the saving in NI with a ltd company, that was very important for me, and I get access to the same "state pension" when it will be the time.

It's quite clear really.

An outside IR35 will be a set of deliverables. For instance, build a website that is capable of X Y and Z.
Often, these aren't necessarily time based. So you might get a daily rate plus project milestone bonuses.

You'll be working mostly alone, but possibly alongside a Project Manager.

It's not repeatable tasks, it's a one-off.

An inside IR35 is similar to an employee. They're often on extendable contracts that can go on for years (in some cases). For instance, I worked with a technical architect who was there for 9 years. That's extreme, but he was effectively doing a job that a company would expect to have an employee doing.

If the contractors you were working with previously were doing stuff alongside yourself as a permanent employee (and as you said, your job), they'd definitely be inside IR35. I wouldn't expect many developers, DBAs or even support staff to be outside.

Pick the wrong one, and HMRC will be after you.

Thanks for this message.

Repeatable tasks are everywhere though, it would be the case from at least more than one point of view, if the HMRC focus heavily on that, it can always identify me always inside IR35.
Obviously now that I know that, I'd try do not do such things, but it's so difficult to judge and in any case I still didn't find any resource on the HMRC that precisely defines what I can do or not, from the technical perspective I mean.

Also, some of the tasks would be already performed by some employee, or it may happen later on, or simply I need to perform tasks that an employee would perform, that's mandatory to conclude a project usually, so shall I refuse to perform such tasks? Honestly, it's impossible to work in this way, every company would kick you out if you refuse to do something like 10% of an employee (and that's a difficult judgment from both parties), as you were hired to deliver the project or whatever, you're required to do some "work-around" anyway. Is this a problem with the HMRC?
I would expect the HMRC to have technical details on the matter if that's so hyper defined, not just that tool you gave me which is only to define your tax status, purely from the taxation point of view, and I wouldn't have doubts on where I stand there.

So as of now, I'm a bit confused by the technical requirements of my job from the HMRC...

The reason you're struggling to reconcile things is that you want to be an employee but not have to pay employment taxes.

You seem to think that being Inside or Outside IR35 is something you're in control of, or that it can be impacted by your own working practices - those things are no longer true.

Practically every role you apply for will be Inside IR35 these days, so in reality there's nothing much for you to consider here.

If you do see any Outside IR35 roles and are lucky enough to get the gig, you'll either be under Ch 10 rules (in which case you've nothing to worry about) or Ch 8 rules (in which case you should consider professional advice).

I'm not trying to avoid taxes, but a few people mentioned that there are more than tax rules, that is, also technical rules for the way you'll be taxed.
Honestly, if a company proposes a contract outside IR35, then I thought they would be responsible for such thing, not me, and btw, it's not my fault if the company will be giving me some tasks that could be handled by an employee, either because the current employees are already doing it, or because generally, employees could do it.
Anyway, if you refuse what they tell you to do and they give you the notice, simple... Regardless what it was contracted before...

For example, how would you judge these situations:

1. I'm a software developer with ton of experience, the company hires me to develop a new feature, or usually a new software.
The company already has developers but they're busy with the current project (very common).

A similar case could be for a Data Engineer, DB Developer, Infrastructure Developer, Cloud Engineer/Developer etc...

2. I'm a security engineer, the company needs a review of the current security posture, but the company obviously already has the the security team.
I saw this service done for 3 months by one contractor in one of the companies I've been employed, we already had our security team but they probably wanted a third party evaluation, pretty common in security, but in theory, the current security team should have been enough, it's just a third party opinion in addition to the current way of working.

3. I work as a project manager, but the other one is on paternity leave, so the company wants to hire someone for at least 6 months. For whatever reason, they propose a contract outside IR35.
How would any entity determine that it's outside or inside IR35?

What counts? The man in paternity leave? The kind of tasks? The fact that you don't find project managers everywhere?? (even though you should see the wonderful projects they create )

I heard this CH8/10 rule now for the first time, but I don't think it's up to me to determine that, would a business consultant know the answer to that? Shall I ask for a consultation before signing any contract?
Honestly, the story that I open the company in 24h and all is gonna be great has fallen very quickly , regardless how easy it is to find such contract, atm they're almost inexistent.

You need to understand that Outside IR35 is a Business to Business relationship, whereas Inside IR35 is an Employment relationship.

Imagine HSBC want to audit one of their departments. What's their choices?

They can either:

A)  Engage another company like EY and give them the brief, agree the price, agree the deliverables and then, once the objectives have been met, the contractual relationship ends. 

In this case, HSBC don't employ the EY staff who physically do the tasks, and they're not responsible for anything like holiday pay, sick pay, pensions etc. 

This is clearly Outside IR35, and HSBC pays EY on Invoice terms rather than PAYE terms.


Or they can choose option 

B ) Hire an auditor themselves. In this example, they may choose to offer a 6 month employment contract, and take responsibility for all employment rights, training, management etc. 

This is clearly Inside IR35, and HSBC pay the individual on PAYE terms rather than Invoices.



I guess put simply, given that you're looking for a job (i.e. you're looking an employer who'll give you tasks and then pay you each month) why are you even thinking about setting up a business?

What's your business going to offer, other than yourself? Why should you be employed on a different basis to everyone else? Aren't you clearly an "Option B" kind of situation?

You've said the reason you want to set up your own business isn't tax treatment so what IS the motivation? Why not just get a job?

Fedcas65

DoctorStrange said:

Fedcas65 said:

DoctorStrange said:

Fedcas65 said:

monkey-fingers said:

Fedcas65 said:

monkey-fingers said:

Sorry, I missed one of the points you asked.

Yes, it takes a couple of weeks for the VAT number to come through. It's not an issue - you can issue invoices without VAT and then backdate them and send new ones once you have a VAT number.

Many outside IR35 contracts are setup like Business to Business (B2B). This means they're often paid monthly, and 30 days in arrears from invoicing. So if you started on the 1st January, you could well find that if you invoice on 31st January that you don't get paid until a few days into March!

I think you're thinking that these outside IR35 jobs are like getting a normal job, but with some risk and well-paid. It's not like that at all.

And talking about dividends.... the way most Ltds work is that you pay yourself a small untaxed wage (£12,500 or whatever your tax code is). The rest of the money your Ltd company takes is taxed at up to 25% in corporation tax. So even if you leave the money in the Ltd company and don't take any dividends, you'll still pay this.

Dividend tax is currently 8.5%, although it goes up to 10.5% in April. That's for the first £37,770. Then it's 33.75% above (shortly to be 35.75%)

Here: I'll give you some basic numbers which don't include any pension contributions.

£500 day rate for 220 days per annum.
Company income: £110,000

I'll assume £3000 in expenses
£12,500 in wages (as above)
£1,126 in employers NI

Company profit: £93,373
Corporation tax: £20,994

The company now has £72,379 to pay out.
You'll actually pay £14,959 in Dividend tax after that.

Giving you a total take home of £57,420 + £12,500 = £70k-ish.

The way you were looking at it on the other thread was thinking like PAYE and you've missed a pile of other things like employers NI and expenses.

You're about £5k a year better off doing it the above way ^

About the kind of job, is it a legal requirement or just what you believe it should be the line of work?
I mean, are you saying that if there is an employee doing a certain job, then the company can't hire a contractor outside IR35 for the same job?
What if he's assigned to that for a certain percentage of his time?

I've seen many contractors along the way, but I've never questioned how they worked there, despite they were doing almost all my tasks.
Though I've seen partners (companies hired by employer) doing something slightly different, and they had their own clients, so that's a bit different but I could have done it too if I had the same client list...
This conversation becomes a bit redundant when it comes to tasks and responsibilities...
I also don't think that you need to deliver what you contract on in IT, you're not delivering a project like the drawing of a house etc, there is an immense grocery list usually and I'm absolutely sure that it will never be in the contract, it's just impossible to put everything there, plus there will be many blockers along the way, which usually require a contract extension, the hire of other contractors or even employees, and probably more often than not, the entire project fails.

At some point I considered the saving in NI with a ltd company, that was very important for me, and I get access to the same "state pension" when it will be the time.

It's quite clear really.

An outside IR35 will be a set of deliverables. For instance, build a website that is capable of X Y and Z.
Often, these aren't necessarily time based. So you might get a daily rate plus project milestone bonuses.

You'll be working mostly alone, but possibly alongside a Project Manager.

It's not repeatable tasks, it's a one-off.

An inside IR35 is similar to an employee. They're often on extendable contracts that can go on for years (in some cases). For instance, I worked with a technical architect who was there for 9 years. That's extreme, but he was effectively doing a job that a company would expect to have an employee doing.

If the contractors you were working with previously were doing stuff alongside yourself as a permanent employee (and as you said, your job), they'd definitely be inside IR35. I wouldn't expect many developers, DBAs or even support staff to be outside.

Pick the wrong one, and HMRC will be after you.

Thanks for this message.

Repeatable tasks are everywhere though, it would be the case from at least more than one point of view, if the HMRC focus heavily on that, it can always identify me always inside IR35.
Obviously now that I know that, I'd try do not do such things, but it's so difficult to judge and in any case I still didn't find any resource on the HMRC that precisely defines what I can do or not, from the technical perspective I mean.

Also, some of the tasks would be already performed by some employee, or it may happen later on, or simply I need to perform tasks that an employee would perform, that's mandatory to conclude a project usually, so shall I refuse to perform such tasks? Honestly, it's impossible to work in this way, every company would kick you out if you refuse to do something like 10% of an employee (and that's a difficult judgment from both parties), as you were hired to deliver the project or whatever, you're required to do some "work-around" anyway. Is this a problem with the HMRC?
I would expect the HMRC to have technical details on the matter if that's so hyper defined, not just that tool you gave me which is only to define your tax status, purely from the taxation point of view, and I wouldn't have doubts on where I stand there.

So as of now, I'm a bit confused by the technical requirements of my job from the HMRC...

The reason you're struggling to reconcile things is that you want to be an employee but not have to pay employment taxes.

You seem to think that being Inside or Outside IR35 is something you're in control of, or that it can be impacted by your own working practices - those things are no longer true.

Practically every role you apply for will be Inside IR35 these days, so in reality there's nothing much for you to consider here.

If you do see any Outside IR35 roles and are lucky enough to get the gig, you'll either be under Ch 10 rules (in which case you've nothing to worry about) or Ch 8 rules (in which case you should consider professional advice).

I'm not trying to avoid taxes, but a few people mentioned that there are more than tax rules, that is, also technical rules for the way you'll be taxed.
Honestly, if a company proposes a contract outside IR35, then I thought they would be responsible for such thing, not me, and btw, it's not my fault if the company will be giving me some tasks that could be handled by an employee, either because the current employees are already doing it, or because generally, employees could do it.
Anyway, if you refuse what they tell you to do and they give you the notice, simple... Regardless what it was contracted before...

For example, how would you judge these situations:

1. I'm a software developer with ton of experience, the company hires me to develop a new feature, or usually a new software.
The company already has developers but they're busy with the current project (very common).

A similar case could be for a Data Engineer, DB Developer, Infrastructure Developer, Cloud Engineer/Developer etc...

2. I'm a security engineer, the company needs a review of the current security posture, but the company obviously already has the the security team.
I saw this service done for 3 months by one contractor in one of the companies I've been employed, we already had our security team but they probably wanted a third party evaluation, pretty common in security, but in theory, the current security team should have been enough, it's just a third party opinion in addition to the current way of working.

3. I work as a project manager, but the other one is on paternity leave, so the company wants to hire someone for at least 6 months. For whatever reason, they propose a contract outside IR35.
How would any entity determine that it's outside or inside IR35?

What counts? The man in paternity leave? The kind of tasks? The fact that you don't find project managers everywhere?? (even though you should see the wonderful projects they create )

I heard this CH8/10 rule now for the first time, but I don't think it's up to me to determine that, would a business consultant know the answer to that? Shall I ask for a consultation before signing any contract?
Honestly, the story that I open the company in 24h and all is gonna be great has fallen very quickly , regardless how easy it is to find such contract, atm they're almost inexistent.

You need to understand that Outside IR35 is a Business to Business relationship, whereas Inside IR35 is an Employment relationship.

Imagine HSBC want to audit one of their departments. What's their choices?

They can either:

A)  Engage another company like EY and give them the brief, agree the price, agree the deliverables and then, once the objectives have been met, the contractual relationship ends. 

In this case, HSBC don't employ the EY staff who physically do the tasks, and they're not responsible for anything like holiday pay, sick pay, pensions etc. 

This is clearly Outside IR35, and HSBC pays EY on Invoice terms rather than PAYE terms.


Or they can choose option 

B ) Hire an auditor themselves. In this example, they may choose to offer a 6 month employment contract, and take responsibility for all employment rights, training, management etc. 

This is clearly Inside IR35, and HSBC pay the individual on PAYE terms rather than Invoices.



I guess put simply, given that you're looking for a job (i.e. you're looking an employer who'll give you tasks and then pay you each month) why are you even thinking about setting up a business?

What's your business going to offer, other than yourself? Why should you be employed on a different basis to everyone else? Aren't you clearly an "Option B" kind of situation?

You've said the reason you want to set up your own business isn't tax treatment so what IS the motivation? Why not just get a job?

Below I answer to your scenarios.
Instead of EY, a security company could provide an audit as well, but the company already has a security team in place, the difference could be that they requested a specific audit, also as a third party perspective (simple as that), so that "contractor" could have his own business, he doesn't need training, he doesn't need anything rather than invoicing the customer.
Also, for me personally there are other reasons too, I don't care about company benefits, I don't care about compulsory extra pension contribution despite they're critical for the pension system in UK, I could also pay dividends to myself from the second year which saves a lot, are these not advantages? (Assuming not so much downtime between contracts)
I think that everyone here believes that I want to play the system or that I didn't study at all on the matter, but I started very humbly in asking questions because it seemed too easy, and I'm not the only one that got it too easy by the look on YouTube .
As I don't believe it is that easy, I tried to get as many possible details, and the worst thing is the assessment between IR35 and outside IR35, which in any case is determined by the company, I won't have chances to decide, though I certainly don't want to be hammered by the HMRC for that, why should I be responsible???
As a business, the client commissions me a job to do, fine, I do that, I still don't get how I should determine the difference between IR35 or not, from the technical perspective, taxation is clear and the gov tool speaks clearly, as I would expect.
Also, before joining the company I wouldn't know their team situation, their company goal or whatever, I shouldn't be responsible for anything honestly...


Btw, in my field, there is no training or similar, either you get everything in 5 minutes of explanation or you're out, and you better OVER-deliver before the end of your probation period or you're out in a day.
Holiday etc, yes, maybe...
So, creating a business is not a bad idea at all, it's just a bad idea as at the moment, I don't see many offers around.

Also, you speak about invoicing, I've got the point between PAYE and invoicing, but just in case, are you instead talking about a single big invoice for the project done VS invoicing per day of work?

Both have their own problems in my opinion, but I wish to know what do you mean.
The first would be complicated, as IT requests are always made by people that should be digging into the ground instead, so I wouldn't go with that.

Invoicing per day of work, already looks more inside IR35, as you may or may not succeed, part of your job may be done by an employee, or by en existing employee/team, or by the employee in paternity leave, whatever, you got the point , but still, how am I supposed to be responsible for the company abuse of the regulations? (intentional or not it doesn't matter)
Also, I can't ask my solicitor to verify every contract I get, which can be more than one at the same time as I may be evaluating multiple at a time, how I'm supposed to be profitable???  

LITRG

Hello, there are a lot of strands to your query, many of which are covered in our guidance on operating through a limited company/being a contractor: https://www.litrg.org.uk/working/limited-companies. Hope this helps, Thanks

monkey-fingers

As I don't believe it is that easy, I tried to get as many possible details, and the worst thing is the assessment between IR35 and outside IR35, which in any case is determined by the company, I won't have chances to decide, though I certainly don't want to be hammered by the HMRC for that, why should I be responsible???
As a business, the client commissions me a job to do, fine, I do that, I still don't get how I should determine the difference between IR35 or not, from the technical perspective, taxation is clear and the gov tool speaks clearly, as I would expect.
Also, before joining the company I wouldn't know their team situation, their company goal or whatever, I shouldn't be responsible for anything honestly...

As an aside, YouTube is a terrible source of just about anything. It's full of nonsense.
But I think as above, you're finally getting it. You won't decide what's inside or outside IR35.

I notice that we've been down this path for quite some time and you don't appear to have an Outside IR35 job, despite saying that you wouldn't consider anything but.

Having just been trawling through a few sites (I need to keep myself up-to-date as my current contract finishes in April), there are even fewer Outside jobs in anything IT wise right now - everything is Inside.

MyRealNameToo

Fedcas65 said:

DoctorStrange said:

Fedcas65 said:

DoctorStrange said:

Fedcas65 said:

monkey-fingers said:

Fedcas65 said:

monkey-fingers said:

Sorry, I missed one of the points you asked.

Yes, it takes a couple of weeks for the VAT number to come through. It's not an issue - you can issue invoices without VAT and then backdate them and send new ones once you have a VAT number.

Many outside IR35 contracts are setup like Business to Business (B2B). This means they're often paid monthly, and 30 days in arrears from invoicing. So if you started on the 1st January, you could well find that if you invoice on 31st January that you don't get paid until a few days into March!

I think you're thinking that these outside IR35 jobs are like getting a normal job, but with some risk and well-paid. It's not like that at all.

And talking about dividends.... the way most Ltds work is that you pay yourself a small untaxed wage (£12,500 or whatever your tax code is). The rest of the money your Ltd company takes is taxed at up to 25% in corporation tax. So even if you leave the money in the Ltd company and don't take any dividends, you'll still pay this.

Dividend tax is currently 8.5%, although it goes up to 10.5% in April. That's for the first £37,770. Then it's 33.75% above (shortly to be 35.75%)

Here: I'll give you some basic numbers which don't include any pension contributions.

£500 day rate for 220 days per annum.
Company income: £110,000

I'll assume £3000 in expenses
£12,500 in wages (as above)
£1,126 in employers NI

Company profit: £93,373
Corporation tax: £20,994

The company now has £72,379 to pay out.
You'll actually pay £14,959 in Dividend tax after that.

Giving you a total take home of £57,420 + £12,500 = £70k-ish.

The way you were looking at it on the other thread was thinking like PAYE and you've missed a pile of other things like employers NI and expenses.

You're about £5k a year better off doing it the above way ^

About the kind of job, is it a legal requirement or just what you believe it should be the line of work?
I mean, are you saying that if there is an employee doing a certain job, then the company can't hire a contractor outside IR35 for the same job?
What if he's assigned to that for a certain percentage of his time?

I've seen many contractors along the way, but I've never questioned how they worked there, despite they were doing almost all my tasks.
Though I've seen partners (companies hired by employer) doing something slightly different, and they had their own clients, so that's a bit different but I could have done it too if I had the same client list...
This conversation becomes a bit redundant when it comes to tasks and responsibilities...
I also don't think that you need to deliver what you contract on in IT, you're not delivering a project like the drawing of a house etc, there is an immense grocery list usually and I'm absolutely sure that it will never be in the contract, it's just impossible to put everything there, plus there will be many blockers along the way, which usually require a contract extension, the hire of other contractors or even employees, and probably more often than not, the entire project fails.

At some point I considered the saving in NI with a ltd company, that was very important for me, and I get access to the same "state pension" when it will be the time.

It's quite clear really.

An outside IR35 will be a set of deliverables. For instance, build a website that is capable of X Y and Z.
Often, these aren't necessarily time based. So you might get a daily rate plus project milestone bonuses.

You'll be working mostly alone, but possibly alongside a Project Manager.

It's not repeatable tasks, it's a one-off.

An inside IR35 is similar to an employee. They're often on extendable contracts that can go on for years (in some cases). For instance, I worked with a technical architect who was there for 9 years. That's extreme, but he was effectively doing a job that a company would expect to have an employee doing.

If the contractors you were working with previously were doing stuff alongside yourself as a permanent employee (and as you said, your job), they'd definitely be inside IR35. I wouldn't expect many developers, DBAs or even support staff to be outside.

Pick the wrong one, and HMRC will be after you.

Thanks for this message.

Repeatable tasks are everywhere though, it would be the case from at least more than one point of view, if the HMRC focus heavily on that, it can always identify me always inside IR35.
Obviously now that I know that, I'd try do not do such things, but it's so difficult to judge and in any case I still didn't find any resource on the HMRC that precisely defines what I can do or not, from the technical perspective I mean.

Also, some of the tasks would be already performed by some employee, or it may happen later on, or simply I need to perform tasks that an employee would perform, that's mandatory to conclude a project usually, so shall I refuse to perform such tasks? Honestly, it's impossible to work in this way, every company would kick you out if you refuse to do something like 10% of an employee (and that's a difficult judgment from both parties), as you were hired to deliver the project or whatever, you're required to do some "work-around" anyway. Is this a problem with the HMRC?
I would expect the HMRC to have technical details on the matter if that's so hyper defined, not just that tool you gave me which is only to define your tax status, purely from the taxation point of view, and I wouldn't have doubts on where I stand there.

So as of now, I'm a bit confused by the technical requirements of my job from the HMRC...

The reason you're struggling to reconcile things is that you want to be an employee but not have to pay employment taxes.

You seem to think that being Inside or Outside IR35 is something you're in control of, or that it can be impacted by your own working practices - those things are no longer true.

Practically every role you apply for will be Inside IR35 these days, so in reality there's nothing much for you to consider here.

If you do see any Outside IR35 roles and are lucky enough to get the gig, you'll either be under Ch 10 rules (in which case you've nothing to worry about) or Ch 8 rules (in which case you should consider professional advice).

I'm not trying to avoid taxes, but a few people mentioned that there are more than tax rules, that is, also technical rules for the way you'll be taxed.
Honestly, if a company proposes a contract outside IR35, then I thought they would be responsible for such thing, not me, and btw, it's not my fault if the company will be giving me some tasks that could be handled by an employee, either because the current employees are already doing it, or because generally, employees could do it.
Anyway, if you refuse what they tell you to do and they give you the notice, simple... Regardless what it was contracted before...

For example, how would you judge these situations:

1. I'm a software developer with ton of experience, the company hires me to develop a new feature, or usually a new software.
The company already has developers but they're busy with the current project (very common).

A similar case could be for a Data Engineer, DB Developer, Infrastructure Developer, Cloud Engineer/Developer etc...

2. I'm a security engineer, the company needs a review of the current security posture, but the company obviously already has the the security team.
I saw this service done for 3 months by one contractor in one of the companies I've been employed, we already had our security team but they probably wanted a third party evaluation, pretty common in security, but in theory, the current security team should have been enough, it's just a third party opinion in addition to the current way of working.

3. I work as a project manager, but the other one is on paternity leave, so the company wants to hire someone for at least 6 months. For whatever reason, they propose a contract outside IR35.
How would any entity determine that it's outside or inside IR35?

What counts? The man in paternity leave? The kind of tasks? The fact that you don't find project managers everywhere?? (even though you should see the wonderful projects they create )

I heard this CH8/10 rule now for the first time, but I don't think it's up to me to determine that, would a business consultant know the answer to that? Shall I ask for a consultation before signing any contract?
Honestly, the story that I open the company in 24h and all is gonna be great has fallen very quickly , regardless how easy it is to find such contract, atm they're almost inexistent.

You need to understand that Outside IR35 is a Business to Business relationship, whereas Inside IR35 is an Employment relationship.

Imagine HSBC want to audit one of their departments. What's their choices?

They can either:

A)  Engage another company like EY and give them the brief, agree the price, agree the deliverables and then, once the objectives have been met, the contractual relationship ends. 

In this case, HSBC don't employ the EY staff who physically do the tasks, and they're not responsible for anything like holiday pay, sick pay, pensions etc. 

This is clearly Outside IR35, and HSBC pays EY on Invoice terms rather than PAYE terms.


Or they can choose option 

B ) Hire an auditor themselves. In this example, they may choose to offer a 6 month employment contract, and take responsibility for all employment rights, training, management etc. 

This is clearly Inside IR35, and HSBC pay the individual on PAYE terms rather than Invoices.



I guess put simply, given that you're looking for a job (i.e. you're looking an employer who'll give you tasks and then pay you each month) why are you even thinking about setting up a business?

What's your business going to offer, other than yourself? Why should you be employed on a different basis to everyone else? Aren't you clearly an "Option B" kind of situation?

You've said the reason you want to set up your own business isn't tax treatment so what IS the motivation? Why not just get a job?

Below I answer to your scenarios.
Instead of EY, a security company could provide an audit as well, but the company already has a security team in place, the difference could be that they requested a specific audit, also as a third party perspective (simple as that), so that "contractor" could have his own business, he doesn't need training, he doesn't need anything rather than invoicing the customer.
Also, for me personally there are other reasons too, I don't care about company benefits, I don't care about compulsory extra pension contribution despite they're critical for the pension system in UK, I could also pay dividends to myself from the second year which saves a lot, are these not advantages? (Assuming not so much downtime between contracts)
I think that everyone here believes that I want to play the system or that I didn't study at all on the matter, but I started very humbly in asking questions because it seemed too easy, and I'm not the only one that got it too easy by the look on YouTube .
As I don't believe it is that easy, I tried to get as many possible details, and the worst thing is the assessment between IR35 and outside IR35, which in any case is determined by the company, I won't have chances to decide, though I certainly don't want to be hammered by the HMRC for that, why should I be responsible???
As a business, the client commissions me a job to do, fine, I do that, I still don't get how I should determine the difference between IR35 or not, from the technical perspective, taxation is clear and the gov tool speaks clearly, as I would expect.
Also, before joining the company I wouldn't know their team situation, their company goal or whatever, I shouldn't be responsible for anything honestly...


Btw, in my field, there is no training or similar, either you get everything in 5 minutes of explanation or you're out, and you better OVER-deliver before the end of your probation period or you're out in a day.
Holiday etc, yes, maybe...
So, creating a business is not a bad idea at all, it's just a bad idea as at the moment, I don't see many offers around.

Also, you speak about invoicing, I've got the point between PAYE and invoicing, but just in case, are you instead talking about a single big invoice for the project done VS invoicing per day of work?

Both have their own problems in my opinion, but I wish to know what do you mean.
The first would be complicated, as IT requests are always made by people that should be digging into the ground instead, so I wouldn't go with that.

Invoicing per day of work, already looks more inside IR35, as you may or may not succeed, part of your job may be done by an employee, or by en existing employee/team, or by the employee in paternity leave, whatever, you got the point , but still, how am I supposed to be responsible for the company abuse of the regulations? (intentional or not it doesn't matter)
Also, I can't ask my solicitor to verify every contract I get, which can be more than one at the same time as I may be evaluating multiple at a time, how I'm supposed to be profitable???  

Since 2021 the client has become liable to determine if a role is inside or outside, though some have simply adopted a policy of not accepting contractors other than via umbrellas. It happened earlier for those in the public sector. The client is also the one that is liable for the taxes if an error was made. This was an obvious move for the likes of HMRC to do because previously they had to chase individual firms often only supplying one contractor whereas now they can target a big company and likely there will be several thousand contractors - I think at one point RBS had over 10,000 contractors. 

Now your contract with the client may require you to indemnify them if the determination of outside IR35 is wrong but then that in itself is evidence of it being an outside role because as a business you should be taking on financial risk. You, or your client, also have the option of buying insurance against the risk, normally you will have to use the insurers evaluation tool and can only buy the insurance if it determines its outside. 

At the end of the day if the client determines outside IR35 you are still free to use an umbrella company meaning it effectively becomes an inside role by your choice. No one is going to tell you that you have to operate as outside IR35 if you have reasons to prefer an umbrella. 

Determining if you are inside or outside is not 100% straightforward, there are many shades of grey. Many of the tools will ask if you supply your own tools... I will answer yes as I bring my own laptop, mouse, smartphone with specialist software on both but the reality is more mixed as I will also use kit they provide and some clients won't allow me to use my own software etc. 

Likewise the question on setting how tasks are done... I have a high degree of autonomy but normally have to fit within some form of framework for the client. My current client would be a great example where they liked my tooling and templates etc so much that they've adopted them so am I still using my own or am I now using theirs seeing as they have been harmonised?

Fixed price, day rate, success fees etc are all valid options in business and therefore also for contractors. Get a plumber in and they'll tell you their hourly rate, its little difference. Red flags are your client paying for time when you're not working (eg holiday or sick), paying you to fix something you did wrong, you having to ask for time off rather than telling them you will be unavailable on certain dates. 

As to your last point, by having your own terms that clients must agree to rather than signing their terms. Depending on the nature of your client and/or how you are winning the work they may be thankful you do have your own contract or may not entertain the idea of signing your contract. 

Getting legal advice, buying insurance etc is all part of being a business, your pricing needs to reflect these costs you incur.  QDOS will do a IR35 contract review for £49 though having done a few you start to know what they are looking for. 

Fedcas65

MyRealNameToo said:

Fedcas65 said:

DoctorStrange said:

Fedcas65 said:

DoctorStrange said:

Fedcas65 said:

monkey-fingers said:

Fedcas65 said:

monkey-fingers said:

Sorry, I missed one of the points you asked.

Yes, it takes a couple of weeks for the VAT number to come through. It's not an issue - you can issue invoices without VAT and then backdate them and send new ones once you have a VAT number.

Many outside IR35 contracts are setup like Business to Business (B2B). This means they're often paid monthly, and 30 days in arrears from invoicing. So if you started on the 1st January, you could well find that if you invoice on 31st January that you don't get paid until a few days into March!

I think you're thinking that these outside IR35 jobs are like getting a normal job, but with some risk and well-paid. It's not like that at all.

And talking about dividends.... the way most Ltds work is that you pay yourself a small untaxed wage (£12,500 or whatever your tax code is). The rest of the money your Ltd company takes is taxed at up to 25% in corporation tax. So even if you leave the money in the Ltd company and don't take any dividends, you'll still pay this.

Dividend tax is currently 8.5%, although it goes up to 10.5% in April. That's for the first £37,770. Then it's 33.75% above (shortly to be 35.75%)

Here: I'll give you some basic numbers which don't include any pension contributions.

£500 day rate for 220 days per annum.
Company income: £110,000

I'll assume £3000 in expenses
£12,500 in wages (as above)
£1,126 in employers NI

Company profit: £93,373
Corporation tax: £20,994

The company now has £72,379 to pay out.
You'll actually pay £14,959 in Dividend tax after that.

Giving you a total take home of £57,420 + £12,500 = £70k-ish.

The way you were looking at it on the other thread was thinking like PAYE and you've missed a pile of other things like employers NI and expenses.

You're about £5k a year better off doing it the above way ^

About the kind of job, is it a legal requirement or just what you believe it should be the line of work?
I mean, are you saying that if there is an employee doing a certain job, then the company can't hire a contractor outside IR35 for the same job?
What if he's assigned to that for a certain percentage of his time?

I've seen many contractors along the way, but I've never questioned how they worked there, despite they were doing almost all my tasks.
Though I've seen partners (companies hired by employer) doing something slightly different, and they had their own clients, so that's a bit different but I could have done it too if I had the same client list...
This conversation becomes a bit redundant when it comes to tasks and responsibilities...
I also don't think that you need to deliver what you contract on in IT, you're not delivering a project like the drawing of a house etc, there is an immense grocery list usually and I'm absolutely sure that it will never be in the contract, it's just impossible to put everything there, plus there will be many blockers along the way, which usually require a contract extension, the hire of other contractors or even employees, and probably more often than not, the entire project fails.

At some point I considered the saving in NI with a ltd company, that was very important for me, and I get access to the same "state pension" when it will be the time.

It's quite clear really.

An outside IR35 will be a set of deliverables. For instance, build a website that is capable of X Y and Z.
Often, these aren't necessarily time based. So you might get a daily rate plus project milestone bonuses.

You'll be working mostly alone, but possibly alongside a Project Manager.

It's not repeatable tasks, it's a one-off.

An inside IR35 is similar to an employee. They're often on extendable contracts that can go on for years (in some cases). For instance, I worked with a technical architect who was there for 9 years. That's extreme, but he was effectively doing a job that a company would expect to have an employee doing.

If the contractors you were working with previously were doing stuff alongside yourself as a permanent employee (and as you said, your job), they'd definitely be inside IR35. I wouldn't expect many developers, DBAs or even support staff to be outside.

Pick the wrong one, and HMRC will be after you.

Thanks for this message.

Repeatable tasks are everywhere though, it would be the case from at least more than one point of view, if the HMRC focus heavily on that, it can always identify me always inside IR35.
Obviously now that I know that, I'd try do not do such things, but it's so difficult to judge and in any case I still didn't find any resource on the HMRC that precisely defines what I can do or not, from the technical perspective I mean.

Also, some of the tasks would be already performed by some employee, or it may happen later on, or simply I need to perform tasks that an employee would perform, that's mandatory to conclude a project usually, so shall I refuse to perform such tasks? Honestly, it's impossible to work in this way, every company would kick you out if you refuse to do something like 10% of an employee (and that's a difficult judgment from both parties), as you were hired to deliver the project or whatever, you're required to do some "work-around" anyway. Is this a problem with the HMRC?
I would expect the HMRC to have technical details on the matter if that's so hyper defined, not just that tool you gave me which is only to define your tax status, purely from the taxation point of view, and I wouldn't have doubts on where I stand there.

So as of now, I'm a bit confused by the technical requirements of my job from the HMRC...

The reason you're struggling to reconcile things is that you want to be an employee but not have to pay employment taxes.

You seem to think that being Inside or Outside IR35 is something you're in control of, or that it can be impacted by your own working practices - those things are no longer true.

Practically every role you apply for will be Inside IR35 these days, so in reality there's nothing much for you to consider here.

If you do see any Outside IR35 roles and are lucky enough to get the gig, you'll either be under Ch 10 rules (in which case you've nothing to worry about) or Ch 8 rules (in which case you should consider professional advice).

I'm not trying to avoid taxes, but a few people mentioned that there are more than tax rules, that is, also technical rules for the way you'll be taxed.
Honestly, if a company proposes a contract outside IR35, then I thought they would be responsible for such thing, not me, and btw, it's not my fault if the company will be giving me some tasks that could be handled by an employee, either because the current employees are already doing it, or because generally, employees could do it.
Anyway, if you refuse what they tell you to do and they give you the notice, simple... Regardless what it was contracted before...

For example, how would you judge these situations:

1. I'm a software developer with ton of experience, the company hires me to develop a new feature, or usually a new software.
The company already has developers but they're busy with the current project (very common).

A similar case could be for a Data Engineer, DB Developer, Infrastructure Developer, Cloud Engineer/Developer etc...

2. I'm a security engineer, the company needs a review of the current security posture, but the company obviously already has the the security team.
I saw this service done for 3 months by one contractor in one of the companies I've been employed, we already had our security team but they probably wanted a third party evaluation, pretty common in security, but in theory, the current security team should have been enough, it's just a third party opinion in addition to the current way of working.

3. I work as a project manager, but the other one is on paternity leave, so the company wants to hire someone for at least 6 months. For whatever reason, they propose a contract outside IR35.
How would any entity determine that it's outside or inside IR35?

What counts? The man in paternity leave? The kind of tasks? The fact that you don't find project managers everywhere?? (even though you should see the wonderful projects they create )

I heard this CH8/10 rule now for the first time, but I don't think it's up to me to determine that, would a business consultant know the answer to that? Shall I ask for a consultation before signing any contract?
Honestly, the story that I open the company in 24h and all is gonna be great has fallen very quickly , regardless how easy it is to find such contract, atm they're almost inexistent.

You need to understand that Outside IR35 is a Business to Business relationship, whereas Inside IR35 is an Employment relationship.

Imagine HSBC want to audit one of their departments. What's their choices?

They can either:

A)  Engage another company like EY and give them the brief, agree the price, agree the deliverables and then, once the objectives have been met, the contractual relationship ends. 

In this case, HSBC don't employ the EY staff who physically do the tasks, and they're not responsible for anything like holiday pay, sick pay, pensions etc. 

This is clearly Outside IR35, and HSBC pays EY on Invoice terms rather than PAYE terms.


Or they can choose option 

B ) Hire an auditor themselves. In this example, they may choose to offer a 6 month employment contract, and take responsibility for all employment rights, training, management etc. 

This is clearly Inside IR35, and HSBC pay the individual on PAYE terms rather than Invoices.



I guess put simply, given that you're looking for a job (i.e. you're looking an employer who'll give you tasks and then pay you each month) why are you even thinking about setting up a business?

What's your business going to offer, other than yourself? Why should you be employed on a different basis to everyone else? Aren't you clearly an "Option B" kind of situation?

You've said the reason you want to set up your own business isn't tax treatment so what IS the motivation? Why not just get a job?

Below I answer to your scenarios.
Instead of EY, a security company could provide an audit as well, but the company already has a security team in place, the difference could be that they requested a specific audit, also as a third party perspective (simple as that), so that "contractor" could have his own business, he doesn't need training, he doesn't need anything rather than invoicing the customer.
Also, for me personally there are other reasons too, I don't care about company benefits, I don't care about compulsory extra pension contribution despite they're critical for the pension system in UK, I could also pay dividends to myself from the second year which saves a lot, are these not advantages? (Assuming not so much downtime between contracts)
I think that everyone here believes that I want to play the system or that I didn't study at all on the matter, but I started very humbly in asking questions because it seemed too easy, and I'm not the only one that got it too easy by the look on YouTube .
As I don't believe it is that easy, I tried to get as many possible details, and the worst thing is the assessment between IR35 and outside IR35, which in any case is determined by the company, I won't have chances to decide, though I certainly don't want to be hammered by the HMRC for that, why should I be responsible???
As a business, the client commissions me a job to do, fine, I do that, I still don't get how I should determine the difference between IR35 or not, from the technical perspective, taxation is clear and the gov tool speaks clearly, as I would expect.
Also, before joining the company I wouldn't know their team situation, their company goal or whatever, I shouldn't be responsible for anything honestly...


Btw, in my field, there is no training or similar, either you get everything in 5 minutes of explanation or you're out, and you better OVER-deliver before the end of your probation period or you're out in a day.
Holiday etc, yes, maybe...
So, creating a business is not a bad idea at all, it's just a bad idea as at the moment, I don't see many offers around.

Also, you speak about invoicing, I've got the point between PAYE and invoicing, but just in case, are you instead talking about a single big invoice for the project done VS invoicing per day of work?

Both have their own problems in my opinion, but I wish to know what do you mean.
The first would be complicated, as IT requests are always made by people that should be digging into the ground instead, so I wouldn't go with that.

Invoicing per day of work, already looks more inside IR35, as you may or may not succeed, part of your job may be done by an employee, or by en existing employee/team, or by the employee in paternity leave, whatever, you got the point , but still, how am I supposed to be responsible for the company abuse of the regulations? (intentional or not it doesn't matter)
Also, I can't ask my solicitor to verify every contract I get, which can be more than one at the same time as I may be evaluating multiple at a time, how I'm supposed to be profitable???  

Since 2021 the client has become liable to determine if a role is inside or outside, though some have simply adopted a policy of not accepting contractors other than via umbrellas. It happened earlier for those in the public sector. The client is also the one that is liable for the taxes if an error was made. This was an obvious move for the likes of HMRC to do because previously they had to chase individual firms often only supplying one contractor whereas now they can target a big company and likely there will be several thousand contractors - I think at one point RBS had over 10,000 contractors. 

Now your contract with the client may require you to indemnify them if the determination of outside IR35 is wrong but then that in itself is evidence of it being an outside role because as a business you should be taking on financial risk. You, or your client, also have the option of buying insurance against the risk, normally you will have to use the insurers evaluation tool and can only buy the insurance if it determines its outside. 

At the end of the day if the client determines outside IR35 you are still free to use an umbrella company meaning it effectively becomes an inside role by your choice. No one is going to tell you that you have to operate as outside IR35 if you have reasons to prefer an umbrella. 

Determining if you are inside or outside is not 100% straightforward, there are many shades of grey. Many of the tools will ask if you supply your own tools... I will answer yes as I bring my own laptop, mouse, smartphone with specialist software on both but the reality is more mixed as I will also use kit they provide and some clients won't allow me to use my own software etc. 

Likewise the question on setting how tasks are done... I have a high degree of autonomy but normally have to fit within some form of framework for the client. My current client would be a great example where they liked my tooling and templates etc so much that they've adopted them so am I still using my own or am I now using theirs seeing as they have been harmonised?

Fixed price, day rate, success fees etc are all valid options in business and therefore also for contractors. Get a plumber in and they'll tell you their hourly rate, its little difference. Red flags are your client paying for time when you're not working (eg holiday or sick), paying you to fix something you did wrong, you having to ask for time off rather than telling them you will be unavailable on certain dates. 

As to your last point, by having your own terms that clients must agree to rather than signing their terms. Depending on the nature of your client and/or how you are winning the work they may be thankful you do have your own contract or may not entertain the idea of signing your contract. 

Getting legal advice, buying insurance etc is all part of being a business, your pricing needs to reflect these costs you incur.  QDOS will do a IR35 contract review for £49 though having done a few you start to know what they are looking for. 

I'm curious to know if you get proofs of your job/task done, as in my field you may not reveal certain things, either by coping some of the code or take partial screenshots.
How someone would determine if all was done?
The are also NDAs to sign...

Trust me, in my field no one bothers with it, it's all based on trust to speed things up, and if you don't deliver what they say, whatever they say, you're out, pretty simple, they won't care about how the HMRC will see things. From this perspective, I believe you're suggesting to hire a solicitor to write me the contract, which protects my business and me eventually, but honestly, no one would go that far as the notice can always be shorter than the total length of the contract, and by far, I've seen something like 1 week or 1 month.
I would assume that I did at least a good portion of my job and paying the bill wasn't a waste of money for them, but many projects can get cut off at half way, something may change along the way, a show stopper may come up etc, I won't be responsible for anything as such for example, regardless how my contract is set, but up to that point I should be paid anyway, or whatever it was paid, it doesn't go back...

DoctorStrange

What exactly are your concerns/questions here OP? 

To  perhaps summarise a little:

IR35 Status is a matter of fact, not opinion 

If the client is Medium/Large, the engagement will fall under Ch 10 of ITEPA. That means the end client makes the determination, and carries all risk

If the client is Small, the engagement will fall under Ch 8 of ITEPA. That means YourCo makes the determination, and carries all risk.

If you wind up with an Outside engagement under Ch 8, then your safest course of action is to have QDOS review your contract and working practices, insure you against the tax risk, and advise you on evidence retention.

monkey-fingers

DoctorStrange said:

What exactly are your concerns/questions here OP? 

To  perhaps summarise a little:

IR35 Status is a matter of fact, not opinion 

If the client is Medium/Large, the engagement will fall under Ch 10 of ITEPA. That means the end client makes the determination, and carries all risk

If the client is Small, the engagement will fall under Ch 8 of ITEPA. That means YourCo makes the determination, and carries all risk.

If you wind up with an Outside engagement under Ch 8, then your safest course of action is to have QDOS review your contract and working practices, insure you against the tax risk, and advise you on evidence retention.

The OP is a developer, like many IT contractors. They feel that they're special and will only go for contracts outside IR35, because of their skills and that as they're developing to a timescale and outcome, that they'll always be outside.

Yet many contracts like this won't allow replacements and will determine when leave is taken and so on, which all stinks of inside. It's like companies don't actually ever employ PAYE developers.

MyRealNameToo

Fedcas65 said:

MyRealNameToo said:

Fedcas65 said:

DoctorStrange said:

Fedcas65 said:

DoctorStrange said:

Fedcas65 said:

monkey-fingers said:

Fedcas65 said:

monkey-fingers said:

Sorry, I missed one of the points you asked.

Yes, it takes a couple of weeks for the VAT number to come through. It's not an issue - you can issue invoices without VAT and then backdate them and send new ones once you have a VAT number.

Many outside IR35 contracts are setup like Business to Business (B2B). This means they're often paid monthly, and 30 days in arrears from invoicing. So if you started on the 1st January, you could well find that if you invoice on 31st January that you don't get paid until a few days into March!

I think you're thinking that these outside IR35 jobs are like getting a normal job, but with some risk and well-paid. It's not like that at all.

And talking about dividends.... the way most Ltds work is that you pay yourself a small untaxed wage (£12,500 or whatever your tax code is). The rest of the money your Ltd company takes is taxed at up to 25% in corporation tax. So even if you leave the money in the Ltd company and don't take any dividends, you'll still pay this.

Dividend tax is currently 8.5%, although it goes up to 10.5% in April. That's for the first £37,770. Then it's 33.75% above (shortly to be 35.75%)

Here: I'll give you some basic numbers which don't include any pension contributions.

£500 day rate for 220 days per annum.
Company income: £110,000

I'll assume £3000 in expenses
£12,500 in wages (as above)
£1,126 in employers NI

Company profit: £93,373
Corporation tax: £20,994

The company now has £72,379 to pay out.
You'll actually pay £14,959 in Dividend tax after that.

Giving you a total take home of £57,420 + £12,500 = £70k-ish.

The way you were looking at it on the other thread was thinking like PAYE and you've missed a pile of other things like employers NI and expenses.

You're about £5k a year better off doing it the above way ^

About the kind of job, is it a legal requirement or just what you believe it should be the line of work?
I mean, are you saying that if there is an employee doing a certain job, then the company can't hire a contractor outside IR35 for the same job?
What if he's assigned to that for a certain percentage of his time?

I've seen many contractors along the way, but I've never questioned how they worked there, despite they were doing almost all my tasks.
Though I've seen partners (companies hired by employer) doing something slightly different, and they had their own clients, so that's a bit different but I could have done it too if I had the same client list...
This conversation becomes a bit redundant when it comes to tasks and responsibilities...
I also don't think that you need to deliver what you contract on in IT, you're not delivering a project like the drawing of a house etc, there is an immense grocery list usually and I'm absolutely sure that it will never be in the contract, it's just impossible to put everything there, plus there will be many blockers along the way, which usually require a contract extension, the hire of other contractors or even employees, and probably more often than not, the entire project fails.

At some point I considered the saving in NI with a ltd company, that was very important for me, and I get access to the same "state pension" when it will be the time.

It's quite clear really.

An outside IR35 will be a set of deliverables. For instance, build a website that is capable of X Y and Z.
Often, these aren't necessarily time based. So you might get a daily rate plus project milestone bonuses.

You'll be working mostly alone, but possibly alongside a Project Manager.

It's not repeatable tasks, it's a one-off.

An inside IR35 is similar to an employee. They're often on extendable contracts that can go on for years (in some cases). For instance, I worked with a technical architect who was there for 9 years. That's extreme, but he was effectively doing a job that a company would expect to have an employee doing.

If the contractors you were working with previously were doing stuff alongside yourself as a permanent employee (and as you said, your job), they'd definitely be inside IR35. I wouldn't expect many developers, DBAs or even support staff to be outside.

Pick the wrong one, and HMRC will be after you.

Thanks for this message.

Repeatable tasks are everywhere though, it would be the case from at least more than one point of view, if the HMRC focus heavily on that, it can always identify me always inside IR35.
Obviously now that I know that, I'd try do not do such things, but it's so difficult to judge and in any case I still didn't find any resource on the HMRC that precisely defines what I can do or not, from the technical perspective I mean.

Also, some of the tasks would be already performed by some employee, or it may happen later on, or simply I need to perform tasks that an employee would perform, that's mandatory to conclude a project usually, so shall I refuse to perform such tasks? Honestly, it's impossible to work in this way, every company would kick you out if you refuse to do something like 10% of an employee (and that's a difficult judgment from both parties), as you were hired to deliver the project or whatever, you're required to do some "work-around" anyway. Is this a problem with the HMRC?
I would expect the HMRC to have technical details on the matter if that's so hyper defined, not just that tool you gave me which is only to define your tax status, purely from the taxation point of view, and I wouldn't have doubts on where I stand there.

So as of now, I'm a bit confused by the technical requirements of my job from the HMRC...

The reason you're struggling to reconcile things is that you want to be an employee but not have to pay employment taxes.

You seem to think that being Inside or Outside IR35 is something you're in control of, or that it can be impacted by your own working practices - those things are no longer true.

Practically every role you apply for will be Inside IR35 these days, so in reality there's nothing much for you to consider here.

If you do see any Outside IR35 roles and are lucky enough to get the gig, you'll either be under Ch 10 rules (in which case you've nothing to worry about) or Ch 8 rules (in which case you should consider professional advice).

I'm not trying to avoid taxes, but a few people mentioned that there are more than tax rules, that is, also technical rules for the way you'll be taxed.
Honestly, if a company proposes a contract outside IR35, then I thought they would be responsible for such thing, not me, and btw, it's not my fault if the company will be giving me some tasks that could be handled by an employee, either because the current employees are already doing it, or because generally, employees could do it.
Anyway, if you refuse what they tell you to do and they give you the notice, simple... Regardless what it was contracted before...

For example, how would you judge these situations:

1. I'm a software developer with ton of experience, the company hires me to develop a new feature, or usually a new software.
The company already has developers but they're busy with the current project (very common).

A similar case could be for a Data Engineer, DB Developer, Infrastructure Developer, Cloud Engineer/Developer etc...

2. I'm a security engineer, the company needs a review of the current security posture, but the company obviously already has the the security team.
I saw this service done for 3 months by one contractor in one of the companies I've been employed, we already had our security team but they probably wanted a third party evaluation, pretty common in security, but in theory, the current security team should have been enough, it's just a third party opinion in addition to the current way of working.

3. I work as a project manager, but the other one is on paternity leave, so the company wants to hire someone for at least 6 months. For whatever reason, they propose a contract outside IR35.
How would any entity determine that it's outside or inside IR35?

What counts? The man in paternity leave? The kind of tasks? The fact that you don't find project managers everywhere?? (even though you should see the wonderful projects they create )

I heard this CH8/10 rule now for the first time, but I don't think it's up to me to determine that, would a business consultant know the answer to that? Shall I ask for a consultation before signing any contract?
Honestly, the story that I open the company in 24h and all is gonna be great has fallen very quickly , regardless how easy it is to find such contract, atm they're almost inexistent.

You need to understand that Outside IR35 is a Business to Business relationship, whereas Inside IR35 is an Employment relationship.

Imagine HSBC want to audit one of their departments. What's their choices?

They can either:

A)  Engage another company like EY and give them the brief, agree the price, agree the deliverables and then, once the objectives have been met, the contractual relationship ends. 

In this case, HSBC don't employ the EY staff who physically do the tasks, and they're not responsible for anything like holiday pay, sick pay, pensions etc. 

This is clearly Outside IR35, and HSBC pays EY on Invoice terms rather than PAYE terms.


Or they can choose option 

B ) Hire an auditor themselves. In this example, they may choose to offer a 6 month employment contract, and take responsibility for all employment rights, training, management etc. 

This is clearly Inside IR35, and HSBC pay the individual on PAYE terms rather than Invoices.



I guess put simply, given that you're looking for a job (i.e. you're looking an employer who'll give you tasks and then pay you each month) why are you even thinking about setting up a business?

What's your business going to offer, other than yourself? Why should you be employed on a different basis to everyone else? Aren't you clearly an "Option B" kind of situation?

You've said the reason you want to set up your own business isn't tax treatment so what IS the motivation? Why not just get a job?

Below I answer to your scenarios.
Instead of EY, a security company could provide an audit as well, but the company already has a security team in place, the difference could be that they requested a specific audit, also as a third party perspective (simple as that), so that "contractor" could have his own business, he doesn't need training, he doesn't need anything rather than invoicing the customer.
Also, for me personally there are other reasons too, I don't care about company benefits, I don't care about compulsory extra pension contribution despite they're critical for the pension system in UK, I could also pay dividends to myself from the second year which saves a lot, are these not advantages? (Assuming not so much downtime between contracts)
I think that everyone here believes that I want to play the system or that I didn't study at all on the matter, but I started very humbly in asking questions because it seemed too easy, and I'm not the only one that got it too easy by the look on YouTube .
As I don't believe it is that easy, I tried to get as many possible details, and the worst thing is the assessment between IR35 and outside IR35, which in any case is determined by the company, I won't have chances to decide, though I certainly don't want to be hammered by the HMRC for that, why should I be responsible???
As a business, the client commissions me a job to do, fine, I do that, I still don't get how I should determine the difference between IR35 or not, from the technical perspective, taxation is clear and the gov tool speaks clearly, as I would expect.
Also, before joining the company I wouldn't know their team situation, their company goal or whatever, I shouldn't be responsible for anything honestly...


Btw, in my field, there is no training or similar, either you get everything in 5 minutes of explanation or you're out, and you better OVER-deliver before the end of your probation period or you're out in a day.
Holiday etc, yes, maybe...
So, creating a business is not a bad idea at all, it's just a bad idea as at the moment, I don't see many offers around.

Also, you speak about invoicing, I've got the point between PAYE and invoicing, but just in case, are you instead talking about a single big invoice for the project done VS invoicing per day of work?

Both have their own problems in my opinion, but I wish to know what do you mean.
The first would be complicated, as IT requests are always made by people that should be digging into the ground instead, so I wouldn't go with that.

Invoicing per day of work, already looks more inside IR35, as you may or may not succeed, part of your job may be done by an employee, or by en existing employee/team, or by the employee in paternity leave, whatever, you got the point , but still, how am I supposed to be responsible for the company abuse of the regulations? (intentional or not it doesn't matter)
Also, I can't ask my solicitor to verify every contract I get, which can be more than one at the same time as I may be evaluating multiple at a time, how I'm supposed to be profitable???  

Since 2021 the client has become liable to determine if a role is inside or outside, though some have simply adopted a policy of not accepting contractors other than via umbrellas. It happened earlier for those in the public sector. The client is also the one that is liable for the taxes if an error was made. This was an obvious move for the likes of HMRC to do because previously they had to chase individual firms often only supplying one contractor whereas now they can target a big company and likely there will be several thousand contractors - I think at one point RBS had over 10,000 contractors. 

Now your contract with the client may require you to indemnify them if the determination of outside IR35 is wrong but then that in itself is evidence of it being an outside role because as a business you should be taking on financial risk. You, or your client, also have the option of buying insurance against the risk, normally you will have to use the insurers evaluation tool and can only buy the insurance if it determines its outside. 

At the end of the day if the client determines outside IR35 you are still free to use an umbrella company meaning it effectively becomes an inside role by your choice. No one is going to tell you that you have to operate as outside IR35 if you have reasons to prefer an umbrella. 

Determining if you are inside or outside is not 100% straightforward, there are many shades of grey. Many of the tools will ask if you supply your own tools... I will answer yes as I bring my own laptop, mouse, smartphone with specialist software on both but the reality is more mixed as I will also use kit they provide and some clients won't allow me to use my own software etc. 

Likewise the question on setting how tasks are done... I have a high degree of autonomy but normally have to fit within some form of framework for the client. My current client would be a great example where they liked my tooling and templates etc so much that they've adopted them so am I still using my own or am I now using theirs seeing as they have been harmonised?

Fixed price, day rate, success fees etc are all valid options in business and therefore also for contractors. Get a plumber in and they'll tell you their hourly rate, its little difference. Red flags are your client paying for time when you're not working (eg holiday or sick), paying you to fix something you did wrong, you having to ask for time off rather than telling them you will be unavailable on certain dates. 

As to your last point, by having your own terms that clients must agree to rather than signing their terms. Depending on the nature of your client and/or how you are winning the work they may be thankful you do have your own contract or may not entertain the idea of signing your contract. 

Getting legal advice, buying insurance etc is all part of being a business, your pricing needs to reflect these costs you incur.  QDOS will do a IR35 contract review for £49 though having done a few you start to know what they are looking for. 

I'm curious to know if you get proofs of your job/task done, as in my field you may not reveal certain things, either by coping some of the code or take partial screenshots.
How someone would determine if all was done?
The are also NDAs to sign...

Trust me, in my field no one bothers with it, it's all based on trust to speed things up, and if you don't deliver what they say, whatever they say, you're out, pretty simple, they won't care about how the HMRC will see things. From this perspective, I believe you're suggesting to hire a solicitor to write me the contract, which protects my business and me eventually, but honestly, no one would go that far as the notice can always be shorter than the total length of the contract, and by far, I've seen something like 1 week or 1 month.
I would assume that I did at least a good portion of my job and paying the bill wasn't a waste of money for them, but many projects can get cut off at half way, something may change along the way, a show stopper may come up etc, I won't be responsible for anything as such for example, regardless how my contract is set, but up to that point I should be paid anyway, or whatever it was paid, it doesn't go back...

NDAs normally have carveouts for things you are required to disclose to police, governmental agencies etc. HMRC are not going to want to see code you wrote but will want evidence of ways of working etc which often comes in the form of contracts and affidavits etc 

Personally I do retain certain things, no things with IP in it but just from my insurance point of view I will keep certain emails showing lawyers approved contract wordings, execs authorised work to proceed etc which would all help in a claim against my PI insurance if they claimed my advices cost them money. 

Notice periods and IR35 are different considerations, your own contract could reference a schedule which holds the notice for this particular engagement so is easily changed.. this is how most agency contracts work. 1 month is a fairly long time for a contractor, but not unusual, never seen one longer and the shortest Ive had was 1 day. 

If they can get rid of your with almost no notice is a separate matter to if you are inside IR35 or not and if your contract requires you to indemnify them. My suggestion was that if you find it costly to have to keep using a solicitor to review their contracts then use a solicitor once to draft you a contract and you use that for all engagements. If they are all as fly by night as you claim they should be happy with that as long as its broadly even and does include the basics like them owning any IP you create for them etc. 

You'd need to read your contracts on what happens and it really would depend on why it was cut half way through and/or why the show stopper came up when it did. If you are promoting yourself as an expert in your field, that the show stopper was obvious from the outset but you missed it then you may find the reality is very different to what you think it is. Professional Indemnity claims for consultancies arent that common but know of one chap who messed up badly and designed an impossible solution and only after £300k had been invested was the problem found. He (or his insurers) certainly did have to repay not only his day rate but the rest of the £300k the company had spent trying to do the impossible.