Contracting for same employer outside IR35

[newbiehere]

Hi,

I am currently a permanent employee in a company and leaving them in 15 days. I have other offers outside which I am considering.

My current employer has offered me a contract role as I was planning to do contracting.

The profile of the contractor role is different to the current profile and I will not be doing exactly the same work.

Could you please advise if there are any ways / steps to keep my contracting job outside IR35 within the same company.

Thanks in advance

[Wanderer]

IR35 is about working practices and would depend on various factors such and RoS, MOO and Direction and Control. These can be detailed in the contract wording but make no difference if the working practises are the same and continue as employee/employer.

Added to this, the fact you are leaving as an employee and starting effectively next day as a contractor at the same place will get the HMRC's spidey-senses tingling.

So, either accept you are caught by IR35, or join the PGC and build a wall of defence.

[vin123]

IR35 is not about working practices, it is a legislation to tackle tax avoidance.

Put it simply, If you declare you are working "inside IR35" -then you pay more tax.
If you declare you are outside IR35 and pay less tax, is up to you to make sure your work is really deemed outside IR35.
HMRC has vested powers within them to make inquiry about working practices. They will assess whether someone is really operating as they claim or just a tax avoidance mechanism.

They do investigate routinely and statistically it turns out to be less than 2% of the cases. So if your limited company gets picked up for an IR35 enquiry, then consider yourself extremely unlucky, hence there are lots of insurance providers out there who will provide cover for you.

[Wanderer]

IR35 is not about working practices, it is a legislation to tackle tax avoidance.

Put it simply, If you declare you are working "inside IR35" -then you pay more tax.
If you declare you are outside IR35 and pay less tax, is up to you to make sure your work is really deemed outside IR35.
HMRC has vested powers within them to make inquiry about working practices. They will assess whether someone is really operating as they claim or just a tax avoidance mechanism.

They do investigate routinely and statistically it turns out to be less than 2% of the cases. So if your limited company gets picked up for an IR35 enquiry, then consider yourself extremely unlucky, hence there are lots of insurance providers out there who will provide cover for you.

Honestly, do you contradict for fun? IR35 IS about working practises.

If you read this 'posters' response in detail you'll see he's actually agreed with my post, I do think our illustrious poster has an issue with me, and attempts to antagonise me, I am the James Hunt persona, he's the Niki Lauda!

Let's race!

[vin123]

Honestly, do you contradict for fun? IR35 IS about working practises.

If you read this 'posters' response in detail you'll see he's actually agreed with my post, I do think our illustrious poster has an issue with me, and attempts to antagonise me, I am the James Hunt persona, he's the Niki Lauda!

Let's race!

Matey, I have nothing against you. All I try here is help people, by furnishing correct and accurate facts.
HMRC cares about "working practices" only if there is tax avoidance - hence the IR35 legislation.



http://www.hmrc.gov.uk/ir35/

PS: Let's not race. Peace. Rather focus on helping.

[newbiehere]

First of all, thanks vin123 and Wanderer for your response. It really helps to make things clear.

So, it appears to me that I am in a high risk group if I do contracting from Limited company for my current employer.

Is insurance a safe bet in such case or are there any hidden facts about these insurance companies. I am looking to take an insurance that covers any fees during inquiry and any tax liabilities. Does that cover everything?

Thanks in advance.

[Wanderer]

First of all, thanks vin123 and Wanderer for your response. It really helps to make things clear.

So, it appears to me that I am in a high risk group if I do contracting from Limited company for my current employer.

Is insurance a safe bet in such case or are there any hidden facts about these insurance companies. I am looking to take an insurance that covers any fees during inquiry and any tax liabilities. Does that cover everything?

Thanks in advance.

Join the PCG for a start, and if you get your standard insurances (PL/PI) from QDOS they will check three of your contracts for IR35-ness for free.

Of course, I still maintain it's the working practices that matter, not what the contract says but it's best to insist from the start and get them both right; watch out for;

RoS - right of substitution - you should retain the right to supply a substitute instead of yourself.

MoO - Mutability of Obligation - basically you dont; have to accept work given outside the scope of contract and neither does the client guarantee any.

DaC - Direction and Control - The client can give you work to do but not tell you how it should be done

These are all pointers away from an employer/employee relationship.

This is what I do, I've been contracting since 1992 in IT and i work my own hours, take days off to suit me (with reference to the client of course) what I don't do is 9-5 because 'that's what the employees' do and I don't take forced holidays.

[newbiehere]

Thanks Wanderer for your response.

Please excuse my lack of knowledge here but is there any difference in PCG and QDos insurance cover. The benefits of both look similar.

https://www.pcg.org.uk/join-us
and
http://shop.qdosconsulting.com/freelanc ... cover-tlc/

Do I need to take both these covers or one is enough?

Thanks in advance.

[Wanderer]

Thanks Wanderer for your response.

Please excuse my lack of knowledge here but is there any difference in PCG and QDos insurance cover. The benefits of both look similar.

https://www.pcg.org.uk/join-us
and
http://shop.qdosconsulting.com/freelanc ... cover-tlc/

Do I need to take both these covers or one is enough?

Thanks in advance.

I'd go with PGC, it's more all-in. QDOS is good though! PGC gives you a lot more inc IR35 issurance (IIRC) and HMIT investigation insurance as well as a whole lot of extra benefits.

[newbiehere]

I'd go with PGC, it's more all-in. QDOS is good though! PGC gives you a lot more inc IR35 issurance (IIRC) and HMIT investigation insurance as well as a whole lot of extra benefits.

But PCG is not an insurance provider. So, how do you think PCG is everything in?

[Wanderer]

I'd go with PGC, it's more all-in. QDOS is good though! PGC gives you a lot more inc IR35 issurance (IIRC) and HMIT investigation insurance as well as a whole lot of extra benefits.

But PCG is not an insurance provider. So, how do you think PCG is everything in?

AIUI they offer IR35 checks, not the insurances, u'll need them too, my bad, I'm 52, and my mind has gone!

Contracting is not the holy grail it used to be!

[vin123]

Thanks Wanderer for your response.

Please excuse my lack of knowledge here but is there any difference in PCG and QDos insurance cover. The benefits of both look similar.

https://www.pcg.org.uk/join-us
and
http://shop.qdosconsulting.com/freelanc ... cover-tlc/

Do I need to take both these covers or one is enough?

Thanks in advance.

Firstly, note that there are only 8 or 10 cases so far where IR35 has been bitterly fought by the Revenue to make a ruling against the favour of Director/Shareholder especially with section 660A(This is is applicable if you use your partner/wife/shareholder to channel non-NIC paid dividend income to your personal/family benefit).

In my view, if you are starting contracting you really do not need IR35 Tax liability insurance - which PCG does not cover anyway (unless of course you charge a humongous rate of over £2000 per day and plan to shift income between 4 partners who are shareholders of your company to avoid NIC all together )

What you need cover for is basically "professional representation costs". This is a basic need as an when Revenue initiates an investigation process (note: this could even be non-IR35 related tax inquiry). Here a tax lawyer and his/her legal back office will support your accountant with your case files for the the duration of case. Please note, with "professional representation cover", tax liability is not covered (if Revenue comes to conclusion that your working practices was really inside IR35 while you declared yourself outside)

Hence personally, I would not recommend both solely for IR35 tax protection purposes.
I was a PCG member till 2011, and I have not renewed with them since then. Reason being, I realised I wasted a lot of money on something for years when my accountant started offering the same cover at a fraction (to be precise: 1/5th of the PCG premium membership cost).

This is my advise:

Since you are starting contracting using Ltd company, I am assuming you must have already found an accountant.
Ask your accountant whether his monthly/annual service fee covers "Revenue (HMRC) investigation fee protection costs".

Most accountants 'absorbs' these investigation fee protection cover costs and offer it to their clients since it saves a lot of hassles to them as well..

Hope this helps.

[newbiehere]

Thanks Vin123 for your response, this surely helps.

I will try to find some accountant that offers such representation. I am about to start contracting in few days so in a 'building blocks' stage at the moment. This forum and post has definitely helped me with my doubts.

The following is what I am thinking of doing, will appreciate your thoughts:

Company - http://www.companiesmadesimple.com/

Accountant - http://www.capricaonline.co.uk/contractor-accountants/ or would you prefer a local accountant?

Thanks in advance.

[vin123]

Thanks Vin123 for your response, this surely helps.

I will try to find some accountant that offers such representation. I am about to start contracting in few days so in a 'building blocks' stage at the moment. This forum and post has definitely helped me with my doubts.

The following is what I am thinking of doing, will appreciate your thoughts:

Company - http://www.companiesmadesimple.com/

Accountant - http://www.capricaonline.co.uk/contractor-accountants/ or would you prefer a local accountant?

Thanks in advance.

There is a lot of paper work involved if you are a director of limited company. Most of them are routine and self-administered (for e.g paying invoices, salary, PAYE, expenses,VAT etc etc)
Just a friendly warning it is indeed a painful process to get used to all the above. Once you are settled - it hardly takes a 3-4 hours each month to complete the same..

Accountant relies on you for key information for him to do work for you.
For e.g your sales invoices i.e contract inbound payments received), expenses, salary taken, bank statements etc.
If you do not furnish the items he need, then he won't be able to service you.
So there is a relationship element that is very vital, which I would give importance to.
If you have a local accountant - it will be handy, but I wouldn't worry too much if you can pick things up via phone and email.