I have another question as well - has anyone got any knowledge or experience of the false self-employment legislation from April 2014?
I sub-contract for an accountant and go in regularly (once per week) to one of her clients offices to do their books. As I understand it, this legisltion is trying to make subcontractors into employees if they go in regularly for a long time to a client. If you have a limited company it's fine but not if you are selfemployed. The accountant I work for would idealy like me to set up a limited company, however I would prefer not to have to go down that route. Has anyone been in a similar situation or encountered this?
This is primarily directed at people classifying themselves as self employed wg#hilst only working for one company, and IT contractors primarily have fallen into this area. Its known as IR35 and I don't think this affects you unless this is your only source of work. If you are a bona fide bookkeeper with other clients then you are genuinely self employed.
I've got an IT consultant and checked IR35 out before I engaged him. He told me his contract with the company he's at now was only for 6 months. I thought as long as they had an end contract date or were there for less than 2 years he would be ok, am I right?
IR35 doesn't apply to the self employed just companies, however the onus of who is responsible for any outstanding tax transfers from the contractor (in the case of the self employed) to the company engaged in the work. This would be why the accountant is keen for you to incorporate. However, as John says, if you have other clients I would suggest your self employed status should stand up but if it doesn't you wouldn't be liable for further tax. Having clauses in any contracts such as substitution of labour help the situation and showing that you take a risk, i.e. if the work is not up to scratch you don't get paid or you put it right free of charge.
I've got an IT consultant and checked IR35 out before I engaged him. He told me his contract with the company he's at now was only for 6 months. I thought as long as they had an end contract date or were there for less than 2 years he would be ok, am I right?
Georgie
No sorry, IR35 is based on the criteria HMRC has laid down, not the length of time the contract is for. IR35 applies from day one should he be deemed to fall foul of it.
IR35 doesn't apply to the self employed just companies
Cheers Rob. What's the situation regarding the self employed person who only works for one company? My understanding was that HMRC class this as not genuinely self employed.
In Carin's situation she would fall foul of IR35 if she was only working for that accountant and became Ltd, so it seem's a silly request.
Hi John, the situation for self employed is that status is determined by weight of evidence rather than clear cut legislation. There is a status indicator tool on hmrc website but the cynic in me thinks that will always lead to a 'you're an employee' answer. It really comes down to risk, supply of heavy tools, substitution of labour. When you have just the one client who pays you a set amount for every hour you work and you work regular hours each week, it may be difficult to persuade hmrc that you are self employed but not impossible. That arrangement may be the best business decision you can take, you may be looking for other work (though of course you can be employed and self employed so that won't be conclusive). On the plus point from the self employed point of view, as I said in my earlier post, it is the contractor who is going to take the hit should hmrc deem you employed as they would be the employer.
In Carin's situation the accountant would be protected from any tax liabilities if she incorporated. Also assuming she had other clients then I would say IR35 would not be an issue. I don't know statistics but I don't think hmrc have had many, if any, successful judgements brought against companies under IR35 legislation. Whether that is set to change with the attitude towards aggressive tax avoidance remains to be seen and then are we on the slippery slope of losing the 'low salary, high dividend' tax planning tool later on??
in the good old days it used to be that if you had several clients then you were safe from it but have you noticed that the beast has adapted to that and now people can find themselves in situations where some concurrent contracts are deemed IR35 whilst others are not rather than the business as a whole being IR35 or not.
One of those subtle changes that slipped in the back door somewhere along the way.
I share your cynicism as to the HMRC tool.
The thing that HMRC have got that we haven't is lots of money to fight these cases although my impression is that even HMRC staff are now becoming a little jaundiced by the lies / spin painted around PSC's in order to sell IR35 in the first place.
I would have good money on it that HMRC have spent more trying to enforce IR35 than it has ever brought in for them above life before it existed.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Apparently I'm classed as self employed according to the indicator, yay!! The questions are quite skewed though and I think what saved me was having to provide my own equipment/tools without any re-imbusement.
False self employment was quite rife in the late part of the first decade post millenium (there must have been an easier way of writing that I'm sure) with many companies in the service industry insisting you be self employed, but now the rage seems to be zero hours contracts.
Hi John
My understanding is that you can be for some of your contracts even if not for all!
Did you all notice that the HMRC will withdraw the business entity tests (BETs) and example scenarios from 6 April 2015, and there are no plans to replace them. From their website:-
The IR35 Forum reviewed the (BETs) and found that they were not helping customers as theyre:
used very little
not fulfilling their intended purpose
You can continue to take the BETs if you wish or are asked to do so as part of a tendering process until 6 April 2015.
Does that not tell you something!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
111 Bookkeeping and Payroll wrote:then they wonder why peeps fall foul of the regulations.
Could that be to do with the fact that there is a vested interest by those setting the tests for those who need to consider them to fail!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
