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IT contracting

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triatharoo
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IT contracting

#450972

Postby triatharoo » October 18th, 2021, 11:41 am

I'm just looking at (maybe) going back to contracting after about 10 years out, and after any current advice.
I see that now it is easy to open a bank account, but if anybody has any recommendations - for or against - I'd love to hear your experiences (I already have a secondary current account with Starling so they seem like a good option).

It also looks very easy to open a limited company on the Companies House website - I assume that the model articles are appropriate?

Any advice (or referrals, as long as you're happy with them) for contracting literate accountants (I'm based in the midlands, but I expect that most/all could be done remotely)? I'd actually be happy to do most of it myself, except that there is a very high risk (speaking from experience here) of submitting late and being fined. :roll:

Cheers

triatharoo
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Re: IT contracting

#450984

Postby triatharoo » October 18th, 2021, 12:20 pm

Up to date with the IR35 changes? Sort of - but of course the rules are rather unreliable....

The contract I've been contacted about is deemed to be outside anyway.

I'm rather untrusting concerning umbrellas, but I do understand they might be required - so recommendations for those wouldn't be refused either.

MyNameIsUrl
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Re: IT contracting

#451002

Postby MyNameIsUrl » October 18th, 2021, 1:27 pm

triatharoo wrote:I'm rather untrusting concerning umbrellas, but I do understand they might be required - so recommendations for those wouldn't be refused either.

Umbrellas do seem to have a poor reputation generally, but I used Parasol a little while ago and would recommend them as a starting point at least

didds
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Re: IT contracting

#451006

Postby didds » October 18th, 2021, 1:40 pm

joey wrote:I would strongly advise getting a formal contract review done (I can recommend QDos for that).


I left contracting (or rather contracting left me!) effectively over 11 years ago now, but would still advise the above. However my huge caveat is that if the other party (eg the one that provided the contract) won't agree to any alterations suggested by the review then you are at an impasse whaving shelled out for the review.

TBH Id cynically ignore any claims for a contract provider that its allegedly outside IR35, given you have even less influence over repercussions that one did eleven years ago .

That all said, i still know conttractors ploughing their very honourable trade despute the amchinations of UR35 and its more recent implementations by the party in power, that when in opposition in the late 1990s described it as a stealth tax that they would oppose and reject if the opportunity arose (direct words to me by my then Conservative MP when I spoke to him in surgery about it). Well... make of that what you will...

BigB
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Re: IT contracting

#451172

Postby BigB » October 19th, 2021, 8:58 am

I would echo the general advice about being cautious about IR35 changes and therefore contracts being in or out. However there is no need to do separate assessment reviews with specialists and/or take advice of contracts being "deemed" outside IR35.

There is an HMRC tool that will allow a contract's status to be assessed against sets of questions and then you can know where you will stand. This process is done with the input of both the client and the contractor - I did a challenge on one of my contracts regarding the answers provided by client to a handful of questions and fresh response was agreed and submitted. Output is a ruling and an accompanying PDF report:
https://www.gov.uk/guidance/check-emplo ... us-for-tax
Check Employment Status for Tax (CEST)

Another big thing that may have changed in 10 years and helps alot could be the use of online accounting software. Quickbooks have a version, but so do several others. These online books can be electronically linked to your bank account, your VAT, your CT, and your accountant as a permitted user. Doing books and hitting submission dates so much easier.

best wishes
BigB

bluedonkey
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Re: IT contracting

#451206

Postby bluedonkey » October 19th, 2021, 10:09 am

Lots of good advice here. One additional point regarding evaluating contracts: if the actual way that the contract is exercised (facts on the ground) differs from the wording of the contract, this can scupper any reliance on the contract for the purposes of being outside IR35.

BigB
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Re: IT contracting

#451222

Postby BigB » October 19th, 2021, 10:31 am

joey wrote:
BigB wrote:I would echo the general advice about being cautious about IR35 changes and therefore contracts being in or out. However there is no need to do separate assessment reviews with specialists and/or take advice of contracts being "deemed" outside IR35.

There is an HMRC tool that will allow a contract's status to be assessed against sets of questions and then you can know where you will stand. This process is done with the input of both the client and the contractor - I did a challenge on one of my contracts regarding the answers provided by client to a handful of questions and fresh response was agreed and submitted. Output is a ruling and an accompanying PDF report:
https://www.gov.uk/guidance/check-emplo ... us-for-tax
Check Employment Status for Tax (CEST)


CEST has been heavily criticised as being unfit for purpose for a long time now. HMRC are even losing cases in court due their reliance on it (look at what Dave Chaplin has to say on the subject). Given that, I would say a review by a third party is a sensible thing to do, especially given that the cost is peanuts.


I understand that CEST is criticised heavily (as have all tax office interpretations been on IR35 for 2 decades!) but in regard to the OP's statement that there is a contract deemed to be outside IR35, then this would be a simple way to confirm that that is also the HMRC view.

In the event that the proposed contract does not give the 'outside' answer on CEST, how many individuals are really going to get separate advice for £50 stating that the contract is possibly 'outside'. You'd be exposing yourself to risk, lots of uncertainty, stress etc. Unless of course the extra advice can come with some indemnity insurance against an HMRC claim.

The real challenge on a contract-by-contract basis for an individual is to understand/agree with the client if they see it inside/outside and to see if the CEST assessment matches. Disagreements can be seen in advance, far preferable to the earlier days, and decisions made accordingly.

moorfield
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Re: IT contracting

#451433

Postby moorfield » October 19th, 2021, 8:56 pm

triatharoo wrote:I'm just looking at (maybe) going back to contracting after about 10 years out, and after any current advice.



Thinking similarly. Indeed the landscape has changed substantially since then and my working assumption is I would most likely be working within IR35 anyway. This doesn't bother me too much as my motivation for returning to contracting is different now - then it was rapid accumulation of income at a favorable tax rate, now it would be the possibility of working mostly at home, in areas/projects that interest me, being able to afford a few decent breaks pottering/doing other stuff, moorfield juniors starting to roll off the production line next couple years, and detaching myself from the utter utter nonsense that is semi annual objective and appraisal reviews (in my industry/employer at least). So probably it would be a brolly company for me, with any spare income funneled into VCTs to offset some income tax (I've pretty much put as much as I want to into pensions now, the LTA beckons).

Fluke
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Re: IT contracting

#451473

Postby Fluke » October 19th, 2021, 11:35 pm

Am I missing something here? The IR35 changes that came in over the past few years mean that it is no longer the contractor who is held responsible if they are assessed to be inside IR35 while claiming to be out, it is the end client. If the end client can’t demonstrate to the satisfaction of the inspectors that it is, in all respects, outside, then they - the end client - will be held accountable for any unpaid tax and NI contributions, not the contractor. So why would the contractor need to get the contract reviewed or get IR35 investigation insurance? That surely only applied when it was the responsibility of the contractor. For this reason most end clients simply don't offer them because it is too much hassle and there are too many grey areas that could be seized upon and picked apart later, consuming huge amounts of someones time. It is simply easier for large organisations who employ hundreds of contractors just to have a blanket rule to make all contracts inside except for a few rare exceptions.

If you are being offered a contract that is outside and clearly states that it is, I’d take it if I were you. However, the contract should state, or you should add some sort of addendum that clearly lays out your deliverables, and working practices for the term of the contract that leaves no one in any doubt. e.g

you will work under your own management and keep your own schedule.
you will work between your own office and that of the client site as and when you see fit (no arriving at 9 and leaving at 5)
you will not be managed or told which meetings to go to
you will deliver an agreed set of deliverables which will be the intellectual property of the client but will be on your own headed notepaper (or equivalent depending on the deliverable)
you may provide a substitute if you are unavailable at any time, or bring in other contractors to work on the project with you.
You do not request days off or holidays you simply state your availability for any given week, and bill accordingly.

And so on and so forth. If you both agree that you will work in this way at the outset and you work in this way for the term of the contract then it will be very difficult for HMRC to determine otherwise. Although, as you are outside you have immediately put your head above the parapet and they might have a go anyway.

The question is, is this contract really outside and are you really sure this is how you want to work?

Fluke
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Re: IT contracting

#451510

Postby Fluke » October 20th, 2021, 8:45 am

joey wrote:
Not quite so. Firstly, there still are some circumstances where status determination and responsibility lies solely with the contractor (e.g. if you are contracting with a small company where turnover and/or number of staff is beneath some threshold, can’t remember the figure off the top of my head).


Maybe, but the vast majority of contracts are with large organisations

Secondly, in the other circumstances — where status determination has moved to the end client — responsibility is actually joint between the client and contractor. Therefore any errors in tax and NI are considered the joint responsibility of both parties.


Ah, didn't know that, but the point is it's not the contract that matters it's how you work, and are seen day in day out to be working, that matters. You have to live it, not just tick a few contractual boxes. At least now the client has a vested interest in ensuring you do which is precisely why they don't offer these contracts very much anymore. The investigating inspectors will interview people from the client organisation and if it emerges that you clocked in at 9 out at 5, hour for lunch, drinks with the team on Friday, and your work is indistinguishable from anyone else's, then you my friend were part of the team and should have been PAYE all along. Here's my bill, have a good day.

HMRC have recently begun compliance checks in the finance and (I think) O&G sectors so I imagine we’ll start to see what that means in practise soon enough.


There'll be some rich pickings there I suspect.

Fluke
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Re: IT contracting

#451575

Postby Fluke » October 20th, 2021, 11:44 am

joey wrote:Both contract and working practises matter.


But not equally, not even close. IR35 inspectors hold very little truck with contracts, it's what emerges from their interviews with the client that determines their assessments, not what the contract says or doesn't say.

I mentioned up-thread that the companies offering contract review also scrutinise working practises for this very reason.


How do that do that? and more to the point, why? Is that person going to stand up for you in the tribunal? The contractor should be fully aware of what it is to be outside of IR35, so should the client, there shouldn't be the need for a 3rd party to check that both sides are sticking to the agreement. Sounds like another cottage industry to me.

Adamski
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Re: IT contracting

#451580

Postby Adamski » October 20th, 2021, 11:50 am

Companies are desperate for good qualified employees. Depends what you're after but nothing wrong with simply going on a company's payroll short term, few months. That way don't have to worry about other stuff.

I've done a 9 month contract as an employee in finance, asked and got a completion bonus, all in all worked out very well.

bluedonkey
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Re: IT contracting

#451589

Postby bluedonkey » October 20th, 2021, 12:01 pm

Several years ago when the extra income tax on dividends was introduced, the ltd co route has been less of an advantage tax-wise anyway.

didds
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Re: IT contracting

#451929

Postby didds » October 21st, 2021, 11:00 am

bluedonkey wrote:Several years ago when the extra income tax on dividends was introduced, the ltd co route has been less of an advantage tax-wise anyway.



So given that above... is it still the case that in effect Ltd Cos are still in reality required to create the clear "split" from the worker being employed by the client and themselves/someone else... CF self-employment versus payrolled worker ? Because AIUI way back when this was a "required status" for contractors. this was so that clients werent deemed to be employers with employers NICs and PAYE responsibilites etc.

??


Put another way maybe - if Ltd Cos are no longer really a benefit why would anybody now use one for contracting?

didds

bluedonkey
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Re: IT contracting

#451940

Postby bluedonkey » October 21st, 2021, 11:42 am

didds wrote:
bluedonkey wrote:Several years ago when the extra income tax on dividends was introduced, the ltd co route has been less of an advantage tax-wise anyway.

So given that above... is it still the case that in effect Ltd Cos are still in reality required to create the clear "split" from the worker being employed by the client and themselves/someone else... CF self-employment versus payrolled worker ? Because AIUI way back when this was a "required status" for contractors. this was so that clients werent deemed to be employers with employers NICs and PAYE responsibilites etc.

??

Put another way maybe - if Ltd Cos are no longer really a benefit why would anybody now use one for contracting?
didds

I'm really only familiar with the tax aspects of contracting. It would be interesting to hear what is happening now in negotiations between the contracting parties. From what I hear from accountants, a lot of contractors are ditching their ltd co's.

One aspect from BigCo's pov I think is that having a "ltd co employee" takes that person out of the headcount, and also makes it easier to dispense with them.

PhaseThree

Re: IT contracting

#452185

Postby PhaseThree » October 22nd, 2021, 10:23 am

It looks like my current contract arrangements are coming to an end and I will need to move to being employed via some form of Umbrella outfit. Does anyone have personal experience and could recommend one ?

Fluke
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Re: IT contracting

#452249

Postby Fluke » October 22nd, 2021, 2:07 pm

didds wrote:Put another way maybe - if Ltd Cos are no longer really a benefit why would anybody now use one for contracting?

didds


The benefit to the client is that they can buy in specialist skills they don't have in-house to plug a gap for the lifetime of the project. They don't have to manage the person, just point them in the right direction, remove any obstacles, and let them get on with the job they're paying them for. They can easily terminate the contract if they're not happy. The benefit to the contractor is that they have skills that people need and are prepared to pay the going rate for. They get to work on their own terms, through their own companies, they get to bring in help from other contractors if they need it and work for multiple clients simultaneously if they wish. T'was always thus, it's just that companies saw a way of keeping the head-count down along with the tax/NI bill, and contractors saw a way of earning more than they were worth for mediocre skills. The majority were always inside of IR35 if truth be told, as evidenced by the scale of uptake of the new 'inside IR35' contracts when the changes came in.

fisher
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Re: IT contracting

#452256

Postby fisher » October 22nd, 2021, 2:17 pm

PhaseThree wrote:It looks like my current contract arrangements are coming to an end and I will need to move to being employed via some form of Umbrella outfit. Does anyone have personal experience and could recommend one ?


Have a look on this forum and maybe start a thread on there. I used to frequent the forum a lot when I was a contractor.

https://forums.contractoruk.com/business-contracts/
https://forums.contractoruk.com/accounting-legal/
https://forums.contractoruk.com/umbrella-companies/

StepOne
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Re: IT contracting

#589952

Postby StepOne » May 18th, 2023, 3:24 pm

didds wrote:Put another way maybe - if Ltd Cos are no longer really a benefit why would anybody now use one for contracting?didds


I still use one, for my part time work with a local software company. Tax wise I am better off and so are they. Am I missing something?

I do wonder why the gov went through the hassle of ir35 when they could simply have started taxing dividends at 20% (outside an ISA) and solved the problem as a stroke.

didds
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Re: IT contracting

#589979

Postby didds » May 18th, 2023, 5:02 pm

StepOne wrote:
didds wrote:Put another way maybe - if Ltd Cos are no longer really a benefit why would anybody now use one for contracting?didds


I still use one, for my part time work with a local software company. Tax wise I am better off and so are they. Am I missing something?

I do wonder why the gov went through the hassle of ir35 when they could simply have started taxing dividends at 20% (outside an ISA) and solved the problem as a stroke.



my query was on the premise of

So given that above... is it still the case that in effect Ltd Cos are still in reality required to create the clear "split" from the worker being employed by the client and themselves/someone else... CF self-employment versus payrolled worker ? Because AIUI way back when this was a "required status" for contractors. this was so that clients weren't deemed to be employers with employers NICs and PAYE responsibilities etc.


ie if that is no longer the case then the ltd company may no longer be necessary - undoutedly there may still be benefots, but only if the ltd company can AND THEIR CLIENTS can avoid IR35

WRT your second point - You'd have to ask Gordon Brown.


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