I can’t afford to be an umbrella company worker: how can I ensure my next gig is “outside IR35”?
TAX CLINIC
Q: I can’t afford to work inside IR35 anymore as an IT contractor, the umbrella and payroll fees and National Insurance hikes are eating into my day rate. How could I legally stay outside IR35 while working project to project, much like an architect or interior designer does without being classed as an employee/inside IR35? Do I have to be juggling more than one project at a time?
A: The determination of whether a role is inside or outside IR35 rests with the end-user of your services if that end user is a medium or large entity. That is essentially any entity with a turnover in excess of £10m. They will decide if amounts paid to you will need to pass through a fee payer who will be responsible for tax deductions. That fee payer will also charge a fee. If you work for a small entity, then the obligation to consider whether you are inside or outside IR35, rests with you.
This question of whether a role is inside or outside IR35 is a complex one and will depend entirely upon the facts. There is no form of contract or legal wording that can make this any easier. It is necessary to examine all the aspects of the role and how it is performed in order to come to a decision. In doing so, it does not matter if you have one contract a year or 12. Each one has to be examined on its own merits.
There are some key questions you can ask (yourself or your end client) and these will – if answered honestly -give a good indication of final status.
First, is there a situation in which you will be paid for turning up at the end client, regardless of whether there is any work to do?
Second, how much control does the end client exert over the project?
Accepting that you have skills the end client does not and that they will not step into that space, they can still tell you how they want their aims achieved, when and how progress will be tracked.
Third, there are numerous questions here that will carry weight.
- Are you embedded in the end client’s business?
- Are you taking any financial risk in the project?
- Who do you report to and what is reported?
None of these is decisive on its own and each much be considered and weighed in the final result.
Finally, many agencies and recruiters will say that a right to substitution is a guaranteed “outside IR35” condition. It’s not. A right of substitution without any practical means of doing that is meaningless.
