Employment Status

Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.

Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.

Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.

The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]

You are here: | |

A General Guide to IR35 for Contractors

Do the rules apply to me?

The rules will apply to your intermediary (own limited company) if it does not meet the definition of a Managed Service Company, and you can answer 'yes' to both the following questions.

1. Would you be an employee if you worked for your client directly and not through your company or partnership?2. Does the company or partnership you work through meet the conditions set out below?

Would I have been an employee of my client?

The IR35 rules only apply if you would have been an employee of your client, had it not been for the existence of your Personal Service Company or partnership.

If you can answer 'yes' to most of the following questions, you would probably have been an employee of your client for the contract in question and therefore within the new rules.

1. Do you work set hours, or a given number of hours a week or a month?2. Do you have to do the work yourself rather than hire someone else to do the work for you?3. Can someone tell you at any time what to do, when to work or how to do the work?4. Are you paid by the hour, week or month?5. Can you get overtime pay?6. Do you work at the premises of the person you work for, or at a place or places he or she decides?7. Do you generally work for one client at a time, rather than having a number of contracts?

And There's More

If you can answer 'yes' to most of the following questions, you would probably not have been an employee of your client and therefore outside the new rules.

  1. Do you have the final say in how you do the work for the client?
  2. Can you make a loss on the contract?
  3. Do you have to provide the main items of equipment you need to do the job for the client, not just the small tools many employees provide for themselves?
  4. Are you free to hire other people on your own terms to do the work you have taken on?
  5. If you are free to hire other people on your own terms, do you pay them out of your own pocket?
  6. Do you have to correct unsatisfactory work in your own time and at your own expense?
  7. Do you have a number of clients at the same time?

You will have to think about each contract individually. Some people will find that they have some contracts, which would have been employment and so come within the rules, and others which do not.

The number of clients you have may be relevant to the decision whether your work for each as an employee, or as a self-employed person. If you have many different clients this may indicate self-employment, and be a factor that should be considered in addition to the actual details of each contract.

If you have a number of different clients, but are unsure whether you are within or outside the rules, you may wish to talk to your contractor accountant or you can see if you fall Inside or Outside of IR35 using the IR35 Status Calculator

[44437 Page Views]

HMRC Compliance

It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.

Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].

Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.