Beating IR35 for Good
A reader sent us this article, on beating IR35, and constitutes his own views. See if you agree with him.
I’ve been involved in the battle against IR35 for as long as I remember and finally I am being persuaded of the direction lobbying needs to take to genuinely help contractors.
Two Types of Contractor
Contractors tend to come into 2 categories:-
- The so-called “Bums on Seat” contractor who works in a way that is largely indistinguishable from permanent members of staff.
This accounts for probably 70% of all software and IT contractors.
2) The so called “Bransons”. These guys are actually not really Bransons at all but do certainly work in a way which looks like any other geniune business, may have employees, will usually have their own office and come across as CREDIBLE BUSINESSES TO JOE PUBLIC.
The problem is that both methods of working are legitimate forms of business but the government values one more than the other tax-wise.
Limited Company the Correct Form
Clearly the Limited Company is the correct form for the 2nd category and nobody in government would have a problem with it.
Clearly claiming that the 1st category NEEDS Limited Company status is false and lacks credibility.
Because anyone with half a brain can tell that the closest thing these contractor resemble is either the jobbing plumber or electrician in terms of the temporary nature of the work.
The fact that the work tends to drag on for years rather than hours is just a matter of scale and nothing else.
Not Genuine Businessman
To claim that a contractor sitting on a client chair, using their equipment for months on end on a contract which relies on time is actually a genuine businessman is laughable.
These contractors are self employed jobbers but without any right to use that status.
The Way Forward
So there are several things which need to happen.
1) Jobbing self employed contractors MUST have a right to be declared self employed.
This is a highly defensible position and you would have relatively little problem with lobbying on this score.
The pawn to sacrifice is the NI and tax incentives of Ltd Co status.
A rate on both somewhere around that a plumber receives would be correct and fair.
2) To be declared as self-employed, the jobbing contractor need not have a contract which talks about right of substitution. However, it must deal with Direction and Control and Mutuality of Obligations.
Self Employment Criteria
To satisfy the criteria for self employment, all contracts should be work-based.
In other words, Contractor X hired to do job Y.
At the moment contracts normally say Contractor X hired for Y months.
The latter is essentially a set term employment.
The beauty of the named work item is that a contractor can know easily and for certain whether he falls in or out of IR35 but the presence or absence of the work item.
Beating IR35 depends on what type of contractor you are.