IR35
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IR35
the chancellor in his budget on wednesday announced a review into whether IR35 should apply to the private sector
https://www.contractorcalculator.co....8210_news.aspx
seems to me that "freelance" flying instructors could now go within IR35 if it is extended.
even though they get none of the benefits of an "employee"
did anyone else consider this? or get any advice? as it could be devastating tax wise if someone is currently operating through a limited company to provide their services
https://www.contractorcalculator.co....8210_news.aspx
seems to me that "freelance" flying instructors could now go within IR35 if it is extended.
even though they get none of the benefits of an "employee"
did anyone else consider this? or get any advice? as it could be devastating tax wise if someone is currently operating through a limited company to provide their services
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IR35 already does apply to the private sector - it's the changes he's talking about
If you pass the current IR35 tests (more than one client, control your destiny, don't have an office/phone/card from an employer) you should be OK
the danger is that a company who employs you will decide to avoid any risk and just say you are an employee -your choice in such a case is obvious - you quit working for them
A freelance instructor with his own 'plane is operating through their own company and has many clients/customers but no "employer" so they should be OK - if, on the other hand, you are freelance and working for a training company who say provides the 'plane.......... well, unless you work for several different ones, you are already probably in trouble if they catch you.
If you pass the current IR35 tests (more than one client, control your destiny, don't have an office/phone/card from an employer) you should be OK
the danger is that a company who employs you will decide to avoid any risk and just say you are an employee -your choice in such a case is obvious - you quit working for them
A freelance instructor with his own 'plane is operating through their own company and has many clients/customers but no "employer" so they should be OK - if, on the other hand, you are freelance and working for a training company who say provides the 'plane.......... well, unless you work for several different ones, you are already probably in trouble if they catch you.
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HH catches the main points.
Turning it around... you are possibly at more risk now than in the event of a change. If you are supplying your services via your own ltd company you are responsible for getting your tax status correct, get it "wrong" and you are liable for the back taxes fines etc etc. In the public sector it is now the Public Sector Body which is responsible. If they say you are out and HMRC later prove you not to be then the PSB is liable for the tax, fines etc. This is part of what has driven the risk averse approach of many PSBs.
Thinking of your status now. This is based on my own research in a non-aviation field. IR35 is really complicated so get some proper advice!
However, the three critical tests for IR35 are:
1/ Substitution
2/ SDC (Supervision / Direction / Control)
3/ Mutuality of Obligation
So:
1: As a "freelance flying instructor (or airline pilot) working via your own limited company do you have the contractural right to send someone else to do your work. If you do then exercising that right regularly is a great benefit.
2: Is how you work laid down for you by the contracting organisation. Do you have specific report times, are you performance managed or supervised by a line manager, do you work to an ops manual. Can you be swapped from one task to another without formal contract changes.
3: Do you have to accept work from them (e.g. turn up even if there is nothing to do) and do they have to pay you even though they may not have any work for you.
Nothing really has changed about those recently.
What's been seen in the public sector is even if people do pass those tests the contracting PSB has decided they are "in" anyhow. It's then very difficult to challenge those decisions.
The way the rule change was put in it was for payments after a certain date (April 2017) and not work done after that date. So people had done work, submitted an invoice and then been told they were inside IR35 and had huge chunks taken off. Some public sector bodies then refused to release payments unless their opinion was accepted. I know one consultant currently taking a client to court over it which is hardly going to get future work from them.
Turning it around... you are possibly at more risk now than in the event of a change. If you are supplying your services via your own ltd company you are responsible for getting your tax status correct, get it "wrong" and you are liable for the back taxes fines etc etc. In the public sector it is now the Public Sector Body which is responsible. If they say you are out and HMRC later prove you not to be then the PSB is liable for the tax, fines etc. This is part of what has driven the risk averse approach of many PSBs.
Thinking of your status now. This is based on my own research in a non-aviation field. IR35 is really complicated so get some proper advice!
However, the three critical tests for IR35 are:
1/ Substitution
2/ SDC (Supervision / Direction / Control)
3/ Mutuality of Obligation
So:
1: As a "freelance flying instructor (or airline pilot) working via your own limited company do you have the contractural right to send someone else to do your work. If you do then exercising that right regularly is a great benefit.
2: Is how you work laid down for you by the contracting organisation. Do you have specific report times, are you performance managed or supervised by a line manager, do you work to an ops manual. Can you be swapped from one task to another without formal contract changes.
3: Do you have to accept work from them (e.g. turn up even if there is nothing to do) and do they have to pay you even though they may not have any work for you.
Nothing really has changed about those recently.
What's been seen in the public sector is even if people do pass those tests the contracting PSB has decided they are "in" anyhow. It's then very difficult to challenge those decisions.
The way the rule change was put in it was for payments after a certain date (April 2017) and not work done after that date. So people had done work, submitted an invoice and then been told they were inside IR35 and had huge chunks taken off. Some public sector bodies then refused to release payments unless their opinion was accepted. I know one consultant currently taking a client to court over it which is hardly going to get future work from them.
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To add to Daysleepers list:-
there are a number of "tests" the Revenue apply to see if you are caught under IR35 - it's a "balance" - not a majority taht decides
as above plus
4. Do you have an office/car/business card/pc/phone provided by your "employer"
5. Are you responsible for approving your own work
6. Are you on their internal contact/telephone list
7. Does the contract have drop dead date -and it should and better it should vary in length between engagements
8 Does the contract have an estimated value - it doesn't have to be correct at the end but it should be there
9 Avoid any mention of "roll-over" provisions in the contract
And if you avoid that then you worry about employing other sub-contractors yourself as you get caught by the Intermediaries legistlation
there are a number of "tests" the Revenue apply to see if you are caught under IR35 - it's a "balance" - not a majority taht decides
as above plus
4. Do you have an office/car/business card/pc/phone provided by your "employer"
5. Are you responsible for approving your own work
6. Are you on their internal contact/telephone list
7. Does the contract have drop dead date -and it should and better it should vary in length between engagements
8 Does the contract have an estimated value - it doesn't have to be correct at the end but it should be there
9 Avoid any mention of "roll-over" provisions in the contract
And if you avoid that then you worry about employing other sub-contractors yourself as you get caught by the Intermediaries legistlation
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Join the IPSE https://www.ipse.co.uk/ and get cover for IR35 investigations plus advice on how to avoid being caught would be a good move. As a contractor, I've been a member for several years. You need protection against HMRC!
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Of course we wouldn't have to bother if all the greedy lunatics in IT hadn't driven a coach & horses through the rule book about 4-8 years ago
When you see ads specifically stating "we can ensure you don't pay tax" in industry magazines you can bet HMRC will eventually catch on and act...................... and, as ever, a load of innocents get crushed in the process
When you see ads specifically stating "we can ensure you don't pay tax" in industry magazines you can bet HMRC will eventually catch on and act...................... and, as ever, a load of innocents get crushed in the process
