We help both - Highering companies and Freelancers to avoid paying extra tax

With the new IR35 changes in the private sector, paying accurate tax is now both companies and Freelancers problems.

Helping contractors to avoid paying IR35 tax will be beneficial to both of them. Small changes to contracts and the way contractors work should take them outside IR35. It is all about differentiating contractors contracts and working practices form those of employees.

Advice to Companies

We advice and facilitate companies to hire contractors for ‘Projects’ or ‘Tasks’ rather than for ‘Fixed time periods’. Which means that we define an SOW and an approximate High Level project plan (if needed) to ensure that the Freelancer is hired for the specific task. Due to changes in ‘circumstances’ the project periods can be changed and we will have clauses to that effect in our projects.

SYNOPSIS – LOGICAL INNOVATIVE MANNER to deal with IR35

• We Do-not have ‘Notice periods’ in the contracts. Instead we have a break-clause.
• We agree which equipment to use- This can also be equipment supplied by us.
• We agree the work location; this can also be flexible, depending upon the requirements.
• We agree the ‘timescale’ for the SOW or task to be done
• We allow a substitute to be used i.e. in case the contractor is unable to perform due to some reasons (these scenarios are highly unlikely)
• We advice companies ‘Not to’ put consultants on company hierarchy charts.
• We ensure that the company is compliant (for example, an employee on PAYE can demand paid leave as per the UK/EU laws)

We ensure that our clients are transparent and clarify the ‘purpose of hire’ and ‘future intentions’ when hiring contractors. Companies can help contractors to avoid paying extra tax and also benefitting from freelancing mutually.

SOW and Highering for ‘Projects’

Typically, if a company has a project that they expect to last 9 months they’ll hire a contractor for three months, then renew them every tree months till the project ends. It would be much better if they hired them for the whole project. If the contractor is not up to standard they can get rid of them more usually because of the next piece of advice

Notice Periods in the Contracts

It is best that the contract between the contractor, company and agency does not have a notice period and if there is a notice time period, it should be different from those of employees and state. This should help to show hat the relationship is a contractor for services. It should also show that there’s no mutuality of obligation.

So, his should help contractors avoid paying IR35 tax.

Equipment Use & Location(s) and timescale agreement

The company must agree this with contractors. It may be a mix between the company’s own equipment an the contractor’s or it may all be the company’s equipment. However, this should be agreed between the two parties rather than imposed on the contractors. The agreement should be documented and signed by the two parties.

The freelancer should have some flexibility of where the work should be done. This should be agreed between the two parties. It may be best to do it all at the company’s site, or it may be best to do some at the contractor’s own home office. Or it may be done at a third party site, e.g. a customer of the company. This should be agreed between the two parties, documented and signed by both parties.

The company should ‘guesstimate’ along with our expertise that how long a task will take. The freelancer must endeavour to do it in that time. Commonsense and Logic must prevail over anything else in the times of requirements or circumstances change.

Substitution of the Resources

We expect the clients to allow us to guide and decide that the contractors could be substituted in case needed. This is for when the contractor can’t make it or can’t do the work for some reason. The company would have to agree any substitute that the contractor proposes.

T HMRC claimed, at one IR35 tribunal case that, as the substitute wasn’t used that pointed to IR35. However, the judge ruled that the burden of proof lay with HMRC. To rule that it was a sham there would have had to be an occasion when a substitute needed to be named and the contractor couldn’t provide one.

PAYE or Company Hierarchy Charts

Companies automatically become liable to provide all the benefits on case an employee is PAYE, including holiday pay etc. Freelancers must be treated as contractors & companies should refrain from putting contractors on their company hierarchy charts. Indeed it would be a good idea to have separate customer / supplier charts for contractors.

If badges are needed e.g. for security reasons, make sure that the badge shows the name of the limited company / supplier that the contractor operates through rather than the name of the company that he or she provides services to.

A tribunal judge has already agreed that a renewal of contract can show that contractors benefit from sound management. Employees don’t get renewed. However, companies could also consider paying contractors a bonus for finishing tasks early. That would show them benefiting from sound management. That would mean that contractors are paid different amounts each month or week, which should help them avoid paying IR35 tax.

It would also be a great boon to the company and project if contractors finished a lot of their tasks early and will change the country and organisational culture.