Hi
I have an appointment with a body guard who is currently employed and goes through PAYE, however he is looking to go self employed and has asked about setting up as a ltd company, he has been told about the benefits of being limited, but before i give him my advice I would like to know whether he would be caught within the IR35 legislation,
He will be working for around 3 people at any one time
Thanks for you help in advance.
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Need more information, but in practice possibly not
Provided that your self employed bodyguard actually BEHAVES as a self-employed bodyguard in both form and substance then he should be able to argue that he is providing a contract-for-services (i.e. genuine self-employment) rather than a contract-of-service (i.e. so called "disguised employment" in the IR35 vernacular).
The core attributes which describe self-employment versus "disguised employment" are neither definitive nor prescriptive, it is better that your client is able to demonstrate as many as possible, but some attributes carry more weight than others (e.g. Control, Genuine and Unfettered Right of Substitution).
In Summary, these aspects are:
Control - Need to avoid close directional control (master/servant relationship)Substitution - Need to be able to send a substitute if ill, etc.Financial Risk - Actual financial losses can be suffered.Mutuality of Obligation - Not required to offer or accept additional work.Part and Parcel - Operate independently of your clients, not part of the clients organization or structure.Employee Rights - None should be offered by or accepted from clientsTerms of Engagement - Contractual terms should be "Contract for Services" not a "Contract of Service" and actual working practices should adhere to agreed contract
The above is just a summary, for more detailed information I recommend your client takes specialist advice or joins the Professional Contractors Group which is essentially a union (technically a trade association) for freelancers joined together to battle with HMRC against IR35.
The PCG offer comprehensive advice and services for people in your bodyguards situation and have an excellent track record of taking on and defeating HMRC with regard to IR35.
I have no affiliation to the PCG other than as a satisfied former member having moved into semi-retirement and no longer subject to IR35.
@frustratedwithhmrc:RE Substitution & Civil Contingencies Act'04
Hi frustratedwithhmrc! RE: Substitution: Could "Civil contingencies act 2004" perhaps assist in requiring that due recognition be made for the need for a substitute - in accordance with law - and thus blow away any attempted assertion by HMRC that any substitution could be fettered?
Here's an e-link:
http://www.legislation.gov.uk/ukpga/2004/36/section/2
where Section 2 is titled "Duty to assess, plan and advise"; subsections (3) and (5) suggest to me - without using the actual word of "substitution" - the need for risk management, presumably including the need for a substitute if an original "protection etc" capability may be affected.
Indeed, it may be that a sufficiently mischievous lawyer might, if s/he appropriately got their act together, be able to use this statutory feature to construct a really "IR35 proof" contract, at least from the "substitution" point of view , in any case where a contract for service envisaged the need for a service continuity that could only be provided with a "Plan B substitute" !
Civil Contingencies Act 2004
RE: Substitution: Could "Civil contingencies act 2004" perhaps assist in requiring that due recognition be made for the need for a substitute - in accordance with law - and thus blow away any attempted assertion by HMRC that any substitution could be fettered?
I don't think we need to get creative with IR35, it's been on the statute books for long enough now that we understand both the nature and the form.
The best guidance on this was David Smith's 2001 publication "Tolley's IR35 Defence Strategies", which was simple and easy-to-follow.
The legal cases have moved on obviously since 2001 and many cases have been won and lost (mostly lost by HMRC), but the fundamentals remain the same. Follow these and you won't go far wrong, no need for esoteric or creative interpretations of other statutes.
I think the biggest problem nowadays is freelancers being complacent and believing that IR35 is no longer relevant.
HMRC are still happy to investigate and prosecute where there are freelancers are in breech of IR35.
IR35 isn't the only worry
This sort of activity lends itself to attack using the agency legislation, which gives HMRC a better yield than IR35 (PAYE/NI on all the income). See the Serpol FTTcase. The exclusions may apply though.
Quite a bit different from HMRC versus Serpol Ltd in my reading
This sort of activity lends itself to attack using the agency legislation, which gives HMRC a better yield than IR35 (PAYE/NI on all the income). See the Serpol FTTcase. Unlike Serpol though I wouldn't imagine you'll get any element of the income through the "not on premises controlled by the engager" let out.
Not sure this is covered by Serpol as in that instance it was the company itself which was disguising its employees as 'self-employed' and pretending to act as an agency, in the circumstance described by the original poster, this would not apply.
If you are of
the opinion that it is not up to HMRC to decide employment status and they have said that is the case by putting the onus on the supplier of work to determine status, then go for it. My view has always been that it is up to the supplier of work and the worker to decide and that really has been proved in the courts over the years. HMRC don't like it cos they don't get as much revenue and that is the only reason.
Interesting thread
I have heard of IR35 proof contracts that some organisations offer as a service. If the bodyguard enters into these contracts with his clients- would that be a sound defence against IR35 ruling?
IR35 proof contracts
@FirstTab - I've never really seen why people get taken in with off the shelf "IR35 Proof" contracts - so much depends on the actual working circumstances of the contractor, that not even the best of contracts can salvage cut and dried disguised employment. I always advise client to worry more about the *actual* working practices than the contract.
A proper contract for services
as approved by HMRC will withstand any challenge from them regardless of working practices.
Don't forget there is no law about employment status. HMRC give guidelines to suite themselves (to get the most money in) but they are not Law.
HMRC are a bit biased towards PAYE on employment status
as approved by HMRC will withstand any challenge from them regardless of working practices.
Don't forget there is no law about employment status. HMRC give guidelines to suite themselves (to get the most money in) but they are not Law.
HMRC's online status certainly throws more "employee" outcomes than "self-employed" outcomes, but I suppose this is what we should expect - after all PAYE collects more income than self-employed taxation does and since the job of HMRC is to get the taxes in Quod Erat Demonstrandum.
Actual Working Practices
Any contract, whether "approved" by HMRC contract review service or not, will only stand as a defence if the Tribunal decide it reflects the reality on the ground - Dave Smith was succeeding, in a line of cases, in moving us to be able to place more reliance on the contracts until the Commissioner in the Dragonfly case decided he trusted the evidence of a witness more than contracts that had been written with IR35-proofing in mind.