IR35 book review: Practical contractors and personal freelanceby
Two solid, blue coloured, second edition paperbacks do what they say they do in their titles, explains Gail Purvis.
The Contractors' Handbook by Dave Chaplin is a contractor's expert guide, offering the latest tax and IR35 updates, Agency Worker Regulations and 20 'solution' scenarios when things go wrong! In Freedom to Freelance or the online revolution and the fight against IR35, you have Philip Ross' personal history account of the “birth of Britain's first on-line trade association” about the shaping and moving personalities of the 14,000 members of the Professional Contractors Group, as well as some of the other 120,000 contractors affected by IR35.
The Handbook comes with David Colom of D J Colom & Co, Chartered Accountants' still valid 1st edition recommendation: “Don't even think about embarking into freelancing without ordering a copy. You could easily spend years finding out the hard way, what this highly focused and relevant book tells you and, after reading it, you will know exactly how to handle all the pitfall and joys of contracting.”
The prime contractor markets are seen as IT and telecoms, engineering, construction, oil and gas and energy, interim management and other highly skilled flexible workers (taking in scientists, arts, medical, financial and coaches) with suggested earning rates running from £15 per hour to £175 per hour.
The handbook is essentially practical. For example you might want to make a company dormant to take in excess of a 12-month break from contracting or to move back inside IR35 so four scenarios are presented for your contemplation. Or if you are scheduled for a contract renewal, very acute advice is given in some six scenarios.
The handbook does see IR35 as originally having a sound purpose and designed to address a very real problem where company employees disguised as entrepreneur limited companies, could if shown to be employees, yield more tax. Legislation was “poorly thought through and badly drafted in the rush to get into the statute books”. The result was IR35 became the sledgehammer to crack a nut.
The 2011 IR35 Forum set up to better administer IR35 released in May 2012, far from simplifying things, added another layer of complexity argues Chaplin: “Whilst investigations up to May 2012 have been relatively rare, in one past case won by HMRC the contractor had to pay £99,000 in back taxes, interest and penalties because he had not made sure of the fundamentals.”
Defending your IR35 status is a pre-emptive strategy, he advises. HMRC looks for easy targets - don't be one. Visit Contractorcalculator.co.uk where some 12 tests are worth taking to find out whether you as a contractor are a high, medium or low risk. Contractors face at least two years of the current business entity tests, not one as promised.
'Freedom to Freelance' writes Philip Ross (contributor to Shout99.com) is a story of how a group of plucky IT contractors banded together and took on the government. It is a story of sacrifice and endeavour, of valour and of many great deeds and successes - one of the first examples of crowd funding High Court drama, the biggest post-1997 lobby on parliament, which many have described as the world's first flash mob and first e-petition presented to parliament, and perhaps the only ever on-air apology transmitted on Newsnight.
It also covers two campaigns: That of the IR35 direct confrontation and the second use of more gentle persuasion and diplomacy to defeat fast track visas.
This is a first person account “my story of my time with the PCG and considers the period between 1999 and 2002, at the heart of the campaign, when I believed in the cause." The biggest irony of IR35 is that a poll taken just after its release, showed the majority of those affected had elected new Labour in 1997.
The other sad, but somehow inevitable irony as is often the case with revolutions, the group turned on itself - and the leading figures ultimately replaced by more establishment characters and attempts at rewriting history.
The chapters cover the forming of the PCG, the parliamentary battle, the judicial review, political engagement, fast track visas, agency regulations, appeal and case law, thermidor and the epilogue - 10 years on when Ross now is a UCL visiting lecturer and works for enterprise architecture consultancy Alpheus in which he is shareholder. No longer a contractor, he still claims commitment to the cause.
With an Appendix of Nominations for the New Statesman Award emails collected at the time; 56 brief biographies in the Who's Who, and a 22 organisation glossary in Freedom and a last chapter on Growing your Business in the Handbook all a reviewer can conclude is that future editions of both invaluably interesting books should indulge themselves by hiring a librarian contractor or freelance and creating indexes!
Join the AccountingWEB Book Club discussion group.