The plot to ensure that everybody becomes an employee of some large organisation (preferably the state) for their 'protection' gathered pace this month. If the announcement that Economic Work Units (aka mothers) are to be required to hand their 2 year olds over to some state sponsored indoctrination centre wasn't enough, there was the disappointing, but largely inevitable, result on the IR35 'Dragonfly' case.
Once again Freelancers are going to have to look closely at the way they operate and review their relationships with clients if they don't want a 'a-posteriori' bill from HMRC.
Conspiracy theorists will have enough to go on at this point. Thanks for reading. Those of you who want the details - read on.
The New Rules
I won't go into the gory details. There is plenty of analysis elsewhere: the best being:
Dragonfly appeal by Roger Sinclair at Egos
Dragonfly shot down in cold blood by Steve Gratton on AccountingWeb
What the new 'clarification' boils down to is this:
- if you do work for somebody and get paid for it that is enough to to satisfy one condition of being an IR35 employee. You are essentially assessed against a Day Casual Worker and not a Full Time Employee.
- That you determine what and how (and probably where in these days of homeworking) the work is done is no longer sufficient. You have to have the right to do more than a similarly qualified professional employee would ever be allowed to do.
- if you allow yourself to become part of the furniture you will become an IR35 employee regardless of what is written in any documents.
- intention is nothing: perception is everything; what the client employees see you as is probably definitive.
2 comments:
Thanks Neil.
I agree tha DragonFly cae was interesting but it was a particular set of circumstances, lets not forget that.
None of the analysis suggests that the rights of substitution is any less effective than it ever was.
I would refer you to the comments in First Word Software, items 34 to 37 at this link http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/cases/UKSC/2007/SPC00652.html
I do think that anyone affected by IR35 legislation should be very careful with their contracts and the way they perform their contracts.
Very importantly its is proving vital that clients understand and support the conditions of engagement.
All status cases are a particular set of circumstances. That's one of the problems with them. To dismiss Dragonfly in those terms is a mistake.
IR35 is a duck tax and whether you are a duck or not is determined by client employees impression of you. Often they don't particularly like contractors and are almost certainly terrified of HMRC. That is a serious problem.
As I said you have to do something an employee simply cannot do. Substitution is one, but often impractical for a freelancer. Multiple simultaneous clients is another, but often problematic due to the nature of IT work. Using your own equipment is a third, but it is has to be substantive and necessary to the job. A laptop probably isn't enough.
All in all it's an irritating mess that really needs a political solution.
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