3 ms·

Usually the individuals are not employees pr. Se, unless the company in question has a local legal presence in the country of the employee. Instead they are hir

by MortenK 14y ago

Usually the individuals are not employees pr. Se, unless the company in question has a local legal presence in the country of the employee. Instead they are hired on a simple business contract containing similar terms as a standard employement contract. The employee then sends invoices for their salary. In theory this makes them contractors, but in practice they are employees. The employee will however most often have a few extra things to take care of themselves, compared to being "employed by the books". For example to report local taxes, pension arrangements, health insurance etc. The company isn't usually involved in that, but might pay for it indirectly through a salary that's adjusted for these aspects. In some countries, local laws require the employee / contractor to have a company (sole proprietor kind). In others, the contracts can be made directly between the business and the individual.

mattmanser 14y ago
In the UK this is not legal. It's not even vaguely close to being outside IR35. While I have no familiarity, I doubt it is legal in many other countries with a socialist state that requires employers to pay things like national insurance. Basically if you walk like an employee, and talk like an employee, you're an employee and shouldn't pretend to be an independent contractor and you probably should not set up your own company as you'll be double hit with taxes if they catch you (company taxes for employees and standard employee taxes). That could leave you with several years worth of some serious taxes to back pay. Don't want to be doom and gloom, but be aware what you're getting yourself into if you're going to pretend to be a consultant/contractor when you're not.
- MortenK 14y ago
  Isn't IR35 used to cover cases where there is actual tax avoidance though? Where it is not a sole propriertorship, but rather a Ltd, and the owner is extracting his salary through NIC exempt dividends?
- sveiss 14y ago
  (Disclaimer: not a tax expert or an accountant, but I have spent too many hours researching this stuff as it applies to my own situation.) IR35 only applies when there's an intermediary -- usually when you're providing services via a limited company, then taking dividends at the lower tax/NI rate instead of a salary. If you're self-employed and contracting with a foreign company, then IR35 can't apply (or so I was told when I spoke to HMRC to ask precisely this question). Now, HMRC could decide that it's not a true self-employment relation. In my case (self-employed, working remotely for a company in the US, limited degree of control by engager, purchasing my own equipment, bearing the risk of invoices not being paid) I think there are enough factors to make it a true self-employment relationship and HMRC's online questionnaire agrees. Even if you were contracting through a limited company, if you met the self-employment test you'd probably meet the IR35 test when operating through a Ltd. I'd prefer not to risk it -- which is why I went the self-employment route.
  - mattmanser 14y ago
    If you're self-employed and contracting with a foreign company, then IR35 can't apply I guess that makes senses now thinking about it. I really hate IR35, there's so much grey area.
    - junto 14y ago
      There are some pretty good IR25 proof legal contracts out there. The key is to have a contract that defines your independence and that the way in which you operate with the client is very unlike that of an employee. Good examples are the ability to choose when and where you work, that you can work for other companies at the same time, and the fact that you use your own resources: http://www.contractoruk.com/contracts/wary_consultancy_contract.html http://www.contractoruk.com/contracts/wary_consultancy_contr... For more information, and where to find a good lawyer who can firm up such a contract, try http://www.contractoruk.com/ir35/ http://www.contractoruk.com/ir35/

by MortenK 14y ago

mattmanser 14y ago

In the UK this is not legal. It's not even vaguely close to being outside IR35. While I have no familiarity, I doubt it is legal in many other countries with a socialist state that requires employers to pay things like national insurance. Basically if you walk like an employee, and talk like an employee, you're an employee and shouldn't pretend to be an independent contractor and you probably should not set up your own company as you'll be double hit with taxes if they catch you (company taxes for employees and standard employee taxes). That could leave you with several years worth of some serious taxes to back pay. Don't want to be doom and gloom, but be aware what you're getting yourself into if you're going to pretend to be a consultant/contractor when you're not.

MortenK 14y ago
Isn't IR35 used to cover cases where there is actual tax avoidance though? Where it is not a sole propriertorship, but rather a Ltd, and the owner is extracting his salary through NIC exempt dividends?
sveiss 14y ago
(Disclaimer: not a tax expert or an accountant, but I have spent too many hours researching this stuff as it applies to my own situation.) IR35 only applies when there's an intermediary -- usually when you're providing services via a limited company, then taking dividends at the lower tax/NI rate instead of a salary. If you're self-employed and contracting with a foreign company, then IR35 can't apply (or so I was told when I spoke to HMRC to ask precisely this question). Now, HMRC could decide that it's not a true self-employment relation. In my case (self-employed, working remotely for a company in the US, limited degree of control by engager, purchasing my own equipment, bearing the risk of invoices not being paid) I think there are enough factors to make it a true self-employment relationship and HMRC's online questionnaire agrees. Even if you were contracting through a limited company, if you met the self-employment test you'd probably meet the IR35 test when operating through a Ltd. I'd prefer not to risk it -- which is why I went the self-employment route.
- mattmanser 14y ago
  If you're self-employed and contracting with a foreign company, then IR35 can't apply I guess that makes senses now thinking about it. I really hate IR35, there's so much grey area.
  - junto 14y ago
    There are some pretty good IR25 proof legal contracts out there. The key is to have a contract that defines your independence and that the way in which you operate with the client is very unlike that of an employee. Good examples are the ability to choose when and where you work, that you can work for other companies at the same time, and the fact that you use your own resources: http://www.contractoruk.com/contracts/wary_consultancy_contract.html http://www.contractoruk.com/contracts/wary_consultancy_contr... For more information, and where to find a good lawyer who can firm up such a contract, try http://www.contractoruk.com/ir35/ http://www.contractoruk.com/ir35/