Tag Archive | "Limited Company or an Umbrella"

Hey, look at what we just did. We killed off IR35!

I thought it worth returning to the Agency Workers Regulations again, if only because I was ever so slightly amused by the reactions of certain agencies to them. With their industry’s usual instant and carefully controlled grasp of the subject, this week contractors started getting emails and letters from some agencies about how to manage the AWR. After the act had taken effect and therefore after the point at which you should react to it for an existing engagement. Genius, isn’t it?

Anyway, as is the way of such things, the letters are asking unanswerable questions.

The first one is “Do you work through a Limited Company or an Umbrella?”. Excuse me, but why do you have to ask? You have the contract in your filing system, along with the payment terms and the pointless fourteen pieces of ID. Don’t you know who you are dealing with? Please don’t tell me you weren’t even faintly interested in the company with whom you signed the contract. Silly old me thought you were dealing with MyCo when clearly you are only interested in dealing with me personally. OK, so that explains a lot, doesn’t it? Dropped the mask ever so slightly there, Mr Agent.

Secondly, “Do you consider yourself to be in business?”. Cue raucous laughter. I have signed a contract with you in my capacity as the Director of a UK Limited Company. A contract in which there are several clauses establishing that there is no employee-like relationship intended, which directs you to pay money into a business bank account and which charges you VAT. Does that not give you a slight hint that I’m trying very hard to be a business and not a temp from Office Angels?

Finally, “Do you consider you are operating inside or outside of IR35?”. Now you really are taking the Michael. We’re using your contract. You set up the deal with the end client, you know the requirement, you know what’s in your contract with them, and you understand how the client views the relationship between me and them. So why ask me? If I am inside IR35, it’s because you put me there, not the other way round.

Ok, so the poor dears are only trying to keep their masters happy and, as usual, de-risk everything as far as they can. Since you can’t actually opt out of the AWR anyway it’s all rather pointless, but if it makes them happy. Although there may be a different slant on this.

If the agencies, on behalf of their clients – who, we must remember, are actually those stout and highly aware souls in the Human Remains department – are concerned about the people they supply being in the scope of the AWR and so able to claim all these interesting extra benefits like holidays, there is a very simple way to prevent it. If you’re in business, you’re out of scope. It says so in the AWR itself.

So, Mr Agent, let’s make sure I am genuinely in business, as best we can, so the AWR can be ignored. This means that firstly you stop the pretence that you have this vast pool of experts at your disposal and you just send a couple of the most relevant over for the client to look at. Secondly that the client will exercise no direction and control over how the work is to be performed, beyond that minimum necessary that all workers will need to follow. And finally we drop all this pseudo-employee-with-multiple-exclusions contractual nonsense and start using simple business-to-business contracts. You know, something along the lines of “YourCo will supply these skills for this period to deliver this thing for which we will pay you this amount of money, conveniently broken down into weekly payments. The End”. It really could be that simple.

Hey, look at what we just did. We killed off IR35 as well. Gosh…

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Consensus Kills by miss_rogue

Posted in alan's blogComments (0)

  • Switch Accountants for FREE

    Switch Accountants for FREEAt K&B Accountancy Group we have introduced a simple and straightforward approach to changing accountants. We’re offering contractors, consultants and freelancers the opportunity to switch to K&B Accountancy Group for FREE without the need to pay for any ‘catch up’ or retrospective accountancy fees for the previous year’s accounts and corporation tax return* *T&Cs apply

our top 5 twitter posts


contractor accountants


twitter Join the conversation
Free Telephone Advice