RE: FN-FORUM: Re: advice please

date posted 23rd November 2007 14:56



>The IR35 trap?
>I know that isn't good, but is that to do with services you offer and
>the definition between employed/self employed?

From what I understand of it....
Some companies used to employ self employed contractors as a means to
lowering their labour costs, eg not NI, holiday pay, sick pay, etc etc.
However this meant some companies would unscrupulously treat part-time or
casual staff as contractor thus illegally devoiding them of any rights to
such back-up payments.

As a result the Government tried to stop this happening by saying ALL
employees on a companies book has to legally have the same rights on a
pro-rata basis. Thus the other side of this was that companies were not
paying employees taxes etc by declaring them as self-employed contractors
when they weren't. Thus creating a situation where it was a real expensive
arse getting the right person to pay the taxes ie is it the employer or the
employee.

Thus the gov has now said if you have someone working for you long term
whether it be as a self-employed contractor or as a direct employee you are
effectively their employee in the traditional sense, and are therefore
responsible for paying their taxes, if the employee/contractor doesn't. Thus
as a result the employer now needs some form of security that the contractor
is going to either pay their taxes or is directly and legally employed by a
3rd party, whom will be liable for any unpaid sums. In the case of a
contractor set-up as a LTD company, the company is responsible anyway as
this is the whole point of a LTD -ie the individual works for the LTD even
if its just the one person in the company. Likewise an umbrella company is
just the same except it effectively has hundreds or thousands of employees.