Contract Advice

You need to understand your circumstances and assess whether your assignment will be caught within IR35.

Do you understand the legalities of your contract? Is your rate competitive? Do you need advice on your contract status? What is your notice period and what is your liability? What insurance do you need? Are you sure your not operating as an MSC? Very importantly is your client credit worthy do you want us to check them out?

At BITE Consulting Ltd we offer

Initial Free Advice on the commitments you are making in your contract. We will review this against the benefits of permanent v contract work and employment v freelance status. We will recommend what we feel is the best way forward for your needs and then offer an opportunity for one or more independent professionally qualified sources of advice for a second opinion.

Detailed Contract Advice on your contract or proposed contract is provided free as part of the Managed Job Search service.

The Inland Revenue will review the actual working practices adopted together with the legal form of each contract. Each IT engagement will need reviewing on a case by case basis, taking into account a number of different factors. The legislation will test the nature of each engagement and judge it to be one of employment or self-employment (freelance and outside IR35)

We believe the key factors in the review will be

The right to exercise control - Is the contract assignment subject to ongoing client supervision and management? Can someone tell you what to do or how to do it?
The right to get a substitute or helper to execute the work - Are you free to hire someone else to do the job or does the client specifically require your services?
The provision of equipment - Are you obliged to provide items of equipment essential for the execution of the assignment? (A worker provided with office space and computer equipment by the client may be considered employed)
Financial risk - Does the execution of a particular assignment expose the contractor to any financial/commercial risk? E.g. fixed price contracts; buying assets in the business and bearing associated running costs; expenditure on training to gain a skill.
The basis of payment - Employees tend to be paid a fixed wage or salary. Is the contractor paid by the hour/week/month or paid overtime? (i.e. Time and Materials) or is a fixed sum paid on the completion of an agreed deliverable?
The opportunity to profit from sound management - A person whose profit or loss depends on his capacity to reduce overheads and organise work effectively may well be self-employed.
Part and parcel of the organisation? - are you an integral member of the client’s staff?
The right of dismissal - Do you have the right to terminate a contract by giving notice of a specified length? (A common feature of employment.) This is less common in a contract for services which usually ends on completion of the task, or if the terms of contract are breached.
Employee benefits - are you entitled to sick pay, holiday pay, pensions or expenses?
Length of engagement - long periods of working for only one client may be considered typical of employment.
Personal factors - Is the Contractor reliant on him/herself for obtaining work? Is the contractor working for a number of clients on concurrent projects? Is expenditure on office equipment and accommodation necessitated by the nature of assignments undertaken?
In Business of your own accord – Evidence that you are an independent business operating as any other business would be expected to do and not as an employee. A strong point is evidence of Marketing and Advertising of your company services. Something that BITE provides and invoices for if required through a B2B Invoice for Advertising or Marketing services on the Internet.
Mutuality of obligation - An ongoing obligation to provide work and to do work provided should not be an explicit or implicit term of the contract. Further work should be under a separate contract. Provisions enabling the client or agency to extend without the consent of the contractor should be avoided.
Exclusivity - It is entirely inappropriate for an independent contractor to be unduly restricted from providing services for other clients.
Intention - As the intention of the parties is not to create a relationship of employer/employee, a clause should confirm the independence of the parties and that there is no relationship of employment. To support this reference to procedures for sickness or absence, misconduct or overtime should be avoided.

The full Inland Revenue guidelines can be found at www.inlandrevenue.gov.uk/ir35 .

In order for an assignment to be considered ‘self-employment’ for tax purposes, and therefore outside the scope of IR35, the assignment will have to pass the tests outlined above. In addition, such contracts will only be submissable as ‘self-employed’ if the end-client is prepared to outsource responsibility for tasks or deliverables to the contractor. It is unlikely that many assignments will satisfy the tests for self-employment unless clients are willing to change working practices to accommodate self-employment contracts. In practice clients may be reluctant to do this.

Great care needs to be taken in determining if a contract is one of self-employment, and therefore outside the scope of IR35. If a company treats revenue from an assignment as falling outside the scope of IR35, and if the Inland Revenue does not agree with this treatment, the Inland Revenue will recover the underpaid tax and interest. They also have the right to issue as a penalty 100% of the underpaid tax, in addition to the additional tax due.

It will be important that you agree with your accountant or adviser the best action to take and this may mean sending your contract (usually via your accountant) to your local Inland Revenue Office for assessment. However, this may take time and you may have completed your contract before you get a decision. SO DON’T GET CAUGHT OUT. SEEK ADVICE AND MAKE PROVISION FOR PAYMENTS TO THE INLAND REVENUE AND COMPLETE A CONTRACT LOG.

Contract Direct

Do you have the opportunity to contract direct to the client?

BITE provides a “safety net ” for contractors who require extra security. This can provide protection against being left high and dry if the client goes “bust” or “does a runner” or is just a slow payer.

We help ensure the contractor gets paid!

BITE'S credit checking service ensures the client is assessed and any risk understood and managed.
BITE'S Credit Control service collects the contractor's money in a timely manner.
BITE'S insurance service guarantee's payment for satisfactory work completed within the contract terms.
BITE'S Professional Indemnity insurance covers contractors for reasonable professional errors or mistakes.

The ‘safety net ' also helps provide or source the necessary contract advice to assess whether you may or may not be caught by IR35 and thus whether you can save approximately 20% of your pay, or make provision for payment to the Inland Revenue.