Agency Guide – Fact & Fiction – Contractors

FICTION – A Concrete Contractor Universal City CA IR35 status is governed by their working practices and their employment contract. Both of these areas have to be fully assessed before determining what a contractor’s IR35 status is.

–Contractors receive the expenses claimed paid back in full from HMRC.

FICTION – HMRC do not re-pay or reimburse expenses in full; An Umbrella Company should reimburse appropriate expenses in full from the invoiced amount. What HMRC do allow is a contractor to claim tax relief on this expense. So for every £100 in expenses they would get £32 reimbursed. (Based on typical Tax and NIC rates)

–Contractors can avoid IR35 simply by adjusting their employment contract.

FICTION – There is no such thing as an IR35 “proof” contract as all of the actual working arrangements
are relevant. Many so-called IR35 “proof” or “friendly” contracts are drafted without consideration for the real situation or the requirements of clients and agencies. HMRC can also investigate actual working
practises by requesting statements from the contractor’s Client.

–Freelance Contractors earn more than perm workers

FACT – The fees earned by contractors are always more than permanent employees. Provided a
professional approach is taken in finding a contract, gaps between contracts can be avoided making the
chance to earn considerably more money than in permanent employment more realistic. If the skill set is heavily in demand, then a contractor could at least double or even triple their current take home pay by contracting.

–A Contractor will receive full holiday pay from their Umbrella Company

FACT – Holiday pay is a commitment usually paid by an employer to a full time member of staff. As a
freelance worker, you do not receive this benefit, however, they will receive a higher basic rate of pay to compensate and the umbrella company will then pass this back to the worker.

–Being a contractor will make it difficult to get finance / mortgages

FICTION – The difficulty lies in proving what their income actually is.

–If a Contractor opts out of the European Work Time Directive, they are automatically “Outside IR35”

FICTION – Opting in or out of the Work Time Directive has nothing to do with the employment and IR35

–After 24 months at one contract, Contractor’s can claim expenses again if they move Umbrella Companies

FICTION – Moving Umbrella Companies does not re-start the “24 Month Rule” this can only happen after a 6 month break in the contract or a complete change in temporary work place.

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