[Nextgrid]

The problem is that the rules are ambiguous and in some industries (such as software development) it is not possible to effectively separate employees from contractors which means that even legitimate contracting activity can look like disguised employment.

If you operate a business that provides software development services and want to help a client with their existing software project (who already has full-time employees working on it) you will often need to become embedded within their team which includes participating in regular meetings (including daily standups) and do "employee-ish" things that look risky from an IR35 point of view. Just speccing out a clear scope of work in advance is very difficult as sometimes the scope will vary over time as edge-cases are discovered during development, so the SOW will end up very broad and may look employee-ish. Your best bet is to have mitigating factors such as working for multiple clients, using your own equipment, etc and possibly contract length (I am not sure if it counts, IMO it definitely should) but none of those are bulletproof either.

Contributing to an existing codebase in parallel with a client's in-house development team is risky from an IR35 point of view even if you are doing so in good faith and want to operate a business rather than just be a "permalancer". That's also why with the new rules (that are now being repealed), a lot of companies did a blanket determination of putting everyone "Inside" IR35 because the rules are not only unclear to begin with, but even more difficult to correctly interpret and apply in certain industries.

[Silhouette]

The spirit of the rules seems fairly clear even for software development. If you're being brought in to help with some specific project or to achieve some specific goal, you are doing that work autonomously and according to your own professional judgement, and you're otherwise operating as an independent business, you're not supposed to be caught by IR35. Obviously there will be some need for communication with other people who work for your client if the project or goal is part of the client's wider activities but that doesn't mean you're an employee.

Personally I'd get very nervous about the kind of contracting where you're expected to integrate with a client's Agile processes that have things like daily meetings and breaking tasks down to very small chunks where sometimes you get them and sometimes a permanent employee does and sometimes they move between you. That starts to look too much like a grey area even if everything else is set up like an independent business.

Maybe there should be some alternative status to support flexible temporary employees that reflects their closer involvement with a client/employer while they're working there but also makes allowances for the added risks and limited employee protections and the extra downtime they will probably have between gigs. It's obviously useful to have this kind of flexible labour force but it doesn't really make much sense to treat it the same as either running a truly independent business like a freelancer or being a full employee with the security and benefits that brings.

Edit: I'm thinking of a model where the rates and allowances work out the same as full-time permanent employment if you do end up working consistently but maybe the important figures get calculated over a whole tax year or can even be carried over across years to compensate for the unpredictability. Then you can probably let the market decide the rest of the pricing in terms of how much extra that flexibility is worth to clients and how much compensation is needed for the added risk to attract enough flexible workers.

[varispeed]

It's funny that if the client decides to hire a big consultancy to do exactly the same thing, these rules do not apply.

The big consultancy gets paid an invoice, they pay their employee some salary and keep the profit. If one man band business does the same thing, there is all sort of fuss about being a disguised employee and if the IR35 is applied, then they get taxed on the entire invoice.

To bring level playing field, these big consultancies should also be taxed on the invoice paid by the client, without being able to keep profit. If their workers were assessed for IR35, they would all be caught by it.

It's such a nonsense.