Working with AWR/IR35

I have been offered a contract that is AWR compliant and therefore inside IR35 as it will offer staff benefits such as paid holidays and bonus etc. There is no rewording option its sign or walk away.

So having hit the calculators and working on some very rough estimations of what the benefits may be worth it seems that they should offset the tax hit by between 50 to 90% depending on whether a bonus (and how much) will be paid etc.

I was just wondering if anyone out there works like this inside of IR35/AWR and how they actually find the experience in real life and how much they find the extra tax is offset by the AWR benefits? So far I have only ever worked through my Ltd co on standard business to business contracts so have never encountered AWR and its impact.


CUK Contractors Respond:
AWR has nothing to do with IR35. Actually it also has nothing to do with in-business limited company contractors; they are out of scope. What you're looking at is a Fixed Term Contract - that's neither employment nor contracting, just the worst bits of both without the money.


ContractorUmbrella Respond:
If you are outside IR35, then you will fall outside the scope of the AWR - if you are inside you won't. As Mal says though - this sounds like a fixed term contract but I would check the wording very carefully - who has the contract been issued by?? Agency or end client??


Contractor:
Ive just googled fixed term contract and I sure as hell hope its not one of those! I dont think it can be as there will be an agent.....from what I can gather HR at this client have said all contracts must be AWR compliant, therefore by default putting the contracts inside IR35 with the 'staff' benefits you get even if you dont want! Its a case of weighing up how much rate plus benefits is worth compared to the extra 20% tax.


CUK Contractors Respond:
You'll find that some agencies are actually trying to get contractors to use these types of contract.

Take a look here: http://forums.contractoruk.com/busin...g-rip-off.html

..and as I've been reminded here () you can't opt-out of AWR.


CUK Contractors Respond:
What do you mean you hope? You are about the only person that should be able to confirm it if is or isn't. You can't go signing contracts 'hoping' it isn't something or other.


Contractor:
Ive not seen it yet Im currently still negotiating with the client, then it will go to an agent to deal with the paperwork.


CUK Contractors Respond:
I spent 2 yrs 10 mnths working like this as an employee of Manpower on assignment to a certain very large Company. Got paid contractor's rates but on PAYE, with 33 days p.a. paid leave, sick leave. I would say that I would do it again, since it also had paid overtime. Net take home was 65% after NI and PAYE.


ContractorUmbrella Respond:
I would read the contract very carefully before signing to confirm what their and your obligations are.


CUK Contractors Respond:
Classic case of the client not understanding AWR. The agency will likely have done a comparator for you to tick a box. If you are a genuine contractor (you will be invoicing from your LTD company) and in business on your own account it does not apply. If you fail the hypothetical comparator test then you have got a terrible rate.


CUK Contractors Respond:
If the engagement is within the scope of the Agency Workers Regulations (as this one is) then the worker would certainly be caught by IR35 too. It's nonsense to say that the two are not connected.


ContractorUmbrella Respond:
There is definitely a connection but it's the other way round - if the worker is in business on their own account i.e. outside IR35 then they are outside scope of the AWR. Saying that, however, if the contractor is to be treated as a permie in the workplace and is to receive all the benefits of permiedom then he can't realistically consider working outside IR35.


CUK Contractors Respond:
The challenge for the OP is whether or not the client is prepared to accommodate outside IR35 status. Most clients can't be bothered/don't understand the IR35 debate, they just don't want it to touch them. Meanwhile, the AWR came along in Sept 2011, which has dominated client thinking and the client choices as far as contracts are concerned are a) all temps have perm rights after 13 weeks, b) use agencies which operate the Swedish Derogation with their temps/contractors, c) continue to use properly worded upper contracts with agencies which recognise the fact that the contractor is in business on own account.

The worry is that clients can't be bothered with b) and c). They simply don't want to be the first AWR test case in the courts. That leaves a) which effectively puts contractor inside IR35 for that assignment. Depending on the day rate, the contractor then has to decide whether a deemed payment is worth the trouble, or walk away.

It may seem odd that some clients are moving in this direction, but I've found that clients make some arbitrary decisions about whether assignment terms are in/outside AWR. A common decision point is the day rate threshold. One client I worked for arbitrarily decided that anything below £300 a day automatically fell inside AWR (and by implication therefore, IR35). I saw that contractors with (arguably) specialised skills that would normally benefit from option c) above, found themselves increasingly drawn into a). Horrible thinking I'm afraid, but there it is. It wasn't helped by the client's late planning to implement AWR back in Sept 2011, and so they jumped on what they saw as the quickest solution for AWR compliance. They also weren't well advised by their recruitment MSP.


ContractorUmbrella Respond:
Think you're right - AWR does seem to have muddied the IR35 waters even more - doesn't get any easier does it


Contractor:
Yep although there is no direct link supposedly, its impossible to get AWR benefits such as paid holiday and claim to be outside IR35, well you could try and chances are would get away with it but if caught then expect a big fine so depends on your appetite for risk.

I think ST summed it up really, I am going to be on the hook for 40% tax but 33 days holiday will negate half of that and other benefits may close the gap further. Its not going to be the most lucrative of contracts but other considerations such as work/life balance, security and skills/experience gained need to taken into account.


CUK Contractors Respond:
Paid holiday = employee.....no further discussion will change that.


CUK Contractors Respond:
Actually, it's a good thing. If there is an engagement where the client wants IR35 style direction and control then they are going to have to abide by the AWR and pay holidays, benefits etc which is a bonus to the worker who would otherwise be languishing in an IR35 caught contract.

If the company wants to avoid the AWR and all it's complications then they have to stop and think about structuring the engagement as a proper B2B relationship which will ultimately help the contractor to avoid IR35.

I don't see the downside, everyone's a winner!


ContractorUmbrella Respond:
All true - what a positive little soul you are 


Contractor:
Thanks for all repsonses on this thread, Im taking the contract

Now I have a decision to make on whether to go Agency PAYE or stick with my Lts Co and work inside IR35.....the calculators Ive used seem to think basic PAYE is a very slightly better take home and I wouldnt have the admin worries either. Is this the general consesus out there?


CUK Contractors Respond:
I wish I could second that but. . .

When AWR was introduced, a previous client came up with a new contract (non-negotiable) which they reckoned would avoid AWR.
By making everyone supply their services through a Ltd Co. as opposed to self employed or brollie, and by procuring direct not through agents, they reckoned they had a silver bullet.
Unfortunately the contract was a cut-n-paste from their standard employee contract and as such it put you slap-bang in IR35 territory.

So while I agree that everyone should be a winner, some clients/HR just can't help but but make pig's ear from a sliken purse.


CUK Contractors Respond:
I'd run it thru your ltd, keep as much span of control over your finances as you can. If you've run ltd for a while, it's not much extra effort.
But then again I'm a control freak..


CUK Contractors Respond:
Since you already have a LTD I'd be inclined to say stick with it but you are right that Umbrellas are a lot less agro.