IR35 defeat costs IT contractor £99,000

[malvolio]

Not sure if I understand this, are you saying I could close my company down and as soon as its closed thats it they cant come at me for IR35 ?

No, absolutely not. IR35 is a personal tax, not a corporate one, it's merely paid by the company on your behalf. The whole point is that the company is a fiction, isn't it.

[Bumfluff]

No, absolutely not. IR35 is a personal tax, not a corporate one, it's merely paid by the company on your behalf. The whole point is that the company is a fiction, isn't it.

Oh well, Ive had a good run (touch wood) as a ltd doing sal and divs, contract now is border line IR35 compliant I wouldnt like to test it though. So Im going full salary now

[Ruprect]

Oh well, Ive had a good run (touch wood) as a ltd doing sal and divs, contract now is border line IR35 compliant I wouldnt like to test it though. So Im going full salary now

Hope you've got the KY ready

[lilelvis2000]

This would make me worry, but luckily I don't have agents anymore. I also don't have work either...but there you go.

Otherwise, my three years completely embedded within my client would make me worry. I still am using one of their laptops to use their VPN when an issue pops up.

[Epiphone]

This is ridiculous. We're being screwed over on the basis of contracts we can't even see. The contract between agency and client is a totally seperate B2B agreement and nothing to do with OurCo.

So if you add a bit of value for money to the client by helping with something that isn't already written into the contract then you get screwed for it? And if you refuse to help out you possibly lose repeat business. Thanks a lot, Labour.

I think it's time for the PCG to aggresivly fight this "upper contract" bulltulip. I'll pop over and post on the fora later.

[backgetyou]

I have just read the transcript and ruling - its below if you want to have a look but its not as clear as summarised at CUK. I have included certain points but have paraphrased:

http://www.bailii.org/cgi-bin/markup...Ltd&method=all

Rate paid: hourly rate of £50 per hour then£480 per day. market rates for IT expertise fell, and the AA paid only £375 per day.

The judge looked at an imaginary contract between Mr Bessell and the AA stating that it would contain a provision that Mr Bessell undertake the tasks allocated to him with a specified but reviewable timeframe and accept the AA's reasonable directions in relation to what he was doing.

Supply to the AA for at least 40 hours per week in return for payment
Paymnet made to staff for making available not for what they did.
The provision of a 4 week notice period suggests that the parties recognised that the work might run out and the AA would no longer wish to pay for the supply of staff it was no longer able to use. This he stated was as long as Mr Bessell turned up, the AA had to pay whether or not work was available for him to do. If however Mr Bessell was working for more than 40 hours then overtime would be paid. In other words if he did no work for 40 hours and then worked 10 more he was paid 40 hours plus 10 hours overtime despite only working 10 hours.

The main statement was:

(i) substitution clause poor
(ii) there was degree of control
(iii) the intention of their being an employment contract was ignored
(iv) the fact he used both his goods and the clients goods (i.e. computer etc) made little difference either way
(v) His expenses outside the contract were minimal and there had little impact
(vi) He only had one other duplicate contract which paid very little
(vii) his ability to increase company profit was low

He worked fairly regular hours on allocated work during each engagement, carrying out a role similar to that of a professional employee. he did not produce a specific product; instead he provided his services to the AA.

[tim123]

Hum,

so he didn't work from home then.

And he got paid a minimum hunber of hours, even if there was no work to do.

Whatever made him believe he had a chance?

And he doesn't owe 99K in extra tax.

At 40ph the total tax (and NI) inside IR35 is 22K and at 50ph the total tax/NI is 29K, so 99K is about the sum of his total tax bill, not the difference between IR35 and nonIR35.

Thanks

tim

[BoredBloke]

FFS

(i) substitution clause poor

If I take on a builder and he subs the job out I would want the ability to check the standard/remove the subby off site if the work was pants.

(ii) there was degree of control

Only in so far as the project is here so we need to be doing that.

(iii) the intention of their being an employment contract was ignored

Not sure what that means

(iv) the fact he used both his goods and the clients goods (i.e. computer etc) made little difference either way

Oh so there goes one of the original pointers

(v) His expenses outside the contract were minimal and there had little impact

I don't see how this is an issue. I thought it was good practice to minimise your expenses. So are they saying he should have rented an expansive office which would be pretty much empty all the time.

(vi) He only had one other duplicate contract which paid very little

but he had one all the same. There are only so many hours in the day. If client A if offering you enough work then why kill yourself to take on more and risk giving a poor service to both.

(vii) his ability to increase company profit was low

His profits were already high because he had low expenses and a high daily rate. That is his profit. If he wanted to make them bigger then do more work outside the contract

[THEPUMA]

No, absolutely not. IR35 is a personal tax, not a corporate one, it's merely paid by the company on your behalf. The whole point is that the company is a fiction, isn't it.

I'm sure you've said this before and I'm sure I told you then that it was nonsense. IR35 is the company's liability and unless it can be shown that you knew that it applied and deliberately ignored it, HMRC cannot recover taxes from you personally.

[ASB]

No, absolutely not. IR35 is a personal tax, not a corporate one, it's merely paid by the company on your behalf. The whole point is that the company is a fiction, isn't it.

When I closed ASBCo down I had this discussion with our accountants. Their view was that since HMRC have approved the closure they have no ability to reopen it for any sort of investigation whatsoever. I then said but what about an investigation into me for IR35. They said their belief was that they would not be able to do that due to the way status has to be determined.