First time contractor for a private sector company. Should I be worried about IR35?

**fannyadams** · 1 April 2017, 12:04

Originally posted by leibnizster View Post

Hi everyone. This is my first post, I hope it's fine if it's here. Some context: I was thinking for going in contracting for some time, and I'm about to take the plunge now. I've read a lot about this IR35 law on the public sector and I was wondering what you guys think will happen to the private sectors contracts. Based on the IR35 rules, it's not clear if my role would fall inside or outside IR35 (IT software). I've talked to a bunch of contractors that have been involved in similar roles and none of them have been investigated for falling inside IR35.

Have any of you been audited for falling inside IR35? How did that go? And would a standard/premium IPSE membership help for ofsetting this risk? I saw somewhere that they had a really good percentage of wins in IR35 disputes.

Thank you!

There are no current plans for the IR35 changes to roll out to the private sector, although almost everyone believes this is likely to happen in the next few years.

Read up on IR35 (lots of guides on the right), make sure you think and act like a business and get your contract reviewed (QDOS (although they are reportedly snowed under with PS work), Abbey Tax (discount if you're an IPSE member), or B&C).

Take out tax investigation insurance - IPSE+ gives comprehensive cover as well as cover for things like jury service, agency going bust etc. There's a 15% discount code on this site if you look around. If you just want tax cover, there are cheaper options.

If you're really paranoid, you can take out cover for the tax owed if you are found to be inside, but these policies are more expensive, and have never had to pay out - if you structure your working practices properly, and have professional representation from the get go, you're unlikely to need it.

You'll be unlucky to get investigated in the private sector, but it does happen - plenty of stories on here from people who have had the dreaded brown envelope.

**leibnizster** · 1 April 2017, 12:28

Thank you for the answer. I will check those names out. I will have my contract reviewed for IR35 compliance and in addition have some insurance in place (without getting too paranoid, as you said).

**hollyblue** · 1 April 2017, 15:15

Originally posted by leibnizster View Post

Hi everyone. This is my first post, I hope it's fine if it's here. Some context: I was thinking for going in contracting for some time, and I'm about to take the plunge now. I've read a lot about this IR35 law on the public sector and I was wondering what you guys think will happen to the private sectors contracts. Based on the IR35 rules, it's not clear if my role would fall inside or outside IR35 (IT software). I've talked to a bunch of contractors that have been involved in similar roles and none of them have been investigated for falling inside IR35.

Have any of you been audited for falling inside IR35? How did that go? And would a standard/premium IPSE membership help for ofsetting this risk? I saw somewhere that they had a really good percentage of wins in IR35 disputes.

Thank you!

I'm not sure if you are confused or if I have misread but if you are deeming yourself INSIDE IR35 because of your working practices then you are safe because you need to pay PAYE etc. If you declaring yourself OUTSIDE and therefore working through a Ltd Co and not paying PAYE but corporation tax instead and HMRC investigate you and decide you are INSIDE IR35 that's when you are in trouble!

IR35 still applies to the private sector as I understand it, but what it means is that YOU are responsible for making the determination about whether you are inside or outside of IR35. You dont actually have to declare it anywhere but the way in which you pay your tax is different (INSIDE = PAYE / OUTSIDE = CORPORATION TAX). If you are in the Public Sector after 6th April the decision as to whether you are inside or out is taken away from you and is made by the End User (e.g. public sector body -PSB).

I'm no tax lawyer so of course do you own investigations but this is the way I understand it.

**leibnizster** · 1 April 2017, 15:39

Maybe I didn't express myself clearly. Being inside IR35 is subjective and there can be made a case for both inside and outside in my case. Obviosly I would lean to be considered on the outside and my worry is with being audited and deemed on the inside. I'm curious how many IT software contractors get audited in the first place and out of those one, how many would have their self assessed IR35 status reversed. The few that I know have not been audited in regards to their IR35 status.

**ladymuck** · 1 April 2017, 15:43

Good luck! All the advice above is good stuff. You're coming in at a challenging time, making contracting even less of an option for the faint hearted. Spend your first couple of contracts building up a good warchest to guard against the lean times. Remember that the money in your LtdCo's bank account does not belong to you!

**leibnizster** · 1 April 2017, 15:53

Originally posted by ladymuck View Post

Good luck! All the advice above is good stuff. You're coming in at a challenging time, making contracting even less of an option for the faint hearted. Spend your first couple of contracts building up a good warchest to guard against the lean times. Remember that the money in your LtdCo's bank account does not belong to you!

Cheers! I will definitely PM you if I decide for the IPSE membership.

**SueEllen** · 1 April 2017, 15:55

Originally posted by leibnizster View Post

Have any of you been audited for falling inside IR35? How did that go? And would a standard/premium IPSE membership help for ofsetting this risk? I saw somewhere that they had a really good percentage of wins in IR35 disputes.

I read somewhere it was 60,000 to 1 and that if you had insurance there is a tendency for your case to be quietly dropped.

If you do a search on here via Google then you see that about 3-4 posters over the year have admitted to have been investigated and of those 75% were in IT. The cases were quietly dropped by HMRC after a 2-3 years of stress due to them having insurance.

I personally know of one contractor in IT who had been investigated. He had no insurance and so paid up. However I've met loads of contractors over the years due to my social circle and the fact some of my siblings are contractors. So it is very rare to be investigated.

IR35 investigations tend to start as an enquiry into something else covering your tax affairs so make sure you file and pay everything else on time including VAT, and don't claim for dubious things. This is where the premium IPSE membership comes in as it stops a simple tax investigation turning into an IR35 one. IPSE will go to court if needed to prove a legal point.

Also choose your accountant wisely as someone on here was being asked loads of questions when registering for VAT by HMRC that none of the resident accountants or regular posters have ever heard being asked.

Finally when you are in a contract store - which may mean printing emails out or forwarding them to your business address - information that proves you aren't inside IR35. For example if you don't have any work to do on your project so are sent home, or how you are treated differently to permanent staff.

BTW thanks for your post I just need to store some evidence to prove IR35 doesn't apply to my current contract.

**leibnizster** · 1 April 2017, 19:29

Thank you SueEllen, that's exactly the kind of information I was looking for! And having mail/email proof of instances where it's clear your work falls outside IR35 is a really good idea - I will defintely do this.

First time contractor for a private sector company. Should I be worried about IR35?