IR35 defeat costs IT contractor £99,000

[tim123]

http://www.contractoruk.com/news/003621.html

This doesn't make any sense to me.

Apparently, this was over 4 years, so works out at 2062.50 per month.

According to http://calculator.contractoruk.com/ you need to be on 125 ph (or a grand a day) for IR35 to make that much difference, so:

1) Do testers for the AA really get paid this much, where do sign up!
2) Someone on that sort of money should find it easier to be able to negotiate better terms than someone on 30 ph.
3) Someone working from home really ought to have made sure to exercise the RoS, simply by having someone else sitting at his home, doing the work, perhaps without telling the client. Ok he might end up being in breach of contract but he would have a sure fire get out of IR35 card.
4) Whilst 99K is a lot of money to most people, it isn't going to be difficult for someonme who has grossed over 800K to find it, so I'm not going to worry too much.

OTOH, the quoted sum could be a huge exaggeration to make a headline.

Um, I wonder which it is.

(and yes, I do agree that it looks like the decision is wrong, but that's another issue)

tim

[BrilloPad]

http://www.contractoruk.com/news/003621.html

This doesn't make any sense to me.

Apparently, this was over 4 years, so works out at 2062.50 per month.

According to http://calculator.contractoruk.com/ you need to be on 125 ph (or a grand a day) for IR35 to make that much difference, so:

1) Do testers for the AA really get paid this much, where do sign up!
2) Someone on that sort of money should find it easier to be able to negotiate better terms than someone on 30 ph.
3) Someone working from home really ought to have made sure to exercise the RoS, simply by having someone else sitting at his home, doing the work, perhaps without telling the client. Ok he might end up being in breach of contract but he would have a sure fire get out of IR35 card.
4) Whilst 99K is a lot of money to most people, it isn't going to be difficult for someonme who has grossed over 800K to find it, so I'm not going to worry too much.

OTOH, the quoted sum could be a huge exaggeration to make a headline.

Um, I wonder which it is.

(and yes, I do agree that it looks like the decision is wrong, but that's another issue)

tim

Interest at 7% a year is a killer...

[Ardesco]

What worries me most about this is the IR seem to have found a way to ignore the contract between the contractor and the agency by focussing on the contract between the client and the agency.

The ruling reads more along the lines of "if the upper contract had been IR35 complient the contractor would have won" rather than anything else.

Looks like Nu Liemore has found a new way to try and make IR35 stick. I do find it slightly worrying that the judgement is implying that true contractors never have to work in teams, only on thier own and that true contractors should not be asked to do a piece of work by a set time.

What planet are they on?? Every contractor is going to be asked to do a set piece of work by a set time, otherwise said contractor would not be accountable for anything. That's like saying I want a builder to build a wall in my garden by the end of the week, however my builder can build a shed instead of a wall if he wants and he can finish it whenever he likes, yet i'm still expected to pay him....

[Xenophon]

Hmmmm... this is a bit of a worry.

[backgetyou]

Is the Ltd name a typo? the Ltd company listed on CUK is dissolved and was only formed in 2005. There is a company from 1996 listed at CH with a slight variation.

[backgetyou]

What worries me most about this is the IR seem to have found a way to ignore the contract between the contractor and the agency by focussing on the contract between the client and the agency.
....

This has always been the case and is why its better to go direct if you can. For me this would be a good thing if Contractors finally move away from Agenices so that more companies will source direct.

I think the rest of your response is very true and well put. I think contracting is becoming very much a worry when ££ involved esp looking at the periods in recent judgements as they go a long way back. I can only assume these actions started long ago - does anyone know? As if its more than six years old I dont have any record of what I was doing and when I have tried to get info relating to old contracts from my solicitors/accountants they too have destroyed them after six years.

[dude69]

Seems like the defeat was of his Ltd, not him personally.

In which case he surely should have wound up the company and withdrawn any assets ages ago....

I know accountants are advising that there is a significant risk associated with leaving signifcant sums of money in a PSC and advising directors to pay out dividends to clearout accumulated the tax.

I am not sure if he can be found personally liable, but if not, then the company would just go bust and he pays nothing.

The question on paying out excess cash is one of additional tax paid (potentially quite high) vs. the risk of being investigated and losing (statistically very low I would think) vs. the opportunity cost of not paying out the sum in the company for personal use in reducing mortgage, investing, etc.

[rootsnall]

As if its more than six years old I dont have any record of what I was doing and when I have tried to get info relating to old contracts from my solicitors/accountants they too have destroyed them after six years.

You'll be liable for the IR999 minimum £30K a year plus interest tax bill then for your missing years

It is a bit of worry, I think these cases are long standing, I got the idea the IR were scaling back new investigations but ?

I'm glad I've moved around a lot, more for boredom reasons than tax safety but my tax bill for any one contract won't kill me.

[dude69]

Other question is it seems that no matter how good your contract and so on they will still look at working practices and the agency->client contract, and the reality is most contractors simply do the bidding of their client and are screwed if it ever came to investigating.

The question then is what is the size of the risk.

How many companies do HMRC do IR35 investigations on per year relative to total number of PSCs, and what percentage of those does HMRC find against the PSC.

[BoredBloke]

He's an idea. Why doesn't everybody who has a non Labour MP email this to them and state the obvious problems with it. How we can be bound by contracts we have not seen or signed. How IR35 now means that we have to work to the letter of our contract. So no ability to get involved in other parts of the project if we want to due to it not being part of the contract.

I have raised issues with my MP a couple of times regarding IR35. On both occasions he simply passed my questions onto Dim Prawn and Ed Balls Up. Neither was of any use. If you have an MP from another party it might stir a little noise - especially given the income shifting stuff also.