IR35 Worst Case Scenario?

[shippwreck]

Thanks guys, that was what i thought.

Basically from this contract i'm hoping to put into savings a substantial amount of it anyway, and in fact from my wifes pay actually covers 90% of our living costs ATM so looking purely at numbers the small wage that i will be taking actually will make up that last 10% of income anyway, therefore 80%-90% of the dividends we plan to put into savings!

So looking at it like that even if they come a knocking and i loose, we should have the cash to be able to pay... I was more worried about if there were any criminal proceedings attached as well, glad there aren't!


As i said i have taken out PCG + cover anyway as i think thats a very sensible precaution, plus just the advice i'll have access to being a newb! As far as IR35 insurance goes, i've looked into it, but was actually warned to be careful as a lot of companies give you cover while your paying the premium, not cover for a specific contract. So you would need the policy for upto 6-7 years after the contract as well... see what i mean.

I haven't looked into it all that well anyway so this may have been only in the cases i saw, but its just something to check IF you decide to get that insurance!

EDIT: Oh yeah and also after reading more i realised that actually the contract is only a small part of it. For instance your contract can be fully compliant, but if your actual working practices aren't and are different to those stated in the contract, then its meaningless. I would imagine this works both ways, so if you had a contract that wasn't, but your working practices were (and you could proove that) then you would also be fine.

Admittedly having a compliant contract would help A LOT, but its not the be all and end all...

[boredsenseless]

So looking at it like that even if they come a knocking and i loose, we should have the cash to be able to pay... I was more worried about if there were any criminal proceedings attached as well, glad there aren't!

We never said there weren't just that it was exceptionally unlikely. If you have the cash to pay and haven't taken the p1ss you should be okay though

[kirk]

How often do these investigations actually take place (relatively speaking) and are you more susceptible when you are a newb? i.e. are the HMRC looking out for it?

[Denny]

I would imagine this works both ways, so if you had a contract that wasn't, but your working practices were (and you could proove that) then you would also be fine.

...

No that's wrong. Your contract terms are vitally important, it's just not the only criteria the IR would use to make their assessment.

Therefore, you must make sure the contract wording does reflect IR35 exempt status, otherwise you'll be stuffed, even if your client does fully expect you to work as a proper B2B business as far as working conditions are concerned.

Otherwise, the IR will just assume that your client is allowing you flexible working arrangements which they could have withdrawn at any time during the contract. After all, this is what your contract says they can do. This is not at all the same as being entitled to work where and however you choose to complete your deliverables because you're in business on your own account. Check the IR criteria for exemption from IR35 - it's well explained there.

There's a huge difference between flexible working arrangements (being allowed to work from home and coming into the officewhere you're based) and working out of your own home office (if that's where your company premises is based) and only making essential client site visits to carry out on-site work for which you may be offered a hot desk for convenience.

[IR35 Avoider]

therefore 80%-90% of the dividends we plan to put into savings!

If you're going to save the money anyway, consider saving inside a pension. Pension contributions by the company count in the same way as salary paid when calculating IR35 liability. Money you put into a pension reduces your potential liability by the amount contributed.

[tim123]

If you're going to save the money anyway, consider saving inside a pension. Pension contributions by the company count in the same way as salary paid when calculating IR35 liability. Money you put into a pension reduces your potential liability by the amount contributed.

Um, pension money is inaccesable until one is 60.

Personally, I don't think that this is a good idea.

tim

[rootsnall]

If you're going to save the money anyway, consider saving inside a pension. Pension contributions by the company count in the same way as salary paid when calculating IR35 liability. Money you put into a pension reduces your potential liability by the amount contributed.

This is another grey area at the moment, post pension A day you could theoretically pay all your Ltd Co money into a pension and pay no tax or NI at all. You can't get at the money until you are 55 but for long term contractors with money in the bank and nearing end of the gravy train it is potentially a massive tax/NI saving. But true to form the taxman backtracked by saying large payments into a pension will be at the discretion of your local tax inspector. So like most tax related matters you don't know if you can or if you can't !!!???!!!

[ratewhore]

Have a look here to understand the process:

http://www.hmrc.gov.uk/pdfs/ir109.htm#7