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Inside IR35 expenses vs reasonable adjustments for disability

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    #31
    Originally posted by BrilloPad View Post
    Then why is he bleating?

    Hopefully some mod will move this into general.....
    This is an accounting question, and it's in the accounting forum. Just because it doesn't apply to you, doesn't make that any less true. I sincerely hope the mods *don't* move it. There are other disabled people in the world, you know. It's at least possible this may be helpful to others.

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      #32
      Originally posted by Glencky View Post
      This is an accounting question, and it's in the accounting forum. Just because it doesn't apply to you, doesn't make that any less true. I sincerely hope the mods *don't* move it. There are other disabled people in the world, you know. It's at least possible this may be helpful to others.
      The answer is quite clear. Its not accounting. DLA/PIP is designed for this purpose.

      I have 2 disabled kids.

      I would post alot more. However I am trying to reach a whole year without getting banned and this is the professional forums. For now....

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        #33
        Brillopad - I'm sorry to hear you've experience of this part of 'the system' from the inside as I know from experiences of friends that this can be tough.

        I don't qualify for PIP. As I'm sure you know, all disabilities are not the same. I have friends also with epilepsy who qualify for PIP. I am not that person, and I am aware that this makes me fortunate if anything. But 'disabled people who qualify for PIP' is a subset of 'people who are covered by the Equality Act'. I fall into the latter category - hence 'reasonable adjustments'. So this *IS* an accounting question.

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          #34
          Originally posted by Glencky View Post
          Brillopad - I'm sorry to hear you've experience of this part of 'the system' from the inside as I know from experiences of friends that this can be tough.

          I don't qualify for PIP. As I'm sure you know, all disabilities are not the same. I have friends also with epilepsy who qualify for PIP. I am not that person, and I am aware that this makes me fortunate if anything. But 'disabled people who qualify for PIP' is a subset of 'people who are covered by the Equality Act'. I fall into the latter category - hence 'reasonable adjustments'. So this *IS* an accounting question.
          Agreed. At its simplest: if the Ltd decides this is a reasonable adjustment, does a BIK arise?

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            #35
            I haven't read all of this yet, but based on the first post you'd be best served if they let you work from home a lot and thus made T&S a moot point.

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              #36
              What a very interesting test case this could make. It shows exactly how unfair IR35 can be, and also in a way that even our whingeing "fairness"-driven media would have to admit is unfair. To do this job, you have to spend this money. But you can't even get HMRC to admit it and they are going to make you pay tax on it.

              Sure, you can ask them, but if they say "go ahead," what do you have? An argument that "Mr So-and-so from HMRC told me on the phone I could do this." At least get the guy's name. But that will only help you avoid penalties if you lose your case later, it won't mean you win the case. A written answer would definitely be better. That would also give you something to take to the press if they write back to say that you lose.

              Even inside IR35, you are still an employee (for tax purposes) of YourCo. If YourCo pays this, is it a "Reasonable Adjustment"? I'd say that argument is easy to answer. It's definitely an Adjustment (you didn't used to do this). And it is definitely "Reasonable" because it is necessary for you to be able to do the task, and the task is bringing in lots of money for YourCo. (I'd get a written letter from your doctor about the need to keep travel limited so you can get the necessary sleep.)

              So I'd say it is definitely appropriate for YourCo to pay the expenses (if they have the money) and for them not to be a BIK. It's a lot of money so a lot of companies wouldn't find that adjustment "reasonable," but you are a highly skilled person (and the bar moves for "reasonable" depending on what the individual brings to the company). I would guess you would have little difficulty having YourCo pay the expenses without it being a BIK -- if it has the money.

              Which probably doesn't help at all, unless YourCo has retained funds. Because the "deemed payment" calculation under IR35 will be based on the contract amount, and I don't think there is any provision for adjusting it. But if you DO have retained funds in your company, I'd guess you could do the normal deemed payment routine and pay the expenses out of those retained funds without much trouble. HMRC is going to be harder to deal with over reducing the deemed payment in an IR35 case than they will be over a separate arrangement between you and YourCo. What they DON'T want is someone reducing taxation on an IR35 contract due to T&S, but if you are paying the whole deemed payment, they probably won't care much what you do with those retained funds.

              I think NLYUK is onto something here, though. You are being taxed as a worker of the client (under IR35), so the wording "contract worker" is important. Your client is to make "Reasonable Adjustments." Is it a "Reasonable Adjustment" for you to expect them to provide T&S? Probably not. Is it a "Reasonable Adjustment" for you to ask them to reduce your contract compensation to provide lodging for you? Well, since it doesn't cost them anymore money to do that, that sounds reasonable to me. I guess they would probably do the same for a key employee and it would not be a BIK. And in this case, I'd guess since the disability rules specifically mention contract workers, they could do the same for you.

              In short, I think chances are good you could get the client to reduce what they pay you on the contract and pay your lodging instead, and that this would be seen as the kind of "reasonable adjustment" that is required for "contract workers" and won't fall under the remit of IR35 and the deemed payment. If they pay YourCo the funds and YourCo pays the hotel, there is probably no provision for adjusting the deemed payment to reflect this, but if they pay the hotel, then a case can be argued that it is just their "reasonable adjustment" and not a payment to you or YourCo, and thus not part of the deemed payment calculation.

              But failing that, if you have retained funds in YourCo, I think it is highly likely you could use them to pay the lodging without incurring a BIK.

              The key thing is the lodging. The travel, you had to do before your disability, but not the lodging. The taxi also is new, but I wouldn't try to claim that. Yes, it is a new expense, but if you get the lodging paid you'll be doing fewer commutes than formerly, so you'll be paying less on travel anyway. And HMRC is likely to argue it is just commuting costs, with some justification. I'd focus on the hotel and avoid the appearance of taking the mick by going for the taxi expense. It's only for six months, anyway, hopefully, until you can drive again. If you'd get some good-looking guy to pick you up, you could skip the taxi expense.

              I would also ask your client if you can flex your schedule a little more. On Monday, can you come in at 9:30 and work until 6 (so you don't have to leave home so early), spend the night, then Tuesday start at 6:30 am and leave at 3 (to get back in time to get the bus home)? That's another "Reasonable Adjustment". It might also strengthen your case if other reasonable adjustments are being made besides just the lodging.

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                #37
                Thoughtful post WIB. Hadn't considered deemed payment. If there are no retained funds, could the OP loan the Ltd the funds for accommodation rather than pay herself. The loan can be repaid when there is an outside IR35 contract.

                Comment


                  #38
                  WordIsBond - thank you. What a very helpful response, drawing together a large number of strands, and building on some of NorthernLady's previous thoughts.

                  My responses, in no particular order:

                  *the flexible working aspect - I appreciate I hadn't mentioned this because I was thinking very much of the accounting points in this thread. But it is my intention to flex hours on particular days and aim to get into a pattern pretty much as you say. I'm a PM. I know the situation I'm walking into and at first I won't be in control of things, but being a PM (and hence, for example, the booker of a lot of the meetings!) will make it easier for me to adjust things to suit such a working pattern. I had already anticipated that, for my husband's sake if nothing else!, going in late on the days when I'm staying over (and hence can easily work late) would be the right answer. That said, I also know myself and my attitude to my job. The hours between 8 and 9 and between 5 and 6 (and OK, earlier and later too...) are disproportionately useful. When you're in a lot of meetings all day, and so are all the other key people, it can be stonkingly useful to have access to people outside of that. And for similar reasons I actually hate working from home - it's necessary, it helped keep me sane/ get what I thought was enough sleep previously, but it isn't the most effective way to do my job. In this role, most of my stakeholders will be in London too, whereas previously they were scattered all over which meant less of an issue to work from home. When most people are in London it's a disadvantage - and hence actually less 'reasonable' for the client - to work from home. All of that said, rest assured that flexible working is my primary line of defence and will be the main thing I'm looking to do to help manage the situation once I start. However I've gone into this with my eyes open knowing that may not cut the mustard for this particular role, so I've only accepted it on the basis that it still works financially if I stay over 2+ times a week and pay the costs from my net salary - hope that makes sense. (forgot to mention, I'd also made it clear in interview I will not be in the office more than 4 days a week on average and they agreed that - so any other flexible working is on top of that basic agreement.)

                  *ClientCo paying me lower rate and instead paying hotel - it's a great idea and it's one I'm going to hold up my sleeve. I won't bore you with the detail but I will be totally honest and say based on my experience during pre-screening and contract negotiations, the client (and more importantly, their agency and outsource partners) will be totally unable to support this kind of negotiation without a lot of hassle. My actual 'boss' I imagine would approve it immediately, but making it happen, another story. I know it sounds ridiculous but I could write a book on the roughly 7 working days I have spent over the last month supporting prescreening and contract. Gahhh! However it's clearly a workable plan in principle so as I say, I'll hold this up my sleeve. I wouldn't try it for this first contract which is only 5 months anyway, but if it goes to renegotiation for an extension (which is at least 50/50 likely unless I decide I really can't hack it and have to look for something closer to home) then I might try it then.

                  *Hotel vs taxi - yes, you're right - in essence I used to pay myself about a tenner mileage and £8 parking a day, and now I'll need to pay about £32 total in taxis (and whilst I'm not keen on the 'random man lift' option !! there may be some days when I get home early enough to use my free bus pass... or get a lift from my husband) The home-to-station costs are different but not that different. I'd already said I wouldn't try and do anything with the train fare as it's unchanged, so yes it's the hotels that are important.

                  * deemed employment calculation - you're not quite right on this, I don't think. The whole annual invoiced amount isn't fed into it as is, there are allowances. The 5% allowance for a start, plus any pension contributions are deductible. On top of that, any legitimate expenses paid to me, that would have been payable had I been an employee of the ClientCo, are deductible. So if MyCo makes the decision to pay hotels as a reasonable adjustment, and if these aren't treated as a BIK, then it seems reasonable to assume the ClientCo would have too (though I recognise this isn't watertight) and hence any hotel expenses would be removed from the total invoiced from the year before the deemed employment calculation takes place and hence be outside of it. So even without me having any accrued funds, it may still be possible to pay myself the expenses without being taxed on them. (I don't have any significant accrued funds, having operated for a while inside IR35 and not to mention been off work for 8 months! so this was a good point to have raised).

                  That said, it's all turning into a lot of hassle, isn't it..!! I've already lost the will to live with it!

                  I thought of another angle, and that's VAT. Let's say the hotel is £120 a night (London, yes, but I'm not going 5 star and I'm booking in advance!) inc VAT. Well even if we assume worst case, and the hotel is both a BIK and not allowable deduction under the IR35 DEC, there may be benefit in the company footing the bill, VAT-wise. So I spend £120 on a hotel (inc. VAT) and the full £120 is paid back to me by MyCo but also reported in full on my P11D so no different to me paying it from my net salary except I've had the hassle of all the expenses claim paperwork from both employer and employee sides. However - separate point - I'm about to deregister for flat rate vat as it's no longer worth it, which would mean I could claim £20 of the £120 back within MyCo for the VAT. That would leave £20 kicking around in the company which I could take as salary (hence getting about £10 of it once all the tax is gone!) or, possibly more significantly, pay it into my pension which is totally allowable within the IR35 DEC.

                  However that's say £40 a week, less than £200 a month and about £2k a year and it's a sh1tload of paperwork in expenses and everything else to get it! may be more worthwhile to just run away!

                  Thanks so much to you for being so thoughtful with this - as you can see, it's really helped me develop my thinking. The conversation I will now have with my accountant will be much better as a result (always best when you've both thought about things as much as possible).

                  If nothing else, even if I end up doing what I always planned to and paying from my net salary, at least I'll know why I'm doing it!

                  Comment


                    #39
                    Whatever you decide to do - if you're an IPSE member then I would be talking to the policy team there to highlight your situation, and also talk to the tax and legal helplines to take their advice.
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                      #40
                      Originally posted by Glencky View Post
                      Finally – yes, I deliberately haven’t told you why I’m inside IR35, and I’m not getting into that discussion here. Obviously I realise being outside would resolve this entire expenses-related issue (for now at least… there’s a lot of change in this area, isn’t there…) but that’s not going to happen. Afraid I’m not going to indulge your curiosity on this one.
                      It wasn't really curiosity, it was m ore of case of are you sure. Not sure why it would be such a secret though (maybe it is curiosity!) but it's up to you. I worked with a guy once who deliberately paid PAYE for moral reasons. He simply thought it was the right thing to do to pay the tax.

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