Falling Foul of IR35

[malvolio]

So if you close down your Co. revery couple of years (and do the whole taper tax relief thingy assuming that continues) and open a new one, do you resuce your exposure - i.e. are they unable to come after you (assuming you've not behaved dishonestly over IR35)?

Once or twice , perhaps. You need their agreement to close a company and they could eassily decide you were behaving in an artificial non-businesslike manner purely to save tax...

[Old Greg]

Once or twice , perhaps. You need their agreement to close a company and they could eassily decide you were behaving in an artificial non-businesslike manner purely to save tax...

Well once or twice will do me fine as I'll be retired in 6 years anyway

[Pondlife]

Off topic

On my own thread as well.

20% x 6 years is a lot to have lying around. Where do you stash it to avoid temptation? Bareing in mind that anything you do must be zero risk.

Business High Interest account
Fixed term bonds
Take it as divs and offset your mortgage

What else???

[kingshuk]

Well yes, that is quite correct, but I would be a bit nervous about using this as anything other than a safety net when all else fails...

Yes absolutely. Its the last safety net, all else failing. Then too maybe if one has the money its worth paying up IR in the event of losing considering the loss of future earning (going umbrella) that you mention.

[ASB]

Of course, the downside is that is if you bankrupt YourCo, you will be barred from being a doirector for a number of years

Sure the possibility exists - but it needs formal proceedings to be taken (by the DTI if I recall correctly).

They will not do this for an "ordinary" bankruptcy - i.e. a standard first time failing. If there is a suggestion that one had been "on the fiddle" in any way then proceedings are quite likely.

If the reason for the bankruptcy was a contested tax case - so one had reasonable belief of being outside - then it is unlikely disqualification proceedings will be brought.

[backagain]

I think you have to take a commercial view on your activities: if you are contracting then you need to change contracts every so often (every 6/12/18 months?). I mean that is what being a contractor is. Otherwise in my opinion you are clearly disguised employment.

If you think there is a chance that you may be caught for not paying tax, then you need to keep enough money aside for this. If you do keep this aside, then invest it so its working for you. A wise man does not spend every penny but keeps money aside for the future or emergencies like this; live a little and save a little?

Alternative is to be insured so as to cushion the risks.

At the end of the day its business; dont let it affect your personal life (but then don't be naive/ignorant or stupid; one needs to be responsible and smart too).

[Lewis]

This being the case, how much (if any) do people keep aside to cover these possibilities? Basically, what's the % difference between being caught (so I assume no expenses either) and not?

The difference between in IR35 vs out IR35 is around 20% (good calculator here http://calculator.contractoruk.com/ir35-calc.php.) If you are worried, instead of putting money aside, you could just take out tax loss insurance (around £300). Others will argue it is not necessary but at the end of the day it's one of the options that you have available to you ....

[Chugnut]

The difference between in IR35 vs out IR35 is around 20% (good calculator here http://calculator.contractoruk.com/ir35-calc.php.) If you are worried, instead of putting money aside, you could just take out tax loss insurance (around £300). Others will argue it is not necessary but at the end of the day it's one of the options that you have available to you ....

In the latest win by the Revenue where the client painted a different picture based on their perception (and maybe the upper level contract), will your insurance pay up or void the policy for reasons potentially out of your control? The cynic in me says this would be the perfect get-out clause.

For example, I have a named substitute and associated clause in my contract and could invoke it. If for any reason the client does not wish anyone else to carry out a particular task, they could refuse the sub. Surely the fact that I COULD provide one is the important point, not that they REFUSE it. I have no control over their decision making at any point in time, nor would I want it.

I am assured by my agent (definitely one of the better ones) that although I am not able to see the upper level contract, there is nothing in there that would void the working practices. The end client goes to great pains to state that I am not an employee, to avoid any employment rights being claimed.

[Qdos Contractor]

We certainly wouldn't withhold cover if the case was lost due to reasons beyond the contractor's control, i.e. the upper level contract and unexpected testimonies from the end client.

Insurance is offered on the basis of a working and business practice questionnaire alone and, providing no material fact has been withheld by the contractor, there are no other issues that could affect the cover.

Re substitution: for a right to be genuine the client must only be able to reject a replacement on reasonable grounds related to skills, qualifications etc. The end client must not have an unreasonable right of veto. If you had a good, unfettered right of substitution in your contract and the upper level agreement and then the client rejected a replacement without giving reason, you may have grounds to challenge the decision on a legal basis.

[Chugnut]

Thanks for the answer QDOS.