I wish to pass IR35 legally - but my Contract falls inside.

[RW Fitzgerald]

Hi,

After being a Permie for a good few years now, I have taken the opportunity to undertake a Contracting role next Month.

There has been a slow and steady goal to move away from the Permie scene into Contracting from myself.

I have registered myself as a Ltd company, I have created a website, I have an office in my house, I'm listed in Yellow Pages, I'm currently undertaking an MSc in Information Security and I'm registered for VAT.

I believe that all of this promotes the fact that I am serious about the Business that I am trying to create for myself.

However, we all need money, and most of us do not get any money for staying in bed so I accepted a role which falls into IR35, ie fixed Contract, the hours are determined and I do not use my equipment in the designated workplace etc.

So I am in a situation that my Contract that I will be working under falls inside IR35, but I have created a business model that falls out of IR35, or certainly on the way to.

My Accountant is happy to submit this case to the Revenue, I was just wondering whether anyone has had the same situation where the Contract that they are undertaking falls inside IR35, but their business structure is outside.

Any suggestions, findings and advice from these sort of people would be very helpful.

Thanks.

[vetran]

OK - Your accountant is unlikely to be an IR35 expert, probably worth getting it checked. Bauer & Cotterell, Accountax & QDOS are take it to them.

Don't approach the revenue, a bit like asking Dracula if you look tasty or the pope's advice on condoms.

Join the PCG, even if you don't believe the hype it will get you insurance and discounts on contract reviews.

[fzbucks]

OK - Your accountant is unlikely to be an IR35 expert, probably worth getting it checked. Bauer & Cotterell, Accountax & QDOS are take it to them.

Don't approach the revenue, a bit like asking Dracula if you look tasty or the pope's advice on condoms.

Join the PCG, even if you don't believe the hype it will get you insurance and discounts on contract reviews.

So does the PCG insure against the cost of defending an IR35 investigation even if the contract is blatantly within IR35?

[RW Fitzgerald]

He/she didn't say that, he/she suggested getting it reviewed by a company that provides Tax Investigation insurance.

Never thought of that...

[oraclesmith]

The contract is the key.

It doesn't really matter that you have a website and an office at home or are listed in Yellow Pages or have your own stationery and business cards or do your own book-keeping etc etc - most contractors can claim to have (or easily set up) these things. Having a limited company and registering for VAT is standard practise. They are additional factors to reinforce the contract situation. It needs to be a contract for services, not of service.

As for equipment; it could easily be argued that you don't need tools to do your job other than your hands (for typing) and your brain. Laptop, PC's etc are more likely to be part of the client's secure infrastructure, so most consultants (eg. Accenture etc) will still need to use the clients PC's to have back-end access the clients systems. As a budding IT security expert, you can easily argue this case. A plumber may have his own small tools for a job, but you wouldn't expect an accountant to bring their own desk and chair with them when they go to see a client...

As mentioned, definitely don't approach the HMRC. Get the contract properly checked and then you'll know. Your accountant doesn't sound very clued up on IT contracting, so I'd change them at the earliest opportunity - or do the legwork yourself.

Re. insurances; they'll sell you a policy and take your money, but it's your responsibility to make sure you stick to the terms. There will be a clause in there about your operational responsibilities.

In my humble opinion.

[Gonzo]

I would agree with the others on here, so long as the contract is a "contact for services" and not a "contract of service" it should be outside IR35.

Ask an expert (probably not your accountant, but that depends on who they are) to review it.

Noone will ever recommend asking HMRC for their opinion on your situation, for good reasons, so don't do it.

[TheFaQQer]

So does the PCG insure against the cost of defending an IR35 investigation even if the contract is blatantly within IR35?

No. They will mount a defence if it is defendable, otherwise they will advise you to pay up quietly.

Get the contract checked out and negotiate to make it outside IR35. Then make sure you are working to those conditions - having an IR35 friendly contract but not-friendly practices will still catch you.

[malvolio]

No. They will mount a defence if it is defendable, otherwise they will advise you to pay up quietly.

Get the contract checked out and negotiate to make it outside IR35. Then make sure you are working to those conditions - having an IR35 friendly contract but not-friendly practices will still catch you.

Wrong wrong wrong....

PCG insurance covers any aspect investigation into your tax affairs. Most of the time that means IR35, sometimes it doesn't, but you're covered anyway (which, BTW, is why the insurances are still worth having even if IR35 is repealed)

IF it is 100% inside IR35 - which is incredibly difficult to prove unless you are a Friday-to-Monday or (rather bizarrely) a PCG director, who fails on D&C - then obviously you should pay up becuase it's the law. They sure as hell won't tell you to pay up otherwise.

[TheFaQQer]

Wrong wrong wrong....

PCG insurance covers any aspect investigation into your tax affairs. Most of the time that means IR35, sometimes it doesn't, but you're covered anyway (which, BTW, is why the insurances are still worth having even if IR35 is repealed)

IF it is 100% inside IR35 - which is incredibly difficult to prove unless you are a Friday-to-Monday or (rather bizarrely) a PCG director, who fails on D&C - then obviously you should pay up becuase it's the law. They sure as hell won't tell you to pay up otherwise.

What are the costs of an investigation for a 100% caught contract?

[malvolio]

What are the costs of an investigation for a 100% caught contract?

Difficult to answer precisely. You're looking at legal representation and professional opinion, it depends how long things drag on for (2-4 years is not uncommon), how many contracts (they will look at all of them) and a pile of other imponderables such as worry and a lot of personal time answering hundreds of pointless and repetetive questions. Usual working figure is around £15k plus back tax and interest (it's unlikely you'll get penalties) but it's anywhere between £5k and £25k for costs.

Or £220 a year anyway...