Low Value Contract Inside IR35

**TykeMerc** · 27 August 2008, 20:02

Originally posted by supersteamer View Post

Any opinions on this...?

Just finished a big contract outside of IR35 (well, who can tell but I believe so). Been offered a 1 month low value thing which is well inside IR35 (stunt double for permie going on long holiday; employee like contract etc.) Handy to get to (round the corner) and seems like interesting enough work so I'm considering it (it's only a month anyway - pays for my cornflakes while I look for something else).

Now.... is it worth an uphill battle to try to get this outside of IR35 or can I just attribute my annual salary / pension contributions to this short contract, and draw divis from the big non-IR35 contract? i.e. is there any financial benefit to be made being outside IR35 in this scenario?

(Obviously will check with my accountant but I always like a 2nd opinion)

Thanks!

Since it's a one off fixed term gig I'd be inclined to just take it and not get in a knot over the tax. You've already described a sensible tax strategy with previous non IR35 earnings anyway so I can't see any particular losing situation in this scenario.
You could even shove it through an umbrella to avoid tainting your MyCo Ltd with an IR35 contract.

**chris79** · 27 August 2008, 21:21

Go umbrella for a month?

**malvolio** · 27 August 2008, 21:31

No! Run it through your LtdCo, use the IR35 income as your taxable part and take the non-IR35 work as divis. While the contracts are individually assessed, Hector doesn't care how you take the resultant gross income out of the company as long as any IR35 money is properly accounted for and taxed.

**supersteamer** · 31 August 2008, 21:46

Thanks

Thanks for the responses. Appreciated.

**chris79** · 31 August 2008, 21:54

Originally posted by malvolio View Post

No! Run it through your LtdCo, use the IR35 income as your taxable part and take the non-IR35 work as divis. While the contracts are individually assessed, Hector doesn't care how you take the resultant gross income out of the company as long as any IR35 money is properly accounted for and taxed.

Double check this, I was always under the impression that if just 1 of your contracts in the company fails IR35, then they all do?... Hence why some people say it's worth creating a brand new limited for very high value contracts to keep them all separate?

**malvolio** · 31 August 2008, 23:40

Originally posted by chris79 View Post

Double check this, I was always under the impression that if just 1 of your contracts in the company fails IR35, then they all do?... Hence why some people say it's worth creating a brand new limited for very high value contracts to keep them all separate?

Nope, totally untrue. Each contract is assessed individually. As for creating separate companies, ever heard of Ramsay?

**NickFitz** · 1 September 2008, 01:21

Originally posted by malvolio View Post

Nope, totally untrue. Each contract is assessed individually. As for creating separate companies, ever heard of Ramsay?

Ramsay MacDonald, or Gordon Ramsay?

Links are good when making brief references in hypertext. They allow you to let people know what you're talking about without having to go into detail. Given that when one asks a rhetorical question such as the one you pose one is normally implying that the respondee is in fact unaware of the subject one is mentioning, providing a link to relevant information can be seen as one of the new courtesies that the technology of the web affords us.

**malvolio** · 1 September 2008, 07:08

Originally posted by NickFitz View Post

Ramsay MacDonald, or Gordon Ramsay?

Links are good when making brief references in hypertext. They allow you to let people know what you're talking about without having to go into detail. Given that when one asks a rhetorical question such as the one you pose one is normally implying that the respondee is in fact unaware of the subject one is mentioning, providing a link to relevant information can be seen as one of the new courtesies that the technology of the web affords us.

Given Ramsay is a fundemental principle of tax law, it is surprising that someone who sees fit to comment on IR35 contractual structures is unaware of it. However, since you are also unaware of it, it is the principle, enshrined in case law, that HMRC can look at a business arrangement, conclude that is artificial and has no financial benefit other than the avoidance of paying taxes due and so can ignore the contract entirely, look at the overall picture and assess the tax owed on that basis.

And as I have said many times - do your own research. Google "Ramsay tax" and the first one up is a detailed explanation of it - no mention of Prime Ministers or Chefs anywhere that I can see.

Low Value Contract Inside IR35