New to ltd company and have a few questions

[Alan @ BroomeAffinity]

The problem here is, where exactly is the line in the sand?

I've shown my contract to 2 small business revenue offices and while one office said I was OK, the other said I wasn't!

Your contract is irrelevant - its your working practices that matter. But I still wouldn't show it to the tax office.

[mkant]

God, don't show it to the tax office. I showed them a contract just when IR35 came out, 2001, and they instantly turned it down. I knew their decision was on the wrong side of borderline, but it took me 3 more letters and a friend's help to get the Status Team Leader to 'accept that the contract with xxx falls outside the legislation'. I keep good care of that letter .

It's just not worth the bother - I think I was lucky to get away with what happened.

[DonaldG]

Your contract is irrelevant - its your working practices that matter. But I still wouldn't show it to the tax office.

You right it is the working practices that matter, but it is still important to have a good contract. Your accountant or agency should be able to provide you with one. I have a standard contract template, you can use if you can't get your hands in one. However you should never show this to the tax office unless specifically requested from them.

Having been involved with several tax investigations (from the good guy's side - ie the accountant/taxpayer), if you show that you have a fair element of financial risk - ie if the project goes belly up you don't get paid, you should be ok. Also susbstitution is a strong point - that is sending someone else in if you can't make it - this doesn't have to actually happen, only the option needs to be there.

Recently the Revenue hadven't really been chasing IR35 as it has not been too successful for them, there are going more for BN66, S660 and PAYE.

[Bunk]

You right it is the working practices that matter, but it is still important to have a good contract. Your accountant or agency should be able to provide you with one. I have a standard contract template, you can use if you can't get your hands in one. However you should never show this to the tax office unless specifically requested from them.

Having been involved with several tax investigations (from the good guy's side - ie the accountant/taxpayer), if you show that you have a fair element of financial risk - ie if the project goes belly up you don't get paid, you should be ok. Also susbstitution is a strong point - that is sending someone else in if you can't make it - this doesn't have to actually happen, only the option needs to be there.

Recently the Revenue hadven't really been chasing IR35 as it has not been too successful for them, there are going more for BN66, S660 and PAYE.

I thought recently the opposite had been shown, that having the option wasn't enough, the right of substitution had to actually be used to provide much defense.

[LisaContractorUmbrella]

I thought recently the opposite had been shown, that having the option wasn't enough, the right of substitution had to actually be used to provide much defense.

You are right Bunk. The recent Dragonfly case proved beyond doubt that the revenue will not accept a ROS in the contract unless the contractor can prove that they could provide a substitute, qualified to perform the role, in their absence and that the client would accept said substitute without question.

[THEPUMA]

Crikey you guys are supposed to be contractor specialist accountants. The ignorance on here in relation to IR35 is astonishing!

Your contract is irrelevant - its your working practices that matter. But I still wouldn't show it to the tax office.

How can the contract be irrelevant? It is the prima facie piece of evidence HMRC will look at initially. Read the Dragonfly decision. There are vast swathes relating to the contractual terms.

Having been involved with several tax investigations (from the good guy's side - ie the accountant/taxpayer), if you show that you have a fair element of financial risk - ie if the project goes belly up you don't get paid, you should be ok. Also susbstitution is a strong point - that is sending someone else in if you can't make it - this doesn't have to actually happen, only the option needs to be there.

Recently the Revenue hadven't really been chasing IR35 as it has not been too successful for them, there are going more for BN66, S660 and PAYE.

"Also, substitution is a strong point"! Substitution is, and always has been, one of three crucial factors, which on their own can will you a case. Financial risk is not one of these.

I thought recently the opposite had been shown, that having the option wasn't enough, the right of substitution had to actually be used to provide much defense.

No all that Dragonfly showed was that if the right of substitution was unreasonably fettered, it was ineffective, which we already knew.

You are right Bunk. The recent Dragonfly case proved beyond doubt that the revenue will not accept a ROS in the contract unless the contractor can prove that they could provide a substitute, qualified to perform the role, in their absence and that the client would accept said substitute without question.

Not quite right. The client can still have the right to give prior written consent, provided that consent cannot be unreasonably withheld.

[Beefy198]

How can the contract be irrelevant? It is the prima facie piece of evidence HMRC will look at initially. Read the Dragonfly decision. There are vast swathes relating to the contractual terms.

It's irrelevant in the sense that just writing "I will work like this" isn't the be all and end all.

[THEPUMA]

It's irrelevant in the sense that just writing "I will work like this" isn't the be all and end all.

That doesn't make it irrelevant. It is a statement signed by both parties. Of course, if it is a sham, it can be overridden. But the onus is on HMRC to prove that it is a sham.

[DonaldG]

I think with all the different opinions, means that each case stands on its own merits and circumstances. Dangerous to assume if one rule saves one person then it will automatically apply to you.

[Tingles]

Substitution

So, as I work from home on Fridays....

I email the client that my co-director will be proofing reading a long report / process documents etc. As I'm unavoidable detained elsewhere on Friday....

They agree by email - I keep the evidence, sorted?



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