New to Contracting within IR35

**poppy01** · 27 February 2009, 14:54

Originally posted by VJTheDJ View Post

Having been made redundant by a big bank I am looking to contract until I find another ideal perm job. I am surprised that I could not find accurate info on whether Ltd Co or Umbrella or dodgy loan schemes would be best for me!

I was convinced that Umbrella would be best for a while BUT now I have changed my mind....

Hence, I would appreciate comments on my latest observation:
1. Umbrella is said to be best for short term contracting.
HOWEVER, is it not better to go Ltd company and be able to claim more stuff (pay the wife up to £40k for doing admin work + keep 5% VAT) as well as leave money in the company until you close it to get a lump sum taxed only for capital gains?

If any accountants are reading this then their input would be very valuable!

first, if you decide to go ltd, do not assume you will be caught by IR35. Most agencies have contracts written to ensure you are outside. If you arrange your working practises correctly then theres no reason to declare yourself caught. A number of accountancy firms (i.e. ACCOUNTAX ) will review your contract for IR35 safety and will offer insurance if they deem it not caught. In the case of accountax they will insure you for legal costs and any tax, interest and penalties due in the event they lose the case. HMRC have an abysmal record on this (they dont understand IR35 any more than anyone else) so you should be able to sleep easy. you can then run you new ltd as a proper business and pay dividends, expenses etc...

if you dont want the hassle, there are some excellent umbrellas out there, I would recommend Parasol IT.

wouldnt go anywhere near anything dodgy though, HMRC are cracking down hard and are not averse to using retrospectivity so it may come back to haunt you. (see bn66 thread)

**BrilloPad** · 27 February 2009, 14:56

Dont do anything until you find a contract.

When (if!) you find one go limited.

**pedroPM** · 27 February 2009, 15:03

Originally posted by BrilloPad View Post

Dont do anything until you find a contract.

When (if!) you find one go limited.

But regarding the process, i understand that as the MD of your ltd co you make the decision about whether you are inside or out but what happens then? You tell your account and carry on with business? When does HMRC get involved, is it every case or do they investigate randomly?

**VJTheDJ** · 27 February 2009, 15:32

New to Contracting within IR35

Thanks Briilo, good advice!
Poppy... I hear you BUT I am pretty sure my working practices would place me cleanly and squarely in IR35. Working on site 9-6 at Client Site on their systems etc. regardless of anything I might be able to get into my contract wording....

**DaveB** · 27 February 2009, 15:38

Originally posted by VJTheDJ View Post

Thanks Briilo, good advice!
Poppy... I hear you BUT I am pretty sure my working practices would place me cleanly and squarely in IR35. Working on site 9-6 at Client Site on their systems etc. regardless of anything I might be able to get into my contract wording....

Still not gurenteed to get you caught. Working on client systems does not catch you automatically, if there is no other way to do the job.

Likewise working regular hours is not an issue if you have to be on hand to work with client co. emplyees who work those hours.

If what you do and how you do it at a low level is dictated by a client co. employee then that causes problems.

If you are a developer for example, and client co says "we need X, go and do it." thats fine. If they say "We need X, you will produce it using these tools, following this process and using these techniques." then it becomes an issue.

Direction and control seem to be the biggest issues in the IR35 cases seen so far.

**poppy01** · 27 February 2009, 15:41

Originally posted by VJTheDJ View Post

Thanks Briilo, good advice!
Poppy... I hear you BUT I am pretty sure my working practices would place me cleanly and squarely in IR35. Working on site 9-6 at Client Site on their systems etc. regardless of anything I might be able to get into my contract wording....

the contract is everything, if accountax deem it safe they will insure you. the chances of being investigated are minimal, and if you lost your insurance would pay out. I dont see the downside personally. why pay HMRC tax they arent entitled to. IR35 is a crock of sh*t anyway and will be gone in 2 years.

**centurian** · 27 February 2009, 19:09

Originally posted by poppy01 View Post

the contract is everything, if accountax deem it safe they will insure you. the chances of being investigated are minimal, and if you lost your insurance would pay out. I dont see the downside personally. why pay HMRC tax they arent entitled to. IR35 is a crock of sh*t anyway and will be gone in 2 years.

But the insurance is only valid if the working practices are consistent with the contract - actually I'm making that assumption - haven't seen the small print, but would be gobsmacked if that clause wasn't in there.

So if you do happen to lose, it will be because of the contract (in which case you won't be offered insurance), or because of your working practices (in which case it won't pay out).

About the only scenario the insurance will pay out is if Accountax screw up the review and don't spot something in the contract that puts you in IR35. That possibility aside, the insurance is worthless.

New to Contracting within IR35