IR35 confirmation / clarification

[pmeswani]

Hi all,

There may be a possibility for me to go and work in Edinburgh again soon, but I need some confirmation / clarification.

I finished a 3 month contract with RBS in July last year (6 Weeks near the City Centre and 6 weeks in Dalkeith). If I secure a contract for a different client in Haymarket part of Edinburgh and it extends into July of next year, will that mean I will be IR35 caught? (I know there are other aspects that needs to be considered, like working practice, MOO, etc, but am looking for confirmation. I know after 2 years I may not be able to claim travel, food and hotel costs, but just want to make sure where I stand in terms of IR35).

Ta very much.

[Clare@InTouch]

IR35 will depend on the working practices themselves, not the location or the client. Control, substitution and lack of MOO will be the determining factors. My suggestion would be to get the contract reviewed before you start, that way you can make a decision and have time to get the contract changed if it's not realistic.

The travel costs will be an issue if you've been at one location, or know you'll be there, more than 24 months. If you're returning to a location you've worked at before then you'll have to consider the 40% rule instead.

[pmeswani]

IR35 will depend on the working practices themselves, not the location or the client. Control, substitution and lack of MOO will be the determining factors. My suggestion would be to get the contract reviewed before you start, that way you can make a decision and have time to get the contract changed if it's not realistic.

The travel costs will be an issue if you've been at one location, or know you'll be there, more than 24 months. If you're returning to a location you've worked at before then you'll have to consider the 40% rule instead.

If I am reading what you are saying correctly, IR35 isn't a factor with regards to location. I always get my contracts reviewed before I commit, but am just covering the what if part.

The bit about returning to a location is what is confusing me a bit. If, for example, I work in Brentford in Middlesex for 6 months, and then 12 months later go and work in Twickenham in Middlesex for 6 months, would I have to consider the 40% rule? If not, why not, if so why?

If I worked in Brentford in Middlesex for 6 months and then 12 months later went to work in Vauxhall for another 6 months, would I have to consider the 40% rule? If not, why not, if so why?

With regards to the 40% rule, if I submit all my expenses whilst within the 40% rule, do I then declare the 40% via the yearly Self Assessment?

You mention the travel costs attracting 40%, what about food and hotel costs? Do they attract the 40% rule as well?

Sorry for asking these silly questions, I should really know this already.

[LisaContractorUmbrella]

I think you are confusing two different bits of legislation Pmeswani - the length of time that you spend at one location or on one contract doesn't have any real bearing in terms of IR35; that will come down to the control, or lack thereof, that the client has over your working practises. You could, however, have an issue with the 24 month rule - if you work in the same location, or know that you will be working in the same location, for 24 months or longer you will no longer be able to claim travel and accomodation expenses. This rule has been refined fairly recently and now applies where there is no 'significant' difference between 2 locations - this means that you could be working for a different client, on a different site but if your journey doesn't significantly change the 24 month rule would still apply. Unfortunately 'significant' is subjective as it has not been defined by HMR&C

[pmeswani]

I think you are confusing two different bits of legislation Pmeswani - the length of time that you spend at one location or on one contract doesn't have any real bearing in terms of IR35; that will come down to the control, or lack thereof, that the client has over your working practises. You could, however, have an issue with the 24 month rule - if you work in the same location, or know that you will be working in the same location, for 24 months or longer you will no longer be able to claim travel and accomodation expenses. This rule has been refined fairly recently and now applies where there is no 'significant' difference between 2 locations - this means that you could be working for a different client, on a different site but if your journey doesn't significantly change the 24 month rule would still apply. Unfortunately 'significant' is subjective as it has not been defined by HMR&C

Hi Lisa,

Thanks for the information. I have removed IR35 from the equation, what I am now confused about is the bit about the 24 month rule. Is it the case I have to work in the location (however HMRC defines it) for 24 months or worked in the same location within a 24 month period (i.e. 2 x 6 month contracts within a 24 month period)?

Up to now, I have ignored this topic as it never applied to any of my contracts.

[Clare@InTouch]

If I am reading what you are saying correctly, IR35 isn't a factor with regards to location. I always get my contracts reviewed before I commit, but am just covering the what if part.

The bit about returning to a location is what is confusing me a bit. If, for example, I work in Brentford in Middlesex for 6 months, and then 12 months later go and work in Twickenham in Middlesex for 6 months, would I have to consider the 40% rule? If not, why not, if so why?

If I worked in Brentford in Middlesex for 6 months and then 12 months later went to work in Vauxhall for another 6 months, would I have to consider the 40% rule? If not, why not, if so why?

With regards to the 40% rule, if I submit all my expenses whilst within the 40% rule, do I then declare the 40% via the yearly Self Assessment?

You mention the travel costs attracting 40%, what about food and hotel costs? Do they attract the 40% rule as well?

Sorry for asking these silly questions, I should really know this already.

IR35 isn't really affected by the location or time at the client site, although the longer you're with the same client the more likely it is that HMRC could argue MOO exists. If you cover one of the other two though (Substitution or Control) you should still be OK.

If you are not entitled to claim for the travel or subsistence costs then they would be a benefit in kind - so it would eaiser to simply not claim such costs through the company in the first place (allowable ones are OK of course). This includes food, travel and accomodation.

HMRC do have some examples for travel and the rules - EIM32080 - Travel expenses: travel for necessary attendance: definitions: temporary workplace: limited duration, the 24 month rule

[LisaContractorUmbrella]

Hi Lisa,

Thanks for the information. I have removed IR35 from the equation, what I am now confused about is the bit about the 24 month rule. Is it the case I have to work in the location (however HMRC defines it) for 24 months or worked in the same location within a 24 month period (i.e. 2 x 6 month contracts within a 24 month period)?

Up to now, I have ignored this topic as it never applied to any of my contracts.

You have to have worked, or know that you will be working, at the same location for 24 months; so if you had a 12 month contract and then were offered an 18 month extension, at that point you would have to stop claiming travel and accomodation as you would be aware that the contract would extend beyond 24 months

[Clare@InTouch]

This topic seems to come up a fair amount. Have a read through the prior threads whcih should help:

http://forums.contractoruk.com/accou...ay-around.html

http://forums.contractoruk.com/accou...year-rule.html

[pmeswani]

IR35 isn't really affected by the location or time at the client site, although the longer you're with the same client the more likely it is that HMRC could argue MOO exists. If you cover one of the other two though (Substitution or Control) you should still be OK.

If you are not entitled to claim for the travel or subsistence costs then they would be a benefit in kind - so it would eaiser to simply not claim such costs through the company in the first place (allowable ones are OK of course). This includes food, travel and accomodation.

HMRC do have some examples for travel and the rules - EIM32080 - Travel expenses: travel for necessary attendance: definitions: temporary workplace: limited duration, the 24 month rule

Thanks for the link Clare. It looks like, unless I am mistaken, I should be ok as I have worked elsewhere during the 2 year period which means that I should not covered by the 40% rule in that given location.

[pmeswani]

You have to have worked, or know that you will be working, at the same location for 24 months; so if you had a 12 month contract and then were offered an 18 month extension, at that point you would have to stop claiming travel and accomodation as you would be aware that the contract would extend beyond 24 months

Thanks Lisa. As I understand it that I can work in Edinburgh, for example, for 12 months, take 6 months off (or work for a different client) and then work for another 12 months in Edinburgh and should be ok. The other threads posted by Clare may indicate this should be ok.