IR35 - who are the actual targets?

**Clare@InTouch** · 27 January 2011, 10:03

It started out by targeting the people who left work on a Friday as an employee and started work on a Monday as a contractor, thus benefiting from lower tax & NI as well as the 'employer' having lower NI and saving on the trouble of having to acknowledge employment law. There's a thread on this very page by someone who's done just that!

HMRC can investigate previous contracts even after you've finished them.

**meanttobeworking** · 27 January 2011, 10:15

Totally understand that (although on the other thread on this page, it seems the individual was made redundant, so hardly something they did on purpose to avoid tax/ni). And in cases where that has actually happened, I can understand HMRC having cause for complaint. But for every individual in that situation, there's a thousand normal contractors that haven't done it, who are just as affected.

I understand they can start an investigation on a previous contract, I just wonder how much investigation they can do into your actual working conditions - interview previous employers? access email accounts? I don't have anything to hide really, just wondering how it might work in practice...

**LisaContractorUmbrella** · 27 January 2011, 10:21

Originally posted by meanttobeworking View Post

Totally understand that (although on the other thread on this page, it seems the individual was made redundant, so hardly something they did on purpose to avoid tax/ni). And in cases where that has actually happened, I can understand HMRC having cause for complaint. But for every individual in that situation, there's a thousand normal contractors that haven't done it, who are just as affected.

I understand they can start an investigation on a previous contract, I just wonder how much investigation they can do into your actual working conditions - interview previous employers? access email accounts? I don't have anything to hide really, just wondering how it might work in practice...

HMR&C don't like anyone that doesn't fit into the 'business owner' or 'employee' catagories and so have tried to legislate to make sure that everyone will fit into one of those boxes (even if it is likely fitting a square peg in a round hole approach). If they do start an IR35 investigation it is quite possible that they will visit previous clients, discuss the arrangements that you had with them, speak to perm employees at the site etc. etc. etc. They will dig until they decide that they have a case..or not as the case may be

**meanttobeworking** · 27 January 2011, 10:24

Maybe they should just ban contractors altogether.... either it's allowed or it's not

**TykeMerc** · 27 January 2011, 10:33

Originally posted by meanttobeworking View Post

Maybe they should just ban contractors altogether.... either it's allowed or it's not

Given the choice I'm sure HMRC would do that.

However the clients (which include Government departments of course) would be none too pleased as many of them are reliant on contracted resource for their project work since they de-manned their IT functions.

**Clare@InTouch** · 27 January 2011, 10:46

Originally posted by meanttobeworking View Post

Totally understand that (although on the other thread on this page, it seems the individual was made redundant, so hardly something they did on purpose to avoid tax/ni). And in cases where that has actually happened, I can understand HMRC having cause for complaint. But for every individual in that situation, there's a thousand normal contractors that haven't done it, who are just as affected.

I understand they can start an investigation on a previous contract, I just wonder how much investigation they can do into your actual working conditions - interview previous employers? access email accounts? I don't have anything to hide really, just wondering how it might work in practice...

When someone is made redundant they can get up to £30,000 tax free - the motive for the company in that case may well have been to save tax and NI! Plus on an ongoing basis they have managed to secure someone on the same rate, but they don't have to pay NI - they've saved 12.8% straight away, not to mention holiday pay, sickness, pensions...

If HMRC take you to Court then there is no reason they wouldn't contact your old client to get a view of how they saw your relationship. Indeed the danger is that sometimes they will talk to an HR department who give a totally different viewpoint than your old manager would have done. Your old manager may not even work there anymore. This is why it's important to keep good records, and perhaps think about getting a Confirmation of Arrangement letter in addition to your actual contract.

**meanttobeworking** · 27 January 2011, 10:51

Agreed on the motives for the company - hopefully HMRC pursue offenders with equal energy and vigour!

Thanks for the advice - much appreciated.

**Ignis Fatuus** · 27 January 2011, 11:19

Originally posted by meanttobeworking View Post

There's a lot of (very justified) talk about how to avoid being inside IR35, but does anyone really understand who the legislation is really targetted at? I, for example, am an IT contractor that works with no notice period, no permie benefits, and no guarantees of work. I operate under a Ltd, and as far as I'm concerned, am a "real" contractor and not a disguised employee at all. ...

In the IR35 view, you are an employee, with the wrong contract as a result of pretending to have the wrong emploment status. Adopt the "correct" employment status and the benefits will follow.

And don't say that you don't actually want those benefits. That just makes you an employee who has given up his rights.

**meanttobeworking** · 27 January 2011, 11:24

Where does it end then? Is my window cleaner an employee of my ltd company, for the 15 minutes he spends partially wiping a damp cloth over the more accessible bits of my windows?!

IR35 - who are the actual targets?