Accountant and IR35

**Clare@InTouch** · 14 February 2011, 08:27

What is he basing his assessment on? Did he review your contract and working conditions? He might just have got the wrong end of the stick, so worth asking him why he's making that assumption before you decide to move to another firm.

Why don't you get a second IR35 review, then you can balance the two and make a decision.

**kaiser78** · 14 February 2011, 08:29

Originally posted by Stan05 View Post

Guys,

Just about to start my first contract today, as I have been employed upto Feb I wasn't going to draw a salary until the new tax year to avoid filling out a self assessment.

I emailed the accountant to confirm if I can safely draw a directors loan without that being classed as income (I understand that so long as it is paid within 9 months from the end of the tax year it was drawn then that is not classed as income) - here is the accountants response

"As you will be IR 35 it will be necessary for you to draw a salary for March, based upon the billing less relevant expenses for February and March, rather than a director's loan."

I'm concerned that the accountant is making the assumption that am inside IR35 from the outset. The contract is 6months, has the right of substitution and I am only required onsite at the customers premises for part of the contract.

Would like some advice on how to proceed with this, should I be looking for a new accountant?

Set him straight as he is assuming you are inside IR35 and see what his response is. Does he specialise in IT contractor accounting ? Most of the accountants we use (I am assuming here now) declare outside IR35 in most circumstances and have experience with IT contractor setups. There is loads of info and previous posts relating to this.
HTH.

**Wanderer** · 14 February 2011, 08:32

Originally posted by Stan05 View Post

"As you will be IR 35 it will be necessary for you to draw a salary for March, based upon the billing less relevant expenses for February and March, rather than a director's loan."

Welcome!

How do they know your IR35 status, did you ask them to review your contract and give you an opinion?

I'd be inclined to write back and tell them simply that, you are working outside of IR35 and your accounts will be done accordingly. Thank you very much.

Which accountant is it?

**RichardCranium** · 14 February 2011, 09:14

Back in the days when I used a local accountant rather than an IT contractor's accountant, he told me IR35 was a done deal and that it applied to me. I assumed he was right until about 2007. That arbitrary decision of his cost me a LOT of money.

Well done for not assuming your accountant is automatically always right.

**SueEllen** · 14 February 2011, 09:19

If the explanation from the accountant of why you are within IR35 is not clear when they haven't seen your contract then look for and change to another accountant asap. The money spent on doing this will save you a time, trouble and money later on.

**Wanderer** · 14 February 2011, 09:21

Originally posted by RichardCranium View Post

Back in the days when I used a local accountant rather than an IT contractor's accountant, he told me IR35 was a done deal and that it applied to me. I assumed he was right until about 2007. That arbitrary decision of his cost me a LOT of money.

To be fair, a lot of contractors made that decision themselves too. Now they are starting to question if they were ever IR35 caught and operating outside so the government is looking at an IR35 replacement...

**TheFaQQer** · 14 February 2011, 09:48

Originally posted by RichardCranium View Post

Back in the days when I used a local accountant rather than an IT contractor's accountant, he told me IR35 was a done deal and that it applied to me. I assumed he was right until about 2007. That arbitrary decision of his cost me a LOT of money.

Well done for not assuming your accountant is automatically always right.

That happened to a mate of mine. His accountant was dead against declaring inside, until he found out that you can still take 5% expenses which would more than cover his bill. At which point he decided that in was the way forward, because it meant less work than him.

**TheFaQQer** · 14 February 2011, 09:50

Originally posted by Stan05 View Post

Just about to start my first contract today, as I have been employed upto Feb I wasn't going to draw a salary until the new tax year to avoid filling out a self assessment.

I don't think that's relevant - all company directors need to fill out a self assessment, IIRC. So not taking a salary won't make any difference to whether you need to do one or not.

I would suggest asking your accountant, but in this case, I'm not convinced that this is a wise move

**Clare@InTouch** · 14 February 2011, 09:53

Originally posted by TheFaQQer View Post

I don't think that's relevant - all company directors need to fill out a self assessment, IIRC. So not taking a salary won't make any difference to whether you need to do one or not.

I would suggest asking your accountant, but in this case, I'm not convinced that this is a wise move

HMRC will tell you they want a tax return if you're a director, although it's not a legal requirement just because you hold that office. Your accountant will probably prepare a return for you anyway as there may well be tax to reclaim (if you've paid PAYE on a larger salary when you were perm then dropping to a low salary mid-year will generate a rebate).

Accountant and IR35