IR35 - Reviewed by 2 accountants

[LisaContractorUmbrella]

Neither of them asked for that, they just wanted a copy of the contract

As others have said IR35 is a minefield but anyone reviewing your status should have an idea of your working practices - a contract can be written to be outside IR35 without being reflective of what happens in reality. HMRC have devised Business Entity Tests which will give you their view of whether they consider you to be high or low risk of falling inside IR35 but they are based on HMRC opinion and not on case law. However, if you complete them and are advised that you are 'high risk' it would be a good indicator that you would be likely to fall inside.

[jamesbrown]

In my opinion, it's pointless having a contract review without also having the working practices reviewed, and even the broader business practices. The contract is just a prerequisite. Also, while it's perfectly fine to have an IR35-trained accountant complete this review, it is also advisable to have a specialist complete the review IMHO, as it's quite nuanced.

Lastly, having tried a few providers, I'd say there's an enormous difference in the depth and quality of these review services (and cost, naturally). I recently had a review completed by Paul Mason at Abbey Tax, and the review was exceptionally detailed and informative. It was significantly more expensive than other reviews I've had in the past, but really worth the money. There was a thorough review of the contract and working practices, as well as broader business practices (based on a detailed questionnaire), accompanied by a detailed explanation as to why the engagement fell outside, and a follow-up phone-call. I would highly recommend them. I've heard that B&C are particularly good also and will work with the client on rewording if required.

[jamesbrown]

By the way, in case it isn't obvious, if the IR35 review does not cover more general T&C, and you're working with the client's contract template, it's also important to have a separate legal review. Afterall, IR35 is just a small part of the picture...

[TheCyclingProgrammer]

As others have said IR35 is a minefield but anyone reviewing your status should have an idea of your working practices - a contract can be written to be outside IR35 without being reflective of what happens in reality. HMRC have devised Business Entity Tests which will give you their view of whether they consider you to be high or low risk of falling inside IR35 but they are based on HMRC opinion and not on case law. However, if you complete them and are advised that you are 'high risk' it would be a good indicator that you would be likely to fall inside.

Pah, the HMRC BETs are rubbish.

According to them I'm "high risk" but I'm about as far outside of IR35 as you can get:

* Solid contract (based on PCG contract, with unfettered RoS)
* I work from home 80% of the time and use my own equipment, set my own working hours and other than reasonable guidance related to project requirements, am left to complete the work as I see fit (clients generally follow *my* advice on how aspects of the project should be approached, they don't tell me how to do my job).
* My client are under no obligation to provide me with work on a given day if there isn't any nor are they obliged to offer me an extension (I'm working on a specific project and if the project ends or they no longer need me, that's it).
* I'm not treated like an employee, am asked (not told) to come into the office from time to time to attend important meetings (and am listened to if I say I don't feel I need to be there) and am specifically excluded from company-specific events (e.g. if I'm in the office when they have a company-wide meeting I'm asked to go and work in a meeting room). I did join them for their Christmas party (as did some of their clients) and have occasionally joined them at the pub though - so sue me.

I generally work direct, always use my standard contract (the schedule can vary but not so much that I worry about getting it reviewed each time) and my working practices always follow the above on all projects. I accept that my clients have an expectation of personal service - they generally approach me and it is my expertise they require, but in the context of the above I don't think it matters. I'm always engaged to work on a specific project and I'm never just a bum on seat. There is nothing employee-like about my relationship with my clients and I treat my business as just that.

I haven't really worried much about IR35 since I put my first year of contracting/consulting behind me, despite what the BETs say. They may arguably make my risk of investigation higher but I don't think they'd get very far (and I have a PCG Plus membership, just in case).

[DirtyDog]

However, if you complete them and are advised that you are 'high risk' it would be a good indicator that you would be likely to fall inside.

No it wouldn't - it would be a good indicator that you could be investigated. HMRC's guidance document says "If you are in either the ‘high risk’ band or the ‘medium risk’ band, there is a risk that we will check whether IR35 applies to you."

[TheCyclingProgrammer]

Out of interest, I just ran through the tests again and came out with 11 points, making me medium risk, although if HMRC were to reject my contract RoS clause as sufficient evidence, then it would be 9 points and high risk.

It seems that with these tests I have been harshly punished for:

* Work on a time/materials basis rather than fixed-bid contracts (as somebody who generally follows an agile/iterative development approach, avoiding fixed bid contracts is not unusual) - 10 points lost on the efficiency test

* Not having any clients that have been bad payers - all my invoices have been paid on time - another 10 points lost on the client risk test.

* Advertising - I get enough work through referrals and people finding me on search engines; I have no need to spend over a grand on advertising each year - 2 points down the drain.

[psychocandy]

Will QDOS review your accounts for you? No they won't so I wouldn't be totally convinced by an an accountants review for IR35. I would want one from an IR35 specialist such as QDOS or B&C.

Out of interest what reasons did they give for being in and out. IR35 is a minefield and alot of opinion has to be applied. Not only that most elements bar the big 4 tend to be flags, not complete pointers. The wording of the sub clause can cause contention for example. If it hints that the client has the ability to refuse a sub for no reason QDOS will suggest you change it to them only refusing subs that are unsuitable.

Post the comment that makes it inside and lets see what the masses here say.

You could of course research the element that they say is inside and understand it properly first so you can make your own opinion.

WHS. Get QDOS to do it for you. Excellent service they provide.

If you buy insurance through them (incidentally, its the best anyway for £20 or so a month) they'll do one review a year for free. In my experience, they're very helpful too - if you need it done sharpish they'll rush it through also.

Cant recommend them highly enough.

[BlasterBates]

To be honest virtually all contractors can be argued to be in or out of IR35.

If you are a bum on a seat doing what your told as a part of project team, you're probably inside but you can argue that you're not, and get away with it. Most contractors have a bogus substitution clause and then usual things like no holiday to push them outside.

In my view you really need fixed price contracts or provide "real consultancy" i.e. not code up what you're told to, or temporarily be a Project Manager, in other words do something like introduce new processes or provide training etc.

[northernladuk]

To be honest virtually all contractors can be argued to be in or out of IR35.

If you are a bum on a seat doing what your told as a part of project team, you're probably inside but you can argue that you're not, and get away with it. Most contractors have a bogus substitution clause and then usual things like no holiday to push them outside.

In my view you really need fixed price contracts or provide "real consultancy" i.e. not code up what you're told to, or temporarily be a Project Manager, in other words do something like introduce new processes or provide training etc.

I would agree with this. Saying that though I am sure there are many that genuinely think like a business and want to run it as such so being outside IR35 and try their damnedest to do it but the client environment and maybe the way we work, as blaster says, means we just can't get there.

But for every one of them there will be 100+ bum on seats disguised permies.

[malvolio]

As others have said IR35 is a minefield but anyone reviewing your status should have an idea of your working practices - a contract can be written to be outside IR35 without being reflective of what happens in reality. HMRC have devised Business Entity Tests which will give you their view of whether they consider you to be high or low risk of falling inside IR35 but they are based on HMRC opinion and not on case law. However, if you complete them and are advised that you are 'high risk' it would be a good indicator that you would be likely to fall inside.

No, no no. They are designed (badly) to save Hector's time and energy by seeing if they determine that you are a suitable case for a further investigation to see if you might fall inside the clutches of IR35. While they are totally unfit for that purpose anyway, they are nothing to do with your IR35 position itself.

Also worth noting that they are being largely ignored by contractors...