IR35 Confusion -

[pauljh]

Sounds like pointless window dressing to me. IR35 isn’t, and has never been, about words on paper. It’s about the hypothetical contract - what the relationship looks like, in the round, if you take a step back from words on paper and consider the facts.

If you’re getting pulled away on BAU work without a contract variation then this has almost certainly been inside all along. Your actual working relationship comes before the contract and, unless you’re proposing to change that fundamentally, no amount of SoW window dressing is going to help. In short, are they really going to treat you differently and you them? Not according to you, as you’re worried about “souring the relationship”. Be honest with yourself.

Yes I'm proposing to change that fundamentally and hence need help drafting and negotiating this. I'm unsure why being concerned about someone bigger flying in and taking it all away is "quoted", its a legitimate concern I need to handle, but it feels like either I change the relationship and say "No" to BAU and be outside IR35, or say "yes" and pay an ordinate amount of tax. Neither option feels great or productive.

[jamesbrown]

Yes I'm proposing to change that fundamentally and hence need help drafting and negotiating this. I'm unsure why being concerned about someone bigger flying in and taking it all away is "quoted", its a legitimate concern I need to handle, but it feels like either I change the relationship and say "No" to BAU and be outside IR35, or say "yes" and pay an ordinate amount of tax. Neither option feels great or productive.

In that case, you need to accept that you’re moving from inside to outside and the client needs to be onboard with that too. It all seems highly unlikely to me. The client is going to treat you how they’ve always treated you. I think you should just accept it and look for other work if you want to build a “real” consultancy (quotes because it isn’t me judging what is or isn’t real - there are many absurdities with IR35, but you need to face them). There is nothing wrong with accepting work that is inside IR35. Your prior relationship will become clear under investigation and a few errant words from the client would be enough to confirm that nothing had really changed. The client/fee payer would be nuts to accept this risk post April 2021 (and I predict they won’t). If the client qualifies as “small”, then the risk is yours.

[northernladuk]

In that case, you need to accept that you’re moving from inside to outside and the client needs to be onboard with that too. It all seems highly unlikely to me. The client is going to treat you how they’ve always treated you. I think you should just accept it and look for other work if you want to build a “real” consultancy (quotes because it isn’t me judging what is or isn’t real - there are many absurdities with IR35, but you need to face them). There is nothing wrong with accepting work that is inside IR35. Your prior relationship will become clear under investigation and a few errant words from the client would be enough to confirm that nothing had really changed. The client/fee payer would be nuts to accept this risk post April 2021 (and I predict they won’t). If the client qualifies as “small”, then the risk is yours.

James is right in both his posts. Re-shaping the paperwork is utterly pointless. The client has what he wants and has decided it's inside. No way are you going to change what he wants. He may agree to a change in paperwork but that's no good if the working practices still say the same. Nothing will stand up historically either so again a change is pointless.

You are stuffed here. The client has very clear needs, you are meeting them but the tax situation is making it difficult for you. The client won't and shouldn't change what they want because of your tax issues.

You have no choice but to find an accountant that will advise how to account for the money properly and carry on. There is nothing else here for your future plans of running a true consultancy. It's still a lucrative gig, albeit messy with employees when the client finally ditches it but still lucrative.

[pauljh]

So the issue comes down to a simple one:-

If the contract is your employee and you do no work for that client you have nothing to worry about - the person who is doing the work is paid via PAYE.

If the contract requires you to do work for the client then you have a problem as if you take money out as dividends you aren't compliant.

So If i do work and Don't take any dividends out I'll be ok?
I'm leaning towards not working and just taking my employee's cut, but kind of feels IR35 is telling me not to work....

[northernladuk]

So If i do work and Don't take any dividends out I'll be ok?

You can continue to take dividends from the profits in the company. None of the money coming in will be profit so will not be available for dividends.

I'm leaning towards not working and just taking my employee's cut, but kind of feels IR35 is telling me not to work....

You are letting the tax tail wag the dog. A tax tail that you are clearly failing to understand. Why would you make a business decision based on a lack of knowledge of your tax situation?

Buck up. Go speak to an accountant, find out what the score is then go from there.

Nothing else we can do for you here.

[pauljh]

You can continue to take dividends from the profits in the company. None of the money coming in will be profit so will not be available for dividends.


You are letting the tax tail wag the dog. A tax tail that you are clearly failing to understand. Why would you make a business decision based on a lack of knowledge of your tax situation?

Buck up. Go speak to an accountant, find out what the score is then go from there.

Nothing else we can do for you here.

I am talking to my accountant, and I am talking to a IR35 Lawyer. Both say different things.....

[jamesbrown]

I am talking to my accountant, and I am talking to a IR35 Lawyer. Both say different things.....

Don't talk to your accountant about IR35. Talk to your accountant about your accounts. Talk to an IR35 specialist about IR35. Talk to a plumber about plumbing. Talk to an electrician about your electrics. HTH.

[SueEllen]

I am talking to my accountant, and I am talking to a IR35 Lawyer. Both say different things.....

Listen to the lawyer.

[northernladuk]

Don't talk to your accountant about IR35. Talk to your accountant about your accounts. Talk to an IR35 specialist about IR35. Talk to a plumber about plumbing. Talk to an electrician about your electrics. HTH.

Why does he need an IR35 lawyer? Client say inside. OP is struggling with how he pays himself.

[Lance]

Why does he need an IR35 lawyer? Client say inside. OP is struggling with how he pays himself.

I’ve got £5 that says he asked them different questions.