Contract durations and IR35

[Ashwin2007]

If the contract durations with clients are 6 months to one year, and not more than one year, can we keep the risk of IR35 down..

Short duration contracts, with substitution clause, visibly show that the contracts are adhoc, so will safely pass the IR35 test..

Any opinions?

[Sockpuppet]

Yes, I'd say lots of shorter contracts at varying places would be easier to defend than one long contract (say multiple years) at the same place doing the same job.

[mace]

If the contract durations with clients are 6 months to one year, and not more than one year, can we keep the risk of IR35 down..

Short duration contracts, with substitution clause, visibly show that the contracts are adhoc, so will safely pass the IR35 test..

Any opinions?

From a legal perspective, anything over a month has the potential to be caught by IR35. Realistically, I wouldn't expect the Revenue to try to extract tax on contracts which have lasted less than a couple of years, as it would cost them more in bringing it to the tribunal than they'd make back from the contractor. Haven't researched the cases, however.

[malvolio]

It's irrelevant. Contract length has no bearing at all on IR35 status. One recent win was by someone who'd been on site over 7 years.

The three basic tests - D&C, MOO and RoS - apply if you're there for life or one day.

[MikeC1408]

From a legal perspective, anything over a month has the potential to be caught by IR35. Realistically, I wouldn't expect the Revenue to try to extract tax on contracts which have lasted less than a couple of years, as it would cost them more in bringing it to the tribunal than they'd make back from the contractor. Haven't researched the cases, however.

That wouldn't bother them. There was a recent post on here regarding Artic Systems. HMRC didn't bother doing a cost review before taking them to court then lost.

[RSoles]

All your eggs in one basket?

Assuming there's a risk involved due to unclear legistation and the subjective view of HMRC wouldn't it be riskier to have say, one contract for five years rather than five one-year contracts?
Surely one five-year contract equals one inspection; five one-year contracts equals five inspections.
RS

[Ashwin2007]

By the way, If one is running limited company, all salaries are paid through limited company payroll, how does the HMRC knows one had five contracts with different clients or a single contract with one client?

[thunderlizard]

It doesn't, until it starts an investigation and starts asking you that kind of thing.

[Burrow01]

It's irrelevant. Contract length has no bearing at all on IR35 status. One recent win was by someone who'd been on site over 7 years.

The three basic tests - D&C, MOO and RoS - apply if you're there for life or one day.

Personally I take it that from a business point of view, why would I sever a contract to supply a service with a client, just to satisfy a nebulous view from HMRC - as a business, if someone wants my services, I am happy to supply. If I was supplying M&S with a product, people would think you were mad if you said after 6 monts - "OK, I'm going to stop now, and find another customer"

Pete

[zathras]

If the contract durations with clients are 6 months to one year, and not more than one year, can we keep the risk of IR35 down..

Short duration contracts, with substitution clause, visibly show that the contracts are adhoc, so will safely pass the IR35 test..

Any opinions?

Length of contract is irrelevent or at best neutral