Direct to client but non IR35 compliant contract...

[salazie]

Hi all,

I've been offered a contract direct to a client (close to home, good money, good role ) but they have a standard contract which all suppliers must use (changing it isn't an option apparently ). The thing is, the contract has failed a professional IR35 review in quite a bad way and I'm a bit stuck as to what to do.

Would HMRC jump on this and claim the contract was caught by IR35 without looking at working conditions? Or could I argue that regardless of the contract details I work in an IR35-exempt way (assuming this is the case) so should be treated as such?

And what's the worst that could happen - I claim to be outside of IR35, after an investigation I'm found to be inside and so have to pay the NI's/tax owed, is that it? In other words - I'm in no worse a situation if I claim to be outside IR35 but am found to be inside for this contract (assuming I put asside enough cash in case the worst happens!).

Or would I be liable to more investigations in the future if I'm investigated and fail the tests for one contract?

Oh and I'm hoping that the fact that if I want the work then I don't have a choice but to sign a standard contract which all suppliers must sign might go in my favour?

Any thoughts anyone?? Thanks!

[malvolio]

Is the rate/convenience sufficiently good to accept it's IR35 caught or can you get non-IR35 work for the same net return? That's the key question: don't let the taxation tail wag the commercial dog.

If the contract is caught and the client ain't changing it regardless, you will find it hard to prove if challenged by HMRC that the working practices are different to the contract: the client will almost certainly insist on the D&C/MOO elements being as they say in the contract.

However, as a supplier of services, why are you being presented with an employee-type contract. If you are direct and are there to provide a defined "thing", can't you do it through a PO instead?

[MrRobin]

You've had a professional, legal, review on the contract and that reveiw has stated it puts you inside IR35. If you chose to ignore that advice and work outside and are investigated, it could very well be considered fraud. (you know that you should be paying, but you aren't is fraud, rather than you wrongfully think/assume you shouldn't be paying but you should is negligent/a mistake/misunderstanding

[salazie]

Thanks for your comments Malvolio. Yeah the work is definitely worth the additional tax/NI burden if it came to that, not a lot of work comes up for me in my area and as it's direct to the client the higher rate (and much lower expenses) would make up for any increased outgoings.

I think the issue is that the contract is actually a master agreement to the company, with schedules of work to be used for individual projects. I guess most of the time they're making use of large consultancies for whom IR35 is obviously not an issue, hence most of the issues being around suitability of individuals, having control over who is on/not on the project etc. There are a few other bits too but this is the main issue.

It's a right pain but I think the tax hit will be worth it, especially for the particular assignment I'm interested in. I suppose there might be an issue for future contracts with other clients if I agree this one is caught by IR35 as it highlights me as a potential catch IR35 and someone to keep an eye on. Then again it may work the other way around...

[salazie]

You've had a professional, legal, review on the contract and that reveiw has stated it puts you inside IR35. If you chose to ignore that advice and work outside and are investigated, it could very well be considered fraud. (you know that you should be paying, but you aren't is fraud, rather than you wrongfully think/assume you shouldn't be paying but you should is negligent/a mistake/misunderstanding

So actual working conditions only count when it's HMRC going after you, rather than when you're defending yourself? Aaah, the fairness of the system leaves you with a warm fuzzy feeling inside.....

Or not.

[malvolio]

FWIW IR35 is a contract-by-contract assssment. What you do on this one won't affect any future (or past) ones: bizarrely it may even help by proving you are willing to tick the IR35 box when it clearly applies.

Still sticks in the throat though: there is no way you are actually an employee, disguised or otherwise, nor are you getting employee benefits.

[MrRobin]

So actual working conditions only count when it's HMRC going after you, rather than when you're defending yourself? Aaah, the fairness of the system leaves you with a warm fuzzy feeling inside.....

Or not.

That's a good point you make. But why would they bother looking at the working conditions when the contract already states inside IR35... It's only fair, of course.

[Turion]

You've had a professional, legal, review on the contract and that reveiw has stated it puts you inside IR35. If you chose to ignore that advice and work outside and are investigated, it could very well be considered fraud. (you know that you should be paying, but you aren't is fraud, rather than you wrongfully think/assume you shouldn't be paying but you should is negligent/a mistake/misunderstanding

Assumes the OP is daft enough to self incriminate. Shed any incriminating evidence now and close your ltd Co after the contract if you have any concerns about this. Ok, I'm ready for the ear bashing . Bring it on.

[Platypus]

Hi all,

I've been offered a contract direct to a client (close to home, good money, good role ) but they have a standard contract which all suppliers must use (changing it isn't an option apparently ). The thing is, the contract has failed a professional IR35 review in quite a bad way and I'm a bit stuck as to what to do.

Would HMRC jump on this and claim the contract was caught by IR35 without looking at working conditions? Or could I argue that regardless of the contract details I work in an IR35-exempt way (assuming this is the case) so should be treated as such?

And what's the worst that could happen - I claim to be outside of IR35, after an investigation I'm found to be inside and so have to pay the NI's/tax owed, is that it? In other words - I'm in no worse a situation if I claim to be outside IR35 but am found to be inside for this contract (assuming I put asside enough cash in case the worst happens!).

Or would I be liable to more investigations in the future if I'm investigated and fail the tests for one contract?

Oh and I'm hoping that the fact that if I want the work then I don't have a choice but to sign a standard contract which all suppliers must sign might go in my favour?

Any thoughts anyone?? Thanks!

Personally, I'd not tick the box and worry about it only if you get investigated.

[NotAllThere]

The so-called "Nuclear Option" springs to mind. I'm surprised that a company willing to deal direct has an IR35 caught contract, as it makes it MORE likely that they'll be found to be your employer, if the Nuclear Option was invoked.

A properly drafted non-IR35 caught B2B contract would surely be far safer for them. Maybe you could express your concerns to them - that you're perfectly happy to sign their contract, but are worried it might give you employee rights that you don't want.