Inside IR35 to Outside IR35

[dx4100]

Hi Guys

I am currently in my first contract lasting 6 months (September) and the client wants to renew for an extra 3 months. I am currently operating as inside IR35 as on the face of it seemed as it would be very difficult for me to claim I was outside of IR35.

The working practices I have been working to have been outside IR35 so at the contract renewal I really want to change the contract to be outside IR35. After initial discussion with a Director they said they would be happy to do this.

So my question is do you think it will draw the unwelcomed attention of the HMRC to suddenly change to outside IR35 on a contract renewal. Would I be better waiting until my next contract or now I have operated inside IR35 will I draw their attention anyway?


Thanks for any advice,

[malvolio]

It's done on a contract by contract basis. Rather than renew, it might be better to take out a completely new contract. Presumably you've been paying tax as per IR35-caught rules on the 6 months so far; I should talk to an accountant to see if that can be recovered safely without waving too many red rags at the taxman.

Remember, it's both contractual terms and working practices that count. If the latter are outside IR35 then fine and you shouldn;t have a problem, but if they aren't then changing the contract won't make any difference to your status.

[dx4100]

It's done on a contract by contract basis. Rather than renew, it might be better to take out a completely new contract. Presumably you've been paying tax as per IR35-caught rules on the 6 months so far; I should talk to an accountant to see if that can be recovered safely without waving too many red rags at the taxman.

Remember, it's both contractual terms and working practices that count. If the latter are outside IR35 then fine and you shouldn;t have a problem, but if they aren't then changing the contract won't make any difference to your status.

Thanks for the advice!

[Platypus]

So my question is do you think it will draw the unwelcomed attention of the HMRC

Doesn't HMRC only know if you are inside IR35 when you tick the box on your tax return?

So don't tick the box.

[Accountax Consulting]

Regardless of whether you previously operated within IR35 or not, and regardless of what box you tick on your return, HMRC systematically carry out compliance reviews on all limited companies in the UK. If you are subject to review and questioned on your IR35 status it will make little difference to the outcome what you decided previously - HMRC will make their own decisions.

switching from operating within IR35 to operating outside of IR35 will put you no higher on HMRC's radar than all other contractors operating outside of IR35. Your best protection against HMRC, as always, get your contract reviewed to ensure there are no ambiguities HMRC can exploit. The best protection for contractors is a robust contract, and if your contract is up for renewal that is the best time to review your position.

[dx4100]

Thanks everyone!

[pisces]

Regardless of whether you previously operated within IR35 or not, and regardless of what box you tick on your return, HMRC systematically carry out compliance reviews on all limited companies in the UK. If you are subject to review and questioned on your IR35 status it will make little difference to the outcome what you decided previously - HMRC will make their own decisions.

Are you sure?

That's alot of companies to review and a lot of work to get through. Where do they get the staff and man hours?

[chicane]

That's alot of companies to review and a lot of work to get through.

Don't worry, Gordo is well on target to have half the UK population working in the public sector within the next couple of years.

Admin note: Further reading IR35