IR35 and complete numpties

[Scoobos]

Hi,

I've just taken on a new contract (hopefully for a very short period of time) . My *cough* fans will know that I've took a crappy project on, at a crappy rate - just to get something more recent than July 2011 on my CV , when I last contracted at a brilliant client before having to take time off.

Thing is, I'm a bit worried by the whole attitude of the other contractors here, and wonder if their opinion could have any repercussions should I be investigated for IR35 (or , conversley if they are).

Here the client wants receipts for any costs I charge them for and to fill out a "Expenses claim form" (e.g train expenses etc, travelling from their own customers sites to their HQ) - and I've NEVER claimed expenses from clients before. I've once been cheeky and charged them for "costs" , but thats a service charge, with my rate added on and then subject to VAT.


No doubt someone will say I'm wrong to be fearful of this, perhaps it is....

Anyhoo, I asked one of the guys here whos been placed via the same agent - and asked if he was worried about IR35 - his answer?

"Ah, you're fine I dont worry about that I let me accountant worry - the simple question is - Do you take holiday? If you dont get paid holiday and dont get paid if you take it, you dont need to worry about IR35"

I then asked the other 3 people who work here on contract and got similar replies.

This scares me a bit as I wonder what would happen if investigated and this client was questioned.

Any thoughts?

[northernladuk]

My thoughts are....

Why haven't you had your contract and working practices reviewed by an IR35 specialist.

Your IR35 status has sod all to do with other contractors. If they want to fail leave them. More than half the contractors I work with here don't even know what it is.

You can, carefully and with a bit of luck, negotiate your own position regardless of theirs. You can offer to not to expenses and invoice it for example. The client may not know about IR35 and really it isn't his business to know either. It is up to you to make sure you are in a business relationship with your client. With a bit of work you could do this even though the guy next to you doing the same role looks 100% hidden permie. You just have to make sure the client treats you differently.

If you have to coach your client in to making you look like your are outside IR35 you are inside IR35 whatever he say..... if that makes sense.

You have been here long enough so you should be able to name the main pointers, guides are on the right if you can't. You should also know to get your contract and working practices reviewed. We bang on about it enough.

The bottom line is the client could expect you to work like a permie, it happens, in which case you are inside IR35 and if all your efforts come to nothing then you just run your tax as if you are. It isn't good for you but it isn't a failing. Some contracts are in, some are out. You have picked one that looks like it is inside. That's life.

It should only scare you if you are incorrectly claming your are outside IR35. Do some research and find out your situation and do your accounting to suit and you won't be scared.

If you do claim you are outside, they question the client and you are deemed inside you will have to pay a lot of tax back.

[Scoobos]

I understand you NLUK but I think we have different opinions, as discussed before. Of course, I am grateful for the response - I'm not meaning to rebut it.

In past cases, colleagues and client managers have been asked and it scares me.

I think you've too much faith in that "if I'm outside then I'm fine dont worry about any one else".

But, I'm open to education - I'm well beyond reading the cookie cutter stuff on the right though - I went through it years ago and refresh quite often.

My contract is built on a template provided by the PCG and "MY" working practices are outside, whether my client realises or not . I don't think any of the stuff counts for anything though, I am SUPER paranoid.

[nomadd]

My contract is built on a template provided by the PCG and "MY" working practices are outside, whether my client realises or not . I don't think any of the stuff counts for anything though

Completely agree.

I am SUPER paranoid.

Stop being like this.

I've said this before, and I'll say it again: The IR are not going to waste time and money chasing people for "short-term" contracts like the one you are on. IMHO (I know NLUK begs to differ! ) I think any contract under 2 years duration, irrespective of what the contract states (as long as it isn't completely stupid), is ever likely to be investigated (and as long as you aren't also doing something stupid like sharing the income with a spouse/partner who does nothing justifiable for it - and hence raising the concerns of the IR.) I'll maintain this view until someone shows me a case of a straightforward contractor doing a simple contract of 2 years or under duration where they were successfully prosecuted by the IR. Too much FUD around IR to the benefit of those making a quick buck from it; again, all IMHO.

If someone does know of such a successful prosecution, please post a link so I can read the detail.

[northernladuk]

I understand you NLUK but I think we have different opinions, as discussed before. Of course, I am grateful for the response - I'm not meaning to rebut it.

Am not really sure where our opinions differ and how it can when IR35 has some pretty clear (cough) pointers.

In past cases, colleagues and client managers have been asked and it scares me.

I think you've too much faith in that "if I'm outside then I'm fine dont worry about any one else".

But, I'm open to education - I'm well beyond reading the cookie cutter stuff on the right though - I went through it years ago and refresh quite often.

My contract is built on a template provided by the PCG and "MY" working practices are outside, whether my client realises or not . I don't think any of the stuff counts for anything though, I am SUPER paranoid.

Not sure what you mean by "if I'm outside then I'm fine dont worry about any one else". I certainly don't see why anyone else's attitude to IR35 should affect mine and I am certainly not going to worry about thier status. As long as I present myself as a business and the client reaslises and treats me as such I don't give a stuff if the other guys CBA. It is up to me to make sure the client understands our relationship. If he still continues to treat me like I am inside then that is the position I have to accept and do my accounts as such. What I do have faith in is that I have actioned everything I can and play devils advocate with myself enough to know I am not pretending I am outside.

Thing is YOUR working practices don't count for much. It is the working practices imposed on you by the client which dictates your IR35 status. You can pretend you are a business as much as you want but if the clients working practices say otherwise you are going to be stuffed in an investigation. Your working practices are also dicated by the client as well. For example your working practice should be to invoice the client. If he won't accept this you will have to put expenses in or walk. Remember it is the client who they will ask when they investigate so it is his practices they will hold you to. Again if you get your contract AND working practices reviewed by the likes of QDOS they will ask what the client makes you do.

Nothing wrong with being super paranoid but there is a limit where you just cannot be outside IR35 how much you think you are. If the client is going to treat you like a hidden permie then that is that. You IR35 has been defined for you.

One thing you could try is get your client to sign a Confirmation Of Arrangements form to have it in writing that he will agree to the points that show you are out of IR35. Shows more diligence than a contract that both of you know won't get honoured. The findings of the JLJ show this where there was a substitution clause in the contract but the client catagorically stated he wouldn't allow even though it was in the contract. You can find a sample COA form on the QDOS website about 3/4 way down on the right. Freelancer and Contractor - IR35 - PI - Contractor Insurance - Freelancer Insurance - Qdos Consulting

You still haven't mentioned if you got your contract/practices reviewed by anyone.

[northernladuk]

I've said this before, and I'll say it again: The IR are not going to waste time and money chasing people for "short-term" contracts like the one you are on. IMHO (I know NLUK begs to differ! ) I think any contract under 2 years duration, irrespective of what the contract states (as long as it isn't completely stupid), is ever likely to be investigated (and as long as you aren't also doing something stupid like sharing the income with a spouse/partner who does nothing justifiable for it - and hence raising the concerns of the IR.) I'll maintain this view until someone shows me a case of a straightforward contractor doing a simple contract of 2 years or under duration where they were successfully prosecuted by the IR. Too much FUD around IR to the benefit of those making a quick buck from it; again, all IMHO.

If someone does know of such a successful prosecution, please post a link so I can read the detail.

Actually I agree. The risk is tiny but I don't think for the cost and small time/effort required it is a reason to let your guard down. There is also an extremely low risk your accounts will get audited as well but that isn't an excuse to start ripping your company off and running your accounts badly.

Seems we are talking about complying with a piece of legislation on a forum we might as well cross the dot the i's and cross the t's. If the OP wants to ignore this then that is up to him and I am very happy with him. While they want to discuss it I am happy to go in to the detail The idea is that the OP won't carry out everything discussed but if he understands it then he can make a call whether to ignore it. For us to tell him to not worry and stumble on blindly would be wrong IMHO. Between us we got it covered LOL!

Besides, gives me something to do while the clock runs down on a Friday afternoon!

[TheFaQQer]

In past cases, colleagues and client managers have been asked and it scares me.

I agree - if the client says something stupid to HMRC then you are goosed. They will pick and choose the bits that they hear and try to screw you with it.

In this scenario, I'd make sure that you have some kind of decent cover in place in the unlikely event that you are investigated.

[BolshieBastard]

Completely agree.



Stop being like this.

I've said this before, and I'll say it again: The IR are not going to waste time and money chasing people for "short-term" contracts like the one you are on. IMHO (I know NLUK begs to differ! ) I think any contract under 2 years duration, irrespective of what the contract states (as long as it isn't completely stupid), is ever likely to be investigated (and as long as you aren't also doing something stupid like sharing the income with a spouse/partner who does nothing justifiable for it - and hence raising the concerns of the IR.) I'll maintain this view until someone shows me a case of a straightforward contractor doing a simple contract of 2 years or under duration where they were successfully prosecuted by the IR. Too much FUD around IR to the benefit of those making a quick buck from it; again, all IMHO.

If someone does know of such a successful prosecution, please post a link so I can read the detail.

Think this under 2 years stuff is very misguided. HMRC have in the past investigated 13 week contracts. I also understand HMRC issued a bulletin to their staff that length of contract nor the cost effectiveness or otherwise of the tax take on a short contract should be the deciding factor.

Their aim is to scare contractors into be IR35 compliant probably for the rest of their contracting career, ie once investigated, would likely play safe in future.

[nomadd]

Think this under 2 years stuff is very misguided. HMRC have in the past investigated 13 week contracts. I also understand HMRC issued a bulletin to their staff that length of contract nor the cost effectiveness or otherwise of the tax take on a short contract should be the deciding factor.

Their aim is to scare contractors into be IR35 compliant probably for the rest of their contracting career, ie once investigated, would likely play safe in future.

Which is why I also said the contract shouldn't have stupid clauses in it and why he shouldn't have any stupid working practices - like split income with a spouse who does nothing for the business.

And the IR aren't stupid. They are not going to waste tens of thousands of pounds taking a contractor to court over a short contract in the vain hope of a victory that nets them only a few thousand pounds in return. So, as long as contractors don't 'fold' each time the IR comes knocking, my point stands. (I've had two tax inspections myself and have never had a problem - and I declare myself firmly outside IR35.)

So, again, I re-iterate: If someone does know of such a successful prosecution, please post a link so I can read the detail.

[BolshieBastard]

Which is why I also said the contract shouldn't have stupid clauses in it and why he shouldn't have any stupid working practices - like split income with a spouse who does nothing for the business.

And the IR aren't stupid. They are not going to waste tens of thousands of pounds taking a contractor to court over a short contract in the vain hope of a victory that nets them only a few thousand pounds in return. So, as long as contractors don't 'fold' each time the IR comes knocking, my point stands. (I've had two tax inspections myself and have never had a problem - and I declare myself firmly outside IR35.)

So, again, I re-iterate: If someone does know of such a successful prosecution, please post a link so I can read the detail.

As I have said before, HMRC have investigated 13 week contracts where the tax take was considerably less than the cost of the IR35 investigation. HMRC do not just work on the cost of the current investigation v tax they can generate of an IR35 win on, say, a 13 week contract.

HMRC know that by putting the frighteners on a number of contractors via an IR35 investigation, even though they may not win or, may only reclaim a small amout of tax from that contract, a number of those contractors will deem themselves IR35 caught going forward.

So, HMRC do not need to continually investigate these contractors and, they will receive IR35 tax off those contractors for what may seem initial negligible return or even a net loss to start with.

And as for 'stupid working practices' and S660, well!