Outside IR35 now even harder to prove PGMOL ruling

[dsc]

Sounds terrifying.

Would it be fair to say that the contract itself is the primary piece of evidence though? That is where an investigation would look first and then seek to verify what the contract claims.

Depends on what works in HMRC's advantage, if the contract shows IR35 safe clauses, then they will claim that real working arrangements were different and the contract doesn't matter, if it's the other way around, they'll claim that the contract describes how things should be and that the client effectively had you inside. Either way, you are fecked.

[NigelJK]

What the government fails to realise is that they are losing yet more tax by contractors getting fed up and leaving to take up permanent jobs, but hey lets not point that out to them as they see us as dirty tax avoiders and just don't understand how finance actually works

That's why I left the game.

HMRCs tax losses would be somewhere in the region of £25k in there efforts to claw in an addition £4K. And that's mostly VAT which is collected at 1p in £, income tax is some 20p in the £.

Not to mention the wasted hours dotting the i's and crossing the t's to keep them at bay.

[woody1]

Yes I know it depends on individual circumstances (day rate, amount of expenses etc). But roughly speaking what's the sort of %retention outside compared to inside?

I'm guessing, if you're outside, you've probably done a quick reckoning of how much you'd stand to lose if you had to move inside? How bad is it?

BTW, why did they do away with the 5% allowance you used to get if you were running your own company inside? At least it was something.

[vetran]

Depends on what works in HMRC's advantage, if the contract shows IR35 safe clauses, then they will claim that real working arrangements were different and the contract doesn't matter, if it's the other way around, they'll claim that the contract describes how things should be and that the client effectively had you inside. Either way, you are fecked.

If you look like a duck in HMRC's opinion then prepare to be stuffed!

[willendure]

Depends on what works in HMRC's advantage, if the contract shows IR35 safe clauses, then they will claim that real working arrangements were different and the contract doesn't matter, if it's the other way around, they'll claim that the contract describes how things should be and that the client effectively had you inside. Either way, you are fecked.

Right. But I mean if investigated whats the first thing they are going to ask for? The contract. And then follow on from there. I mean without seeing the contract they won't even know what work I have been doing, or who they might talk to verify my claims and so on. So I think its still the primary thing to get the contract in order - of course once the contract is in order its legally binding on client co to stick to its terms. Of course, I don't know, this is just how I imagine things would unfold, unless you know otherwise?

[willendure]

Yes I know it depends on individual circumstances (day rate, amount of expenses etc). But roughly speaking what's the sort of %retention outside compared to inside?

I'm guessing, if you're outside, you've probably done a quick reckoning of how much you'd stand to lose if you had to move inside? How bad is it?

BTW, why did they do away with the 5% allowance you used to get if you were running your own company inside? At least it was something.

It depends on what you do with the inside earnings. Probably the best you can do is to divert as much of it as you can into a SIPP pension, because that is tax free up to £60K/year. So going inside might not actually be too bad compared with the equivalent rate outside. A well paid inside rate would be particularly worth taking for a 6 month stint, or 12 months spread over 2 tax years with high input to a pension fund.

The issue I personally have is that I am running a business and have expenses, and want to be able to build a war chest for hard times or seed capital for projects of my own. Putting it all into a pension does not allow me to allocate capital for the business.

I guess they took back the 5% because it was an easy thing to take away from us "tax dodgers". Did they actually take it back? I googled and articles I read seem to say it still exists, but perhaps they are out of date? Clarity on that appreciated if anyone knows...

[WTFH]

The issue I personally have is that I am running a business and have expenses, and want to be able to build a war chest for hard times or seed capital for projects of my own. Putting it all into a pension does not allow me to allocate capital for the business.

A warchest in a business, or tied up in other business “projects” is not a warchest. Likewise, putting all your money in a pension is not savings. It may be reducing your personal tax burden, but you (the person) do not have easy access to the money.
If you can’t separate your personal finances from tax savings in the company, then you don’t know the difference between business and personal - you are exactly who HMRC are trying to deal with, and rightly so.
Get yourself a personal warchest - money you have extracted from the company and paid tax on. Money you or your business can’t be touched for, money that isn’t tied up in schemes and tax efficiencies.
A warchest is personal money, easily available (i.e. a couple of days) that will assist you or your immediate family, without needing an accountant, tax adviser, lawyer, or major penalties to access it. I’ve been an advocate of premium bonds - might not be the highest returns of other savings accounts, but it is easy access money that might return an increase, and is already taxed/paid for.
If everything is tied up in pensions and business shenanigans, it’s not a warchest, it’s a long-term investment.

[dsc]

Right. But I mean if investigated whats the first thing they are going to ask for? The contract. And then follow on from there. I mean without seeing the contract they won't even know what work I have been doing, or who they might talk to verify my claims and so on. So I think its still the primary thing to get the contract in order - of course once the contract is in order its legally binding on client co to stick to its terms. Of course, I don't know, this is just how I imagine things would unfold, unless you know otherwise?

As it's often been shown, having for example RoS clauses in the contract means bugger all as the client might say "well we actually wouldn't accept a replacement", so there goes the whole legally binding argument. So contract needs to tick all boxes, but means nothing, unless it means something against you, then it's valid, if it's in your favor, HMRC will just ignore it and claim reality is different. Luckily most judges still see the absurdity of such approach and knock HMRC cases out claiming they are bollocks, but that's not really helpful considering you still have to go through the stress of investigation.

[willendure]

If you can’t separate your personal finances from tax savings in the company, then you don’t know the difference between business and personal - you are exactly who HMRC are trying to deal with, and rightly so.

Thanks for the "advice". Yes, I know the difference between business and personal. Its not like "warchest" is some precisely defined term, it can mean different things to different people. But yes, I know that money kept in the business is at risk.

Not so long ago I was interviewed for a permie role in high frequency trading, and the interviewer had previouisly been a contractor and got nailed for IR35. I cannot vouch to the legal certainties of it, but he told me that even money he had taken out of the business after paying taxes on it and gifted to his children, or put into his personal war chest was clawed back. One to give you nightmares...

[willendure]

As it's often been shown, having for example RoS clauses in the contract means bugger all as the client might say "well we actually wouldn't accept a replacement", so there goes the whole legally binding argument. So contract needs to tick all boxes, but means nothing, unless it means something against you, then it's valid, if it's in your favor, HMRC will just ignore it and claim reality is different. Luckily most judges still see the absurdity of such approach and knock HMRC cases out claiming they are bollocks, but that's not really helpful considering you still have to go through the stress of investigation.

"So contract needs to tick all boxes" - the point I was making.