Has anyone actually been investigated?

[dogeson]

Hello,
I'm reading here a lot about IR35.. but really, has anyone actually been investigated or it's just a scary deterrent?
Looking at the case history, that's about 1 or 2 a year? and targeting celebrities.
Like what are the real risks?

Juding by this article, it's close to zero. So why do people worry so much?

https://www.contractorcalculator.co....2610_news.aspx

[WTFH]

Hello,
I'm reading here a lot about IR35.. but really, has anyone actually been investigated or it's just a scary deterrent?
Looking at the case history, that's about 1 or 2 a year? and targeting celebrities.
Like what are the real risks?

Juding by this article, it's close to zero. So why do people worry so much?

https://www.contractorcalculator.co....2610_news.aspx

You might want to check the date of that article - it's 9 years old.

[eek]

Hello,
I'm reading here a lot about IR35.. but really, has anyone actually been investigated or it's just a scary deterrent?
Looking at the case history, that's about 1 or 2 a year? and targeting celebrities.
Like what are the real risks?

Juding by this article, it's close to zero. So why do people worry so much?

https://www.contractorcalculator.co....2610_news.aspx

Because the current investigations especially at the tribunal level are under the old (Chapter 8) rules that were difficult for HMRC to enforce.

Since 2021 IR35 has followed the new Chapter 10 rules and those rules are very different. HMRC play the game of finding 1 contractor who should be inside and then go well if Fred Jones is inside all 500 other contractors you are using are also inside so here is a very large bill we want you to pay.

There is then a secondary point that most contracts pass that liability back to you so you end up (3-5 years later) being found to have been inside (with zero right to appeal) because of the actions of someone else...

[dogeson]

Because the current investigations especially at the tribunal level are under the old (Chapter 8) rules that were difficult for HMRC to enforce.

Since 2021 IR35 has followed the new Chapter 10 rules and those rules are very different. HMRC play the game of finding 1 contractor who should be inside and then go well if Fred Jones is inside all 500 other contractors you are using are also inside so here is a very large bill we want you to pay.

There is then a secondary point that most contracts pass that liability back to you so you end up (3-5 years later) being found to have been inside (with zero right to appeal) because of the actions of someone else...

What if Fred Jones is overseas? Am I safe?

[WTFH]

What if Fred Jones is overseas? Am I safe?

Let's assume you are Fred Jones.

[northernladuk]

The answer is very few. The JLJ case is one but it's very old. We've a couple of people on this forum that have been investigated but nothing came of it. Regardless of the result you really want to avoid being investigated. It can take three or four years, and could be involving potential penalities of 100's of K depending on your situation. From what the few people have fed back on here is that even through they were cleared it was a horrible period during the investigation.

So if you are asking to find out if next to no one gets investigated so you can bend the rules and 'get away' with stuff then I think that's a very bad idea. The few people that get investigated are the ones doing this. If you are doing things properly, got a good knowledge of IR35, run your business diligently then the risk of them spotting something will be next to absolute zero.

I believe IR35 investigations are triggered from other indescretions that put you on the radar, so if you go around thinking you can do what you want you'll never get caught then you are putting yourself in that group. If you do stuff properly you won't if you get me.

All that said, and as others have said, the landscape has changed significantly so times now are competely different to the old days when everyone was outside and HMRC (quite rightly) didn't believe that can't be the case.

We don't know what will happen in the future and whether HMRC will apply anything retorspectively or the liability can be passed down the chain or whatever so do play it loose, do it properly and don't be the one that they pick on to test the process.

[dogeson]

Let's assume you are Fred Jones.

Sorry, I'm stupid! What if I work in the UK but the company is overseas? If they find a contractor for the US client and deem them inside, how they can find the list of other 500 contractors? They go to US and the client says "Sorry, confidential information", end of story

[dogeson]

The answer is very few. The JLJ case is one but it's very old. We've a couple of people on this forum that have been investigated but nothing came of it. Regardless of the result you really want to avoid being investigated. It can take three or four years, and could be involving potential penalities of 100's of K depending on your situation. From what the few people have fed back on here is that even through they were cleared it was a horrible period during the investigation.

So if you are asking to find out if next to no one gets investigated so you can bend the rules and 'get away' with stuff then I think that's a very bad idea. The few people that get investigated are the ones doing this. If you are doing things properly, got a good knowledge of IR35, run your business diligently then the risk of them spotting something will be next to absolute zero.

I believe IR35 investigations are triggered from other indescretions that put you on the radar, so if you go around thinking you can do what you want you'll never get caught then you are putting yourself in that group. If you do stuff properly you won't if you get me.

All that said, and as others have said, the landscape has changed significantly so times now are competely different to the old days when everyone was outside and HMRC (quite rightly) didn't believe that can't be the case.

We don't know what will happen in the future and whether HMRC will apply anything retorspectively or the liability can be passed down the chain or whatever so do play it loose, do it properly and don't be the one that they pick on to test the process.

Understood yep, make sense. The way I'm working now for a US client. I did make a contract review (not with QDOS) which kind of showed some problems, then I amended the contract to be IR35 compliant (RoS, MOO, control). It was still deemed inside by the accountant I used (like, everything green, but one point red), they said it's "marginal fail", because I can get stock options as individual. I called QDOS and apparently I can get NSOs as individual.
https://www.contractorweekly.com/tax...d-share-alike/

The accountant didn't agree, but I deemed myself Outside IR35 anyway since I have all the 3 pillars + OK from QDOS that options are ok.

But I do understand that there's a risk still. HMRC may say, hey, but the accountant said it's inside, why are you outside? So I have to bring all up all my arguments. I got an insurance, but anyway, I hate the whole risk thing and losing my sleep over it.

[northernladuk]

So this is where diligence and understanding come in. Great start to be fair but..

Understood yep, make sense. The way I'm working now for a US client. I did make a contract review (not with QDOS) which kind of showed some problems, then I amended the contract to be IR35 compliant (RoS, MOO, control). It was still deemed inside by the accountant I used (like, everything green, but one point red), they said it's "marginal fail", because I can get stock options as individual. I called QDOS and apparently I can get NSOs as individual.
https://www.contractorweekly.com/tax...d-share-alike/

NEVER.. and I mean NEVER, let your accountant deem your IR35 status. Firstly they rarely know enough about IR35 to be correct and secondly that looks like they are running your company for you so you've clear problems with MSC legislation. Get someone that is profession in IR35 law to do it.

The accountant didn't agree, but I deemed myself Outside IR35 anyway since I have all the 3 pillars + OK from QDOS that options are ok.

Bad mistake but then you did mention QDOS. Do you know enough about IR35 to do that? Do you know what MoO or 'lack of' really is because a vast majority of people don't. Do you know what an unfettered right to substition is? Do you know if they will actually accept a sub because most sub clauses are considered shams by the courts.

Working practices trump contracts so it's what you will be doing that counts, not the contract. You could have a great contract and the minute you join they ask you to do a different piece of work and D&C hits from day one.

But I do understand that there's a risk still. HMRC may say, hey, but the accountant said it's inside, why are you outside? So I have to bring all up all my arguments. I got an insurance, but anyway, I hate the whole risk thing and losing my sleep over it.

Again, take your accountant out of the loop, take their feedback and understand it but it's advice and nothing more.

You mention QDOS? Have you paid for a full contract review including working practices or just used some checklist they publish?

[dogeson]

So this is where diligence and understanding come in. Great start to be fair but..


NEVER.. and I mean NEVER, let your accountant deem your IR35 status. Firstly they rarely know enough about IR35 to be correct and secondly that looks like they are running your company for you so you've clear problems with MSC legislation. Get someone that is profession in IR35 law to do it.

Bad mistake but then you did mention QDOS. Do you know enough about IR35 to do that? Do you know what MoO or 'lack of' really is because a vast majority of people don't. Do you know what an unfettered right to substition is? Do you know if they will actually accept a sub because most sub clauses are considered shams by the courts.

Working practices trump contracts so it's what you will be doing that counts, not the contract. You could have a great contract and the minute you join they ask you to do a different piece of work and D&C hits from day one.

Again, take your accountant out of the loop, take their feedback and understand it but it's advice and nothing more.

You mention QDOS? Have you paid for a full contract review including working practices or just used some checklist they publish?

Yeah I said accountant, but really what I mean is the accountancy firm I use they provide professional IR35 review service. So initially they said my RoS is not right, and they provided the wording to make it unfettered. Same with MOO and Control, added a few new clauses there. Only on the share options we didn't agree, so I called QDOS for a free advice and got an email from them as a confirmation, but the reviewer I have used didn't agree, so we kind of agreed to disagree on that one and I went with self-determination.