Reply to: Accountants and IR35

Re

pauldack - you might want to ask your accountant if the IR35 issue could by entered as a note to the acounts (contingent liability) rather than as a provision.

Still surprised that can be so certain. As things stand my accountant is happy that my accounts are prepared this year as if I am outside IR35 - and I know he is good because we both qualified as chartered in the same year!

Re:Accounts

What are you blethering about Rodger? IR35 has no effect on possible or actual company costs or liability. A deemed payment is not a real one so has no effect on either the P&L or balance sheets.

Wrong! Affects the corporation tax payable and the PAYE payable both of which affect the P&L and balance sheet.

Proceeds of Crime Act 2002

Accountants work within the framework of the Proceeds of Crime Act 2002 which requires them to make a confidential report to the National Criminal Intelligence Service if they suspect that money is the "proceeds of crime".

"Proceeds of crime" is now defined very widely and extends beyond what most people would think of as the proceeds of crime. It can include money obtained legitimately but on which the correct amount of tax may not been paid. (I say "may" because the accountant has an obligation to make a report to NCIS if he "suspects" that it may be the "proceeds of crime").

Specifically with regard to IR35, the guidance issued by the Institute of Chartered Accountants in England and Wales states:


"Q18.&nbsp &nbsp &nbsp &nbsp I have taken on a new client who I believe comes within the IR35 regime but his previous accountants have advised him that is not the case. What should I do?

A. You must not assist a client in preparing an incorrect return. If you are convinced that IR35 applies and the client refuses to go along with your view you should refuse to act for him. If you reasonably suspect that tax has been underpaid because earlier returns are incorrect you need to tell NCIS. However, bearing in mind that the distinction between employment and self-employment depends on the precise facts of a particular assignment and in most cases involves a fine balancing act, it is hard to see on what basis you can suspect tax evasion in an earlier year if you do not have full knowledge of the facts."

Re: You're showing your age Roger...

"Unless he can be persuaded that IR35 treatment is remote, prudence convention dictates that he has to take account of possible cost in the accounts"

What are you blethering about Rodger? IR35 has no effect on possible or actual company costs or liability. A deemed payment is not a real one so has no effect on either the P&L or balance sheets. Only if a payment or a definite decision to pay one has been made would it be correct to show appropriate make up of creditors in notes to the accounts and employer's NI on it in the trading and P&L sheet. Neither is mandatory.

I think what is actually being referred to here is submission of the end of year PAYE returns, P35 and P14, and specifically, ticking the box on the P35. This the only route whereby the IR has any information about IR35 status, nothing to do with the company accounts at all.

NAA but on that pauldack, unless you would rather consider yourself caught and make due payment by the 19th May, I would suggest that you TELL your accountant to do nothing of the sort. If you do turn out be caught, or if even if you think you are, there are no obligations on you to tick the box and no penalties if you do not. If you tell them yourself that you are caught and pay very little income tax/NI they may come enquiring?

You're showing your age Roger...

Prudence is no longer a fundamental accounting concept.

Re: In all cases?

I am truly sorry for the omission darren, I have been a little poorly of late.

I hope to be able to resume my normal high standards asap

Re: In all cases?

A truly professional & comprehensive answer RR....not even a mention of women's private regions!

Re: In all cases?

Chartered accountant is in theory bound by his professional rules, which require him to exercise his professional judgement in preparation of accounts - this IMO includes adoption of fundamental accounting concepts. If client refuses this and it is material the effect should be disclosed as a contingent liability. Directors still have responsibility to prepare accounts that show a true and fair view even if there is no audit.

In all cases?

Roger,

Is that true in all cases? Surely if there is only accounts preparation rather than a formal audit the accountant (chartered or otherwise) can just do the common "well that's what the director said anyway - and look he has to that effect signed here".

Re: How does he know ?

Accountant is right

We always appreciate valuable input from a professional tax evader

Re: How does he know ?

Accountant is right.

Accounts have to be prepared in accordance with the fundamental accounting conventions, one of which is prudence - ie recognise all potential costs as soon as they are foreseeable.

Unless he can be persuaded that IR35 treatment is remote, prudence convention dictates that he has to take account of possible cost in the accounts.

This is of course entirely different from agreeing with the Inland Revenue that you are subject to IR35 - he should fight tooth and nail for you.

How does he know ?

IR35 assessment is based on mixture of fact & law.

No one can make a decision wether you are within IR35 or not without reviewing your contract & working practices. Your accountant cannot make this decision without knowing the facts, even if he was fully coversed with employment law.

As you have joined the PCG, I would suggest you take up the PCG's Route35 insurance for another £80. This will give you cover all the way from PAYE review to commissioners hearing.

Your Accountant doesn't really seem to be batting on your side, does he? It is possible to make your own decision on IR35 and absolve the accountant of responsibility - he sounds about as useful as a chocolate teapot and I bet he costs more than £50 + VAT per month for a less than comprehensive service. Get out now!!

You don't seem to have much luck with the companies you choose - I was with JSA for 4 years - need I say more.

check out www.************.co.uk

Accountants and IR35

He's not strictly a 'contractor' accountant. I was with JSA and then moved to another large firm and had nothing but problems. I then decide to move to a local one-man accountant. He's been superb so far but he is playing safe and admits he's not an IR34 expert. I have agreed to purchase an contract review through Accountax but if they say caught I still don't want to knock on the IR door with my cheque book.

I've joined the PCG and am willing to fight if the IR coming looking for me but I see no sense in 'owning up' to IR35.

Pay for an assesment by someone competent to do it such as QDOS,Accountax etc. Depending on the result decide. cost is fairly cheap £100 - 500, which relative to the tax is nothing.

Of course if your accountant is adamant and advises you incorrectly then he will be liable , my accountant is also chartered, he sent me a letter asking me to make the decision. A cop out but he sleeps soundly.

Has your accountant done a full assesment or does he just think its safer to go IR35 caught?