IR35 fast track catch up

[TonyF]

The pension contributions are a real winner if you are not long off being able to get your hands on them. If IR35 caught then you are saving both lots of NI and potentially the difference between lower and higher rate tax. That is the theory anyway.

A few years back IPSE and it's forerunner used to quote some impressive figures about seeing off IR35 investigations at the first hurdle, is that now not generally the case ? When I started contracting again it appeared that IR35 investigations were few and far between but it looks like there are a few around looking at the message boards.

HMRC are said to be pursuing more IR35 cases these days, but that doesn't mean that they get seen off quicky or not. I would hope that if you have good people talking for you then HMRC might go somewhere else for a quicker win. Alternatively, HMRC might see that you have a good team and think that there's something good to be had if they win!

I read online (so it must be true) that the average cost of a full investigation is around £50k if you pay for the lawyers yourself...

[rootsnall]

The pension contributions are a real winner if you are not long off being able to get your hands on them. If IR35 caught then you are saving both lots of NI and potentially the difference between lower and higher rate tax. That is the theory anyway.

A few years back IPSE and it's forerunner used to quote some impressive figures about seeing off IR35 investigations at the first hurdle, is that now not generally the case ? When I started contracting again it appeared that IR35 investigations were few and far between but it looks like there are a few around looking at the message boards.

[Fred Bloggs]

I thought company pension contributions were ringfenced from IR35 calculations.

They are. That's why lump sum fixed price plus hourly rate work could be be beneficial, funding pensions from the (IR35 caught) hourly pay and using the lump sum jobs as divis. Even these days, I think if you tender and win a fixed price job, no tribunal in the UK will call it IR35 caught. With a bit of give and take, it could work out well for all parties.

[rootsnall]

I thought company pension contributions were ringfenced from IR35 calculations.

They are unless something has changed, one of the reasons I made the post, but I'm pretty sure on that one. If my understanding is correct it is just the NI on the dividend portion ( + penalties of ? ) that I'd be on the hook for.

[adubya]

I thought company pension contributions were ringfenced from IR35 calculations.

[tarbera]

IR35 fast track catch up

I'm a long in the tooth contractor who was clued up on IR35 once upon a time. I went Perm and after a few years as a Permie I was made redundant and did a Friday to Monday switch to start a contract with the same employer/client. It was meant to be a few weeks work but I'm now into Year 3, Eek ! I decided I was probably stuffed IR35 wise due to the Friday to Monday bit but on the plus side I work irregular hours as required by the client, sometimes no work for a few weeks, work from home, all my own equipment etc and I'm the expert in my area so decide how I do it. The contract was tulip ( on my old IR35 knowledge ) and not reviewed or changed. I have structured things on approx. 10K salary, 20-25K divis and the rest into my pension. The theory being if I get nabbed I was only on the hook for the divis bit, so £5Kish a year plus penalties of ??? which I can handle. The final potential bill is now getting worth some attention. I have been a member of IPSE before. I have spent this afternoon trying to catch up on many years of IR35 knowledge and it looks even messier then ever. Discuss ;-)

No

10k + 25k div + say 25k pension

Forget the £10k (tax allowance) that leaves £50k (or much more) to tax at about 45% ish

So your on the hook for £20k a year

[rootsnall]

1. Join IPSE. May not help much.
2. See if you can get QDOS TLC35 cover on at least your current contract. They probably won't cover it, but you could try.
3. Start looking for another contract elsewhere.
4. Split off any projects where it makes sense into fixed price contracts, if your current client will work with you on that. Those will be outside IR35, you can use those for your divis and the inside stuff for pensions and salary.
5. Once you have another contract elsewhere, consider closing your company and starting another one. Don't claim ER, just pay out the funds in dividends. You are almost certainly less likely to be investigated on contracts through a closed company.
6. Put aside a reserve, you may have a lot of pain coming.

It's probably too cushy to give up, I'd possibly opt inside IR35 and pay the NI rather than travel/commute by choice. The reserve is there but it's just heading into painful territory if I understand the potential bill correctly. The fixed price idea might be worth investigating. The Ltd Co won't last long of this contract comes to an end.

[WordIsBond]

1. Join IPSE. May not help much.
2. See if you can get QDOS TLC35 cover on at least your current contract. They probably won't cover it, but you could try.
3. Start looking for another contract elsewhere.
4. Split off any projects where it makes sense into fixed price contracts, if your current client will work with you on that. Those will be outside IR35, you can use those for your divis and the inside stuff for pensions and salary.
5. Once you have another contract elsewhere, consider closing your company and starting another one. Don't claim ER, just pay out the funds in dividends. You are almost certainly less likely to be investigated on contracts through a closed company.
6. Put aside a reserve, you may have a lot of pain coming.

[SueEllen]

I'm a long in the tooth contractor who was clued up on IR35 once upon a time. I went Perm and after a few years as a Permie I was made redundant and did a Friday to Monday switch to start a contract with the same employer/client. It was meant to be a few weeks work but I'm now into Year 3, Eek ! I decided I was probably stuffed IR35 wise due to the Friday to Monday bit but on the plus side I work irregular hours as required by the client, sometimes no work for a few weeks, work from home, all my own equipment etc and I'm the expert in my area so decide how I do it. The contract was tulip ( on my old IR35 knowledge ) and not reviewed or changed. I have structured things on approx. 10K salary, 20-25K divis and the rest into my pension. The theory being if I get nabbed I was only on the hook for the divis bit, so £5Kish a year plus penalties of ??? which I can handle. The final potential bill is now getting worth some attention. I have been a member of IPSE before. I have spent this afternoon trying to catch up on many years of IR35 knowledge and it looks even messier then ever. Discuss ;-)

Use Google and do a search on this forum on IR35 there are lots of threads to keep you occupied for a few hours.

[rootsnall]

I'm a long in the tooth contractor who was clued up on IR35 once upon a time. I went Perm and after a few years as a Permie I was made redundant and did a Friday to Monday switch to start a contract with the same employer/client. It was meant to be a few weeks work but I'm now into Year 3, Eek ! I decided I was probably stuffed IR35 wise due to the Friday to Monday bit but on the plus side I work irregular hours as required by the client, sometimes no work for a few weeks, work from home, all my own equipment etc and I'm the expert in my area so decide how I do it. The contract was tulip ( on my old IR35 knowledge ) and not reviewed or changed. I have structured things on approx. 10K salary, 20-25K divis and the rest into my pension. The theory being if I get nabbed I was only on the hook for the divis bit, so £5Kish a year plus penalties of ??? which I can handle. The final potential bill is now getting worth some attention. I have been a member of IPSE before. I have spent this afternoon trying to catch up on many years of IR35 knowledge and it looks even messier then ever. Discuss ;-)