Reply to: Legaly outside IR35 ?

Re: Errm, possibly...

Interesting Mindmoo. So your solution to IR35 is to give away all your money. I’m assuming these “non relatives” don’t give the money back to you because then it would be taxable.

Re: Errm, possibly...

Not if your shareholders are also directors and are not connected

The whole point of the argument of IR35 is that as a close company usually with connected persons as directors, you are effectively setting your salary which not a commcercial one purely for tax avoidance

If you company is not closely held and your directors are not connected then you have no control over your salary

And S660a doesnt come into place either

Virtually every contract I have had has been safely outside IR35 - but the company structure adds a little bit of protection as well

Re: Errm, possibly...

No. You'll be taxed on your deemed salary. Regardless of where the money has actually gone.

If you are caught by IR35, all these intermediaries are ignored for the purposes of calculating deemed salary.

Re: Errm, possibly...

Yeh - but even if i am inside ir35 - so what. I'm only going to get taxed on the 5k?

Re: Errm, possibly...

Surely she's outside IR35 ?

She is. But you wouldn't be.

You could always get someone not realted and not involved with you to do it.

And that wouldn’t work either

Re: Well...

Unless of course you trust the other person not to run off with your money

In my case my other half has a big family who we get on well with. We are not married. All my shares are held by his in-laws and adult off spring of them (8 of them in total). None of them could be classed as a connected person according to the legislation

Yes its a risk but my annual turnover after expenses and salary split 8 ways means if one decides not to return the cash to the rightful owner then I'm out less than if I got caught for IR35.

And they'd have my other half to deal with

Well...

That would put you clearly inside S660a and could also quite fairly be described as an artifical construction to avoid tax which is now (it seems) illegal.

You could always get someone not realted and not involved with you to do it. That would be legal - but I don't think it would be good business!

Re: Errm, possibly...

How about this....

You make your wife the Managing Director. She gets all the dividends - but doesn't do any on site work. She pays me a minimum wage. Surely she's outside IR35 ?

Errm, possibly...

Last time I looked (so I may well be out of date), everyone else was on a per contract basis, and they had to approve the contract beforehand. So while one contract is not a problem, two or three get expensive - remembering that you potetnially have to cover up to seven years after the event.

ISTR that PCG is a one-off for the year, for as many contracts as you are running or have run.

If that is the case (which it may not be!) then the PCG deal is preferable.

Re: Errm no...

I wouldn't argue that having insurance that covers a tax inspection is worthwhile - I've got a policy myself.

What I would argue with is the £20k cost of defending yourself - it may be way less than that. It cost a contractor I know £1,500 but that was won before it got to the commisioner stage. I suspect that if it gets as far as the commisioners you have been sailing pretty close to the wind and may well lose.

You can get insurance without joining the PCG and it works out at less than half the PCG+Insurance cost. You need to decide if anything else the PCG offer is worth the extra. My personal decision was that it isn't.

Errm no...

You at the back really ought to pay attention

Seriously though, I'm faily confident I'm outside IR35 but I have had to take the business decision about what happens if Hector decides to take me through a three year investigation costing around £20k.

You are far more likely to get investigated if your annual paperwork is delayed, late or wrong or your SA form shows significant variations year on year. That's really what raises their antennae.

Surely if you need to take out insurance against IR35 isn't that like saying "Hi there - come and take a look at me - I'm IR35 but taking a chance"???

Re: How Many Clients

Then they gave you a huge great gift/loan/whatever

I think if it's completely at the discretion of of people running a trust whether or not to give the contractor any of the 80% of "his" fees that have gone into it, and in fact they could give "his" money to someone else, or someone elses money to him, that breaks the link with the original contract. (This is just an example made up by me - who's not an expert.)

I believe EBTs became established, not because any specific legislation said they should be allowed to exist, but because companies were allowed to deduct payments into them as an expense (of employing people) by normal rules for allowing expenses, but employees could only be taxed if/when they actually received anything - obviously it would not be fair to tax them on money they might never get.

Although EBTs came into existence without specific legislation, specific legislation has been passed to control their use. Companies can now only deduct payments into them as an expense in the year when the funds are paid out again.

I think income from a straight-forward UK EBT is taxed the same as salary, including NI, so the clever/controversial bit in all these schemes is providing benefit to contractors while avoiding this, which is where the depreciating foreign currency loans came in, for example.

How Many Clients

How many clients would one need ? Would invoice value be an issue ?

The way the legislation is framed, it does not matter how many clients you have, as each contract is supposed to be assessed on it's own.

However, during the IR35 Judicial Review, business pointers "In Business On Your Own Account" IBOYOA were considered to be small pointers to being outwith IR35.

Re: Reasonable

I have never bothered having my contracts looked at, mine is a standard agency one that appears to say all the right things re. substitution etc etc The PCG have one you can download so compare yours with that. If you look at the cases that have gone to court, the actual working relationship between you, the client and the agency is looked rather than what is said in the contract. Having a correctly worded contract isn't going to do you any harm though. In a normal style engagement working on a client site it appears to be very difficult to argue you are outside IR35 when you look at the rules. However looking at the PCG figures they have a good success rate and I am assuming that the IR look elsewhere when they work out a case is going to be fought by people who know what to say and do. Its a lottery, keep back enough cash to foot any bill and try not to worry about it !