Reply to: No Accountants and HMRC

[Hex]

I think it's worth joining the PCG. I think there are other less tangible benefits. One of the biggest being that you become part of a community who you can look to for support and help if you did become embroiled in an IR35 investigation, or for any other thing that troubles you - contract problems, payment problems etc. There is a lot of experience there and the discussion boards are supportive in general.

I know you can get similar insurance cover for the same money or less but I think being a member gives you much more than that.

You also get Jury Service insurance cover and Agency going bust cover (as part of PCGPlus).

[chris79]

I think in total it's costing me ~£450 all in, I guess the question here would be whether it's worth switching to PCG on the basis it may bring more benefits. Certainly something I plan on looking into in the next week or two before renewal.

[malvolio]

The contract I'm on requires me to have a minimum level of PI insurance, so after shopping around last year I found this place to be the best deal. Was happy to find the legal insurance was only an extra £75 which was a bonus. For myself the only real issue would be IR35 (probably like the majority of contractors), and this covers it - although in all honesty it's my personal belief that the risk/chance of being investigated for IR35 and it coming to anything is very low. I certainly don't lose any sleep over it, and this policy gives me peace of mind to know if it does kick off I can just make a phone call and the experts will deal with matters for me.

Granted though, it's a banker for the insurance companies on the PI/PLE/ELI insurance as the chances of me ever claiming are close to nil, since the client insisted on a minimum level of cover on the PI front all I did was simply negotiate a slightly higher rate to cover this, so in effect they are paying for it themselves.

Don't disagree, but a quick reality check is in order just out of general interest.

I pay £300 for PI/PLI/ELI; I'm a PCGPlus member so IR35 cover is in place for all contracts without limitations already. It's arguable whether or not you see the IR35 insurance as costing the £210 membership fee, but personally I don't since I didn't join the PCG for the insurance. But as long as your PI and IR35 cover is less than £510 you may be ahead of the game, assuming the cover is as complete as mine is.

Totally agree about getting the client to pay if they demand extra cover though.

Also, the chance of losing an IR35 investigation is quite low, but the cost is still high; the average price of representation through the typical 3 year investigation is around £15k.

[chris79]

A lot of people have the impression that HMRC exist to catch tiny mistakes by businesses and to grind those businesses into the dust and make their owners bankrupt.

This is not the case.

The medium-sized (£5 million) company I worked for made some a fairly basic error (VAT on disbursements) due to an accountant with lack of knowledge. HMRC pointed this out, changes were made, that was all. No big deal.

They have lots of helplines to help new businesses, and they actually do want to help (i.e they want you to understand the rules and obviously comply with them).

They have made the capital allowance changes expressly to reduce the complexity of small companies' accounts.

They recognise that businesses are in many cases going to be run by people less numerate and able than the typical IT contractor. And they are prepared for some mistakes.

The idea perpetuated by accountants that a company earning less than £100k with very simple p+l is horribly complicated and you'd be mad to do things yourself, and if you make so much as one error on your returns they'll come down on you like a tonne of bricks is mad.

The only real catch is IR35 - most contractors who say they are outside of it are at risk of HMRC deciding otherwise, and this is the real reason for avoiding any scrutiny.

Well said, I totally agree.

[chris79]

You need to be careful to compare like-for-like. While the £75 on top looks (and is) good, the PI/PLE/ELI package is actually a banker for the insurance company since it is rarely if ever paid out. Given they've now done all the admin side, adding the IR35 cover at cost is easy.

Also, is it just IR35 or any tax-related aspect enquiry, are there any preconditions or exclusions, how many contracts does it cover, how long after contract end does it apply...

Not saying it's a bad deal, it's just that the other packages cost much the same as each other for a reason.

The contract I'm on requires me to have a minimum level of PI insurance, so after shopping around last year I found this place to be the best deal. Was happy to find the legal insurance was only an extra £75 which was a bonus. For myself the only real issue would be IR35 (probably like the majority of contractors), and this covers it - although in all honesty it's my personal belief that the risk/chance of being investigated for IR35 and it coming to anything is very low. I certainly don't lose any sleep over it, and this policy gives me peace of mind to know if it does kick off I can just make a phone call and the experts will deal with matters for me.

Granted though, it's a banker for the insurance companies on the PI/PLE/ELI insurance as the chances of me ever claiming are close to nil, since the client insisted on a minimum level of cover on the PI front all I did was simply negotiate a slightly higher rate to cover this, so in effect they are paying for it themselves.

[hgllgh]

Because you'll make mistakes and be late with your returns?

Well, this is the problem I had with my accountants They made an incorrect VAT calc and I was late a number of times because I was constantly having to send them documents receipts etc every quarter and they were too slow to respond.

If you're on the flat rate VAT and use the HMRC employers cd rom for your PAYE this should simplify the calculations. Admittedly I haven't yet returned my online PAYE forms but I am guessing that it will not be any more difficult than filling in your online self assessment. As long as you enter the figures from the employers cd rom this shouldn't be a problem either. The cd rom also has a diary showing the dates that forms need to be submitted by...

[NotAllThere]

Accountant's fees £0 tends to give it away.

So don't put that line in. Anymore than you'd put in a line about R&D costs if you don't do any R&D.

Or if you really want to put a line in, put it as an internal cross-charge.

Even when I had an accountant, the P&L that went off to HMRC didn't include detail of that level.

[dude69]

A lot of people have the impression that HMRC exist to catch tiny mistakes by businesses and to grind those businesses into the dust and make their owners bankrupt.

This is not the case.

The medium-sized (£5 million) company I worked for made some a fairly basic error (VAT on disbursements) due to an accountant with lack of knowledge. HMRC pointed this out, changes were made, that was all. No big deal.

They have lots of helplines to help new businesses, and they actually do want to help (i.e they want you to understand the rules and obviously comply with them).

They have made the capital allowance changes expressly to reduce the complexity of small companies' accounts.

They recognise that businesses are in many cases going to be run by people less numerate and able than the typical IT contractor. And they are prepared for some mistakes.

The idea perpetuated by accountants that a company earning less than £100k with very simple p+l is horribly complicated and you'd be mad to do things yourself, and if you make so much as one error on your returns they'll come down on you like a tonne of bricks is mad.

The only real catch is IR35 - most contractors who say they are outside of it are at risk of HMRC deciding otherwise, and this is the real reason for avoiding any scrutiny.

[malvolio]

You need to be careful to compare like-for-like. While the £75 on top looks (and is) good, the PI/PLE/ELI package is actually a banker for the insurance company since it is rarely if ever paid out. Given they've now done all the admin side, adding the IR35 cover at cost is easy.

Also, is it just IR35 or any tax-related aspect enquiry, are there any preconditions or exclusions, how many contracts does it cover, how long after contract end does it apply...

Not saying it's a bad deal, it's just that the other packages cost much the same as each other for a reason.

[chris79]

Yes certainly.

I use www.caunceohara.co.uk for my PI and employers/public liability cover. Part of their package offers the following cover for an extra £75 which I think is worth it for peace of mind it offers (I've been with them a year, if anyone knows a better deal then please tell me as I'm about to renew very soon):-




The Freelance Contractors Legal Expenses policy gives you the power, through its level of cover upto £50,000 of legal costs per claim, access to a 24-hour helpline and to professional advice through a nationwide panel of specialist solicitors.

This policy provides cover for, amongst others:-

IR35 Investigations

Inland Revenue Investigations

Employment Disputes

Legal Defence

Property Protection and Bodily Injury

Debt Recovery

Tax Protection

Helpline Access – counselling etc

[Clippy]

Yeah but this is the thing I don't get.

People seem scared that they will be 'targeted' by HMRC for trying etc, I don't share this view. At the end of the day a 1 man contractors books should be quite simple, and if there are mistakes just hold your hands up and say "ok, tell me what I owe". You would have had to pay this anyway so it's no loss?

I personally refuse to operate a different way to what I 'want do do' simply through fear of the tax man, I welcome them to come and check me out if this is what they want to do as it's my honest belief that I'm doing everything correct and within guidelines / the law. What's there to be scared of?

Just for the record I pay a small premium for legal insurance in the event anything does ever kick off, this also covers IR35 issues etc, costs me about £75 a year.

Chris - could you post a link to these insurances please. TIA.

[xoggoth]

Most accounts include a director's report that is basically the profit and loss in much more detail. Accountant's fees £0 tends to give it away.

It is not part of the statutory requirement and you do not have to include it but if HMRC can see what you are spending by way of expenses, salary etc. and they look reasonable it probably lessens chances of investigation.

[malvolio]

So why are you asking the question then? Do you need vindication of your position? It looks entirely reasonable to me

There appear to be two points to kick of the aspect inquiries that lead to IR35 trawls. One is your name comes out of a hat, since they will check a certain number of random companies anyway. The other is an anomaly between one return and the next, a history of poor accuracy or late returns or both, apparent mismatches betwen SA and P35 and very occasionally between SA and company records. If you can do things 100% right and on time every time then no problem. If you can't, though, then you need to think of the options.

[chris79]

Yeah but this is the thing I don't get.

People seem scared that they will be 'targeted' by HMRC for trying etc, I don't share this view. At the end of the day a 1 man contractors books should be quite simple, and if there are mistakes just hold your hands up and say "ok, tell me what I owe". You would have had to pay this anyway so it's no loss?

I personally refuse to operate a different way to what I 'want do do' simply through fear of the tax man, I welcome them to come and check me out if this is what they want to do as it's my honest belief that I'm doing everything correct and within guidelines / the law. What's there to be scared of?

Just for the record I pay a small premium for legal insurance in the event anything does ever kick off, this also covers IR35 issues etc, costs me about £75 a year.

[malvolio]

I registered online to do my own VAT and PAYE (one man ltd co) after "issues" with my accountant. I plan on finding an accountant to do my corporate and year end accounts when they are due.

Is it true that HMRC are more likely to target me for investigation as I don't have an accountant? Things is, how do they know I don't have an accountant?

Because you'll make mistakes and be late with your returns?