Reply to: IR35 & Contract Length

[Wanderer]

It matters if they investigate only one contract and you will owe the tax from a 2 month's contract rather than 2 years'. Still I believe it is more likely for a 2year contract to be investigated than all 12 x 2 month contracts.

Agreed, they are going to go for the big fish.

If they had to argue through 12 contracts with me it would take a seriously long time as I argued each point individually and I would make damn sure that they were losing the will to live by the end of it.

[centurian]

Of the cases HMRC have taken to court - have any of them been for short contracts.

[SallyPlanIT]

In majority of cases the basis for an investigation of any type is pretty simple. They do the electronic equivalent of picking a name out of a hat. That's it

Yes, but what started out as an aspect enquiry has turned into a full blown IR35 investigation in the past. To minimise the risk of any HMRC intervention, ensure (or make sure your accountant does) all your filing and payment deadlines are met so you're not flagged in their system.

[Not So Wise]

Based on potential return to HMRC, I'd say yes. Surely, it is not cost effective to investigate 6 or 8 x 3 month jobs when the next contractor along has 1 x 24 month job?

Cost effective?
Nothing to do with it. In majority of cases the basis for an investigation of any type is pretty simple. They do the electronic equivalent of picking a name out of a hat. That's it

Cost effective/ efficient / value for money? They are civil servants, they have never heard of those terms

[Lumiere]

It doesnt matter whether your contract is 2 months or 2 years, they're still bastards when it comes to IR35.

It matters if they investigate only one contract and you will owe the tax from a 2 month's contract rather than 2 years'. Still I believe it is more likely for a 2year contract to be investigated than all 12 x 2 month contracts.

[BolshieBastard]

Based on potential return to HMRC, I'd say yes. Surely, it is not cost effective to investigate 6 or 8 x 3 month jobs when the next contractor along has 1 x 24 month job?

Nope. Because HMRC have shown (and I think Im correct in saying its in their latest manual) that even if the money recovered to the tax system is outweighed by the cost of the investigation, the investigation should still be made where its considered iR35 applies to the contract \ contractor.

It doesnt matter whether your contract is 2 months or 2 years, they're still bastards when it comes to IR35.

[centurian]

I'm fully aware that you can be caught by IR35 even if your contract's duration is just 1 day.

Correct. However it is hard to become "part and parcel" of an organisation in a single day - although this is just one determination of IR35 status.

I think it's easier to sleep at night due to IR35 if you do lots of short term contracts, but it's certainly not a sliver bullet, so don't get complacent about it..

[Wanderer]

This makes perfect sense, but not many inspectors are that business minded. It doesn't really matter what the potential yield is - they will just want to prove their point.

They have a finite amount of resource to investigate these cases and if they want to waste it persuing low value or unwinable cases just to prove a point then that's great news for the rest of the contractors out there innit.

[zedAccounts]

I'm fully aware that you can be caught by IR35 even if your contract's duration is just 1 day. My question really is about the realities of doing a large number of short term contracts and what bearing that would have on likelihood of a full blown investigation.

I only ask the question because over the last year or so I've done four separate three month stints with different clients and am now about to start my fifth. For the revenue to do a full blown investigation, they'd have to invest resources in investigating 5 separate contracts. Wouldn't they be likely to think that it's not worth it & better go and investigate someone who has been with the same client co for 2 years?

Agreed. I tend to go for short contracts with as many different clients for that reason, and because it's more interesting to move around.

ZED.

[malvolio]

True - but the amount they gain by people going brolly because they are too worried to go limited must be quite large.

I did the sums a while back - it's a few hundred million, which in UK PLC terms is trivial. Philip Green avoids more than all by himself.

Just to put things in context, the defence side of the Arctic case was around £400k in total, and probably the same again on HMRC's side (not that they look at costs, of course). The actual amount in dispute was £6000... It's more about establishing case law than recovering money.

[VectraMan]

HMRC don't seem to be in the business of common sense either so would quite expect them to spend more on an investigation than they would recover tbh.

Hopefully in the current cost-cutting climate, pressure will be brought on HMRC to act a bit more sensibly. I hope that's not blind optimism.

[Fred Bloggs]

This makes perfect sense, but not many inspectors are that business minded. It doesn't really matter what the potential yield is - they will just want to prove their point.

Point taken, but can you show this is really the case? If you can, then a formal complaint should be made to whichever Gov't Dept is responsible for the cretins who do that. Afterall, it is public money we're talking about being wasted here. It must be close to criminal being that reckless.

[Clare@InTouch]

My thoughts entirely. ISTR reading somewhere that the amount of money recouped by HMRC is relativaly low given the small number of cases won and the costs incurred in carrying out the investigations.

True - but the amount they gain by people going brolly because they are too worried to go limited must be quite large.

[northernladuk]

Based on potential return to HMRC, I'd say yes. Surely, it is not cost effective to investigate 6 or 8 x 3 month jobs when the next contractor along has 1 x 24 month job?

I would say no. I wasn't aware that they used cost effectiveness as decision as to who to investigate. Look at examples of the police spending stupid amounts of time on minor issues and so on. I would sincerly hope if someone needs investigating he will be investigated fairly regardless of situation.

HMRC don't seem to be in the business of common sense either so would quite expect them to spend more on an investigation than they would recover tbh.

[Qdos Contractor]

Based on potential return to HMRC, I'd say yes. Surely, it is not cost effective to investigate 6 or 8 x 3 month jobs when the next contractor along has 1 x 24 month job?

This makes perfect sense, but not many inspectors are that business minded. It doesn't really matter what the potential yield is - they will just want to prove their point.