Reply to: Accountant and IR35

[Stan05]

Thanks for the guys,

I've dropped the accountant a mail asking for an explanation and stating that I believe I am outside IR35 if I'm not happy then time to move on (no money has changed hands yet)

For the record, he hasn't seen the contract - it was only signed last Thursday as I wasn't happy with all the T&C's. The thing that is most strange is that at our initial meeting we discussed the salary/dividend splits so find the whole IR35 conversation bemusing.

[malvolio]

They are Chartered Accountants not solicitors. If I wanted to challenge the legal basis of IR35 in the European court I would use a solicitor. If I wanted to write a contract from scratch I would use a solicitor (although in practice I would use one of the excellent PCG model contracts instead).

I am not asking them for a general legal opinion on my contract - but on the basis of IR35 alone. The advice is based on company law and tax and its practical application in previous case law decisions, experience of prior investigations and tribunal decisions - within their specialist market.

If a specialist Chartered Accountant provides written IR35 advice based on a review of my contract, I value that significantly. They would not keep their Chartered status long if they get it wrong!

Such faith, so misplaced...

Assuming they haven't got a PCG Accredited Accountant badge, they possibly aren't too hot on IR35 and its myriad ramifications. For one thing, if you have a RoS, as you say you have, and it is reasonably unfettered and the client would actually honour it in principle then any good representative will get you outside IR35 anyway. Same applies for Mutuality and D&C. The fact they are saying you are caught when you do have an RoS means either it's a sham and they know it, or they don't understand the case law. You need to find out which.

Over 98% of all IR35 cases fail. People should assume they are outside unless provably caught, and even then they need to be certain before cheerfully signing away 20% of their gross.

[yorkshireman]

Unless your accountant is a lawyer as well, I'd question the benefit of having someone unqualified look over the paperwork.

It surprises me the number of people that rely on an accountant to give them legal advice about things like this - in the same way that I wouldn't ask a lawyer what VAT rate I should be paying, I wouldn't ask my accountant for a contract review.

They are Chartered Accountants not solicitors. If I wanted to challenge the legal basis of IR35 in the European court I would use a solicitor. If I wanted to write a contract from scratch I would use a solicitor (although in practice I would use one of the excellent PCG model contracts instead).

I am not asking them for a general legal opinion on my contract - but on the basis of IR35 alone. The advice is based on company law and tax and its practical application in previous case law decisions, experience of prior investigations and tribunal decisions - within their specialist market.

If a specialist Chartered Accountant provides written IR35 advice based on a review of my contract, I value that significantly. They would not keep their Chartered status long if they get it wrong!

[Danielsjdaccountancy]

I agree, seek a second opinion. Some IR35 specialists are PCG Accredited so are qualified to form an opinion for you.

[TheFaQQer]

If he based this judgement on an IR35 review of your contract then get another accountant to give you a second opinion. Intouch Accounting gave my contract a free IR35 review before I switched. I am sure the other specialists will too.

If his advice is not based on a review of your contract then I would ask for a complete refund of anything you have paid so far before you switch to a contractor accountant. If necessary threaten to complain to the Institute of Chartered Accountants.

Unless your accountant is a lawyer as well, I'd question the benefit of having someone unqualified look over the paperwork.

It surprises me the number of people that rely on an accountant to give them legal advice about things like this - in the same way that I wouldn't ask a lawyer what VAT rate I should be paying, I wouldn't ask my accountant for a contract review.

[yorkshireman]

"As you will be IR 35 it will be necessary for you to draw a salary for March, based upon the billing less relevant expenses for February and March, rather than a director's loan."

If he based this judgement on an IR35 review of your contract then get another accountant to give you a second opinion. Intouch Accounting gave my contract a free IR35 review before I switched. I am sure the other specialists will too.

If his advice is not based on a review of your contract then I would ask for a complete refund of anything you have paid so far before you switch to a contractor accountant. If necessary threaten to complain to the Institute of Chartered Accountants.

[Clare@InTouch]

I don't think that's relevant - all company directors need to fill out a self assessment, IIRC. So not taking a salary won't make any difference to whether you need to do one or not.

I would suggest asking your accountant, but in this case, I'm not convinced that this is a wise move

HMRC will tell you they want a tax return if you're a director, although it's not a legal requirement just because you hold that office. Your accountant will probably prepare a return for you anyway as there may well be tax to reclaim (if you've paid PAYE on a larger salary when you were perm then dropping to a low salary mid-year will generate a rebate).

[TheFaQQer]

Just about to start my first contract today, as I have been employed upto Feb I wasn't going to draw a salary until the new tax year to avoid filling out a self assessment.

I don't think that's relevant - all company directors need to fill out a self assessment, IIRC. So not taking a salary won't make any difference to whether you need to do one or not.

I would suggest asking your accountant, but in this case, I'm not convinced that this is a wise move

[TheFaQQer]

Back in the days when I used a local accountant rather than an IT contractor's accountant, he told me IR35 was a done deal and that it applied to me. I assumed he was right until about 2007. That arbitrary decision of his cost me a LOT of money.

Well done for not assuming your accountant is automatically always right.

That happened to a mate of mine. His accountant was dead against declaring inside, until he found out that you can still take 5% expenses which would more than cover his bill. At which point he decided that in was the way forward, because it meant less work than him.

[Wanderer]

Back in the days when I used a local accountant rather than an IT contractor's accountant, he told me IR35 was a done deal and that it applied to me. I assumed he was right until about 2007. That arbitrary decision of his cost me a LOT of money.

To be fair, a lot of contractors made that decision themselves too. Now they are starting to question if they were ever IR35 caught and operating outside so the government is looking at an IR35 replacement...

[SueEllen]

If the explanation from the accountant of why you are within IR35 is not clear when they haven't seen your contract then look for and change to another accountant asap. The money spent on doing this will save you a time, trouble and money later on.

[RichardCranium]

Back in the days when I used a local accountant rather than an IT contractor's accountant, he told me IR35 was a done deal and that it applied to me. I assumed he was right until about 2007. That arbitrary decision of his cost me a LOT of money.

Well done for not assuming your accountant is automatically always right.

[Wanderer]

"As you will be IR 35 it will be necessary for you to draw a salary for March, based upon the billing less relevant expenses for February and March, rather than a director's loan."

Welcome!

How do they know your IR35 status, did you ask them to review your contract and give you an opinion?

I'd be inclined to write back and tell them simply that, you are working outside of IR35 and your accounts will be done accordingly. Thank you very much.

Which accountant is it?

[kaiser78]

Guys,

Just about to start my first contract today, as I have been employed upto Feb I wasn't going to draw a salary until the new tax year to avoid filling out a self assessment.

I emailed the accountant to confirm if I can safely draw a directors loan without that being classed as income (I understand that so long as it is paid within 9 months from the end of the tax year it was drawn then that is not classed as income) - here is the accountants response

"As you will be IR 35 it will be necessary for you to draw a salary for March, based upon the billing less relevant expenses for February and March, rather than a director's loan."

I'm concerned that the accountant is making the assumption that am inside IR35 from the outset. The contract is 6months, has the right of substitution and I am only required onsite at the customers premises for part of the contract.

Would like some advice on how to proceed with this, should I be looking for a new accountant?

Set him straight as he is assuming you are inside IR35 and see what his response is. Does he specialise in IT contractor accounting ? Most of the accountants we use (I am assuming here now) declare outside IR35 in most circumstances and have experience with IT contractor setups. There is loads of info and previous posts relating to this.
HTH.

[Clare@InTouch]

What is he basing his assessment on? Did he review your contract and working conditions? He might just have got the wrong end of the stick, so worth asking him why he's making that assumption before you decide to move to another firm.

Why don't you get a second IR35 review, then you can balance the two and make a decision.