Reply to: Staying under the IR35 radar

[Pacciae]

I for one will continue to use Qdos for my contract checks but this is because unlike other businesses in this area Qdos's whole business is not dependent or built around IR 35 and all it entails so dont worry Qdos I am not suggesting that because you employ ex revenue and have been to an OTS meeting that your aim is to keep IR 35

[Qdos Contractor]

I think you are being unessecerily paranoid here, you are also misunderstanding Kate's role on the IR35 Forum.

She is not an employee of HMRC, nor is she enaged directly by them to work on their behalf. She is one member among 12 on the IR35 Forum which was set up specifically to review the IR35 legislation with a view to reforming it and making it clearer and more transparent. Other members of the forum include representatives of the PCG, ICAEW, CIOT, The Association of Professional Staffing Companies and the Federation of Small Businesses, as well as HMRC operational and policy staff. If you don;t trust her, you probably shouldnt trust any of them either.

She is probably the leading authority in the country on the IR35 legislation and makes her living advising people how to avoid being caught by it and defending those that HMRC decide to take to court. As the website says, they have never lost a case, which would be strange if they were in the busines of handing people over to HMRC.

If you don't want to take their advice, more fool you.

You should also be extremely careful about the comments you make about specific individuals, it's very easy to stray into Libel territory.

WHS.

Kate is a hugely experienced and knowledgeable expert on IR35, so who better to advise the OTS? There are a lot of people who think they know everything about the legislation, but you're only really an expert if you've been at the sharp end of multiple enquiries. It would have been a nightmare if they had just picked up some self-styled guru who makes lots of noise on the internet.

Surely the fact that one of the OTS' recommendations was to suspend IR35 proves that there was no conflict of interest on Kate's behalf? It was the Government that decided to retain it.

We also met with the OTS to give our opinion, and our best consultants are ex-HMRC, but I'd hope these facts wouldn't put people off using us.

[Pacciae]

You should also be extremely careful about the comments you make about specific individuals, it's very easy to stray into Libel territory.

I think you will find that I have not made comments about specific individuals, however I will say that IMO there is a conflict of interest with a company working for both camps, and according to the B&C website they are all ex revenue so IMO I have a problem with that as will no doubt many other people IMO.

[DaveB]

Yes I do have a problem with it and its called a conflict of interest.

I would rather not chance it all the same mate, leopards never change their spots and fingers in both camps always leads to disaster.

I'd agree. Their loyalty will be to the client who is worth the most to them. Is that you? I doubt it.

I think you are being unessecerily paranoid here, you are also misunderstanding Kate's role on the IR35 Forum.

She is not an employee of HMRC, nor is she enaged directly by them to work on their behalf. She is one member among 12 on the IR35 Forum which was set up specifically to review the IR35 legislation with a view to reforming it and making it clearer and more transparent. Other members of the forum include representatives of the PCG, ICAEW, CIOT, The Association of Professional Staffing Companies and the Federation of Small Businesses, as well as HMRC operational and policy staff. If you don;t trust her, you probably shouldnt trust any of them either.

She is probably the leading authority in the country on the IR35 legislation and makes her living advising people how to avoid being caught by it and defending those that HMRC decide to take to court. As the website says, they have never lost a case, which would be strange if they were in the busines of handing people over to HMRC.

If you don't want to take their advice, more fool you.

You should also be extremely careful about the comments you make about specific individuals, it's very easy to stray into Libel territory.

[Pondlife]

As an aside, are there figures for number of IT contractors actually been caught and forced to shell out because of IR35?

Also, number gone to court? Won/lost etc?

PCG have some figures based on cases they have been involved in or are aware of.

[psychocandy]

As an aside, are there figures for number of IT contractors actually been caught and forced to shell out because of IR35?

Also, number gone to court? Won/lost etc?

[philip@wellwoodhoyle]

There is also another element of them not wanting to start a battle they may lose in case it sets a precedent, so the average lowly inspector will stay well within his comfort zone. If an inspector did start challenging and a case was taken to tribunal, an adverse ruling could impact lots of other cases, so they are very careful not to rock the boat. Even if it doesn't get taken to tribunals, i.e. the inspector backs off after starting down a particular track, the accountant involved can use that in other cases under the auspices of fairness - i.e. "you can't persue client B for this as Inspector Z looked at the same matter on client A a month ago and accepted it". In my experience, inspectors are cautious about what challenges they make and only do it when they're confident they can win. Of course, they're often wrong, but they go into it with a confidence (even misplaced) - they won't start anything they're not confident about - they'll either forget it, or if the manual dictates to do so, they'll refer it upwards to specialists to wash their hands of the problem. Very few of them are confident re IR35 at the moment.

[philip@wellwoodhoyle]

Will paying more salary prevent a full blown IR35 inquiry - or how far HMRC will push it. IR35 investigations are very complex and time confusing. One theory is that HMRC will go for the bigger yields first - and so may target those paying min salary with long contract renewals. Their compliance manual states that they should not do this, but I think the evidence has shown that they do go after the bigger targets. To my knowledge, all of the main cases they have won have been for bigger chunks of cash.

If HMRC inspectors applied logic and forethought, then you may indeed expect them to go after the bigger fish first, but my experience is that they don't think that deeply, certainly not lower down the HMRC inspector food chain. Most compliance visits and enquiries do indeed appear to be random, so the average inspector won't really know what to expect before they start digging around.

Once the digging starts, it's really a matter of the inspector's experience and skills (?) as to what they look for and pick up on. I've certainly seen a few cases of the "elephant in the room" being completely missed by them as they've picked up on some minor technical argument, and ignored a huge matter that they could have really got their teeth into, which was basically handed to them on a plate if they'd had the gumption to notice it! One particular inspector who wouldn't let go of a tiny issue spent months, with long letters to and fro between us, with him trying to get us to agree to a very minor disallowance which would have netted him probably around £100 or so - he was completely bonkers!

I think HMRC inspector training re IR35 has been poor, meaning that a lot of their field staff just don't know enough about it, and given the lack of success in the courts, probably turn a blind eye for all but the most obvious "caught" instances. Given that everyone (including HMRC) were expecting IR35 to be abolished and replaced, I think the inspectors weren't really looking for a fight. Now that it appears here to stay, there'll probably be increased vigour and better training, and perhaps we'll see more challenges.

You may think it is easy for HMRC to simply review accounts and look for low directors fees & high dividends from profits on relatively modest levels of turnover, but this model isn't just for IT contractors. I've got clients who are photographers, IFA's, business consultants, medical practitioners, mechanics, even tradesmen, whose accounts show the same traits and who are clearly outside the scope of IR35. If they used some interrogation software to look for "obvious" potential IR35 cases, it would still throw up hundreds of thousands of companies so it's not really a very good indicator of whether IR35 may apply or not. There really is no alternative but to dig deeper and find out things like number of clients, read the contracts, etc., and that can't be done remotely by data interrogation, it has to be done on the ground, hence the promises/threats of increased random compliance visits.

Far more efficient is to find a contractor working under a "caught" contract at a particular large employer, say BT, and then simply ask BT for a list of agencies/contractors, etc., and work "top down" in the hope of bagging an entire room/floor/building of contractors doing virtually the same work, i.e. help desk or whatever. I hear that there have been signs of this happening, but there are so few specialist HMRC IR35 inspectors that they're grossly understaffed to work this way for more than a very small number of cases at a time.

[aubergine]

I would rather not chance it all the same mate, leopards never change their spots and fingers in both camps always leads to disaster.

I'd agree. Their loyalty will be to the client who is worth the most to them. Is that you? I doubt it.

[Pacciae]

Kate used to be an inspector of taxes long before she started to advise HMRC on IR35 or reviewing contracts. As said above I can absolutely guarantee you that she is not bothered about dobbing you in to HMRC over IR35. Kate is probably the most knowledgeable person in the UK on IR35 bar none.

I would rather not chance it all the same mate, leopards never change their spots and fingers in both camps always leads to disaster.

[Pacciae]

And what is your problem with this? You are worried they will review it and then dob you in it?

Surely if they work as experts for the HMRC on IR35 they are the best placed people to make sure you duck it? They may consult HMRC but I don't think they work for them.

Yes I do have a problem with it and its called a conflict of interest.

[maxima]

To put it simply, they're a bunch of twats who dont give a **** about wasting more public money than the spend on the office christmas party.

I am not surprised. Do you think all the doctors live to cure patients, lawyers to help their clients and software contractors to write best possible software? 90% of them are money makers. 10% are idealists of very new on the market and will turn to other 90% later in their careers.

Of course IR exists to fill the coffers AND kick ar$e..

[BolshieBastard]

There was an IR35 investigation where, the amount of money involved being 'caught' was literally about 3 grand.

HMRC justified going through the full rigmaroll of an investigation by saying it wasnt the amount of tax avoided \ gathered, it was a question of ensuring people comply with the legislation.

To put it simply, they're a bunch of twats who dont give a **** about wasting more public money than the spend on the office christmas party.

[SueEllen]

So if your not PAYE registered does this mean you've got less of a chance of being investigated? LOL.

I'm not paying anything in salary this year (I already had a 12K payment from my last employer as a PILON payment so my minimum salary for NI etc has already been paid/used up).

There is no point in investigating you until you have a load of money from them to take off you. So I expect they will wait a few years yet.

I only actually know people who have had VAT inspections. One of them screwed up by not doing things properly there as the rest found it a walk in the park.

[Sockpuppet]

i'd go to Qdos Qdos Consulting - Taxation & VAT, Employment Law, Insurance, IR35 for my contract checks I stopped using Bauer & Cotterill becuase they work for the Revenue as IR35 experts and IMO too close to HM revenue.

Kate used to be an inspector of taxes long before she started to advise HMRC on IR35 or reviewing contracts. As said above I can absolutely guarantee you that she is not bothered about dobbing you in to HMRC over IR35. Kate is probably the most knowledgeable person in the UK on IR35 bar none.