Reply to: QDOS cranking up the pressure with IR35 insurance

[jamesbrown]

I know Abbey Tax are meant to be the experts but this sounds like bollacks to me.

Unless you're offering an insurance product tailed to a specific individual, risk comprises probability of successful investigation (based on all past cases) and potential loss. So it isn't bollocks insofar as a lower salary implies a larger amount potentially in dispute. I don't buy the argument on what's commercial or not, but I do buy the possibility that it's a flag for a PAYE investigation that might lead to an IR35 investigation. However, like anything else, it requires some judgment. I'm not aware of any evidence that it's used by HMRC, but they're not about to publish their risk profiling either. My feeling is that the NI band is perfectly justifiable and many accountants do recommend this.

[northernladuk]

I know Abbey Tax are meant to be the experts but this sounds like bollacks to me.

How on earth can the amount of salary you pay yourself as director be in, any way, be connected to IR35 apart from the obvious? (i.e. If your deemed income is £70K, and you pay yourself £8K then theres £62K to pay tax/NI on. If you pay yourself £12K, there's only £58K)

Surely IR35 is based purely on the contract and working practices and sod all to do with how much you pay yourself. Like someone pointed out, if you're going to argue about salaries then paying as much as a McD employee is hardly going to to cut the mustard either is it?

Surely this would only be relevant if you paid yourself £30K or something (which would somewhat defeat the object anyway and is what HMRC want us all to do anyway!)

Surely the low salary/rest divis is synonymous with the type of avoidance that IR35 is looking to catch so it has to be connected. If you were inside you wouldn't be doing it that way so it is in someway linked. It is a grey area as all accountants seem to disagree with the exact amount but the reason some don't go lowest is to avoid unwanted attention which would indicate risk so it has to be a valid flag. Maybe a better way to put it is most IR35 investigations come off the back of a tax investigation so making yourself a tax target increases risk of IR35 investigation?

[psychocandy]

Abbeytax doesn't insist on NMW, but they do advise it and there is an excess to pay if you ever claimed and you hadn't paid NMW. I can't remember the excess exactly but it was about a couple of thousand. It's to do with risk. They reckon there is more risk of being investigated if you don't pay NMW.

This doesn't affect the PCG insurances at all.

I know Abbey Tax are meant to be the experts but this sounds like bollacks to me.

How on earth can the amount of salary you pay yourself as director be in, any way, be connected to IR35 apart from the obvious? (i.e. If your deemed income is £70K, and you pay yourself £8K then theres £62K to pay tax/NI on. If you pay yourself £12K, there's only £58K)

Surely IR35 is based purely on the contract and working practices and sod all to do with how much you pay yourself. Like someone pointed out, if you're going to argue about salaries then paying as much as a McD employee is hardly going to to cut the mustard either is it?

Surely this would only be relevant if you paid yourself £30K or something (which would somewhat defeat the object anyway and is what HMRC want us all to do anyway!)

[Hex]

Hmm, interesting that they should say this. My accountant, NW, advise the 7488 as OK.

Im assuming though that since Abbey Tax are the ones the PCG use for their normal IR35 legal coverage that they dont impose this on normal PCG coverage? Be scary for all of us who thought they were covered only to find PCG/Abbey Tax told us no way because our salaries weren't enough.....

Also, like you say, assuming minimum wage is 12K (is it?) then I cant see how that's vastly different to 7.5K to be honest. Neither of which are really are commercial salary.

One thing - how much extra NI per year would be due if you decided to up your salary in this way? Am I right in saying that both employer and employee NI would come into play here, so around 19-20%. £4500 = £900 extra NI?

QDOS dont have this limitation do they? Surely better to leave salary alone and go with QDOS rather than Abbey Tax?

Abbeytax doesn't insist on NMW, but they do advise it and there is an excess to pay if you ever claimed and you hadn't paid NMW. I can't remember the excess exactly but it was about a couple of thousand. It's to do with risk. They reckon there is more risk of being investigated if you don't pay NMW.

This doesn't affect the PCG insurances at all.

[psychocandy]

Sorry, coming into this thread really late.

Our TLC policy is an annual fee which covers the current and all backdated tax years. So you will be covered as long as you have the policy in place, regardless of the contract/tax year HMRC are looking into. You don't insure individual tax years or contracts. If you stop contracting and close your company down, you'd just need to keep the policy in place for a limited period (i.e. not 6 years).

We have a minimum PAYE salary level of £5k.

Let me know if you have any other questions.

Cheers Mr QDOS

[Qdos Contractor]

I might do to be honest. How is QDOS different though?

Sorry, coming into this thread really late.

Our TLC policy is an annual fee which covers the current and all backdated tax years. So you will be covered as long as you have the policy in place, regardless of the contract/tax year HMRC are looking into. You don't insure individual tax years or contracts. If you stop contracting and close your company down, you'd just need to keep the policy in place for a limited period (i.e. not 6 years).

We have a minimum PAYE salary level of £5k.

Let me know if you have any other questions.

[psychocandy]

Yes, unless the Director also has a contract of employment. From what I understand, it's theorized that HMRC could make a fuss about 7488 not being a "commercial" salary, but it's pretty specious to suggest that the difference between a commercial salary and not is 4k. Afterall, it's in the strong interests of the company not to overpay tax, within reason. I've also heard that a salary below NMW could be a flag for investigation, but that's speculation. Some accountants recommend the NI threshold, some recommend NMW.

Hmm, interesting that they should say this. My accountant, NW, advise the 7488 as OK.

Im assuming though that since Abbey Tax are the ones the PCG use for their normal IR35 legal coverage that they dont impose this on normal PCG coverage? Be scary for all of us who thought they were covered only to find PCG/Abbey Tax told us no way because our salaries weren't enough.....

Also, like you say, assuming minimum wage is 12K (is it?) then I cant see how that's vastly different to 7.5K to be honest. Neither of which are really are commercial salary.

One thing - how much extra NI per year would be due if you decided to up your salary in this way? Am I right in saying that both employer and employee NI would come into play here, so around 19-20%. £4500 = £900 extra NI?

QDOS dont have this limitation do they? Surely better to leave salary alone and go with QDOS rather than Abbey Tax?

[psychocandy]

It ranges from £299 upwards depending on contract value. Likely to be between £300 and £400 per year. It is different to QDOS though in that once you've paid for a year it covers all contracts for that year on an on-going basis. You do not need to pay if you stop working - it still covers all your old contracts. You only need to pay the next year if you have more work you need covering.

It's called Survive35. You can ask for more info by emailing: [email protected]

I might do to be honest. How is QDOS different though?

Also, if I joined either one now would they cover me for any investigations (obviously assuming nother was in progress at the moment) from now onwards even if related to contracts performed in last 18 months say? Or is it only any additional payments accrued from start date?

[Higgs Boson]

Is it not just worth a few hundred pounds just for piece of mind? The cost is about £1.20 per working day.

Would you pay £1.20 out of your loose change everyday to be covered for the investigation and the tax?

[Hex]

Any idea how much Abbey Tax charge on top?

It ranges from £299 upwards depending on contract value. Likely to be between £300 and £400 per year. It is different to QDOS though in that once you've paid for a year it covers all contracts for that year on an on-going basis. You do not need to pay if you stop working - it still covers all your old contracts. You only need to pay the next year if you have more work you need covering.

It's called Survive35. You can ask for more info by emailing: [email protected]

[jamesbrown]

Exactly. 4 years of grief Im guessing...

Any idea how much Abbey Tax charge on top?

Why minimum wage? Whats that got to do with it? Trying to work it out but I'm guessing £8K a year is no good then....

Still cant see the relevance of this since I think I'm right in saying a Directors salary is not subject to minimum wage legislation?

Yes, unless the Director also has a contract of employment. From what I understand, it's theorized that HMRC could make a fuss about 7488 not being a "commercial" salary, but it's pretty specious to suggest that the difference between a commercial salary and not is 4k. Afterall, it's in the strong interests of the company not to overpay tax, within reason. I've also heard that a salary below NMW could be a flag for investigation, but that's speculation. Some accountants recommend the NI threshold, some recommend NMW.

[psychocandy]

If you are a PCG member and contact Abbey Tax directly, for an additional fee they will increase their IR35 insurance to cover any IR35 tax liability should you be investigated and found inside. There are some conditions though; you must be paying minimum wage, not be overdrawn on your director's account and also have a contract that's been passed by a reputable supplier. It depends how much you want to pay for peace of mind but as someone who has had a 4 year investigation and won, it works for me.

Exactly. 4 years of grief Im guessing...

Any idea how much Abbey Tax charge on top?

Why minimum wage? Whats that got to do with it? Trying to work it out but I'm guessing £8K a year is no good then....

Still cant see the relevance of this since I think I'm right in saying a Directors salary is not subject to minimum wage legislation?

[Lockhouse]

If you are a PCG member and contact Abbey Tax directly, for an additional fee they will increase their IR35 insurance to cover any IR35 tax liability should you be investigated and found inside. There are some conditions though; you must be paying minimum wage, not be overdrawn on your director's account and also have a contract that's been passed by a reputable supplier. It depends how much you want to pay for peace of mind but as someone who has had a 4 year investigation and won, it works for me.

[psychocandy]

Indeed but as I have very little evidence from people I trust on the outcomes if needed the extra £300 a year (not forgetting tax relief) is a cheap option in my book. Like you said, each to their own level of risk.

Yeh. True enough. When the potential if you do somehow get tagged for IR35 is potentially life-ruining its worth it possibly.

Got to admit I'm with PCG at moment but considering adding the extra as well. I know that likely it wont ever be needed but I dont really want to go through 2 years+ of sleepless nights wondering 'what if'. If you're covered then in theory you dont need to give a toss whether you win or lose because the insurance will pay out....

[psychocandy]

Is that right? I thought you only got it as part of the PI/PL package? I wouldn't buy just PI anyway but interested to know.

Ah. I've got the whole package too but I thought it was if you had ANY product off them.
Not sure though. Not much point in having less than the whole package anyway since the price isnt much cheaper and QDOS are way cheaper than anyone else anyway.