Reply to: Paying director salary instead dividends & ir35

[Jessica@WhiteFieldTax]

Well... all I need is a professional service for money I pay...

After all each professional should do his/her job - I do mine and I hire someone for something I am not professional in.

As I understand, such service does not exist in our case...

If you come to a doctor, he doesn't ask you to fill questionnaire and then decide by yourself if you are ill or not. He just tells you: you are ill or you are healthy.

I'ld tend to disagree! Most docs, it seems to me, give a tentative diagnosis and then discuss treatment options with patient making the decisions. Likewise I prefer, nay require, my clients make the decisions - it's their money/risk at the end of the day - just as its my health.

I can understand if you are miffed that your contract review was through in your view, or definitive. But that you have a contract review in your favour is a huge asset from a risk management perspective, it shows diligence which could well tip the balance in your favour at a later date.

[malvolio]

Well... all I need is a professional service for money I pay...

After all each professional should do his/her job - I do mine and I hire someone for something I am not professional in.

As I understand, such service does not exist in our case...

If you come to a doctor, he doesn't ask you to fill questionnaire and then decide by yourself if you are ill or not. He just tells you: you are ill or you are healthy.

Thre is a slight difference; nobody knows for certain what the IR35 rules are, and nobody knows how the courts will interpret them if you get that far. Would you guarantee a piece of development work if your end client hadn't told you what the end product was supposed to do?

I think you need to hit the Guides; clearly you don't really understand some key issues.

[anddrew]

Well... all I need is a professional service for money I pay...

After all each professional should do his/her job - I do mine and I hire someone for something I am not professional in.

As I understand, such service does not exist in our case...

If you come to a doctor, he doesn't ask you to fill questionnaire and then decide by yourself if you are ill or not. He just tells you: you are ill or you are healthy.

[northernladuk]

The fact you say you are IR35 proof shows some lack of understanding somewhere IMO. You are inside our outside. Not pass or fail or proofed or not.

[Wanderer]

Are there any specialists who (for money of course) will tell exactly if my contract is right or wrong from the point of view of ir35?

Yes, you can get a pretty definitive answer from HMRC for free if you ask them.

Based on my answers they told I am ir35 proof. They did not even look at my contract and that's why I don't believe in their answer - they just took my money and did not convince me and did not give any guarantee.

You have got what you need - an opinion that your contract is outside IR35. If you are found to be IR35 caught then you can present this review in mitigation telling them that since you were not a tax professional, you took independent advice and acted in good faith running your company as outside IR35 and hopefully avoid penalties. All this adds up to proof that you didn't act recklessly and hopefully it will reduce the penalties due - perhaps to zero.

Have you done the Business Entity Test? How did you score? Can you structure your business to get a higher score in that test?

[Jessica@WhiteFieldTax]

Many thanks to everybody!

Are there any specialists who (for money of course) will tell exactly if my contract is right or wrong from the point of view of ir35?

I asked such an advice (paid) in an accounting company who claim they give ir35 advice.
What they did - they emailed me a questionnaire with lots and lots of questions about my contract and how I work. For many of these questions I did not know the answer, for example: "If you were unable to meet a deadline would your client extend your contract?" and many similar. I told them I don't know the answers, but they ignored this.

Based on my answers they told I am ir35 proof. They did not even look at my contract and that's why I don't believe in their answer - they just took my money and did not convince me and did not give any guarantee.

Can you recommend a company who does give good ir35 advice?

Many thanks...

Although thats not verbatim from our questionnaire, its very similar. And heres the thing - an accountant or lawyer can only advise on IR35, the decision has to be yours, and to that end you need to have a handle on questions like this how they impact on your IR35 status. If you can't answer them clearly then my view is you are a sitting target if HMRC were to inspect. Sorry if thats harsh.

[northernladuk]

Have a look at this thread. It will help you understand how best to search the forums.

http://forums.contractoruk.com/welco...uk-forums.html

Then try doing that using the term 'contract review' or similar. You will find loads of threads discussing who to use, all the possible outcomes from pass to fail and what people did about it to get it fixed.

[stek]

Many thanks to everybody!

Are there any specialists who (for money of course) will tell exactly if my contract is right or wrong from the point of view of ir35?

I asked such an advice (paid) in an accounting company who claim they give ir35 advice.
What they did - they emailed me a questionnaire with lots and lots of questions about my contract and how I work. For many of these questions I did not know the answer, for example: "If you were unable to meet a deadline would your client extend your contract?" and many similar. I told them I don't know the answers, but they ignored this.

Based on my answers they told I am ir35 proof. They did not even look at my contract and that's why I don't believe in their answer - they just took my money and did not convince me and did not give any guarantee.

Can you recommend a company who does give good ir35 advice?

Many thanks...

Well QDOS will, but ultimately it's down to you as the business owner.

[anddrew]

The correct approach is to get some insurance against investigation and have your contracts (and working practices) vetted to ensure they are not under the scope of IR35.

Then take dividends.

Many thanks to everybody!

Are there any specialists who (for money of course) will tell exactly if my contract is right or wrong from the point of view of ir35?

I asked such an advice (paid) in an accounting company who claim they give ir35 advice.
What they did - they emailed me a questionnaire with lots and lots of questions about my contract and how I work. For many of these questions I did not know the answer, for example: "If you were unable to meet a deadline would your client extend your contract?" and many similar. I told them I don't know the answers, but they ignored this.

Based on my answers they told I am ir35 proof. They did not even look at my contract and that's why I don't believe in their answer - they just took my money and did not convince me and did not give any guarantee.

Can you recommend a company who does give good ir35 advice?

Many thanks...

[captainham]

There are other options like self employed and LLP which you could also consider.

Except no agent will touch a sole trader for reasons of liability, and almost none will touch an LLP as they don't understand that the first two letters still stand for Limited Liability.

[lithium147]

I think ppl choose an umbrella cos they dont know what they are doing, so its the simplest option. Anyone who has done the limited route before, would almost always choose to do that again.
There are other options like self employed and LLP which you could also consider.

[northernladuk]

Why do people actually choose umbrela companies instead of working in own limited company and paying yourself salary without dividends?

http://forums.contractoruk.com/umbre...composite.html

[Craig@Clarity]

Echo echo echo..........

[ASB]

Hello!

I am currently contracting via my limited company.
So I receive a minimal salary and the rest pay myself as dividends.

As I understand, HMRC can claim I am breaching the ir35 and I can be in serious trouble.

I am wondering: can I just instead of paying myself dividends pay all of them as salary.
Of course, this way I will pay much more tax and also national insurance, as dividend tax is 20% and salary up to 40% + NI. But still the contract rates in the financial IT market are much higher than rates for employees.

But if I do this, I will be absolutely safe from HMRC.

Is this correct?

Why do people actually choose umbrela companies instead of working in own limited company and paying yourself salary without dividends?

Yes, you can do that if you wish.

If you use an umbrella it reduces your admin, it reduces your accountancy costs. Both positives. I am sure some people value their time highly enough to believe it is a worthwhile option.

Some umbreallas may be a little charitable in their expenses policies (complete with potential associated risks). Some chare more than other.

Also with an umbrella you will lose the 5% expense allowance IR35 gives (which will only actually cost you the tax on it of course). There is also potentially the profit you might conceivably make from the vat flat rate scheme if you use it.

Also with an umbrella it may be difficult to arrange company pension contributions, which can potentially be a big saver since these can be paid out of gross corporate income.

In summary people use umbrella because it suits their own personal circumstances. It's a simple value judgement. A lot of people I think find dealing with vat etc a pain and are happy to pay a little to avoid it.

[Craig@Clarity]

Hi anddrew,

If the contract is thought to be caught by IR35, you'd effectively be treating as caught by paying all the profit as a salary so "if" HMRC were to investigate your company, they have nothing to gain since you've done what they're after anyway.

Yes it is less tax efficient treating all your profit as salary compared to salary + dividends but if you are effectively deemed to be an employee of the end client, than it makes sense all the profit under that contract should be subject to PAYE (give or take 5%).

There are a number of factors as to why people choose brolly over a limited company e.g. administration, easy life, low day rate and less liability to name a few.