IR35 - Back to first principles....

[mudskipper]

Don't know if this will be any help http://www.law.ox.ac.uk/themes/tax/d...oc08-12-02.pdf article written in 2001 referring to the original IR35 proposals

Interesting article, thanks Lisa. A sense of deja vu...

[malvolio]

In principle this isn't bad. But to be clear, even if you think you are in a weak negotiating position, you don't make concessions without expecting concessions in return. The problem I have with IPSE's FLC is it appears to do exactly that -- make concessions without detailing any that HMG should make in return. (We HOPE that HMRC won't target FLCs for IR35, but we aren't insisting.)

If you think your position is weak, you may make larger concessions than you ask for, but you won't make concessions without any in return. That's surrender.

Agreed, but the whole point of the exercise is to distinguish between one man businesses and those taking the Michael out of the tax and employment laws. We can argue for the status quo in terms of net taxation of course, but some degree of trade off will be necessary. To pitch the FLC as a taxation preservation vehicle would be counter-productive; that's not what it's for. Rather, it is meant to provide the separation and hence attract other "concessions" such as T&S and freedom from IR35 investigations.

Obviously the plan would be to pitch for as little taxation change as possible! I doubt zero would be achievable though, given HMG's current position.

[sira]

IR35 was poorly written, difficult to police and easy to circumvent. Everything I have read so far on the new issues can be circumvented by contractors buddying up and forming a ltd with 2 directors proving business services to 2 or more clients. Thus, such a company falls outside the definition of "an employment intermediary" and SDC, IR35 etc doesn't apply.

My accountant suggested this and he has already created one for his clients. Perfectly legal, as far as I'm aware.

[jamesbrown]

My accountant suggested this and he has already created one for his clients. Perfectly legal, as far as I'm aware.

It's also total nonsense and doesn't circumvent IR35. If the person providing the service retains a material interest, defined as control or ownership of 5% or more of the ordinary shares, then those services are within scope of IR35, other factors being equal (but not necessarily inside IR35). What you're describing is a sham. Obviously, if you were describing a real situation where a given service was being delivered by multiple people simultaneously to the same company or multiple companies simultaneously, those services would probably not be inside IR35, but the point stands that your suggested route to circumvent the legislation is total nonsense.

[cojak]

My accountant suggested this and he has already created one for his clients. Perfectly legal, as far as I'm aware.

Do you have that in writing?

This is where dealing with IR35 skids you into EBT-type Tax Avoidance schemes.

Take great care that you aren’t setting yourselves up to be moved into the HMRC Enquiries forum, people...

[eek]

It's also total nonsense and doesn't circumvent IR35. If the person providing the service retains a material interest, defined as control or ownership of 5% or more of the ordinary shares, then those services are within scope of IR35, other factors being equal (but not necessarily inside IR35). What you're describing is a sham. Obviously, if you were describing a real situation where a given service was being delivered by multiple people simultaneously to the same company or multiple companies simultaneously, those services would probably not be inside IR35, but the point stands that your suggested route to circumvent the legislation is total nonsense.

+1 - the contract itself is the item subject to IR35 - changing the entity that pays you doesn't fix the contract. So if the contract is for £100,000 that £100,000 has to be paid to you via PAYE....

To me the entire plan seems very similar to the Managed Companies schemes (where 20+ contractors were each given their own class of share and the accountant did all the work) that used to exist before HMRC shut them down many years ago....