Cost of abolishing IR35

[mudskipper]

I'm sure this must have been discussed before (it was published March 2015), but I don't remember seeing it, and my google skillz are failing me.

https://www.gov.uk/government/upload...lishing_it.pdf

Document estimates the cost of abolishing IR35 at £550 million - from people who declare themselves inside and wouldn't, people who pay more than the minimum tax efficient salary and wouldn't, and employees who would incorporate (I guess this might include brolly users?)

[WordIsBond]

Right. Obligation One, Understanding the IR35 legislation, and ascertaining whether it applies

The majority (75%) of these companies use an external accountant. Evidence from members of the IR35 Forum, as well as our own research, shows that the majority of accountants include IR35 tax advice and contract reviews within their fees. Therefore we expect that this obligation will be met by their accountant. The accountant will spend time ascertaining whether IR35 applies, and we have used the hourly rate for chartered and certified accountants from the ONS 2013 Annual Survey of Hours and Earnings1 (to which a 30% uplift for overheads (such as pension, NI contributions) has been added) to calculate the cost of this time.

How many here rely solely on their accountant to ascertain whether the legislation applies? How does HE know your working practices? If you tell HMRC that your accountant has said it doesn't apply, well they just say, "OK" and walk away?

Of course not. So there is far more involved in understanding and complying with IR35, and this is a blatantly dishonest document. And I'd guess, based on past history, that they didn't even include the effect of the dividend tax in their calculation.

I would expect HMRC to be biased, but I don't expect them to lie.

[DaveB]

Right. Obligation One, Understanding the IR35 legislation, and ascertaining whether it applies

How many here rely solely on their accountant to ascertain whether the legislation applies? How does HE know your working practices? If you tell HMRC that your accountant has said it doesn't apply, well they just say, "OK" and walk away?

Of course not. So there is far more involved in understanding and complying with IR35, and this is a blatantly dishonest document. And I'd guess, based on past history, that they didn't even include the effect of the dividend tax in their calculation.

I would expect HMRC to be biased, but I don't expect them to lie.

It's not a case of your accountant says it doesn't apply, they will give you a written assessment of the contract indication why it doesn't apply and HMRC will generally accept that, especially in public sector contracts where it became a requirement in order to prove your status.

Most accountancy firms do now provide IR35 reviews either as part of their core service or as an optional extra. QDOS and Bauer and Cottrell are still the best known when it comes to contract reviews, but there are a lot of others providing the same sort of service. A quick check of the Accountancy firms advertising on CUK confirms this.

[SimonMac]

I wonder if this includes "lost revenue" that Hector isn't in fact collecting as it stands now

[SimonMac]

Also who knew there was a House of Lords Select Committee on Personal Service Companies

Select Committee on Personal Service Companies - UK Parliament

[mudskipper]

And I'd guess, based on past history, that they didn't even include the effect of the dividend tax in their calculation.

The calculation pre-dates new divvy tax.

[jamesbrown]

It's not a case of your accountant says it doesn't apply, they will give you a written assessment of the contract indication why it doesn't apply and HMRC will generally accept that, especially in public sector contracts where it became a requirement in order to prove your status.

Not sure where you read that, but I'm not aware of any evidence that HMRC will accept a contract review as evidence of being outside IR35. They may accept it as evidence of due diligence in deciding whether to administer penalties, but an investigation will begin with a fact-finding effort w/r to the WP and there's little evidence, that I'm aware of, to suggest that a contract review will have any bearing on that fact-finding effort or the decision to pursue a case. It just suggests you're in a good position if the contract reflects the WP. I think you're confusing two different things. The requirement for public sector bodies to seek assurances upfront about IR35 status (for which a contract review is adequate) is not the same as demonstrating status under investigation by HMRC.

[jamesbrown]

The calculation pre-dates new divvy tax.

And common sense.

[jamespoole]

it has already started the domino effect

[WordIsBond]

Not sure where you read that, but I'm not aware of any evidence that HMRC will accept a contract review as evidence of being outside IR35.

Exactly. If anyone thinks that paying for and relying on accountant's advice is sufficient IR35 compliance, I feel sorry for them when Hector comes investigating.