IR35 investigations – anyone been done?

I’m just going through my first contract as a consultant (Ltd company). And the ir35 stuff is putting the willies up me.
Am I succumbing to all the ir35 contract review service marketing bollox, or is there a real risk?
Online tests/ questionnaires suggest I should be ok, but it’s a bit of a worry.

Anyone been done or know of anyone who has been investigated?

what did you say your NI number was again?

😉

known loads of contractors and not one worries about IR35, was going to be my next move if I hadn’t have bagged a permy role that was to good to pass up

A friend of mine got done. Took him years to pay off the amount he owed. He’s the only one I heard of though.

I did the IT ltd thing for 10 years. ir35 was in the last 4 of those. Out of maybe 50+ folk I know as contractors I know one guy who got investigated. He was a member of whats-it-called (unofficial ir35 group) and they stood up for him. He won in the end – but in the meantime he’d saved the NI difference in a savings account so his worst case wasnt too bad.

The clincher apparently was providing his own equipment / software for out of hours and weekend cover.

Just do it.

The government are lookign at first suspending IR35 whilst they look at alternatioves and then removing altogether according to the ‘unwind the tax spaghetti tzar’ on Radio 4 this morning, so it may not be an issue (in its current form) for much longer).

Cheers wwas. I heard that too. I suspect I’m worrying too much about it TBH.

Problem with IR35 is that it appears to be largely subjective. You can do the contract review, and fill in all the questionnaires that go with it, think you are in the clear, but if HMRC wants to have a go, they will.

I’m all for stopping people taking the piss with tax dodges, but IR35 is poor in both thought and execution.

Did it for 6 years in a grey area coming out OK (Final accounts to do)
Simple rules
Don’t Take the P*ss
Your Wife is not your Secretary
Your Dog is not your Guard Dog
You do not work for the company!

If you are doing real 6-24 month contracts then the you are safe, been there 3 years and have your own desk – open a savings account.

There is apparently a change coming relating the agency supplied workers right’s in the autumn which may change some of the rules

I was a contractor for 8 years. Half of them under IR35. The intention in the ruling is probably correct (imho) but it was poorly implemented. Afaik, the earlier IR35 court cases – the revenue didn’t do so well but it was the later ones where the Inland Revenue began to get rulings in their favor.
I would have thought any replacement ruling in the autumn will echo the sentiment of the current ruling. And hopefully, they will consult with the various bodies / contractor groups out there on the wording.

I would have thought any replacement ruling in the autumn will echo the sentiment of the current ruling.

There appears to be a suggestion that there will become more onus on the client to ensure compliance.

The regs seem like common sense, the only bit I struggle with is the substitution bit. In many cases, the client hires the individual based on their skills and experience. It seems a little clumsy to insist that the contract needs to stipulate unfetted substitution. 😕

As I understand it, you’re not supposed to be working ‘as a permanent employee’. Now I worked one place for 4 years, but it was a 4 year project. The simple fact that we were all let go once the project was over must mean that we weren’t working as permies, surely?

No project = no job. You simply don’t hire permies on that basis, so I thought I was pretty safe there.

lots of subbies in our place.

if you choose to pay yourself minimum wage (and many in our place do just this) 6 to 12k, to avoid paying high tax levels, proper NI contribution, but still wish to be able to rock up and use the NHS etc, i think its shameful and unethical.

You make your bed, so you should face the consequences if they come knocking. Only ever heard of one being done though, the stress he was put under doesnt appeal to me.

As I understand it, you’re not supposed to be working ‘as a permanent employee’. Now I worked one place for 4 years, but it was a 4 year project. The simple fact that we were all let go once the project was over must mean that we weren’t working as permies, surely?

No project = no job. You simply don’t hire permies on that basis, so I thought I was pretty safe there.

I’m afraid its not quite that simple. Did you use their computers, sit at their desks and use their canteen? Could you have sent someone else in your place? Did you pay anyone else to help you with the contract? Did you have your contract reviewed / checked for compliance?

I’m sure you’ll be fine, but it looks like a bit of a mine field.

Did it for 6 years in a grey area coming out OK (Final accounts to do)

You can still be investigated after the company has been closed, although it is unlikely.

If you are doing real 6-24 month contracts then the you are safe, been there 3 years and have your own desk – open a savings account.

The length of time is not in itself an indicator of IR35 status – it is the working practices that are key. Turning down an extension because you’ve been there too long (especially in these uncertain times)? Doesn’t sound like good business sense to me..

if you choose to pay yourself minimum wage (and many in our place do just this) 6 to 12k, to avoid paying high tax levels, proper NI contribution, but still wish to be able to rock up and use the NHS etc, i think its shameful and unethical

It’s a trade-off.. most contractors probably pay more in Corporation Tax than they would have done NI/PAYE for an equivalent permanent position. Factor in lower job security / protection and benefits – the ‘perks’ offset the higher inherent risks.

Did you have your contract reviewed / checked for compliance?

Getting the contract reviewed is still no guarantee. If you are supplied through an agency the chances are that your contract is with the agency and the agency have a separate contract with the client, which you will probably never see and which could contain anything!

Anyway, hopefully today’s announcement of the preliminary review will bring a glimmer of hope / clarity to the murky waters of IR35..

I’m afraid its not quite that simple. Did you use their computers, sit at their desks and use their canteen?

Yes, but so did the consultants from IBM. And they’re not at risk from IR35, are they?

Perfectly normal for external consultants to do those things – just because there’s only one person in my company shouldn’t make any difference.

her fault it’s crap legislation

Yes, but so did the consultants from IBM. And they’re not at risk from IR35, are they?

No, because they were employees of IBM.

Perfectly normal for external consultants to do those things – just because there’s only one person in my company shouldn’t make any difference.

http://www.contractoruk.com/contracts/wary_consultancy_contract.html

No, because they were employees of IBM.

So? I’m an employee of Molgrips Ltd.

So? I’m an employee of Molgrips Ltd.

Could Molgrips Ltd have supplied someone else to do the work you were doing?

I’m not having a pop, but I think you need to have a look at some of the guidance around IR35. From the bit of information you have provided, it looks as though you could have been at risk with that contract.

I’m just trying to sort things before I sign the contract so that it doesn’t come back to bite me on the bum!

Could Molgrips Ltd have supplied someone else to do the work you were doing?

Well there’s only one employee, so that’s not entirely fair. I could certainly have recruited someone else, of course.

Entirely unfair to penalise companies for only having one employee when they are working on the exact same basis as companies that have many.

Equally, it would be ludicrous for a company with an IT team of 20 (who are otherwise busy anyway) to employ 100 permies knowing full well they are only going to need them for four years.

Surely IR35 is to stop people working as permies but dodging tax. Which we clearly weren’t!

Bear in mind a lot of that IR35 advice is from IR35 specialist legal people, so they’ve a vested interest in making it look as complex as they can.

Bear in mind a lot of that IR35 advice is from IR35 specialist legal people, so they’ve a vested interest in making it look as complex as they can.

But I don’t think it is complex – it looks quite straightforward really. Whether it is fair, is a different matter.

If you paid NI and income tax the same as you would if you had been employed then you’ll be OK – but who in their right mind would do that if it was their own company?

Could Molgrips Ltd have supplied someone else to do the work you were doing?

Another example of the ambiguity of IR35.. how can you ‘prove’ the right to substitution? It may specify it in the contract but until you try and exercise that clause you will never know whether it’s worth the paper it’s printed on.. you can claim that it says so in the contract, but the working practise may differ..

Another example of the ambiguity of IR35.. how can you ‘prove’ the right to substitution? It may specify it in the contract but until you try and exercise that clause you will never know whether it’s worth the paper it’s printed on.. you can claim that it says so in the contract, but the working practise may differ..

It has been suggested to me that a simple way to be safe on this, would be to bring someone else in to do a few days on specific tasks, that either I don’t fancy or I’m no good at – probably worth it IMHO.

That checklist is ridiculous though. Why on earth would I have to bring in my own computer, say? That’d cause havoc with the company’s IT and other consultants from big firms don’t do it!

Possibly one of the stupidest laws ever.

That checklist is ridiculous though. Why on earth would I have to bring in my own computer, say? That’d cause havoc with the company’s IT and other consultants from big firms don’t do it!

Or the question could be, why on earth would a company employ contractors to sit at their desks, work when they tell them to, on projects they decide instead of emplying them directly and paying the additional associated taxes.

Possibly one of the stupidest laws ever.

It has possibly saved UK PLC a few quid in taxes which may not have been paid otherwise, but there are clearly flaws with it!

As I read more and more about it, it seems that you are unlikely to be investigated as long as you comply with all the tax reporting and payments in a timely manner and don’t get yourself on their radar.

I suppose not completing tax returns because you are out of the country for a couple of months could raise eyebrows though 😯

Geoff,

I am in the same situation as yourself. IT consultancy Ltd company. I start on Monday. My fears have been mostly dealt with my accountant and my friends who are contractors. I think you are worrying too much.
You have to be sure that your contract is compliant. That should cover any of the issues raised above. The company employing your services, the agancy and the accountant should keep you right since its in their interest.
I have also been told. Dont take the piss and play by the rules. That includes paying up for all the necessary stuff.
Getting yourself a good accountant is key. Get a recommended one if you can. They will explain all this stuff.

Molgrips – IR35 is not really that complex – that checklist only shows indicators of employment / self-employment.
The bit about using “own equipment” is applicable to other industries and not directed just at IT.

You have to be sure that your contract is compliant.

Not only must the contract be IR35 compliant but it is also important the contract reflects the true working practices.
ie. a right of substitution clause – but realistically never being able to exercise it.
Simply put, most contractors non-IR35 contracts will be worthless in courts when determining IR35. The revenue simply asks your “employer” whether the clauses were accurate and exercisable by you.

The company employing your services, the agancy and the accountant should keep you right since its in their interest.

Sorry, this is incredibly naive.. many companies have even less idea about how IR35 works (some even dispose of contractors before 24 months is up because they think something bad will happen) and it is not their responsibility to police it in any case.

Agencies are happy as long as they get their cut, and are irrelevant to the actual working practises.

Accountants can advise you on IR35 but, again, many lack understanding of the legislation (understandable as so much of it is down to interpretation).. and, again, it makes little difference to them as long as you pay their fee.

Molgrips….I thought you were a ‘socialist’ yesterday? 😀

Molgrips – IR35 is not really that complex – that checklist only shows indicators of employment / self-employment.

It’s not complex, but it is ambiguous / open to interpretation – as illustrated by the fact that there are only ‘indicators’ rather than any definitive rules..

For example, if you are working on a high security site you would be unlikely to be able to use your own equipment (one of the ‘indicators’) – that does not automatically put you inside IR35 though..

Another example is ‘right of control’.. what does that mean? Where do you draw the line? The client would expect you to follow their procedures and policies (e.g H&S on a building site) etc. – is that control?

Most people I know don’t have a problem with the theory of IR35 per se.. it is the way it is implemented..

A cynic would say that it was legislation put in place by a government that was absolutely enamoured with big business. The big guys liked the reduced staff costs and tax bills, and when HMRC started grumbling, they had the clout to get it handed off to the little guy.

But some good news this morning:

http://www.pcg.org.uk/cms/

Molgrips….I thought you were a ‘socialist’ yesterday?

Apparently I’m not.

Am I not allowed to be a socialist and a contractor?

Sorry, this is incredibly naive.. many companies have even less idea about how IR35 works (some even dispose of contractors before 24 months is up because they think something bad will happen) and it is not their responsibility to police it in any case.

The companies I will be primarily working with, do know. They employ a lot of contractors and want to keep it that way. I dare say there are companies who dont have a clue. The same will go for agencies and accountants but if they are working in certain sectors they have to be on the ball or they wont get any repeat business.
frogstomp
I think you have some hard earned experience to share?

I think you have some hard earned experience to share?

Nope, just information gained from reading case studies and gathering information whilst I’ve been contracting.

The main point of my last post was that it is your responsibility to ensure you are outside of IR35 (if you choose to be so) and not any 3rd party, in much the same way that you are responsible for your tax affairs and not your accountant (having read and signed your accounts).

“My client/agency/accountant told me it would be ok” doesn’t wash with HMRC..

molgrips – Member

Am I not allowed to be a socialist and a contractor?

Not if you avoid tax.

Tis true.

Link up with other contractors in the same game, and either setup a Ltd or more probably LLP business.

My other half and I run through the same Ltd, and are both fee earners, in the same game. Mixture of agency and non-agency contracts/quotations.

For me its also about how you act within your company; I only have an Accountant for the legal stuff, everything else is done as it would be in any other business; e.g. expense sheets, business cards, quotations etc – and numerous clients.

The main point of my last post was that it is your responsibility to ensure you are outside of IR35

Totally agree.

it is your responsibility to ensure you are outside of IR35

If you can dictate who, how and when you work then this may well be the case. But the sad fact is, ensuring you are outside of IR35 to most contractors means simply re-wording their contracts to reflect conditions that can never be exercised. Which is really not enough.

You could also send your contract to the IR Contract Review service….
IR35@inlandrevenue.gov.uk

You could also send your contract to the IR Contract Review service….

😆