IR35 Questions & Answers
Questions:
My accountant offers IR35 reviews…
Remember, IR35 is fundamentally a legal question and requires specialist expertise in employment status above and beyond knowledge of accountancy. Case in point, would you ask your GP to take your teeth out? Please also see ‘Why Choose The Law Place’. Crucially, in the event of an IR35 inquiry an accountant is required by law to disclose all advice and working papers to the Revenue. The Law Place offers a fully confidential service as it is providing you with purely legal advice.
How is The Law Place able to charge low prices?
We have a low costs base and can pass the savings on to you. We have a highly efficient business structure which eliminates the need for surplus staff and therefore minimises the risk of information loss. If you give your payment details over the telephone can you be sure that this information is safe? That’s why we use Paypal.
Are there any circumstances where I can safely operate outside IR35?
If you operate as a genuinely self-employed consultancy and the client requires a completed project rather than a particular individual then you’re off to a good start. The key is to have your contract and working practices professionally reviewed BEFORE starting an engagement. Call for more details.
What if I use a substitute or subcontractor during the course of my engagement?
This would undoubtedly help but the term in question needs to be drafted as a reasonably unfettered right. The Revenue can and will ignore substitution clauses which are a sham – see the Dragonfly case. Recent case law has indicated that the courts are taking a harder approach to substitution.
Is the contract between the agency and the client relevant?
The IR35 legislation requires analysis of all the circumstances of the engagement and this has been used as an excuse for the Revenue to compare the so-called upper level contract to the contract between the contractor and the agency. However, the upper level contract does not always mirror the contract between the contractor and the agency and, crucially, the contractor is not a party to the upper level contract. Given the Revenue’s sweeping powers to demand documents it is incorrect to assume that the Revenue won’t request sight of the upper level contract.
The Revenue has issued Notices of Determination and a huge tax bill – what can I do?
In the first instance you need advice regarding an appeal to the General or Special Commissioners. If we advise that there are reasonable prospects of the appeal succeeding we can act on your behalf. The costs involved will be based on an estimate based on our director’s superb track record.
How far can the Revenue go back during an investigation?
Once the Revenue has started an aspect inquiry or an Employer Compliance Review they can look back at engagements in the previous 6 years and widen the scope of the inquiry. If you have received notice of an Employer Compliance Review please contact us now. Click here for details of our Revenue Representation services.
I am being supplied to the client by an agency – does this affect IR35?
Some commentators suggest that the presence of an agency in the supply chain undermines a contractor’s claim to be legitimately self-employed. This is incorrect as many agencies have sole-supplier agreements in place with a client. If this is the case you cannot enter into a contract directly with a client.
Are IR35 safe solutions involving a service provider genuinely safe?
This practice could fall foul of the Managed Service Companies legislation and may result in the Revenue demanding employment tax from you if the so-called scheme provider disappears. Unlike IR35, the Managed Service Company legislation does not provide a reduction in liability for running your own business.
Should I send my contract to be reviewed by the Revenue?
In essence, this approach is fraught with risk. Indeed, despite denials from the Revenue, sending your contract to the Revenue for a free review is placing your company and yourself at their mercy.
The new guidance published as a result of the IR35 Forum does not change existing legislation (in fact it ignores the basic question of mutuality of obligations) and, crucially, HMRC’s service does not provide an opportunity for amendments to be made to a contract to accurately reflect the working practices.
In practice, a large proportion of contracts do not reflect the actual working practices when initially reviewed; careful redrafting and negotiating with the recruiter and end-client is often needed to correct the contract in question. This may be due to bad practice on the part of the recruitment consultant and lack of clarity by the end-client. If a contractor relies on HMRC’s service and has already started an engagement (note, HMRC does not offer a time scale) it may be too late to seek legal advice to correct the mistakes. The Law Place has acted for contractors in respect of HMRC’s previous review service where complaints have been made concerning excessive delay. Anecdotal evidence suggests that the new service will be just as slow and inaccurate and in the absence of new funding from the Treasury the obvious question is how HMRC intends to fund this service.
The most cost effective solution for any contractor would be to seek legal advice from The Law Place as soon as a contract has been offered. The costs of defending an IR35 inquiry are always much higher than a pre-emptive independent contract review. Indeed, the costs of dealing with HMRC’s correspondence in the initial phase of an inquiry alone are likely to be 4-5 times that of an IR35 Contract Review. It is clear from the new guidance that HMRC intends to deter contractors from legitimately operating outside of IR35 using companies and heard them towards umbrella companies or out-dated and inherently risk PAYE self-employment. We would recommend seeking legal advice from The Law Place.
How does the review of the IR35 legislation affect me?
Although the Office for Tax Simplification is proposing to redraft the IR35 legislation, the Revenue can still impose the exisiting the existing IR35 legislation in respect of engagements undertaken before abolition. Therefore, contractors need to remain vigilant about whether the contract terms truly reflect the actual working practices. The Law Place is happy to undertake an IR35 Contract Review even if the engagement has been completed and can offer suggestions on how to improve your tax position.
My accountant offers IR35 reviews…
Remember, IR35 is fundamentally a legal question and requires specialist expertise in employment status above and beyond knowledge of accountancy. Case in point, would you ask your GP to take your teeth out? Please also see ‘Why Choose The Law Place’. Crucially, in the event of an IR35 inquiry an accountant is required by law to disclose all advice and working papers to the Revenue. The Law Place offers a fully confidential service as it is providing you with purely legal advice.
How is The Law Place able to charge low prices?
We have a low costs base and can pass the savings on to you. We have a highly efficient business structure which eliminates the need for surplus staff and therefore minimises the risk of information loss. If you give your payment details over the telephone can you be sure that this information is safe? That’s why we use Paypal.
Are there any circumstances where I can safely operate outside IR35?
If you operate as a genuinely self-employed consultancy and the client requires a completed project rather than a particular individual then you’re off to a good start. The key is to have your contract and working practices professionally reviewed BEFORE starting an engagement. Call for more details.
What if I use a substitute or subcontractor during the course of my engagement?
This would undoubtedly help but the term in question needs to be drafted as a reasonably unfettered right. The Revenue can and will ignore substitution clauses which are a sham – see the Dragonfly case. Recent case law has indicated that the courts are taking a harder approach to substitution.
Is the contract between the agency and the client relevant?
The IR35 legislation requires analysis of all the circumstances of the engagement and this has been used as an excuse for the Revenue to compare the so-called upper level contract to the contract between the contractor and the agency. However, the upper level contract does not always mirror the contract between the contractor and the agency and, crucially, the contractor is not a party to the upper level contract. Given the Revenue’s sweeping powers to demand documents it is incorrect to assume that the Revenue won’t request sight of the upper level contract.
The Revenue has issued Notices of Determination and a huge tax bill – what can I do?
In the first instance you need advice regarding an appeal to the General or Special Commissioners. If we advise that there are reasonable prospects of the appeal succeeding we can act on your behalf. The costs involved will be based on an estimate based on our director’s superb track record.
How far can the Revenue go back during an investigation?
Once the Revenue has started an aspect inquiry or an Employer Compliance Review they can look back at engagements in the previous 6 years and widen the scope of the inquiry. If you have received notice of an Employer Compliance Review please contact us now. Click here for details of our Revenue Representation services.
I am being supplied to the client by an agency – does this affect IR35?
Some commentators suggest that the presence of an agency in the supply chain undermines a contractor’s claim to be legitimately self-employed. This is incorrect as many agencies have sole-supplier agreements in place with a client. If this is the case you cannot enter into a contract directly with a client.
Are IR35 safe solutions involving a service provider genuinely safe?
This practice could fall foul of the Managed Service Companies legislation and may result in the Revenue demanding employment tax from you if the so-called scheme provider disappears. Unlike IR35, the Managed Service Company legislation does not provide a reduction in liability for running your own business.
Should I send my contract to be reviewed by the Revenue?
In essence, this approach is fraught with risk. Indeed, despite denials from the Revenue, sending your contract to the Revenue for a free review is placing your company and yourself at their mercy.
The new guidance published as a result of the IR35 Forum does not change existing legislation (in fact it ignores the basic question of mutuality of obligations) and, crucially, HMRC’s service does not provide an opportunity for amendments to be made to a contract to accurately reflect the working practices.
In practice, a large proportion of contracts do not reflect the actual working practices when initially reviewed; careful redrafting and negotiating with the recruiter and end-client is often needed to correct the contract in question. This may be due to bad practice on the part of the recruitment consultant and lack of clarity by the end-client. If a contractor relies on HMRC’s service and has already started an engagement (note, HMRC does not offer a time scale) it may be too late to seek legal advice to correct the mistakes. The Law Place has acted for contractors in respect of HMRC’s previous review service where complaints have been made concerning excessive delay. Anecdotal evidence suggests that the new service will be just as slow and inaccurate and in the absence of new funding from the Treasury the obvious question is how HMRC intends to fund this service.
The most cost effective solution for any contractor would be to seek legal advice from The Law Place as soon as a contract has been offered. The costs of defending an IR35 inquiry are always much higher than a pre-emptive independent contract review. Indeed, the costs of dealing with HMRC’s correspondence in the initial phase of an inquiry alone are likely to be 4-5 times that of an IR35 Contract Review. It is clear from the new guidance that HMRC intends to deter contractors from legitimately operating outside of IR35 using companies and heard them towards umbrella companies or out-dated and inherently risk PAYE self-employment. We would recommend seeking legal advice from The Law Place.
How does the review of the IR35 legislation affect me?
Although the Office for Tax Simplification is proposing to redraft the IR35 legislation, the Revenue can still impose the exisiting the existing IR35 legislation in respect of engagements undertaken before abolition. Therefore, contractors need to remain vigilant about whether the contract terms truly reflect the actual working practices. The Law Place is happy to undertake an IR35 Contract Review even if the engagement has been completed and can offer suggestions on how to improve your tax position.
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