I run my own small bookkeeping & accountancy firm via which I provide bookkeeping and accountancy services for a handful of small businesses.
The firm doesnt provide me with enough cash inflow so I decided to go and contract in the city in addition to my existing clients. I managed to land a six months contract with an investment bank in a finance department (maternity cover).
Ive been reading a lot on IR35 and Im not entirely sure whether I am caught by this legislation.
Looking at the main criteria HMRC looks at Ive come to the below conclusions.
Control obviously I would be reporting to the person managing the department.
Financial Risk - I have assets such as laptop, printer etc (I cant use my own equipment at this particular place due to security reasons) so if the client fails to pay me I would most definitely experience financial loss.
Substitution I cant send someone else to do the job
Right of Dismissal This particular contract is with one month notice for both sides, the rest of my clients contracts with the same notice period.
Employee benefits I will not get any holiday pay, sick pay, pension contributions, training courses, Christmas dinners or the annual staff summer outing.
I would appreciate your thoughts on the above subject.
You omitted to state whether or not you are a limited company but as you are asking the question I will assume that you are.
Do you pay yourself dividends?
When IR35 first came in it was a general test and we could show that by having different clients that we were not affected.
Over time it changed to be on a client by client basis so you can be IR35 for one but not another.
I am assuming theat the contract is a rather large chunk of your income rather so it would be considered a material part of the business.
Do you have any control over the hours / days that you work?
Would you have to make good at your own expense any errors that you make?
Generally IR35 is a lot more difficult to prove and enforce than HMRC admits. Their real hatred is of people not paying 25.8% national insurance so if you are paying salary rather than dividends they are unlikely to make a song and a dance as it will cost them a small fortune for very little return to prove that IR35 applies.
Conversely, if you are paying yourseelf dividends then they do not seem so reluctant to chase cases even where they are making a loss on the deal.
Also you state that this is a six month gig so you have multiple other clients and a longer stint with a particular client during that.
Whilst I could be wrong, I do not think that HMRC would make a song and dance about this gig which is part of a wider business model in the same way that when an independant auditor spends three months at a client site they are not working for the client but performing tasks necessary for the business which could not have been performed from their office.
I assume that this is a regular client where you have taken a short extended gig with them due to their necessity.
I think that I could argue this one and win that it's not IR35... BUT... I would still expect to have to fight it.
Have a think about the above points espechially in relation to payment by dividend, have a read of the contract and decide whether you feel that this contract in isolation of the rest of your business is truly seperate or whether it is part of the general business but simply necessitates an extended period on site.
I appreciate that this is not an answer but rather a supportive think about these things as well. Sometimes though I find that simply knowing that someone is listening forms the definitive answer in your own mind one way or the other.
And thats really what matters. What do you believe that the contract is? Could you argue that convincingly with an inspector?
HTH for starters,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Shaun,
Yes, I do operate as limited company and the idea was to pay small salary and the rest in dividends to minimise the tax.
This contract will definitely provide a very big chunk of my income thats why its so tricky.
I will get paid a daily rate and this is not a regular client. Most likely it will be a one off job and it is quite separate from my general business.
My interpretation of the agreement is that I will be liable for any errors as I am required to have my own appropriate insurance.
Another thing, my contract is via an agency not with the bank directly.
Would you recommend to see a tax specialist to get this completely clear? Just want to make it very clear and clean so no unexpected surprises at later stage.
Most accountants would advise that HMRC could not make IR35 stick in the circumstances described but the reality is that it all comes down to your own personal attitude not just to risk but also whether you want the hassle and worry of a prolonged battle with them.
Considering that you intend to take dividends the risk is of course increased so I would suggest that you could if you wish get you contract approved by HMRC.
Write explaining your specific circumstances and include a copy of your contract to :
IR35 Customer Service Unit
HMRC
Ground Floor North
Princess House
Cliftonville Road
Northampton
NN1 5AE
Or alternatively give them a call on 0845 303 3535 to discuss the matter.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
what you need is a cast iron IR35 proof contract. The problem however is that there are more than one contracts in place, there is yours with your agency and then the agency with the end user so it gets quite complicated, however if you seek advice from someone like AbbeyTax or look at the Professional Contractors Group (PCG) website they can probably help with either writing a contract or certainly reviewing the contract. Very few IR35 disputes seem to go the way of HMRC and it often makes me wonder what would happen if such a company under threat would not just dissolve (so long as all assets, i.e. cash had been withdrawn legitimately). I think if you wrote the hmrc for contract approval you will be saying hello to a lot of deemed salary, but having said that the advice Shaun gives is certainly not incorrect, I would just personally do things differently first.
