It’s vital that you ask your accountant the right questions when it comes to IR35.
As the number of contractors working in the UK and contributing to the economy has risen rapidly in recent years, so too has the number of firms claiming to specialise in helping them fend off the taxman.
IR35, the unpopular tax legislation that HMRC designed to catch contractors operating as ‘disguised employees’ has fueled the rise of these self-styled expert specialist advisors – many of them accountancy-led firms. And with the countdown well and truly on to the shift in responsibility within the private sector, there seems to have been a frenzy of activity from them to win new clients.
There can be no doubt that the majority of contractors, agencies and engagers will benefit from external advisors in relation to IR35. The lack of clarity around whether a contractor belongs inside or outside the rules has plagued contracting since the arrival of the controversial legislation in 2000. Even more recently, HMRC’s own IR35 tool, CEST, has been found to be ineffective despite the fact it was built for IR35 reform.
Added to these specific issues with IR35 is HMRC’s generally aggressive nature when attempting to enforce the rules. This isn’t a disgruntled taxpayer’s opinion, but the formal finding of the House of Lords enquiry into HMRC attitudes and practices at the end of last year. So it’s no secret that when it comes to IR35, contractors need all the help they can get to make sure their tax affairs are in good shape.
But think carefully about the people and firms you trust with your tax affairs. There are some things any contractor considering signing up with them should want to know. It isn’t always a black and white scenario. There might be similarities between contractor engagements, but that doesn’t make them all the same or lead to a one size fits all solution. When all’s said and done, there’s nothing more useful than having the gritty experience of being in the field against HMRC representing the interests of a client.
Not that this has stopped some companies spotting the opportunity IR35 presents for new fees and suddenly positioning themselves as an authority on the subject. Worryingly, misleading claims of expertise by people that say they are specialists in this particular field seem to be on the rise again.
So, as a contractor seeking advice in preparation for further changes to IR35, it’s important you ask your accountant the right questions. These include:
- How many IR35 enquiries have you handled?
- What’s your track record in defending contractors from IR35?
- How many years of IR35 experience do you have?
- How much have you saved your clients in tax?
- How ready are you for IR35 reform?
When setting IR35 status, there isn’t an easy workaround – not one that doesn’t overpromise and risk breaking the rules, which is the last thing you want to do given HMRC’s approach to compliance and the sheer sums of money that can be involved in IR35 cases.
Other compliant services such as umbrella companies, certainly serve a purpose but that’s not to say working through one of these vehicles is your only option either.
Effective measures do exist that can safeguard you from the growing threat of IR35. This is despite the fact contractors will no longer set their own IR35 status in the private sector from next April, much like in the public sector already.
Learn more about QAccounting and its IR35 accountancy packages here.
Here a question I’d like answering..
Currently working in the Netherlands via a UK Agency that pays a Dutch payment company..
1. Can be paid 1/3 in Holland and Dutch taxes are applied to this. The rest 2/3 to my limited company in the UK.
I work in the office in The Netherlands and claim all expences to the UK company i.e. Travel, Hotels, Meals etc
2. Work as above but solely from home in the UK but logging into the Dutch VPN on their laptop. Paid 100% into a UK Limited company.
What the the IR35 tax implication of this ?
I once asked the Tax Office if I owned a property in the Isle of Man and worked for a UK company what would be the tax.. Was told I could claim the full 20% max manx tax and their extremely generous married mans allowance.. However I would be taxed by the UK government the tax I would have had to pay if in the UK.. So wiped out any benefit of being resident on the isle of man.
But that didn’t take into concideration working from home as that wasn’t available in those days.
You may be confusing an account with a tax adviser. Unless your accounts is both (or is also a director in your company), I’m not sure they have liability , or indeed any real accountability, for the IR35 determination. Plenty of accountants will offer impromptu / verbal advice, but probably shouldn’t as they have little view of your working practices.
Sure they can be adept or otherwise at answering HMRC questions, but I’m not sure that will include the determination itself, for which they would be within their rights to defer to the director (i.e. You!)