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Would you act for this client?

I recently took a client on from another firm, and am about to file second years accounts. I suspect the source of income in the accounts would be viewed as IR35'able.

The director wishes me to prepare the accounts & returns on a normal trading basis, or will go to another accountant.

Would you continue to act for them? The fee is good, work is minimal & he is happy to sign an annual disclosure that I have advised him to take his own advice on IR35 and that he instructs me to prepare the accounts as a standard trading company.
Anon

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16th Apr 2008 20:45

IR35 Advice
When a client is sure that he is outside IR35 and he wants to stay there, then part of the accountant's responsibilities could be seen to be to advise on how to make his case as robust as possible, to steer him away from poor practices and documentation.

This could mean extra fee income for you, if you can check his contracts and work practices. If you are not up to scratch on IR35, do you have sufficient knowledge to 'suspect' that he may be within IR35?

My poor clients get a thorough grilling every year.

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15th Apr 2008 19:07

Ethics
As I said originally, it comes down to personal ethics.

I agree with Andy Partridge, and would shy away from something I believe to be wrong.

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By Anonymous
15th Apr 2008 18:31

That analogy made me laugh!
Andy, fair comment and like the style in which you make your point.

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15th Apr 2008 10:58

Perhaps we don't disagree, Steve
IR35 is a bad example. Yes, we as accountants take instructions, but to go along with something we believe to be wrong? Aren't we meant to be the experts? Not only will I not rob a bank with my client, I won't drive the getaway car either.

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By Anonymous
14th Apr 2008 18:07

Disagree totally with Andy
My approach with IR35 has always been to explain the various risks and interpretations that may be applied to IR35 and then proceed upon clients instructions after having obtained their opinion and decision in writing (unless in my opinion it is clear cut the other way but very rarely is).

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By Anonymous
14th Apr 2008 16:50

Howard/Judith
Howard - No, the crux of this post is not whether the client is IR35'able or not, that is irrelevant & I dont want to get into that debate. It's whether it is our responsibility or the client's for this declaration, and what our exposure is for advice (or lack of it) given.

Judith - I sent him IR175 "Supplying Services". This looks like a 2001 leaflet and I can imagine theres been lots of changes since.

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By Anonymous
08th Apr 2008 12:20

Thanks Andy.... OK here's why I asked the question
I want to keep the client but needed to assert the risk element to myself first.

I've decided to keep the client, send him a copy of the IR35 legislation, and get him to physically sign (and tick) the P35 declaration before I submit it on his behalf online.

The basis of my question was that the Company would be put into CVL if a large PAYE debt was assessed. I know HMRC could potentially pursue the director personally for PAYE/NIC on his deemed salary & needed to know whether there was any recourse to myself i.e. a potential PI claim or complaint.

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08th Apr 2008 11:43

Off on a tangent
This thread has gone off on a tangent.
Anon was not asking if his client was IR35-able, he had already suspected (concluded?) that he was.
What anon wanted to know was, given that his client refused to take his advice, what was his next course of action? This could apply to any situation.
If the consensus is to keep quiet and take the money, the profession is diminished. Little wonder some hold accountants in contempt.

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08th Apr 2008 10:57

'No' and leave blank
I think if 'No' is the answer to part 1 of Q.6, then no need to go any further!

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08th Apr 2008 10:48

Ageed with Ronnie's response
The context of the questions is clearly "Service Company as defined by IR35/ MSC legislation" and thus I will also be answering No and No for all normal, non-IR35/MSC companies.

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09th Apr 2008 15:20

Hi Anon
It would be easier in future (for me if you would use a name ie Peter or Mary) as there seem to many Anon's.

I agree with all you have said. THere is a requirement for the employer to agree the P 35 before it is submitted - so getting your client to complete the boxes re Service Companies I think is a good idea, get him also sign a copy of the form before you submit it - thats what I am doing for all those who could be IR35able.

David Winch thank you again for helping us out.

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08th Apr 2008 09:59

many thanks Steven & Ronnie
there's over 75 comments so far on 2 of the threads (which I've so far seen) started by Nicola & Rebecca and the discussion has moved on to the SATR rather than P35 - I'm very happy to adopt your postion on Q6 but I haven't yet seen it established as the "official" consensus view

http://www.accountingweb.co.uk/cgi-bin/item.cgi?id=181474&d=1032&h=1019&f=1026&dateformat=%25o%20%25B%20%25Y

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08th Apr 2008 09:16

P35
Nick ... see the detailed thread on this from the AWEB team. Their conclusion was that unless you had operated IR35 the answer has to be no & no. The use of capitals is an interesting point which I hadn't spotted!

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07th Apr 2008 18:19

P35
Hi Nick

I'm going for No as the answer to "Are you a Service Company".

The supplementary question refers to IR35 & so makes it clear (to me) that the context of the question is IR35 only, not service companies in general.

And the use of a capital S and a capital C in the question on the P35 confirms (to me) that they aren't talking about service companies in general. Otherwise we'd be answering Yes (& then No) for every P35 we do.

And I don't want to go down that road of waving frantically to HMRC to come & have at look at all my company clients...

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07th Apr 2008 18:05

Referring to Andy's point

Speaking about money laundering here (not giving an opinion on whether or not IR35 applies in a particular case) the money laundering issue revolves around dishonesty.

A tax offence (such as tax evasion) necessarily involves dishonesty by the client.

In criminal law a person is dishonest where their behaviour (which might be an action or a failure to act) is (i) dishonest by the standards of ordinary and decent people AND (ii) the offender himself realises that his behaviour is dishonest by that standard.

You are not dishonest if you believe you are doing what is right (even if you are mistaken in that view).

So the client who genuinely believes he is behaving correctly cannot commit a criminal offence of tax evasion. So there is no question of reporting him to SOCA if your mind reading skills are sufficiently attuned for you to be satisfied that he thinks he is doing the right thing (even if you think he is not).

I hope that helps.

David
www.MLROsupport.co.uk

P.S. Of course a client who has not been dishonest might nevertheless find himself subject to civil penalties and interest where he has been merely negligent in his tax affairs - that is altogether a different situation (and not one that involves a money laundering report).

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07th Apr 2008 17:52

I agree with you but how do you answer q6 on p35?
I agree with you Ronnie, Steven & Anon but how do you answer q6 on p35 on behalf of your client?

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07th Apr 2008 17:39

Go for it!
I agree with Steven. IR35 cases are rarely cut & dried & are mostly open to interpretation.

Provided you have explained to the client the criteria on which HMRC judge IR35 to apply, & the client has confirmed that in his view he is outside the scope, then I see no reason at all to turn the job down.

If he is going through an agency, his contract is almost certain to be "IR35 friendly" so I'd get a copy of that for your file.

Then get ready to start preparing those Directors Minutes & dividend vouchers. And there's still another year to income split, don't forget!

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By Anonymous
07th Apr 2008 16:49

Thanks Steven
That is my viewpoint too. I can deal with this one of two ways -

1. Send him the relevant leaflets/info and ask him to write back to me confirming whether he would like IR35 to be applied; or

2. Get rid of him and lose a perfectly good client that may not deemed to be an IR35 case in the first place.

Not really a question of morals, it's whether it is our duty to advise them on this, or whether to present the facts and let them make up their own minds.

Am I leaving myself open? That is the real question.

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07th Apr 2008 15:37

You can't tell ...
if its IR35 from just looking at the records / accounts. HMRC have lost 1449 cases against 5 for contractors represented by the PCG. A client of mine successfully one his case having been engaged by the same client for 5 years. Lesson: there are few black and white cases when legislation is as imperfect as IR35.

Our job is not to moralise; it is to give clients the best advice to beat this nonsense piece of legislation. Most contractors simply are not employees any more than the Jones' were tax evaders. I wonder if the same accountants who cry wolf in these circumstances also took the HMRC line during the Artic systems debacle. Believe it or not, just because HMRC want something to be so does not always mean that it is!

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07th Apr 2008 15:10

client with IR35 aversion
I think a question of ethics come into this case. I think that I would cease to act if the client was being as cagey as suggested, despite the good money and little work.

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07th Apr 2008 12:32

Educate first
Just who is the expert here? If you have a client that repeatedly chooses to ignore your professional advice what sort of relationship do you have? What respect are you getting? Aren't you being treated with contempt? You are in his pocket, he is paying you 'hush' money. Is it a money laundering offence. Come in, please, David Winch and tell us.
I would resign, but that's just me. It's my way or the highway as they say. However, it might just suit you fine. Sounds as though it doesn't though.

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By Anonymous
07th Apr 2008 10:45

Not enough info
You don't really give enough information for me to decide.

However, where I have IR35 risk clients, I go through the requirements at the start with them, and tell them the risks, including sending them recent IR35 articles and HMRC notes. It is then up to them to ensure that they have IR35 proof contracts with their clients and ultimately engage in service provision rather than pseudo employee relationships.

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