How common is IR35?

How common is IR35?

Didn't find your answer?

How common is IR35?

While I was an ACA (and later a CTA) student, the risks of IR35 were something I studied a lot.

During my career, I have helped set up a number of sub-contractors as limited companies. I have always advised them of the possibility of IR 35, but I have never seen any kind of IR35 inspection.

I'm not being complacent. I would never set up a subcontractor in a clear sham situation.

Is IR35 a real danger? 

Replies (7)

Please login or register to join the discussion.

avatar
By User deleted
14th Jul 2015 17:31

There is no danger so long as you're mentally prepared to pay all the PAYE and NIC or having hedged against it.

Thanks (1)
Jennifer Adams
By Jennifer Adams
15th Jul 2015 13:18

The likelihood is slim.....

I recently looked at the statistics on IR35 for an article I was writing for another publisher. In that article I stated that:

Statistics do not exist for year’s pre 2006 but it is known that for 2006/07 the number of IR35 enquiries stood at 158 yielding £1.9m.

Three years later and that number had fallen to 12 enquiries with a yield of £155K.

When the Tories came into office in 2010 the Office of Tax Simplification was created and tasked with, inter alia, a review of IR35 and its workings. The review concluded that IR35 should either be suspended, with a view to being abolished, or retained but with “improved administration”.

The government chose the latter and an IR35 Forum was formed with the remit to monitor the changes.  The “improvements” lead to a direct increase in the number of new enquiries for 2012/2013 by 433% to 253, yielding £1.1 million.

I ended the article with:

However, looking at the IR35 statistics as a whole it could be said that the likelihood of being “caught” is slim but there again the reason for the low number of enquiries could be as a result of contracts being written and conducted correctly.

>>> IR35 is on HMRC's radar as the past two Budgets have proved.

In my working life I have had a number of sole director company clients whom I would say are possibly IR35. HMRC have frightened the agencies so much recently that the more responsible ones have issued 'disclaimers'. Problem is - how do you get clients to agree they are IR35 (or even understand!). I make sure I tell them of the possibility of being investigated (proof = email). Some accountants turn such clients away.

Thanks (1)
blue sheep
By NH
15th Jul 2015 13:40

one aspect

One aspect to IR35 I had not thought about until an AE Webinar from TPR yesterday - it was clearly stated that if an employer/employee relatonship is found to exist (exactly the same criteria as IR35 was stated), then the "employer" must auto -enrol the worker.

So I take that to mean if you are caught by IR35, your employing client has to pay pension contributions for you.

Thanks (0)
Replying to whitevanman:
Portia profile image
By Portia Nina Levin
15th Jul 2015 13:47

I can confirm

NH wrote:

One aspect to IR35 I had not thought about until an AE Webinar from TPR yesterday - it was clearly stated that if an employer/employee relatonship is found to exist (exactly the same criteria as IR35 was stated), then the "employer" must auto -enrol the worker.

So I take that to mean if you are caught by IR35, your employing client has to pay pension contributions for you.

That you have got completely the wrong end of the stick.

The point is that there is no employer/employee relationship under IR35, because of the insertion of an intermediary, but there would have been such a relationship had there not been an intermediary. That is why IR35 is there!

Thanks (0)
Replying to ketteringUK:
blue sheep
By NH
15th Jul 2015 14:07

from TPR

Portia Nina Levin wrote:

NH wrote:

One aspect to IR35 I had not thought about until an AE Webinar from TPR yesterday - it was clearly stated that if an employer/employee relatonship is found to exist (exactly the same criteria as IR35 was stated), then the "employer" must auto -enrol the worker.

So I take that to mean if you are caught by IR35, your employing client has to pay pension contributions for you.

That you have got completely the wrong end of the stick.

The point is that there is no employer/employee relationship under IR35, because of the insertion of an intermediary, but there would have been such a relationship had there not been an intermediary. That is why IR35 is there!

I take your point, however, According to TPR all the things we would use to check if a client falls into IR35 are the same things that an "employer" should check for a "worker".  Things like, do they work in a team, use the company computer, have a company email add etc.

So my point was, if you fall into IR35, surely it must follow that the "employer" when they assess the "worker" despite there being an intermediary would find that they should be classed as an eligible jobholder?

Thanks (0)
Avatar
By I'msorryIhaven'taclue
15th Jul 2015 14:13

On the Horizon

I suppose IR35 will become something less of an issue next April when the dividend tax, not to mention the proposed clampdown on travelling and subsistence expenses, will narrow the tax gap between PSCs caught within IR35 and those outside of IR35.

It's the variety of opinion on IR35 that strikes me as odd: accountants with polar opposite opinions; it's as if the entire IR35 subject is one huge grey area. For an example of such diverse opinion, see the current IR35 thread about a junior doctor on "Any Answers". Not surprisingly, here in Commuterland its the contractors themselves who appear to have the clearest understanding and interpretations.

Thanks (0)
Portia profile image
By Portia Nina Levin
15th Jul 2015 14:46

@ NH

You appear to be missing the point.

IR35 looks at a notional contract between the client and the worker, because there is no actual contract between the client and the worker. In the absent of a contract there cannot be any actual employer/employee relationship.

The so-called tests are used as identifiers to see whether the notional contract would be one of employment.

The TPR are over-simplifying. They have probably dumbed it down for the purposes of brevity, but AE applies to workers, which is a different thing to an employee:

However, where an individual is engaged through an intermediary they cannot be a worker in relation to the end client, because there is not a direct relationship

See section 88 of the 2008 Pensions Act (which lays down the framework for AE) for the definition of worker. It is clear that there must be a direct contractual relationship.

Thanks (1)