IR35

IR35

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I've been approached to act for a client who has accepted a contract with a company in ROI as a sales consultant. The contract is for £40k over 12mths, 37.5 hours per week + car allowance  + they provide a laptop, blackberry and will reimburse all expenses inc mileage.  Its a 12 mth contract.  There are 2 other consultants apparently who have accountants who have set them up a sole traders.

This has got be caught under IR35...hasnt it?

Should I get a 2nd opinion by an expert. Is there ever a way around this?  Would it be worth an expert taking a look?  Where would I go to get more advice?  Any ideas?

Or is the way around this just not to set up a Ltd co? If I set client up as a sole trader could HMRC challenge the self employed status?  Im not sure I believe the client is actually self employed.  What can I do to prevent this self employed status being challenged? 

Thank you in advance

Sheffield accountant

Replies (14)

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By ShirleyM
29th Sep 2011 13:39

Sole trader

Should present no problems for your client. The company engaging him is taking a gamble that this may be viewed as employment, but that is no concern of yours.

Setting him up as a limited company would transfer that risk to your client, so avoid it if possible.

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By essex accountant
29th Sep 2011 13:39

IR35

Set them up as a Limited company - I am very surprised that the company for whom they work does not demand this. They are in great danger of incurring substantial national insurance liabilities unless they can show that your client is truely self employed if asked by HMRC.

Make sure that your client has a contract that clearly shows they are 'in business' working through the Limited company. Mainly the contract need to show a lack of mutuality of obligations, a suitable substitution clause and no detailed control over the way the work is done is taken by the company for whom they work.

The details you have given seem to point towards employment but some simple changes can be made to rather point to self employment. This would be best both for your client and the people fo whom they are working.

 

Andrew Clarke

CKS Accountancy Ltd

www.cksonline.co.uk

 

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By George Attazder
29th Sep 2011 14:01

I imagine...

... that the ROI may have legislation similar to the UK's intermediaries legislation to which you're referring, but you need to ask someone in the ROI.

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By DMGbus
29th Sep 2011 14:07

Do NOT set them up as a Ltd Co

If the client conducts the work via a Ltd Co then the PAYE/NIC cost risks transfer to the client from the engager.

So definitely do NOT advise the client to operate a a Limited Company.

 

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By Steve Holloway
29th Sep 2011 14:24

I agree!

Why on earth would you advise to set them up as a limited company Andrew? The end client is taking all of the risk here by treating them as self-employed and you propose that you transfer this all to the OP's client!?

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By oor001
29th Sep 2011 14:48

I am in ROI.

There is no similar legislation here to IR35.

However Revenue are very strict on the employment v self employment issues.

He will have to register etc in ROI for Income Tax and VAT as it looks like he will be over the VAT threshold.

The contract should state that he is on a contract as a self employed individual and is responsible for his own insurance etc.

The extras would worry me ie the reimbursed expenses etc, and it would be unusual for a self employed individual to receive a laptop and phone.

This could be challenged by Revenue. In cases where this issue has been challenged in ROI - in my experience, they have pursued the 'employer' company for underpaid paye and prsi.

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By essex accountant
29th Sep 2011 15:46

ROI

Would the OP say if the work is done in the UK or ROI. Apologies that I thought that it was UK work and was commenting accordingly.

 

I am puzzled by the comments about transferring the PAYE/NIC cost risks to the engager. providing the right contracts are in place then there is no/minimal risk to the client. But being self employed earning £40k is going to bring a liability of Class 4 NIC of £2-£3,000, which can be entirely and legitimately avoided by operating through a Limited Company.

 

Ask the client: would he (a) take the extremely low risk of an IR35 enquiry or (b) decide to pay £3,000 in National Insurance?

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By Steve Holloway
29th Sep 2011 16:12

... but

with the description given ... years contract, 37.5 hours per week + laptop ... I can't see you getting that contract underwritten by accountax etc and therefore you would have to advise your client to ignore the law?

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By ShirleyM
29th Sep 2011 16:16

In any case....

Haven't contracts been overturned in favour of working practice? Given the terms specified I doubt that any contract would be a defence against IR35.

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By sheffieldaccountant
29th Sep 2011 17:21

The client works in the UK. 

The client works in the UK.  Sorry for the confusion. The company issuing the contract is based on ROI.

 

Thxs

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By Marion Hayes
29th Sep 2011 20:27

UK duties for offshore company

If I remember rightly if you work for an offshore company which does not have a permanent establishment here in thr UK the PAYE responsibility devolves to the employee. P35 and P11d's are self prepared and deductions paid over. If they have an office here he may escape the responsibility. The job description does not sound like self-employment.

The risk therefore is with him whichever structure is used. PAYE or IR35.

 

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Replying to petersaxton:
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By sheffieldaccountant
29th Sep 2011 20:43

Any ideas where I could verify that Marion?

I need to get back to my client with an answer that I can back up.

 

Thanks

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Nichola Ross Martin
By Nichola Ross Martin
30th Sep 2011 12:31

Employment law

Thinking of the recent decision in Autoclenz, your client may also be acquiring employment rights. Illustrates what dangerous ground this is for the engager.

In passing I agree: do not incorporate the client.

Virtual tax support for accountants: www.rossmartin.co.uk

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