Tax enquiry: "Why is ltd co director not an employee of end client?"
Strange tax enquiry question. The client is a typical contractor/consultant -not IT, but does get work via an agency usually on 6 month contracts. The first enquiry letter asked for a breakdown of sales invoices, which for the year in question were all for the same contract (6 months in middle of year with no work before and after that year). I answered and expected a reply asking why IR35 hasn't been applied etc - i.e. the usual stuff re IR35.
But, no, the inspector has asked "why he is not considered an employee of that company" meaning the end client. This has thrown me. He can't be an employee of the end client because the work is being done via two intermediaries, the agency and his own limited company. I don't know if the inspector is trying to be clever/devious or whether it's simply a new inspector who doesn't really know about limited companies. Should I respond with the full arguments about employment versus self employment (i.e. IR35 etc), or should I respond to say that he can't be an employee because of the two intermediaries?
Other questions asked by the inspector tend to suggest he is relatively new and experienced (i.e. referring to "proprietor" and "self employment" in a question about training costs which are only relevant to a sole trader, not a limited company director).
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