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CIS and IR35

CIS and IR35

I have just taken on a new client who is going to be a civil engineering contractor.  He has set up a LTD company and he believes that because he is registered and is going to be paid under CIS that IR35 is not relevant.

I was under the impression that IR35 is still relevant and that the employment status indicators need to be considered. His contract (verbal) is for 7 months and this is his sole contract at the moment.

Can someone confirm if I am on the right track since this is a new area for me.  I've studied the HMRC guidance but can't find anything on both CIS and IR35.

Many thanks

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31st Aug 2010 10:02

CIS and IR35

IR35 is indeed still relevant and registration under CIS does not at all imply genuine self employment or business activity.

 

So yes, you are on the right track.

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31st Aug 2010 11:46

Agreed

And don't forget that the company will be able to deduct the CIS tax suffered each month from the PAYE due under IR35 each month.

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By lfidler
06th Sep 2010 13:36

Follow the money!

CIS is concerned with the limited company getting paid by its clients.  IR35 deals with the engineer getting paid by the limited company that he just happens to own. These are two separate issues that need to be looked at in isolation - as you thought. 

Make sure that the contract for the job is definitely between the limited company and the client. Quite often, the individual fails to recognise that the limited company is a separate legal person and not simply a bank account and it turns out that the contract is between the individual and the client.  If a status issue does arise, the client might not be happy as they might be on the hook for any PAYE and Class 1 NICs if they contracted with the individual and he turned out to be an employee in HMRC's eyes.

 

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06th Sep 2010 15:44

condom needed

 

tell him to get a written contract drawn up ASAP. It needs to be dated at least 1 day b4 he started, and ir35-compliant, to stand a chance of evading ir35.

His payer does not care as the tax problem rests with your client thanks to the interspersion of an ltd

Otherwise bin the company, and start again etc...

 

 

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09th Sep 2010 17:39

No contract?

The fact that he doesn't have a contract probably helps to differentiate him from a normal employee. Since he has no contract what's to stop him saying "I'm not coming in tomorrow" or saying "I'm finished" without giving any notice. This takes care of the Mutuality Of Obligation (MOO) factor. I doubt he is allowed to Substitute himself with someone else and the Control factor probably won't differentiate him from a normal employee either. What are the practicalities of his engagement? Does he have to turn up every day or is it under his control? Does he use any of his own equipment, etc. If he does get a contract make sure it includes a Substitution clause or allows him to terminate without any notice period.

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