IR35 and IFA debate

Sole director company working in one 'head office' with other IFA

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Debate in our office to whether a client is caught by IR35. We initially thought he was okay but recently another IFA in the head office (or business premesis) have had his annual accounts completed with the deemed calculation. The set up is similar to larger organisations such as St James Place. The director can do his own timetable (other than a Monday where the firm have a meeting and are requested to be in the office - potential issue)? All income is paid directly to the head office with the % split afterwards (basically a commission of the initial fee to the customer). Also there is a remittance given at the end of the month detailing the client,fee and split. People can walk in off the street as well but in this situation the % split is different. All documents the client uses do not contain his own Limited Company name or details but the head office - could this be changed? The head office cover all the costs such as professional indemnity insurance. Costs such as laptops, train fare, stationery are not paid by head office. There are employees of the 'head office' company such as receptionist, the concept is the % split of commission takes into account these costs incurred by the head office and not paid directly by our client. There would be nothing to stop our client employing someone else to support them should they require this. I am sure this type of set up is not uncommon across the UK and we would appreciate other accountants thoughts. Happy to provide more information if needed. Appreciate your time and hope this question helps others in the future. 

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By johnjenkins
11th Apr 2018 10:04

I have a similar scenario with IFA's. Client A owns a property in which 4 IFA's and 4 staff work. After numerous calculations we decided that the easiest and cheapest (this set up may not work for all) way was to set up a Limited company with all 4 IFA's as directors and shareholders. All 4 IFA's were also self-employed. The four staff are on PAYE. There is also a compliance officer who is self-employed. All income goes through the Limited company, with rent etc. being paid as expenses. Commission is paid to the IFA's accordingly with the option of a non taxable dividend if available.
Works very well.
If you think of workings first and tax savings second you always get the best results.

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By cfield
11th Apr 2018 12:35

Control of the work is the biggest factor. How do these guys work? Do they have a "boss" who allocates customers to them and tells them what procedures to follow, is there a manual they have to go by, or is it pretty much up to them how they do the work?

Everyone likes to think they're in control of their work, especially contractors for obvious reasons, but actually it can be quite an elusive thing. It doesn't take an awful lot for the client to be in control.

Their best bet is to get their client on-side as much as possible and try and persuade them to sign a statement of circumstances confirming which aspects of the job are left up to them. Then keep a log of tasks which tend to suggest they are in control of the work.

Best advice of all is to stay under the radar and not give HMRC the slightest excuse to open a compliance review by making sure they meet all their tax deadlines and being squeaky clean with their payroll, dividends and expenses.

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Red Leader
By Red Leader
11th Apr 2018 13:25

Looks like their get out of jail free card is the right of substitution you alluded to. If you establish that both contractually and de facto, you're home.

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Replying to Red Leader:
By cfield
11th Apr 2018 14:48

I think he was talking about the support staff rather than their own services.

Unfettered right of substitution is even more elusive than control of the work in most cases.

Still, these are just the silver bullets. You don't need a silver bullet to win an IR35 case. A client is by no means a lost cause just because he's not the Lone Ranger. Many IR35 cases have been won on the balance of the facts.

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