I am coming across time and time again. Large well known Agencies forcing "employees" to go down the limited company route for obvious reasons. I know the government will at some point take action and curb this blatant abuse.
I came across a prospective client last week who will just make parts for ships (one client). He has a supervisor who tells him what to do and there are other pointers towards IR35. Contract is just for three months - probably will get extended.
Nice guy that whats to do the right thing but he would prefer to have a simple life. Doesn't really want the hassle of a limited company but has no choice.
Anyway, he says there are many other individuals that work in the same workplace under a limited company but are not under IR35. They mainly have one Tax Adviser (ex HMRC inspectator) and they get paid around £300 a week in Salary and the take the rest in dividends. However he does not want to use this ex HMRC inspectator
I know the onus is on the director for IR35 but this is glaringly IR35. While I would like to take this client on but only under IR35 conditions. Though he may willing to take the risk that he is outside IR35 especially as the CSA are after him too
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Despite a lot of sabre-rattling, HMRC seem to be pretty useless at cracking down on IR35 - so in all probability he could get away without applying IR35. But I wouldn't want to take the risk on acting for him on that basis.
If I was the ex-Inspector who had a practice based on dubious "non-IR35s" then I'd be having a few sleepless nights.
He's not really a shipbuilder is he? He makes bits of ships.
And what's an HMRC inspectator?
Didn't really fill me with confidence that there were lots of pointers to IR35 being in point, if I'm being honest.
Can he choose his hours, does he have his own insurance, does he get paid holiday/sickness etc? Is there a difference between his work and actual employees?
You said the contract is for 3 months but also that there is no contract.
You are the adviser so if you want to take on this type of work, then advise him to get a contract, get it reviewed by a specialist, get any changes put through and advise the day to day working arrangements to keep him outside IR35, like not going to the Xmas party. Not sure whether he can work from home though. If you don't think he can keep the contract outside IR35 then advise as such.
I discuss working terms at length with my at-risk clients, one is on a different computer system from employees, every little factor helps but I agree it is a grey and risky area.
Of course he could just keep all the money in the company and then avoid IR35 and the CSA :)
Of course he could just keep all the money in the company and then avoid IR35 and the CSA :)
How does that avoid IR35?
It's the other way round. If you're at risk of IR35, keep as little cash in the company as possible. It won't stop IR35 biting, but you can stop using the company and put it to sleep (eventually) under s1003 so they can go whistle (to coin a recent phrase).
True, they could go to the director if they can prove he was negligent and drove a coach and horses through IR35, but it's such a grey area there are bound to be arguments in defence and I've never heard of that happening.
At the end of the day it's the client's decision, not ours. All we can do is offer our opinion based on what we know of their work and warn them of the consequences if the balloon ever goes up.
Accountants are not usually totally au fait with how their clients do their work so we should not presume to be aware of all the factors in an individual case that may influence IR35 status. Just make sure your engagement letter covers you in the unlikely event of an employer compliance review.