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What would you do?

Fairly blatant IR35, client does not agree

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Edited As Requested

Apologies for the anon - I am a regular poster, but my real ID can be worked out.

EDIT:  Client has a wholly owned small ltd company with some trade in.  His main job is for another business for which he is a company director and a minor shareholder.  The small co, is billing the big co. for "management fees"

In the year in question, on top fo the normal sales, they have billed a significant sum to the "day job", and doesnt have a salary any more in the big co.  (previously they had a small salary/mainly dividend set up)

This looks fairly blatent IR35 issue, and I have advised my client its probably caught by virture of being an office holder.

Client says his accountants for the main company (which is another firm) say its fine.

I suggested the other accountants probably mean from their POV its fine - which it is.

I have drafted a massive disclaimer saying "we are not advising on this but acting on your instruction" and "HMRC CEST tool says you are in"

But I am now having doubts, whether I should dig my heels in, and say "no chance"

What would you do?

Client is going next year anyhow as the existing activity is drawing to a close and the main business reorganising, but it seems like a hopeless case should HMRC enquire and potentially into money laundering etc etc.  I cant even think of a fig leaf to hide behind on this one.

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By Matrix
16th Jul 2019 17:21

I think it is is an issue for the other accountant and the Directors. If your client is a Director then shouldn’t the payments be put through the payroll rather than invoiced?

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to Matrix
16th Jul 2019 17:42

No sure about that.

Isn't the issue whether the small ltd company (the OP's client) is going to apply IR35 rules to the payments it receives or not?

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to Wanderer
16th Jul 2019 18:40

I agree, it’s currently the contractors’ responsibility to get it right.

In terms of what I’d do, I have to say I am one for big disclaimers. Others will disagree.

I guess it comes down to how much you need this year’s fees & how you sleep at night.

When he dissolves the company next year, is that the end of your relationship with him?

Personally, I’d send him an email with a paragraph-or-two of disclaimers, but do the accounts as he wants anyway.

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By Matrix
16th Jul 2019 18:45

Please reread the OP and reread my post. The client is a Director and shareholder of the company they are invoicing, this is not a typical contractor IR35 scenario. I am not referring to the off payroll rules. I am referring to the remuneration of officers which in the first instance should be payrolled.

If I have misunderstood then maybe the OP could update the question.

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to Matrix
16th Jul 2019 20:11

Depends what's been billed for.

I think its' turned from an accepted arrangement (small salary, large dividends in large co) to one which may potentially be caught by IR35 on the whole amount in small co.

Of course we don't have full details of why / what has been billed however I think it's much easier for the arrangement to be attacked in the small co than the previous set up ever was in the large co.

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to Matrix
16th Jul 2019 21:39

OP: “I have a client with a small ltd company along side the day job for which my client is a minor shareholder and director and has been for a number of years. ”

I took that as “my client has a PAYE’d job. He is also director/shareholder of a separate small ltd.”

You took it as “my client is director/shareholder of his FT employment. He also has a small ltd.”

OP - can you edit the Q so we know who’s right?

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By Matrix
to atleastisoundknowledgable...
16th Jul 2019 22:00

I think I interpreted it that way since in the 4th para it says he is an office holder.

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17th Jul 2019 09:48

Let him go now. Why store up trouble for yourself?

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17th Jul 2019 10:01

Taking your analysis of the IR35 situation as read, itt seems to me you really have two choices

a) Do as he requests but with disclaimers and caveats all round
b) Insist that you do it your way or not at all. (It doesn’t matter what advice the other firm may have given (and you only his word for it) – it’s not advice that you can legally rely on).

I lean away from a) because if it all goes wrong, you are likely to have a lot of unbillable time to sort out the mess.

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17th Jul 2019 10:12

The OP seems absolutely convinced that IR35 is in play.

With this in mind can they really go the 'disclaimer route'.

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17th Jul 2019 10:22

I (wrongly) thought Matrix was coming at it from the angle of Part 7A of ITEPA.

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