HMRC looking to curb travel expenses for self employed?
Discussion
Eric Mc said:
FredClogs said:
Eric Mc said:
FredClogs said:
IR35 (this conversation is soooo 2005) is b
ks and I don't know of hardly any cases where contractors have actually paid any money back to the revenue,
Have you read the case of "Dragonfly Ltd"?ks and I don't know of hardly any cases where contractors have actually paid any money back to the revenue, 98elise said:
plasticpig said:
Dr Jekyll said:
I daresay you can, but I was initially responding to the accusation that any contractor who operates through a Ltd must be running a tax dodge.
Hmm. Well I know a few contractors. Pretty much all of them minimize their salary and maximize their income through dividends. Why wouldn't you avoid paying out loads in both employer and employee NI contributions if you can avoid it? If this isn't a tax dodge what is it? Its no different to using something like an ISA to "dodge" income tax on interest.
IR35 does NOT have to apply to most contractors PROVIDED the contractors exercise great care in ensuring that the engagement - both as described in the written contract AND (most importantly) in the actual way in which the duties are performed - make it absolutely clear that the engagement is NOT a substitute for an employment.
By making sure the contract is carefully worded AND the reality reflects that wording - then the contractor should have no problems with IR35.
By making sure the contract is carefully worded AND the reality reflects that wording - then the contractor should have no problems with IR35.
Eric Mc said:
IR35 does NOT have to apply to most contractors PROVIDED the contractors exercise great care in ensuring that the engagement - both as described in the written contract AND (most importantly) in the actual way in which the duties are performed - make it absolutely clear that the engagement is NOT a substitute for an employment.
By making sure the contract is carefully worded AND the reality reflects that wording - then the contractor should have no problems with IR35.
Have to disagree. By making sure the contract is carefully worded AND the reality reflects that wording - then the contractor should have no problems with IR35.
I have seen lots of contracts which lawyers or accountants say are IR35 compliant. However, IR35 is so widely drawn my own view is almost all contracts (where a contractor works for a period for a single employer) are open to challenge. I suggest the decision in HMRC V Dragonfly supports my view. I know the case was before the NHCT so is open to appeal to higher courts. But if its not over turned then I think lots contractors may be getting large bills.
Mrr T said:
Have to disagree.
I have seen lots of contracts which lawyers or accountants say are IR35 compliant. However, IR35 is so widely drawn my own view is almost all contracts (where a contractor works for a period for a single employer) are open to challenge. I suggest the decision in HMRC V Dragonfly supports my view. I know the case was before the NHCT so is open to appeal to higher courts. But if its not over turned then I think lots contractors may be getting large bills.
Just start a new Ltd company every two years or so to reduce possible liabilities. Obviously we should all be aware of our obligations under IR35 as Eric MC suggested above, and make sure we comply, but if you're careful about the wording of the contract and the way you work the chances of getting caught in breach are tiny (the chances of getting an investigation are tiny to start with) and your liabilities if you manage yourself properly are small.I have seen lots of contracts which lawyers or accountants say are IR35 compliant. However, IR35 is so widely drawn my own view is almost all contracts (where a contractor works for a period for a single employer) are open to challenge. I suggest the decision in HMRC V Dragonfly supports my view. I know the case was before the NHCT so is open to appeal to higher courts. But if its not over turned then I think lots contractors may be getting large bills.
I have a few friends who work in the oil and gas sector in the North sea who are "ltd Co" they are no more running a business as flying to the moon!
Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
Granfondo said:
I have a few friends who work in the oil and gas sector in the North sea who are "ltd Co" they are no more running a business as flying to the moon!
Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
So if a contract is offered subject to working through a Ltd co, what exactly are they supposed to do?Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
Granfondo said:
I have a few friends who work in the oil and gas sector in the North sea who are "ltd Co" they are no more running a business as flying to the moon!
Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
If the O&G sector want to employ contractors that's fine. For insurance purposes the individuals need to run a Ltd Co. The contractors then whining about being let go suggests they considered themselves employees of the client, not their company (IR35!). All the IT contractors I know don't flaunt their rates and don't complain about termination of contract - that's the deal.Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
IMO if you can't make the rate YOUR COMPANY charges cover a decent period with no invoicing (i.e. continue paying the company's employees and/or directors for a good few months at least despite no invoicing), then you shouldn't be contracting. Lots of people seem to struggle with the conceptual and legal separation of the contractor and their company too.
Dr Jekyll said:
Granfondo said:
I have a few friends who work in the oil and gas sector in the North sea who are "ltd Co" they are no more running a business as flying to the moon!
Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
So if a contract is offered subject to working through a Ltd co, what exactly are they supposed to do?Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
What I was getting at is they are only a Ltd Company in name only!
Mrr T said:
Have to disagree.
I have seen lots of contracts which lawyers or accountants say are IR35 compliant. However, IR35 is so widely drawn my own view is almost all contracts (where a contractor works for a period for a single employer) are open to challenge. I suggest the decision in HMRC V Dragonfly supports my view. I know the case was before the NHCT so is open to appeal to higher courts. But if its not over turned then I think lots contractors may be getting large bills.
Just because something is open to challenge by HMRC does not mean that HMRC will win.I have seen lots of contracts which lawyers or accountants say are IR35 compliant. However, IR35 is so widely drawn my own view is almost all contracts (where a contractor works for a period for a single employer) are open to challenge. I suggest the decision in HMRC V Dragonfly supports my view. I know the case was before the NHCT so is open to appeal to higher courts. But if its not over turned then I think lots contractors may be getting large bills.
The problem in the past was that people thought that the wording of the contract was all that was needed to ensure IR35 didn't apply. That is not so and has been proved in a number of IR35 cases - including Dragonfly Ltd.
I did make a point of saying that what is written in the contract is NOT the really important factor - although it IS important. How the relationship between the contractor and the principal is conducted is by far the most important factor.
Granfondo said:
Dr Jekyll said:
Granfondo said:
I have a few friends who work in the oil and gas sector in the North sea who are "ltd Co" they are no more running a business as flying to the moon!
Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
So if a contract is offered subject to working through a Ltd co, what exactly are they supposed to do?Now that the sector has slowed right down and they are sent home because they are not "employees" is unfair, the fact they have been dodging tax and NI for years is lost on them!
What I was getting at is they are only a Ltd Company in name only!
And HMRC has absolutely no problem whatsoever with individuals operating through limited companies. The issue they have is when the limited company is used to "disguise" what should really be a formal employee/employer relationship. If such a "disguised" relationship exists, IR35 will apply.
However, HMRC are happy to let the company continue.
However, HMRC are happy to let the company continue.
Eric Mc said:
I did make a point of saying that what is written in the contract is NOT the really important factor - although it IS important. How the relationship between the contractor and the principal is conducted is by far the most important factor.
I agree completely. I have worked with many contractors I do not remember one whose nature of work, place of work, and reporting did not put them clearly within IR35. Most so far have not received demands but I am sure they are on the way.
FredClogs said:
Just start a new Ltd company every two years or so to reduce possible liabilities. Obviously we should all be aware of our obligations under IR35 as Eric MC suggested above, and make sure we comply, but if you're careful about the wording of the contract and the way you work the chances of getting caught in breach are tiny (the chances of getting an investigation are tiny to start with) and your liabilities if you manage yourself properly are small.
I suspect that chopping your limited company for a new one every few years will only serve to attract increased scrutiny from HMRC.I always have my contracts reviewed by an expensive IR35 expert and despite successfully negotiating (or rather dictating) terms to agencies I am finding they are increasingly reluctant to even discuss and rather wish to apply standard T&Cs which fail to take into account the true nature of the engagement. I think this has arisen because more clients now have large, centralised recruitment and procurement managed services provided by 'big' agencies and are ever less likely to wish to engage directly or via smaller agencies who are generally more discerning and accommodating.
As per my previous post I believe the most important thing to focus on is ensuring your working practises are as autonomous and independent as possible. Few contractors I work with have adopted a truly independent mindset and most seem happy to work under client direction. I'm always swift to distinguish myself in this respect. I also have multiple revenue streams and regularly deliver consultancy services to other clients - every single calendar month I invoice at least 3 clients and sometimes more. I also subcontract work occasionally. These are all generally good ways in which you can help distinguish yourself as a supplier instead of an employee.
HMRC simply can't look at everybody.
There are many limited company contractors out there who should be very worried about IR35. However, in most cases nothing happens because HMRC does not have the resources to examine each case in detail. Now and then however, one unfortunate contractor falls into their clutches and it becomes very expensive.
There are many limited company contractors out there who should be very worried about IR35. However, in most cases nothing happens because HMRC does not have the resources to examine each case in detail. Now and then however, one unfortunate contractor falls into their clutches and it becomes very expensive.
Eric Mc said:
HMRC simply can't look at everybody.
There are many limited company contractors out there who should be very worried about IR35. However, in most cases nothing happens because HMRC does not have the resources to examine each case in detail. Now and then however, one unfortunate contractor falls into their clutches and it becomes very expensive.
I agree, but I do get the impression HMRC is starting to look more closely particularly at small Ltd with high dividend levels. There are many limited company contractors out there who should be very worried about IR35. However, in most cases nothing happens because HMRC does not have the resources to examine each case in detail. Now and then however, one unfortunate contractor falls into their clutches and it becomes very expensive.
As you also say for those caught its maybe expensive since HMRC can potentially go back for ever.
It does worry me many accountants, some who are even qualified, are not explaining the risks to clients.
Ultimately you take your chances. I know one contractor facing demands of over £120k. This is just 6 years if he loses I am sure they will go back further.
Mrr T said:
Eric Mc said:
I did make a point of saying that what is written in the contract is NOT the really important factor - although it IS important. How the relationship between the contractor and the principal is conducted is by far the most important factor.
I agree completely. I have worked with many contractors I do not remember one whose nature of work, place of work, and reporting did not put them clearly within IR35. Most so far have not received demands but I am sure they are on the way.
hmrc have introduced quarterly reporting requirements that compel employers to report quarterly all payments to all non paye staff (ltd co. and umbrella) which will automatically flag up those people who are disguising themselves.
the next step is obvious......... they are clearly looking to clarify the currently muddy water between avoidance and evasion.
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