Contractors' Questions: Is this a workaround to the new IR35 rules?

Contractor’s Question: Regarding the public sector’s now in-force off-payroll rules, can I get around them by simply working with other contractors to avoid being a PSC? If I can’t, and there’s no workaround, I’ll likely make my company dormant, rather than liquidate, before accepting a temporary IT development role at a charitable organisation. Please advise.

Expert’s Answer: As to your first question, the answer is ‘no.’

Whatever form your company takes it will be considered an intermediary. To “get around” the April 6th legislation you must own less than 5% of the shares in the company (this includes your wife and/or relatives). This arrangement used to be known as a ‘composite company,’ and broadly fell out of use with the introduction of the Managed Services Company legislation in 2008, so beware. Also, it is not beyond the realm of possibility that a provider introduces this type of arrangement.

In terms of the position of your company, you mention making it dormant. Your company can indeed be put into a “non-trading” position. You will still need to file Confirmation Statements, Annual Accounts and Corporation tax returns for the company, but these will be more straightforward than those of trading companies. You can be de-registered for VAT and PAYE, while retaining the company name should you wish to us it again in the future.

The decision to remain dormant or liquidate is often dependant on the amount of reserves in the company and tax planning opportunities. I recommend you seek tailored and face-to-face advice before pursuing either option.

Lastly, you say the assignment you’re looking at is for a charity. Well, you might be interested to know that some charities are caught by the new rules; and some aren’t. To put the affected status of the charity beyond doubt, simply ask it or, if not, visit this page on https://www.whatdotheyknow.com; it lists all 19,258 public authorities. Good luck!

The expert was Helen Christopher, operations manager of contractor accountants Orange Genie.

Editor’s Note: This is part three of a Contractors’ Questions series based on questions posed in a ContractorUK webinar on the April 6th off—payroll rules. Read part one and part two.

Tuesday 23rd May 2017