Long Contracts - Do I Extend?

[Ian3Vale]

Hi there

I have been with my existing client for a period of 2.5 years and have been offered a further 6 month extension. I have not claimed any expenses since Jan 08 - when I hit the 2 year rule.

I have spoke to my accountant re the IR35 risks of staying in the same contract and he has suggested dissolving my existing Ltd company and starting a new one.

The work is overly exciting but over the time of the contract I have negotiated a good rate.

Anyone have experience of long contracts and any IR35 implications who can give me the benefit of their wisdom - to my mind I have 3 choices:

(1) Just carry on with existing Ltd and keep fingers crossed that the HMRC flags dont go up;
(2) Do as my accountant suggests - dissolve and start again
(3) Just leave

Any advice would be much appreciated.

[Platypus]

Hi there

I have been with my existing client for a period of 2.5 years and have been offered a further 6 month extension. I have not claimed any expenses since Jan 08 - when I hit the 2 year rule.

I have spoke to my accountant re the IR35 risks of staying in the same contract and he has suggested dissolving my existing Ltd company and starting a new one.

The work is overly exciting but over the time of the contract I have negotiated a good rate.

Anyone have experience of long contracts and any IR35 implications who can give me the benefit of their wisdom - to my mind I have 3 choices:

(1) Just carry on with existing Ltd and keep fingers crossed that the HMRC flags dont go up;
(2) Do as my accountant suggests - dissolve and start again
(3) Just leave

Any advice would be much appreciated.

I'm sure there is case law pointing to length of contract not being a factor in IR35, but I'll defer until someone like Malvolio comes along. There are people on here better qualified than I am to cite case law.

However I'm certain that you shouldn't "just leave" unless you think that you are already working inside IR35 in which case (2) would probably be a better course of action. In my opinion.

[Lewis]

Hi there

I have been with my existing client for a period of 2.5 years and have been offered a further 6 month extension. I have not claimed any expenses since Jan 08 - when I hit the 2 year rule.

I have spoke to my accountant re the IR35 risks of staying in the same contract and he has suggested dissolving my existing Ltd company and starting a new one.

The work is overly exciting but over the time of the contract I have negotiated a good rate.

Anyone have experience of long contracts and any IR35 implications who can give me the benefit of their wisdom - to my mind I have 3 choices:

(1) Just carry on with existing Ltd and keep fingers crossed that the HMRC flags dont go up;
(2) Do as my accountant suggests - dissolve and start again
(3) Just leave

Any advice would be much appreciated.

Presumably if you start a new Ltd you can benefit from the 1% flat rate VAT discount again

I can see no downside to opening a new Ltd other than hassle and small cost. But the big upside is that I think you are pretty much IR35 home free once it is closed.

Sounds like a good idea to me.

[malvolio]

Two choices really - stay as you are an risk and IR35 investigation or close the company and risk an IR35 investigation. Since duration of contract is utterly irrelevant in terms of IR35, but non-business related changes of structure - especially where you are staying wth the same client - are a potential trigger, which is the safer option?

One of the earlier (and still unchallenged) IR35 wins, the guy had been with his client for 7 years; others have been longer. That's good customer management from where I sit...

Be realistic. You're doing nothing wrong. Ignore the accountant's FUD (and get one that understand the rules properly...). Take the extension.

[rawly]

Whether people like it or not, there is no known case of an investigation for a contract less than 4 years long.

My advise is, keep the company, and dump the client. Move on, fresh place, new contract, higher rate, safe as houses.

[Lewis]

Whether people like it or not, there is no known case of an investigation for a contract less than 4 years long.

My advise is, keep the company, and dump the client. Move on, fresh place, new contract, higher rate, safe as houses.

That's interesting. Where did you get that information from?

[ChimpMaster]

- especially where you are staying wth the same client - are a potential trigger, which is the safer option?

And this is the crucial point. If you were leaving this client and starting another contract elsewhere, then closing the Ltd would have more relevance. Closing the Ltd and starting a new one, whilst remaining in exactly the same course of business, will not be lightly seen at HMRC.

I understand your position, in that closing a Ltd ties up loose ends and closes potential IR35 issues that might otherwise arise.

Wait until the contract is over before doing what your accountant suggests. It's even better if you have some time off between contracts in this case.

[malvolio]

That's interesting. Where did you get that information from?

He read it on a lolly stick...

[pmeswani]

He read it on a lolly stick...

Must have had a lot of lolly in his time.

[Fred Bloggs]

At the moment IMO it would be rash to not extend. Duration on its own has little to do with IR35. Get a better accountant.