Contract review says I'm inside IR35 - colleagues working as outside

**DirtyDog** · 10 March 2014, 17:40

Originally posted by Posie View Post

Just had the results of my contract review from B&C (first time contractor). They say based on working practices I'm clearly inside IR35. This is a bit of a blow because friends working on the same kind of contracts are paying themselves as if outside IR35 and their contracts are worded in and 'IR35 friendly' way. The difference is most of them found their contracts via an agency and the agencies take care of the contract. My contract is written by the client. Obviously I could try to get my contract re-written and then conduct myself as if outside IR35 but given what B&C told me I would be knowingly avoiding tax and that's not my aim.

Read what you've written there - "based on working practices I'm clearly inside IR35 ... I could try to get my contract re-written..." Even if you copied your friend's contracts word for word, it would make no difference - it's the working practices that count if you are investigated. Based on the working practices, B&C's expert opinion is that you would be caught by IR35.

Originally posted by Posie View Post

It's quite hard to swallow knowing that everyone else I'll be working with will be taking home significantly more than me and no doubt the people I tell will think I'm crazy for going down this route. I guess most of them will have been told by the agency that they're outside IR35 and are happily going along with that.

You have a choice here. You either declare yourself inside IR35 and pay the tax and NI, or you declare yourself outside IR35, don't pay the tax and NI and hope that you get away with not being investigated. If you are investigated, and it's found that you took expert advice and then ignored it, I wouldn't be surprised to see HMRC apply penalties for tax evasion - you know you shouldn't do it, but decided it was worth the risk, so you deserve the punishment if it comes.

If you're worried people will think you are crazy, why tell them? It's none of their business how you operate your business.

Originally posted by Posie View Post

I'm not sure what advice I'm asking for really. Just wanted some reassurance that I'm doing the right thing I suppose!

If you declare yourself inside IR35, then you are absolutely doing the right thing. You can sleep soundly, and (if you go in for schadenfreude) know that if they get investigated they are in for a reaming.

My last permie gig, I was surrounded by contractors who had been in the game for a while - out of the team of six or seven, one always declared himself inside IR35 and all the rest didn't. No-one seemed to think that he was crazy - his advice from his accountant (note, not an IR35 specialist!) was to declare himself inside and pay the additional tax and NI. I've always suspected that it was less hassle for the accountant who advised him to do it that way, though - once he found out that the accountancy bill would come out of the 5% expenses, he changed tack and advised him to be inside!

If you are really upset by it, you could try to explain to the client that you need an increase to cover your additional taxes, but expect that to fall on deaf ears - the client doesn't care how you run your business. Alternatively, leave the contract and find an outside IR35 one and fill your boots.

**northernladuk** · 10 March 2014, 17:43

Forget what your friends do or say. Their business is theirs and yours is yours. You treat each situation on it's merits and deal with that. To get upset comparing your situation with theirs is just, well, a bit ridiculous.

I presume B&C will have detailed the areas they believe are putting you inside IR35. Why not go back to the client and renegotiate the terms of your engagement to remove the offending practices. I mean from the working practices and not the contract. If they won't budge then that's that. Leaves you with two options, get on with it or turn it down.

**malvolio** · 10 March 2014, 17:46

Originally posted by Posie View Post

Just had the results of my contract review from B&C (first time contractor). They say based on working practices I'm clearly inside IR35. This is a bit of a blow because friends working on the same kind of contracts are paying themselves as if outside IR35 and their contracts are worded in and 'IR35 friendly' way. The difference is most of them found their contracts via an agency and the agencies take care of the contract. My contract is written by the client. Obviously I could try to get my contract re-written and then conduct myself as if outside IR35 but given what B&C told me I would be knowingly avoiding tax and that's not my aim.

It's quite hard to swallow knowing that everyone else I'll be working with will be taking home significantly more than me and no doubt the people I tell will think I'm crazy for going down this route. I guess most of them will have been told by the agency that they're outside IR35 and are happily going along with that.

I'm not sure what advice I'm asking for really. Just wanted some reassurance that I'm doing the right thing I suppose!

You could try for a second opinion, but a judgement from B&C is probably as good as you'll get anywhere. You should also ignore the other lemmings, if you're inside then you're doing the right thing. Worrying about other people's take home is the route to madness; focus on your own take home which is presumably plenty enough for you to pay the rent and feed the cat.

However, next time, make sure you fully understand the rules, make sure you get a good contract on the table (PCG have the full set, including direct engagements; you should join them anyway) and negotiate. Being a contractor is your job now, learn to do it well.

**eek** · 10 March 2014, 18:27

Originally posted by malvolio View Post

You could try for a second opinion, but a judgement from B&C is probably as good as you'll get anywhere. You should also ignore the other lemmings, if you're inside then you're doing the right thing. Worrying about other people's take home is the route to madness; focus on your own take home which is presumably plenty enough for you to pay the rent and feed the cat.

However, next time, make sure you fully understand the rules, make sure you get a good contract on the table (PCG have the full set, including direct engagements; you should join them anyway) and negotiate. Being a contractor is your job now, learn to do it well.

This was an advert on behalf of PCG........

**malvolio** · 10 March 2014, 18:49

Originally posted by eek View Post

This was an advert on behalf of PCG........

Not really meant as such. If you want the best advice and the best resources though...

**TheCyclingProgrammer** · 10 March 2014, 19:17

As above, if your working practices put you inside IR35, then an IR35 contract isn't going to help you much in an investigation.

If you can sort your working practices, then you can look to backing them up with a better contract. But if you want to be outside IR35, your working practices are where you need to start.

Why did B&C think your working practices put you inside?

**mudskipper** · 10 March 2014, 21:09

Originally posted by DirtyDog View Post

If you are investigated, and it's found that you took expert advice and then ignored it, I wouldn't be surprised to see HMRC apply penalties for tax evasion - you know you shouldn't do it, but decided it was worth the risk, so you deserve the punishment if it comes.

Perhaps a good reason for not getting a contract professionally reviewed?

**mudskipper** · 10 March 2014, 21:09

Originally posted by TheCyclingProgrammer View Post

Why did B&C think your working practices put you inside?

WHS - what was it that made you "inside"?

**northernladuk** · 10 March 2014, 21:40

Originally posted by mudskipper View Post

WHS - what was it that made you "inside"?

My money is on a lack if RoS for a start.

Contract review says I'm inside IR35 - colleagues working as outside