Contractors paying more tax than they should because of poor IR35 advice, says survey

[TheFaQQer]

Contractors paying more tax than they should because of poor IR35 advice, says survey

There's some choice advice in here from the head of tax at contractor accountant Abbott Moore, like how you should discuss your salary with your clients, and make sure you focus on IR35 best practice by following the BETs.

[TheCyclingProgrammer]

“Salary levels should be a discussion between a contractor and their client,”

That must surely be an error? I'm sure it should say "contractor and their accountant" which, in the context the quote is taken would make sense as he goes on to say:

“If taking a low salary, the contractor should understand the advantages and disadvantages and the same is true if the accountant suggests taking a higher salary.

I agree with what he's saying though regarding salary level...its been discussed many times on here before but unless contractors are paying themselves a realistic commercial salary then I've never understood the logic that paying a few extra £k (e.g. minimum wage instead of full personal allowance or whatever happens to be the most tax efficient salary for that year) somehow reduces your IR35 risk or chance of getting investigated.

Also, whilst we all know the BETs are bollocks as far as determining your true IR35 status - I'm sure James Abbott does too - if scoring low on the tests is supposed to reduce your chance of being investigated and that is your main aim then it doesn't seem like terrible advice.

Suggesting that scoring low on the BETs puts you outside IR35 or makes you immune to an investigation *would* be terrible advice however.

[jamesbrown]

I've never understood the logic that paying a few extra £k (e.g. minimum wage instead of full personal allowance or whatever happens to be the most tax efficient salary for that year) somehow reduces your IR35 risk or chance of getting investigated.

Quite simply because there is no logic to it. If you're invoicing, say, 100-200k, 10k is not a "commercial" salary, neither is 12k, nor 15k, nor 20k, but all of these figures are justifiable as remuneration for your administrative activities as company director. And, in terms of IR35 targeting, there's a lot of guesswork (they probably do look for low salary/high dividend combinations in general terms, but the above point still stands).

[TheCyclingProgrammer]

Quite simply because there is no logic to it. If you're invoicing, say, 100-200k, 10k is not a "commercial" salary, neither is 12k, nor 15k, nor 20k, but all of these figures are justifiable as remuneration for your administrative activities as company director. And, in terms of IR35 targeting, there's a lot of guesswork (they probably do look for low salary/high dividend combinations in general terms, but the above point still stands).

Well that was kind of my point and also the point, I think, of the linked article.

[jamesbrown]

Well that was kind of my point and also the point, I think, of the linked article.

I know, I'm agreeing

[Zero Liability]

Quite simply because there is no logic to it. If you're invoicing, say, 100-200k, 10k is not a "commercial" salary, neither is 12k, nor 15k, nor 20k, but all of these figures are justifiable as remuneration for your administrative activities as company director. And, in terms of IR35 targeting, there's a lot of guesswork (they probably do look for low salary/high dividend combinations in general terms, but the above point still stands).

From what I've read, the three main factors they look at are dividends:salary, size of the potential yield (which is related to the former metric) and whether you're late in filing returns etc., besides any targeted campaigns they have going on. All this makes sense, because ultimately they will want to maximise their takings given the abysmal cost-efficiency of the measure.

[Contreras]

“Salary levels should be a discussion between a contractor and their client,”

That must surely be an error? I'm sure it should say "contractor and their accountant"

Having met J.A. a few times at PCG events I am absolutely certain that is what he meant to say.

[TheFaQQer]

Having met J.A. a few times at PCG events I am absolutely certain that is what he meant to say.

I had an email from CC about the article which said that they need a better proof-reader

They meant "Salary levels are a discussion between the accountants client, the contractor - not the contractors client."