Short term inside IR35 contract amidst outside IR35?

[uyejyen]

Hi folks, apologies if this has been discussed before. I did search but there is so much use of "inside" "outside" and "ir35" it is somewhat difficult to find an answer.

I've been working on a public sector, outside IR35, contract for around three months this FY. Six month total duration.
I'm now considering a two-month contract, which my accountant seems to want to declare as outside but I'm not having it*.
At the end of this contract I will have a short break and take on another ~6 month contract outside IR35.

On the basis that I'm not trusting my accountant on this one, can you guys explain exactly how the two contracts would interact over a financial year? Would I simply treat the second contract as salary and then not pay myself for the rest of the year, only dividends?

For arguments sake let's say the contracts gross £25k, £10k and £40k to give a nice round(?) figure of £70k.

* They've given me a company car, fuel card, no financial risks to my company.

[mudskipper]

I'm assuming the new contract is private sector.

Yes, you basically take all the IR35 caught income as salary, or stick it into your pension (there's a 5% allowance for expenses). Don't forget that you can't claim T&S.

If it public sector, it's a bit different - see the FAQs in the public sector forum.

[uyejyen]

Second contract is private sector, yes. Will discuss pension options with my accountant. Not concerned about T+S as theyve given me a vehicle and fuel card. Lunch is bring your own anyway given site locations. It's pretty local too so no digs.

[northernladuk]

You shouldn't be taking IR35 advice from your accountant. Get the contract over to QDOS and see what they have to say. If they say inside then I'd probably be doing as you said.

[uyejyen]

You shouldn't be taking IR35 advice from your accountant. Get the contract over to QDOS and see what they have to say. If they say inside then I'd probably be doing as you said.

OK will do, thanks. But given the perks of the contract e.g. Free loan of car, surely it's not worth the fee to be told "yeah you're inside"?

Working practices trumps contract and all that?

[Patrick@Intouch]

So, your first contract was outside IR35 and the income that the company generated from this contract was used by your company to meet its running costs and provide you with remuneration. Your remuneration would have been split between salary and dividends in a ratio determined by yourself.

It is certainly unusual for a client to provide a third party with a vehicle and fuel card. It would be interesting to understand the other details of this contract and the interactions between you and your client as this may look very different if the car were not an issue.

If this contract is inside IR35 then any income derived from this contract would need to be subjected to a deemed salary calculation with the majority of this income then being processed under PAYE as salary paid to you by your company. You would then assess your income for the tax year to ascertain the tax impact of any dividends already taken as well as any that are planned for the remainder of the year.

As you have said that you are local to the client, does the benefit of having the car outweigh the potential differences in tax between this contract being outside of IR35 versus inside?

There are lot's of avenues to investigate with this and it would certainly be worth a conversation.

[northernladuk]

OK will do, thanks. But given the perks of the contract e.g. Free loan of car, surely it's not worth the fee to be told "yeah you're inside"?

Working practices trumps contract and all that?

Ah well yes absolutely, if it's so blindingly obvious you could be right. Obviously we don't know how much you know about IR35 and the details of the gig but if there are more example like that you are likely to be right. That and the fact not taking any further wages after this isn't really making much different over the year it could be the no brainer you say.

That said if you have TLC35 from QDOS you get some contract checks free. I thought it used to be 3 a year but things seem to have changed not so long ago so I'd just check that.

[northernladuk]

What does strike me as odd is if this is so obviously inside IR35 and your accountant is saying outside I'd be taking him to task about that. We don't know here but on the face of it that's staggeringly poor advice.

[Qdos Contractor]

That said if you have TLC35 from QDOS you get some contract checks free. I thought it used to be 3 a year but things seem to have changed not so long ago so I'd just check that.

Unlimited assessments with TLC35.

[northernladuk]

Unlimited assessments with TLC35.

Oh wow. There is me thinking it was 3 and it might have gone down to one. Got that one totally wrong. Has that changed recently? Is it one free with PI/PL or does having just that not give you any?

Need to go back and read the site again but thanks for that.