View Full Version : New contractor & IR35

21st August 2004, 08:49
I'll be starting my 1st contract in a few months after quiting my permanent job last week. I have read stacks about IR35 over the past year and came to the conclusion that I am unable to determine if I'm in or out of IR35 until I have some contract work history behind me as I don't know the nature of work I'll be doing.
When do you have to declare yourself in or out of IR35 ? I don't want to opt in unnecessarily or get accused of avoiding tax. I see from other posts that an agency may ask you to opt in or out when signing a contract!!!

At this point it is my intention to move around doing short term contracts and not remain with a single client for an eternity.

21st August 2004, 10:22
If you want to know whether your circumstances bring you inside or outside the IR35 legislation then a solicitor or (better still!) a barrister can give you an opinion. They would need to see the contract and also have information about the surrounding circumstances, in order to advise you whether IR35 applies or not.

Note that IR35 is not the same thing as the employment agency regulations "opt out".

John Antell


www.john.antell.name (http://www.john.antell.name)

23rd August 2004, 17:25
Not same thing at all.

NAA but I would not get too concerned about this immediately.

If you think your contract is outside IR35 you will avoid any penalties if you have made reasonable efforts to ensure this is a correct viewpoint. This does not have to include professional input, just do your own research and write down your reasons. There are various contract review services and insurances available if you prefer more certainty.

You theoretically decide at 19th April each year, as that is when any IR35 deemed payment is due from previous year. Assuming there are no penalties as above (and given cases so far you would really need to be taking the piss basically) you would just need to pay interest on amounts paid after that if the IR finds you are caught.

If not totally sure, do the sums to see what you could owe in the worst case and do not spend it. There are several IR35 calculators on the internet. Check what the money can earn in the best account you can find (compound interest) against what you might end up paying the IR in interest (simple interest). Unless you are earning a really high rate you may find the difference is not all that frightening.

Don't forget to claim all expenses and allowances (including pension) to make amount you might owe as small as possible.

23rd August 2004, 22:44
Xoggoth...or anyone else, how often do the IR query the contracts?
If I had say 3 contracts over a year (hopefully), and felt none were inside IR35, would they on me like a spaniard on your sister or do you (or some guy you were talking to in a pub one night) generaly get away with it? :\

24th August 2004, 05:45
The IR have been amazingly lax in checking IR35 status. The vast majority of contractors have never been questioned at all despite probably 50% declaring "not caught".

They can go back over 6 (iirc) years of records though and more if they decide there has been deliberate evasion.

24th August 2004, 09:35
Generally in enquiries they do not go back more than three years and one is not obliged to keep records longer than that. Not sure if IR35 is any different.

PS Fastest thing about a Spaniard on my sister would be speed he tried to escape I think.

24th August 2004, 09:46
I can't speak for how far back the IR go if they do turn up, but you are *definately* required to keep all relevent records for the past 6 years. Chucking them away after 3 is asking for trouble.


24th August 2004, 10:00
Thanks Chaps, I've a feeling my current position is outside IR35 as the boss is never in, there's no direction and the machines are so crap I need to use my lappy to get anything done. :)

24th August 2004, 11:51
The IR's usual method of starting IR35 investigations is the so called PAYE revue.

As stated in a recent thread do not agree to a meeting ! Have a reasonable excuse planned for this eventuality - perhaps your clients cannot spare you. Use your accountant to advise you and deal with the IR exclusively through the post - I don't think the IR have progressed to that new fangled email thing yet :)

24th August 2004, 18:52
Thanks for the advice, I think I'll back both horses and do all I can to stay out of the IR's way, definitely not self declare inside IR35, and keep a bit of money aside in case they do decide I owe them some money.

Not sure I can sit on it for 6 years though !!!

24th August 2004, 21:11
But if you look at the IR's own info tim123, I think it says (this is off the top of my head admittedly) that a company needs to keep PAYE records for three years and info relevant to your personal tax return for 22 months after submission.

I quite agree it would be wise to keep records for at least six years to counter any excessive estimates by the IR, but I cannot see any reason why one should supply information older than three years to them that would not help your own case.

I have had two PAYE enquiries and can say they only ask to see three years' records normally.

24th August 2004, 22:19
www.inlandrevenue.gov.uk/...sme3.htm#5 (http://www.inlandrevenue.gov.uk/e-commerce/sme3.htm#5)

Is your friend. Note that we *are* talking about company records here: the contract and invoices between the Co and its client.


24th August 2004, 23:24
Interesting tim123.

However, if you look at the latest version of booklet 490 it still says in section 11.2 that records relating to employee expenses and benefits need only be kept by the company for 3 years. (And in section 12.1 about the 22 months for personal tax returns)

Yet in the section for your link it lists "all receipts and expenses that arise in the course of the business" which would presumably include employee expenses and benefits. Looks like a clear case of the IR not knowing its arse from its elbow. Not uncommon. (Probably because it is 100% arse and no elbows or other more acceptable body parts)

Your section deals with records to support a company tax return, ie corporation tax. Invoices certainly but not sure a contract is relevant here as IR35 has no direct relevance to CTSA. If you have not paid sufficient salary or a deemed payment you will have paid more CT than you should have, so there is no liability under that heading and it won't be the CT bods pursuing you for dosh.

Suspect we are both rather off the point. Possibly there is something in the IR35 stuff that deals directly with contract records. Anyone know?