Completely lost

[nickd01]

This is my first post here, so be gentle

I am contracting through my own Ltd company (Where I am the director and my dad the secretary) and have been doing so for about 4 years.
The problem is, I pay full wack PAYE & NI every month just like a permie would. My accountant basically said I'm caught fair and square by IR35.

Recently, though, more and more contractors working with me appear to use various means to reduce their payment to Mr. Brown. I am very risk averse and cannot afford a huge tax bill in 5 years time if I sign up to a "dodgy" scheme. So, can someone please explain in simple (!) terms what the best way to set myself up to reduce my tax bill is?

I've seen numerous schemes advertised offering take-home of 70%+ of your invoice amount. Are there any of these schemes that allow me to take home a bit more than my current 50% of invoice amount but that I wont be looking over my shoulder for the next 10 years incase I get a knock at the door for xx years of backdated tax?

Nick

[gtullett]

There are a lot of things you can do that are completely above board and will increase your take home, substinance is one, where you can claim a certain amout per day just for being away from home it not much about £25 per day but its a start, travel, training etc are all perfectly ok to claim as expenses.

There are some grey areas as well such as hotels up to the value of £45 which dont need receipts.

If you take the time you can increase your income, best way is to get someone to do it for you, such as an umbrella, parasol it are good, all done online and they do things buy the book.

[Mailman]

Simple answer, get a different accountant who says you arent IR35 caught

Mailman

[gtullett]

Basically Mailman is right and thats what i have done, i think you can even insure against ir35 but dont quote me

[xoggoth]

You really don't have that much at risk. Provided you make a proper assessment that you are not caught and can demonstrate that, then if the IR find you are caught you will pay interest but not penalties. IR interest is flat rate, check their site for current rates. If you invest the money you might have to pay them in the best deposit account you can find, the net amount you owe at worst case may be about 1 to 2% a year. If you insure for about £150 you get all your costs to appeal paid and they will probably not pursue a borderline case. You are safe after 6 years and usually after three.

[handsfree]

You really don't have that much at risk. Provided you make a proper assessment that you are not caught and can demonstrate that, then if the IR find you are caught you will pay interest but not penalties. IR interest is flat rate, check their site for current rates. If you invest the money you might have to pay them in the best deposit account you can find, the net amount you owe at worst case may be about 1 to 2% a year. If you insure for about £150 you get all your costs to appeal paid and they will probably not pursue a borderline case. You are safe after 6 years and usually after three.

Very good post. Thanks Xoggoth.

My understanding is that you should make this "proper assessment" for every contract you have. This means writing a statement of how and why you came to the objective conclusion that IR35 does not apply to your situation. Very useful to have in any future investigation.

Do you think there is any value in having 'Confirmation of Arrangements' (COA's) letters signed by the client? I get the impression they were considered useful by some contractors, but it seems the IR is ignoring them?

Thanks

[lawspeed]

Confirmation of Arrangements

Obtaining input from the client during or after an engagement setting out their understanding of the actual working practices can be extremely helpful to reach a satisfactory outcome of an IR35 dispute. It is important to get this very carefully drafted because:

- The document is only useful if the facts set out do actually support your case for deemed self-employment!
- Terminology can be very important, seemingly cosmetic 'semantics' could have a bearing on the interpretation of your status (e.g. "Working from 'home'...").
- Putting words into the client's mouth can reduce the evidential weight of the final document.

Best advice is seek professional advice on the structure of this document. It is also vital to ensure that the client signatory is a viable 'witness' - by this I mean they should be 'proximate' and therefore know what your working practices really are and they should be 'credible' as an actual representative of the client. Seeking input from your project manager who himself is an independent contractor is certainly not as helpful as if he were a senior employee within the client company.

In our experience (over 130 successfully completed Revenue cases) the Revenue does more recently seek to question the client even after receiving this 'Confirmation of Arrangements' but our ammunition is massively improved by having this documented evidence to hand to refute the Revenue's 'interpretation' of the client's off-the-cuff comments.

[rootsnall]

My current thinking is that if you work via a Ltd Co, get IR35 friendly contracts, declare yourself outside IR35 and insure yourself for legal costs then the odds are strongly in your favour that you won't cop for a big tax bill. However I don't think there is any way of making yourself bullet proof ( especially if legal rulings change things or retrospective legislation is brought in ) and you have to live with this uncertainty, its your choice in the end !? Most contractors I know are taking the risk.

[Bagpuss]

nickd01 you have PM

[John Galt]

There are a lot of things you can do that are completely above board and will increase your take home, substinance is one, where you can claim a certain amout per day just for being away from home it not much about £25 per day but its a start, travel, training etc are all perfectly ok to claim as expenses.

There are some grey areas as well such as hotels up to the value of £45 which dont need receipts.

Think you should check this Gullet me old mullet. Can't see Gordon Brownstuff letting you off £125 tax per week just 'cos you've got a contract and I am pretty sure that you need receipts for everything.