Contractors' Questions: Any IR35 risk to using client’s staff hire cars?
Contractor’s Question: My client uses hire cars for permanent employees for travel. The client wants contractors to use the same vehicles and just claim back the petrol costs. Would using the full-timers’ cars be unhelpful for IR35? How do I relay this without causing a fuss?
Expert’s Answer: If the client were to provide you with a hire car for your business travel in the same way that they do for their permanent employees, HMRC would likely argue that this is an employment-type benefit and therefore you are integrated into the client’s organisation, as the hire car would be at the client’s expense. This would therefore be an issue that the Revenue would use to suggest you are caught by IR35 in the event of an IR35 enquiry.
Although in isolation this hire car issue is unlikely to be conclusive, it certainly would not help demonstrate that your limited company is operating as a genuine business in its own right. A genuine business would be expected to arrange and fund their own travel and where applicable, any other equipment wholly necessary to the provision of the services.
As IR35 is such a complex piece of legislation, our advisory always has to consider all the relevant facts and key tests to ascertain a contractor’s IR35 status. Anything that can be done to improve the prospects of success in an enquiry could tip the scales in favour of the contractor and any negative issues, where possible, should be avoided.
Under the new guidelines for Travel and Subsistence (T&S), if you are operating outside of IR35 you can claim relief for your home-to-work travel expenses. Therefore, assuming you are operating outside of IR35, traveling by your own means and then claiming relief for T&S would be most consistent with operating a genuine business.
Should you adopt this approach, then explain to your client how using the hire car could have a negative impact on your self-employed status and would cause unwanted attention should HMRC approach. An explanation like this may help the client understand that you are not trying to be awkward but do wish to look after your company’s best interests.
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