IR35
Since the now infamous pre-Budget anouncement on
9th March 1999, press release number IR35 has caused much concern
and problems for those workers who trade through a personal service
company, particularly contractors
in the IT, Telecoms, Engineering and other knowledged based consultancy
sectors.
Typically, an annual tax
saving of £12,000 can be secured if your
affairs can be structured to fall outside of IR35. This arises
by drawing profits from your personal company by the most tax
efficient remuneration package (small salary + balance as dividends),
rather than the high salary package required if caught by IR35.
All such businesses must assess their current IR
35 risk exposure (via
example IR35 checklist) and decide which of the following
options is most relevant to them:
- If it appears IR35 does apply:
- Accept that IR35 cannot be avoided, and:
- Comply with the prescriptive requirements of paying
an actual or 'deemed' salary through your own personal
service company,
- Seek an HM Revenue & Customs ruling on status,
- Cease trading through your own personal service company
and transfer onto the payroll of an umbrella or composite
company,
- Cease trading through your own personal service company
and transfer onto the payroll of your client,
- Amend your actual and documented contractual
arrangements to keep outside of IR35,
- If it appears IR35 does not apply:
- Seek an HM Revenue & Customs ruling on status,
- Continually improve actual and documented practices to
evidence your opinion that IR35 does not apply.
One of our more popular IR35 services involves us
reviewing your current work practices and providing an opinion
on how we believe the Inland Revenue would catagorise you. We
will prepare a detailed report on the positive, neutral and negative
aspects of your current arrangements and make practical suggestions
on improvements you may wish to consider, if commercially acceptable
to both you and the client. This service is provided by an ex
Inspector of Taxes, who now works for us as a senior tax manager.
His Revenue experience of status disputes and his up to date knowledge
of relevant case law make this a service that will usually pay
for itself many times over.
Clients who are fearful that their IR35 situation
may be investigated
by HM Revenue & Customs, through a corporation tax return enquiry
or PAYE control visit, may wish to consider taking out our
fee protection insurance.
Whether or not IR35 applies, we offer a mix of services
that most Contractors will need, as back office support, to run
their business:
We intimately understand how important to you it
is that you stay outside of the requirements of IR35. We also
understand how you need to be told the truth, even if it means
IR35 does apply and probably always will.
Practical Examples of our IR35 Expertise
- Preparing dormant accounts for Contractors who have
transferred 'onto the books' of the client.
- Acting for Contractor
clients who are geographically remote from us.
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- Operating the
payroll and calculating the year end IR35 'deemed
payment' IR35 adjustment.
- Corresponding with HM Revenue & Customs, on your behalf,
in relation to IR35 status disputes and the related tax
enquiries.
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