As a director of a limited company, it is your duty to ensure that your company pays the correct tax, and, of course, it is your responsibility to ensure that your personal tax affairs are in order. Therefore, the onus of getting the employment status of a particular engagement that your company is undertaking also falls to you.
This clearly is not always straightforward, and it is therefore highly unfair that the decision on a complex tax matter should be left to an individual whose expertise lies outside of tax. However, those are the rules and getting that decision wrong could prove costly – not only will HMRC seek to recover the lost tax and interest, but they will also seek to levy a penalty on the basis of taxpayer negligence.
It seems extremely sensible therefore to have your contract reviewed. This gives you the peace of mind to know that if your engagement does fall outside of IR35 then you can distribute the company profits accordingly. Furthermore, you have an independent opinion which shows that you have taken reasonable care to establish the tax opinion and HMRC therefore cannot justify the levying of a financial penalty.
Freestyle Accounting clients can apply to Abbey Tax to have any of their contracts reviewed as part of the Freestyle Contractor Service.
What’s involved in an IR35 Contract Review?
The review has two distinct parts: firstly, the contract wording is considered with particular attention paid to how it deals with the three key elements of substitution, control and mutuality of obligation; secondly, a questionnaire which you will be asked to complete will seek to address both the working practices of the assignment and the business practices of your company.
A summary report is provided, which will conclude with a “pass” or “fail”. If you would like a full report, which will also include suggested improvements to the contract wording, then this can be arranged separately with Abbey Tax Protection for a £75 + VAT (£88.13 gross) charge.
Abbey Tax also provides a tax losses insurance which is designed to reimburse the tax, interest and any penalties that may be incurred if a contract which they have reviewed and deemed to be outside of IR35, is subsequently challenged by HMRC and successfully reclassified as ‘caught’. If you wish to know any more about this insurance or the contract review service, then please contact Abbey Tax directly on 0870 607 7000 or by e-mail at firstname.lastname@example.org