IR35 Vs CONTRACT LAW

[DRICH1]

Hello,
I am a new member and have a question....If you have a contract for services where the parties clear intent was for a client-contractor arrangement not an employer-employee arrangement does an IR35 determination over rule this and can the client use said contract to determine a relationship not intended by the contract?

[R0b]

That depends whether the services are being provided through an intermediary. IR35 only applies in that case so if the contractual relationship is between A Company Limited and Mr Joe Bloggs, IR35 probably isn't going to apply.

[DRICH1]

Ok so this is between my PSC and another larger LTD?

[R0b]

What is a PSC?

[DRICH1]

Professional services company

[DRICH1]

Basically I am a small limited construction company

[R0b]

So then yes, IR35 would be applicable because the company is the intermediary, rather then contracting personally with you. Have you gone through the CEST tool to see what it says?

[DRICH1]

Thanks Rob for all your help and yes I have done the CEST tool as you suggested. The problem is when it comes to vehicle costs my client wont accept it as a financial risk. My arguement is that I use my own vehicle which needs to have business insurance on it and because my business miles are twice my normal miles both maintenance costs and depreciation not to mention extra business insurance give me significant financial risk. They wont accept this. My travel back and to from their office is at my cost and they pay me 25p per mile for travelling to other offices or locations around the UK. What are your thoughts? Thanks in advance.

[R0b]

That doesnt sound like an IR35 issue, rather it sounds like a commercial point up for negotiation at the time you agreed the contract.*

If you knew that the additional cost puts you under financial risk then you shouldnt have agreed to the contract or at least negotiated a price sufficiently covering your expenses.

Is that not the case?

[DRICH1]

Rob I never thought it would be an issue my contract clearly states a client-contractor relationship in at least 3 places so my additional costs could have been absorbed by the company. Now its not the case I have lost that ability. I think companies are also forgeting the CEST Tool is a guide and the actual deciding factors should be is my engagement the same as an employee. I see plenty of differences. However as the HMRC as saying the client should deal with any appeals who does the contractor take to a tribunal? I can see it being very awkward to make it my client and the end of our relationship if I do.

[R0b]

I'm really struggling to see what exactly your issue is. A contract is made under common law and the IR35 has been enacted by legislation so whatever your contract says is irrelevant if it conflicts with what the rules around IR35. HMRC have confirmed that they will stand by the CEST tool provided the information input is accurate. If, after any appeal your client does not uphold it, then I believe it would become a breach of contract issue and a claim for unpaid debt.

Again, I don't see what IR35 has to do with what you agreed with your client about expenses and travel. If you want to avoid the IR35 situation, then you should be contracting personally with your client and not through a middle man.

I'm not a tax expert so my understanding of IR35 is limited but I do know that you aren't the only person in the same situation who is going to drastically lose out. Unofrtunately, you can complain and moan about it but the reality is that it is still going to happen, so you need to get ahead of the curve and perhaps seek some tax advice on how to make the best of your situation.

[DRICH1]

Thanks Rob. I will consider my position some more but I still feel IR35 CEST tool is a guide and whilst my assessment says out my clients says in. As clients have nothing to gain and everything to lose Im not convinced it will be applied correctly. I feel my appeal has to be heard by HMRC not my client as these cases will need to go to tribunal to be concluded fairly and I would rather it be HMRC attending than my client qhich would end my contract in any case. At the tribunal I will set out the differences between my engagement and that of an employee which I feel the CEST tool does not consider properly.