To send, or not to send, that is the question? Do you want to stick your head in the sand, spend the taxman’s money and hope he doesn’t catch you, or contact the tax office at the risk of giving more of your hard earned cash to the government?
It seems to be the generally held view by most contractors that if you believe your contract is borderline IR35 then it isn’t really worth sending it in to the Inland Revenue. The IR will, in most cases for borderline cases, argue that it falls inside IR35. It hardly seems worth sending it in really does it?
Still, bear in mind that if the Inland Revenue investigate you they can go back 6 years into your accounts to reclaim tax due, in addition to the large amounts of interest owed. This is a risk many people don’t want to take. Also, many contractors would like to know either way so they can go out and start spending their cash on the latest gizmos and gadgets!
The alternative to sending yourself to the 'IR slaughter house' is of course to put your head in the sand, pretend you’ve passed, and hope for the best. Granted, quite a risky option!
Get a Proper Lawyer
So, for those of you who are going to check the contract with the Inland Revenue there is one piece of advice: Get a lawyer. I’ll say it again. Get a lawyer. Get a lawyer who is an expert on self employment law. One more piece of advice: Accountants manage your accounts. They are not lawyers, nor are they experts on self employment law. Your accountant may well have a little more knowledge than you, but no more than you can pick up by reading up on the subject on various web sites like this one. Do not use your accountant to argue your case against the Inland Revenue. Would you hire a pilot to drive for your Formula One racing team? No. Get the right person for the right job. A trained experienced lawyer who is an expert in self employment law will know more than any accountant on the planet.
An Example
Here is a real life story which shows exactly why you should spend the money on getting a proper lawyer:
I personally know of two people who worked in exactly the same office, doing exactly the same role, and only one of them passed IR35. The contracts were exactly the same. The first used a lawyer who specialised in self employment law. The second asked the advice of their accountant. Both said they were borderline.
The lawyer for the winning case argued with the Inland Revenue and put a very good case forward for the reasons for passing.
Unfortunately in the second case the accountant did not put up such a good fight and the contractor paid the money to the IR.
The fact is that the contracts and roles were the same. If the person that passed did not use a very good lawyer, there is no way he would have passed. He knows little about the law compared to the lawyer, and in hindsight could not have put up the arguments that the lawyer did with the Inland Revenue.
Conclusion
Use the right tool for the right job. Pay top money for the best tools you can find.