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Clumsy Accountants cause IR35 havoc

16th September 2009

There has been a recent article published in Accounting Web entitled “Accountants’ IR35 knowledge worryingly vague”. As many of our contractors are not members of this website, we thought it would be useful to post something on our website about the issues that they addressed.

The article painted the picture that following much research in the UK, the consensus is that most high street accountants have very little comprehension of the intricacy’s and legislation surrounding IR35. This has caused massive uncertainty across the board and ultimately puts the UK contractor market at risk if they are receiving potentially inaccurate and flawed advice. More precisely, Accounting Web quoted a couple of firms who were questioned about IR35 as saying “Contractors didn’t need to worry about IR35 and the legislation had ‘died a death’”. Knowing the level of resources HMRC have allocated to IR35 investigations, these statements seem ludicrous and dangerous to us.

Contracting is always going to be a part of our economy, but not all contractors are affected by IR35. However establishing who is and who isn't, is an intricate process especially as those inside IR35 will pay considerably higher tax that those outside. However if IR35 is ignored and the company investigated is found to be within IR35, the consequences and penalties could be even more severe.

Interestingly, Accounting Web made reference to the fact that IR35 has caused many contractors to opt into Umbrella payroll schemes instead of starting their own Limited Company, resulting in many of them paying higher levels of tax by not utilising the tax efficiency of operating their own business. Sadly, if many of these Umbrella contractors had sought a contract review they would have been reassured that they could legitimately run their own limited company whilst maintaining full IR35 compliance.

Thus, it’s critical that contractors acquire specialised and trustworthy IR35 advice. As Carrington is PCG qualified, having completed and continuing a rigorous training program, we are competent to advice on all aspects of IR35 such as Control, Independence, Substitution, and Mutuality of Obligation. We will meticulously review your contract for a fee of £175 + VAT and offer you an IR35 investigation guarantee if we deem you to be outside of IR35. Every contractor should protect themselves with a review at the beginning of each new contract they are offered.

We would encourage you to contact Carrington Accountancy on 020 7324 6020 for further details.

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