Beware quick-fix IR35 avoidance products

An article in The Times money section today 3 May, issues a timely warning against products that promise protection against IR35.

Avoiding IR35

The article warns against the easy allure of model contracts that offer a "get out of jail free and pass IR35 card". I have always counselled against quick fixes for IR35 whether they are model contracts or complex schemes such as many of the umbrella companies that use dubious and increasingly discredited techniques such as employee benefit trusts, loans in weak currencies and the diversion of monies offshore.

One point I would take issue on is the suggestion in the article that those seeking guidance on their contracts could use the Revenue's own contract review service. Despite assurances that they approach their review impartially there is considerable evidence that when the position is not clear cut they tend towards viewing a contract as caught by the IR35 legislation. Once they have pronounced a contract caught by IR35 it can be an uphill struggle for a business to prove otherwise.

This was clearly demonstrated in the recent High Court appeal case of Synaptek where a small business volunteered its contracts to the Revenue for an opinion and then spent 2 years trying to overturn the Revenue's view that one of their contracts was caught. Despite having been found to be in business on his own account, Gordon Stutchbury, the owner of the business nevertheless lost his appeal to the High Court and has had to pay additional tax and NIC in respect of his main contract.

Kevin Miller FCA; UKTECH