Website venture: in business on my own account?
A reader asks:
As well as being my original contract company, since Dec 1999 my limited company has also been used for my own successful website venture, and my wife's IT PR consulting (all from home and on own equipment). The website venture has revenues of approx. £5000 per month from various other companies, and incurs significant monthly overheads as well - approx £1500 monthly. This includes website hosting charges and buying in data. Prior to accepting my most recent contract I spent 3 months solely working on this website. We have had business cards and letterheads printed for it and also spend money advertising the website. We also have had a dedicated business phone line/ISDN installed. Additionally I have bought a lot of computer hardware to develop and host the site. I also have public liability insurance, and business equipment cover.
While my current contract is allegedly IR35 compliant, I don't truly believe this is the case - and was prepared prior to the recent statements by the judge in this case, to pay up on the portion of income derived from this contract. However I do believe I have taken significant risk with my website and am definitely in business on my own account with respect to this, which may exempt me from IR35.
How should I proceed? Is it wise to approach the IR? Should I view myself as 'in business on my own account' and just not pay up at all, or should I pay PAYE on my contract earnings only.
Kevin Miller replies
Your situation looks pretty much like a real business to me. There is evidence of financial investment in equipment and you are taking financial risks. You have a proper business set up with an office that is used for client work. Given that you host websites for other businesses have you also got professional indemnity insurance to cover the risks that your clients sue if the web site service goes down?
Even if your current contract is marginal re IR 35 you also need to think about whether the salary you take out of the business exceeds the deemed payment that would otherwise be payable on the contract? If it does there will be no deemed payment and no further tax due under IR 35. If that is the case then it is not really an issue whether you ticked box 6 no. They can't penalise you if there is no further tax due.