Dear Contractor Doctor,
I've had my contract tweaked by a law firm so that it appears more IR35 friendly.
However, I am concerned that if HMRC actually review me they may decide that I'm not outside IR35. I'm saving money in the company account in case I do get investigated, but of course I'd rather take it out. But then there is the risk that I could get caught later.
Do you have any suggestions which you may have regarding this dilemma?
Contractor Doctor says:
It is indeed a shame leaving the money in the company just in case you get caught. To be ultra safe you would have to save it for 5 years since the tax man can only go back that far.
You might be better off taking the money out of the company account anyway and putting it in a personal account if you have an offset mortgage. It will work better for you that way.
Provided you keep a good record of what steps you took and why you concluded you were outside IR35 you will not incur penalties. These need to be avoided if you get caught. 5 years interest on top of the extra taxes would be a further blow.
One option would be to get IR35 tax insurance. There are many companies that offer this service with varying degrees of cover. Some only do investigation defence fees, and others cover all the taxes if you should lose the case. You get what you pay for like anything else.
In terms of getting investigated the chances are very slim. Unless you make a complete mess of your accounting and draw attention to yourself it is unlikely you will get chosen for investigation. There are very few random checks that are done for investigations. Normally, they are hand picked by the investigators. We have a separate article that discusses minimising the risk of a HMRC inspection
Good luck with it all.