Composites What Do People Think Will Happen

[malvolio]

must admit i don't reall know how they work, but I was under the impression a large chunk of your money was tied up as shares so they could pay out large dividends. But then as I don't intend on getting involved with composites I really don't have to worry about my lack of understanding of them

It's not about shares or shareholding, it's about dividends withdrawn to avoid NICs. If the dividend payments are ruled unlawful, since they are either unrelated to the overall company's business or are a pure tax avoidance and not a reflection of profitability, you will be asked for the NICs on all such income. If that's only a liability of £10, someone's been doing something wrong...

[ASB]

but I was under the impression a large chunk of your money was tied up as shares so they could pay out large dividends.

Not shares generally, but retained funds. That which has not been paid out could be at risk.

As Bradley says it is generally difficult for the revenue to transfer liabilities - but it is by no means unknown. If the employer has not been handing over PAYE payments these are difficult to stiff the individual with. If the composite has only been paying CT at the lower 19% rate rather than the full 30% rate it will be difficult (although there was a suggestion the HMRC have recently done exactly that, difficult to see it holding up if challenged by the tax payer).

If dividends have not been paid out of profits it is difficult to get them back.

The exceptions to this are that the taxpayer can be proved to have known it was happening.

I expect the easiest attack will be IR35. Although this is aimed initially at the employer ultimately it is a personal tax - and can get directed at the individual.

[tim123]

The same applies with these umbrella companies that pay out inflated expenses. If the promoters suspect that an "employee" is claiming inflated expenses then they have a duty to report it to the police through SOCA. A suspicion is enough. So if the promoters of the scheme don't report it they are committing a criminal offence and the Revenue/police will go after them first.

Of course you are right that the Police will be able to prosecute them for the incorrect reporting, but that reporting offence doesn't move the tax liability.

The brolly operator can be given a fine for the criminal offence. The "employee" will still be the one who is chased for the un-paid tax.

tim

[BoredBloke]

To ad my 2p. This sums up what is so unfair in the UK. We have a group of companies offering a service which they quote as being 100% legit and safe to use. It is sold to individuals on that basis. Then in a PBR the govt decides to target these companies and the people using them. All the while the companies are allowed to continue trading and pull more people into their organisation. All the while the amount of money which could be owed to the govt builds up. As we all know, govt reviews take forever. So the net effect is that when the rules get changed and the taxman comes knocking, the financial effect on the individual concerned is massive. As with Section 660A, the indiviudual faces financial ruin for simply following the advice given to him.

[Nixon Williams]

A sane person would say that they are doomed, although the Revenue do not appear to know what is going on at the moment so they may survive yet...having said that I would not think they will last much longer as they are clearly being abused.

Alan