"Phoenixing" issue - sue SJD, or any other solution?

[MrMarkyMark]

My view on this would be that the OP should proceed with caution to not fall foul of the rules. I agree that of course there's a reasonable chance they may go back to Ltd Co contracting and not suffer any consequences, either because HMRC don't bother to look, or because HMRC accept tax wasn't a main motivation.

To the comments re going into employment, my understanding is by this they mean the situation below would not be caught:
- Joe Bloggs runs Joe Bloggs Ltd doing IT consultancy.
- Joe Bloggs Ltd is liquidated, capital distribution.
- Joe Bloggs gets a permie role doing IT consultancy for 2+ years.
Ie Joe Bloggs may well be doing similar work post liquidation, but the change from Ltd Co contractor to employee is enough that won't consider it continuing the same trade.

However, in the OP's situation it's a bit different:
- Joe Bloggs runs Joe Bloggs Ltd.
- Joe Bloggs Ltd is liquidated, capital distribution.
- Joe Bloggs gets a permie role for 9 months.
- Joe Bloggs considering setting up Joe Bloggs 2 Ltd.
My understanding would be that they therefore would be returning to the same trade within 2 years, so certainly could be at risk, relying on other get outs (eg tax not a main motivator) to avoid the rules.

My view would be that the OP could of course get other permie roles, or even work via an umbrella to meet the 2 years post liquidation distribution. Then (and only then IMHO) could they return to Ltd Co contracting and be safe.

As others have suggested:
- condition A is pretty clear cut, and virtually every contractor will fall under that one.
- condition C is very vague, so IMHO if you're relying on that, it's a dangerous game.
- condition B therefore is the one that's reasonably black and white (ignoring differing views on same trade/activity), so if it were me, this would be the one that I'd try to ensure I kept on the right side of.

This.
I can't see the OP would have any issues going the umbrella route

[northernladuk]

My view on this would be that the OP should proceed with caution to not fall foul of the rules. I agree that of course there's a reasonable chance they may go back to Ltd Co contracting and not suffer any consequences, either because HMRC don't bother to look, or because HMRC accept tax wasn't a main motivation.

To the comments re going into employment, my understanding is by this they mean the situation below would not be caught:
- Joe Bloggs runs Joe Bloggs Ltd doing IT consultancy.
- Joe Bloggs Ltd is liquidated, capital distribution.
- Joe Bloggs gets a permie role doing IT consultancy for 2+ years.
Ie Joe Bloggs may well be doing similar work post liquidation, but the change from Ltd Co contractor to employee is enough that won't consider it continuing the same trade.

However, in the OP's situation it's a bit different:
- Joe Bloggs runs Joe Bloggs Ltd.
- Joe Bloggs Ltd is liquidated, capital distribution.
- Joe Bloggs gets a permie role for 9 months.
- Joe Bloggs considering setting up Joe Bloggs 2 Ltd.
My understanding would be that they therefore would be returning to the same trade within 2 years, so certainly could be at risk, relying on other get outs (eg tax not a main motivator) to avoid the rules.

My view would be that the OP could of course get other permie roles, or even work via an umbrella to meet the 2 years post liquidation distribution. Then (and only then IMHO) could they return to Ltd Co contracting and be safe.

As others have suggested:
- condition A is pretty clear cut, and virtually every contractor will fall under that one.
- condition C is very vague, so IMHO if you're relying on that, it's a dangerous game.
- condition B therefore is the one that's reasonably black and white (ignoring differing views on same trade/activity), so if it were me, this would be the one that I'd try to ensure I kept on the right side of.

I'll allow this post because it appears to be made of win.

[Tardigrade]

wow

Guys,

I thought I'd check to see if my post was out of moderation, fully expecting to have to wait 3 days for that one reply. To see 21 replies was unbelievable, and having read them all, to see they were such great help -what a forum - THANK YOU

I'd like to clarify some things please. First the points I think are very clear, just for confirmation:

1. A FTC with prospect client under their PAYE is absolutely fine. There is no doubt here.

2. My existing circumstances therefore are also fine - ie I'm not already in breach by virtue of having a permie role in a "similar trade".

Two options were mentioned by one person but not followed through by others:

3. ChimpMaster suggested "Re launching" my old company - is this actually possible or just a nice thought?

4. Critical?! eek stated: "... because the changes were introduced after the liquidation started you probably aren't subject to those new rules" - my liquidation did start before April 6 - it finished after it - can anyone confirm my position here?

Umbrella co's:

5. jamesbrown, missinggreenfields believe an umbrella company would "most likely be caught", and SJD (now, as opposed to the quote) do also. A number of people however express surprise I don't just go through an umbrella company as if it is obvious that route is fine (wordisbond, vectraman, Maslins, theCyclyingProgrammer, MrMarkyMark). Is this a reflection of legislative ambiguity (ie I'm taking a risk) or (as weight of opinion suggests) are the earlier responses out of date?

To answer some implied questions:
• I suspect getting something in writing that I'm not welcome / termination by mutual agreement will be possible. I suspect the only reason I'm not being pushed harder is the CEO has a conscience and knows he shouldn't have hired me in the first place hence is giving me time to find a new job.
-I can't drag this out much more as I'm literally twiddling my thumbs at work. Nothing to do, and it is clear that won't change. It doesn't make sense to *fight* to stay on.

There is one thing I forgot to mention - I have the intent of claiming Enterpreneurs relief when the tax year is processed. Does this impact anything?

[jamesbrown]

Hi, JB.
I know there were experts with different views on "the same or similar trade or activity." But the August clarification from HMRC to which Maslins linked is pretty clear.

Hi WiB,

I was referring to your point about FUD. I think it's true only to a point, because FUD is embedded in the legislation itself, quite apart from our (or HMRC's) interpretation of it.

The second, though, should answer without a doubt that part of the question.

The OP should be fine if they don't return to contracting and I'm aware that this was not their focus (the PAYE risk). I'm also aware of the updated guidance (I provided the link). However, the legislation and our (and HMRC's) interpretation of it are two different things. Whether HMRC's view of "the same or similar trade or activity" is upheld in the broad sense that they intend is TBD, but it's important not to confuse the legislation with a particular interpretation of it that isn't yet upheld.

The question you've raised, though, is not really relevant to the question OP is asking.

But it was relevant to your point about FUD, which I quoted. Separately, the problem for the OP, if they return to contracting, is their reliance upon the avoidance clause alone, which is not satisfactory IMO, because all other conditions would be met. Perhaps they'd ultimately demonstrate that avoidance was not a primary motivation, but it would be risky.

[jamesbrown]

5. jamesbrown, missinggreenfields believe an umbrella company would "most likely be caught", and SJD (now, as opposed to the quote) do also. A number of people however express surprise I don't just go through an umbrella company as if it is obvious that route is fine (wordisbond, vectraman, Maslins, theCyclyingProgrammer, MrMarkyMark). Is this a reflection of legislative ambiguity (ie I'm taking a risk) or (as weight of opinion suggests) are the earlier responses out of date?

There is no absolute guarantee that you'd be caught if you returned to trading through a Ltd. Rather, you'd be at risk, IMO, because you'd be relying on the clause about avoidance not being a primary motivation. It's not always easy to demonstrate intent, but I think you'd have a reasonable case. It's not a route I would entertain, though (your risk tolerance may be different). The only clearly caught situation is the situation that existed before the TiS was updated, namely where you close one company with the intention of opening another. The update hasn't changed much, other than providing more clarity about where the intention cannot have been to avoid, i.e. "2 years". In that sense, it's welcome.

On the umbrella scenario, you won't get a definitive answer, I'm afraid, but the umbrella is (IMO) a technicality in this context, since it's a vehicle through which you would be undertaking a similar trade or activity. It's nice that HMRC has attempted to clarify the PAYE scenario w/r to connected persons, and you might assume that this is extended to an umbrella scenario too, but that's an assumption, and none of this is in the legislation itself.

I have the intent of claiming Enterpreneurs relief when the tax year is processed. Does this impact anything?

There are separate requirements for ER, but they are more easily met. The important thing w/r to the TiS legislation is whether you take a capital distribution, which you've already done, and not the additional relief from ER.

[jamesbrown]

4. Critical?! eek stated: "... because the changes were introduced after the liquidation started you probably aren't subject to those new rules" - my liquidation did start before April 6 - it finished after it - can anyone confirm my position here?

It would be when the transaction in securities had completed, not when it started. In practice, I think this means when the capital distribution(s) were taken, so you could have a scenario where two distributions come under different rules. Maslins could confirm this, because I'm not 100%. Also, it may be different if you obtained clearance under the old rules.

[Maslins]

Two options were mentioned by one person but not followed through by others:

3. ChimpMaster suggested "Re launching" my old company - is this actually possible or just a nice thought?

4. Critical?! eek stated: "... because the changes were introduced after the liquidation started you probably aren't subject to those new rules" - my liquidation did start before April 6 - it finished after it - can anyone confirm my position here?

Umbrella co's:

5. jamesbrown, missinggreenfields believe an umbrella company would "most likely be caught", and SJD (now, as opposed to the quote) do also. A number of people however express surprise I don't just go through an umbrella company as if it is obvious that route is fine (wordisbond, vectraman, Maslins, theCyclyingProgrammer, MrMarkyMark). Is this a reflection of legislative ambiguity (ie I'm taking a risk) or (as weight of opinion suggests) are the earlier responses out of date?

If a company has gone into liquidation, there's no reversing it. So afraid backing out and pretending it never happened isn't an option (and wouldn't be even if you'd put the company into liquidation last week).

My understanding is it's the date of distributions which is relevant. Putting a company into liquidation pre 5 April 2016, but receiving a distribution after that could still be caught.

Re umbrella, interesting, and I can see both views on this. HMRC have fairly clearly stated that going on to become an employee of another company, even if doing similar work, would not be caught. Legally if you work for an umbrella, then you're an employee of that umbrella company. My view would therefore be that you would be safe from the rules. Having said that, I'm not dismissing the logic that many would say that using an umbrella organisation is still contracting rather than permie employment.

Basically I agree with everything jamesbrown has said in this thread, bar perhaps disagreeing on that final point re whether an umbrella is safe or not. My hunch would be yes it is safe, but as with so much of this, we're interpreting vague stuff, hence why several people can come up with different conclusions.

[jamesbrown]

bar perhaps disagreeing on that final point re whether an umbrella is safe or not. My hunch would be yes it is safe, but as with so much of this, we're interpreting vague stuff, hence why several people can come up with different conclusions.

I don't even disagree with this TBH. I simply don't know, but I fully understand where you're coming from w/r to extrapolating from the August HMRC guidance on PAYE. It's a reasonable extrapolation. My only caution would be that HMRC frequently say "stuff", and then later on say contradictory "stuff", and the legislation is insufficiently clear without case law. I can sympathise with the OP (although I don't think they have a case against SJD, as SJD are wading through the mud with the rest of us); one could easily interpret the avoidance clause as not being met, based on what the OP has said, but it would require some bravery (of course, many will be brave or ignorant, and it might be tested, eventually, but TiS is way broader than our contractor scenarios, so it could be a very long wait).

[Tardigrade]

Thanks again all - yippee for clear regulation...

Which leaves just one last unanswered Q I think - is it worth approaching HMRC on this, specifying what's happened and "asking for permission"? How would I go about it?

[stek]

Thanks again all - yippee for clear regulation...

Which leaves just one last unanswered Q I think - is it worth approaching HMRC on this, specifying what's happened and "asking for permission"? How would I go about it?

No.