Role Change - Potential Working Arrangements

[Costa]

In your first post you said that the potential new contract was direct.
If it's direct, then why is an agency involved?
Also, if you are going through an agency, I'd advise you to get independent IR35 advice, as I strongly suspect the agency advisors will provide carefully worded advice that is the best result for the agency.

Thanks.

Good question. Yes, the client calls them "direct" contractors, but actually the client has a tie-up with one of the contractor agencies, and all "direct" contractors need to go via that agency (for compliance, background checks etc). (While for the previous contract, I was with a separate consultancy altogether)

And yes, good point regarding independent IR35 advice. Have always done that for all my contracts. And will note it for this time too.

[Costa]

None of that matters. To provide some perspective, HMRC would still consider that you'd breached condition C of the TAAR if you went from IT consultancy to selling computers. There is literally no prospect of moving from one IT role to another and that not being "the same or a similar trade or activity" if you continue to purse as a trade. Again, Option 1 is only an option in your head.

Thanks. Noted that regarding Condition C.

Just touching upon the point 1b from my initial post again -
b) In fact, when I decided to close the company last year, the main purpose was not tax saving. I was closing the company only because I no longer needed it. So, I think Condition D also should not apply?

May I please ask why you reckon Condition D applies here?

[northernladuk]

Thanks. Noted that regarding Condition C.

Just touching upon the point 1b from my initial post again -
b) In fact, when I decided to close the company last year, the main purpose was not tax saving. I was closing the company only because I no longer needed it. So, I think Condition D also should not apply?

May I please ask why you reckon Condition D applies here?

You did need it. You are a contractor working on many short term gigs for different clients. One contract does not dictate the way a contracting business should go. You might not needed to use it for the rest of the time of that contract but the lifecycle of your LTD isn't dictated by one contract.

In any case where a contractor winds up their company because they are going inside when there is still clearly outside work on the market can't be construed as anything but an opportunity to gain a tax advantage. The argument you MVL'd because there were no future outside prospects will fall on very deaf ears. The new legislation was to correct tax issues where they existed, not to force the entire industry inside. The decision to go inside in MVL was a very poor one on behalf of the contractor. There were outside contracts available and at some point in a long career the contractor is going to find another. No way will anyone believe it was a reasonable decision to say there would be not more outside work so shutting the company was the only option. Making it dormant until the dust settles was has been suggested endlessly on here by accountants and contractors alike.

You saw a chance and you jumped at it. The very fact you want to go outside again so quickly is evidence of this. I am sure you believe you did what you did was for a good reason, many of us don't think so and we said this many times as the legislation approached. We also advised many people not to take this course of action well before the legislation hit.

To satisfy Condition D they will also look at what's happened after the event and what has happened is that you've stayed with the same client and in less than a year been offered outside work. It's entirely justified to ask why the contract business did not plan for this and stay open rather than a knee jerk reaction to claim a tax advantage. The fact this is all with the same client and in the same area of work isn't going to help your case. You are, and always have been, selling your skills to the same client but are flipflopping your business vehicle. The 'business' is still going on. There might be (but there isn't IMO) an argument if you went to one client that was inside then went to get more work at a different client that was outside you might get away with D but to stay at the client, doing exactly the same thing just makes it worse.

IMO the client moving you to umbrella only is not enough justification that the company and it's business has ended so D is met.

You might think it's complicated with many nuances but put it in a simple paragraph and, IMO, it really isn't.
You were outside, client said umbrella only for the rest of the term of that contract, less than a year later you get a new role with the same client outside all while carrying on the same trade with the client. That's it.
You want your tax advantage but you want to keep doing business with the client, now under a new LTD. Not a chance that's gonna pass even the most basic investigation. That's a bad business decision due to the tax benefits, not a justified reason the LTD closed.

One contract does not determine a contractors career so even the most casual observer will wonder why on earth people are MVL'ing just because of one single contract in a long career. If you say tax advantage they will all nod and say 'ahhh that makes sense'

[northernladuk]

In the legislation it says

'The main purpose test is applied by reference to intentions known at the time the decision was made to wind up the company. However, this will be evidenced by what happens after the winding up occurs and it is likely that, in order to test assertions in relation to the main purpose, officers will review all available evidence.'

So it's the fact that less than 12 months later you are outside at the same client that completely screws you.