Tax 'enquiries' into newly formed limiteds

[misterlamott]

Considering that there have no doubt been thousands of additional new limited company formations over recent months, together with the fact that HMRC know exactly why the majority of these companies have been formed (pretty much as a direct result of Gordo's latest budget the result of which is that going limited has probably become the dominant model for contractors), it would be fair to assume that Hector could (and possibly already has) a super sized list of new companies with a big red mark already against them, making them ripe for investigation. Any surviving limited companies for example formed by Giant under their Trailblazer monica before Trailblazer was withdrawn you'd expect to score a few bonus points and be slightly higher up the list!

Any paranoid people out there that think a list of 'marked' limiteds might be in the pipeline or already exist?

If it were to exist, and considering it would be pretty pointless to investigate new companies before they have actually taken any half decent money, would it be fair to assume any newly formed companies are unlikely to get any ‘enquiries’ for at least say 12 months or possibly longer?

[malvolio]

It's probably a fair assumption. What a shame those thousands didn't read the writing on the wall over the previous 18 months and do the sensible thing in advance.

[Bluebird]

Considering that there have no doubt been thousands of additional new limited company formations over recent months, together with the fact that HMRC know exactly why the majority of these companies have been formed (pretty much as a direct result of Gordo's latest budget the result of which is that going limited has probably become the dominant model for contractors), it would be fair to assume that Hector could (and possibly already has) a super sized list of new companies with a big red mark already against them, making them ripe for investigation. Any surviving limited companies for example formed by Giant under their Trailblazer monica before Trailblazer was withdrawn you'd expect to score a few bonus points and be slightly higher up the list!

Any paranoid people out there that think a list of 'marked' limiteds might be in the pipeline or already exist?

If it were to exist, and considering it would be pretty pointless to investigate new companies before they have actually taken any half decent money, would it be fair to assume any newly formed companies are unlikely to get any ‘enquiries’ for at least say 12 months or possibly longer?

what makes you think anybody in government goes about things in a logical manner ?

[misterlamott]

what makes you think anybody in government goes about things in a logical manner ?

My limited just so happens to have a contract with a UK Government agency, so I know the answer to that one from the inside! Good point...

[Bluebird]

My limited just so happens to have a contract with a UK Government agency, so I know the answer to that one from the inside! Good point...

ditto

[Lewis]

Considering that there have no doubt been thousands of additional new limited company formations over recent months, together with the fact that HMRC know exactly why the majority of these companies have been formed (pretty much as a direct result of Gordo's latest budget the result of which is that going limited has probably become the dominant model for contractors), it would be fair to assume that Hector could (and possibly already has) a super sized list of new companies with a big red mark already against them, making them ripe for investigation. Any surviving limited companies for example formed by Giant under their Trailblazer monica before Trailblazer was withdrawn you'd expect to score a few bonus points and be slightly higher up the list!

Any paranoid people out there that think a list of 'marked' limiteds might be in the pipeline or already exist?

If it were to exist, and considering it would be pretty pointless to investigate new companies before they have actually taken any half decent money, would it be fair to assume any newly formed companies are unlikely to get any ‘enquiries’ for at least say 12 months or possibly longer?

So what if they did. For the following reasons:

(a) A giant trailblazer created company will not have had any dealings with Giant since April 6th so MSC legislation can't be applied
(b) Giant are unlikley to be classified as an MSCP now anyway as they have shut down Trailblazer.
(c) What does it matter if you get an enquiry as long as you are doing things properly. You could get an enquiry even if you setup 18 months ago and did it all yourself!
(d) If you have tax investigation cover from PCG or QDOS etc.. (which you should) they will deal with any investigation for you.

So no need to worry!

[philip@wellwoodhoyle]

Don't assume that there is any collective, rational or common sense thought within HMRC. Even glaringly obvious tax evasion and/or serious mistakes very often goes un-noticed because very few HMRC staff are at senior inspector level and have any real grasp of what is wrong or right. Most work is dealt with by junior, inexperienced, poorly trained staff, who to be brutally honest wouldn't know whether a tax return or set of accounts looked right or not.

Even at senior levels, there appears to be no cohesive, co-ordinated approach to what needs to be investigated. Different tax offices/inspectors deal with the exact same situation in different ways. In the old days when we sent contracts to the tax office for their IR35 opinion, I sent the exact same contract and covering letter to two different local offices (two clients, living within different tax areas, but working for the same organisation doing the same job). One came back inside IR35, the other came back outside IR35. You couldn't make it up!

The basic problem is that there are very few specialist offices, and those that exist are along the old fashioned lines, i.e. specialist office for non-residents, specialist office for foreign nationals, specialist office for high-net-worth individuals. Beyond that, which tax office deals with a particular business is merely an accident of geography. If your company registered office address is Cumbria, then you are dealt with by Cumbria tax office, even if you trade in Wimbledon! It matters not that Cumbria tax office is a farmers specialist office and probably has not a single clue about IT consultants!

I think what HMRC is suffering from is institutional paralysis. Staff know there are problems, staff are demoralised, staff want to be more efficient, management don't know what they're doing (sounds like the NHS really!), but perhaps more importantly, there are too few staff in the HMRC that actually know and understand the dynamics of businesses and entreprenneurism.

So, back to the OP point, no, I honestly don't expect there to be any "black list" of newly formed limited companies. It may not even be apparent to the HMRC managers that x new companies have been formed - they'd have to collect statistics from hundreds of local tax offices each dealing with hundreds of new company formations. Even if such a list exists, HMRC won't be investigating any for a few years - in our experience, they never enquire into new companies until after the first few years unless the accounts/returns are glaringly dodgy - the inspectors want to be able to go back several years to maximise their "take", - only getting one years worth of tax out of a company trading for just a year is not a good return and won't look good on their statistics/profit related pay. By the time 5 or 6 years have past, the guy in charge of the "list" will have moved on and the list will be long forgotten anyway! So basically, I wouldn't worry too much!

[misterlamott]

Cheers guys. Good answers, and like you say as long as everything is in place there is no real point in being concerned anyway....