Inside IR35 but Ltd Co

[Lewis]

IR35 is a personal tax, not a company tax. How will opening/closing down companies prevent you from being caught? Having no money to pay Hector does not prevent him chasing you.

I disagree. MSC's used to get around IR35 loses by just closing the company down and opening a new one the next day. This is partly why the MSC legislation was introduced. In order for it to become personal tax HMRC need to prove you knew you were inside IR35 but declared yourself outside. If you have a review that says outside that to me is evidence enough to show you believed you were not caught. That is how I understood it from previous discussions on here ...

[Turion]

Yep, agreed. Clearly another barrack room expert with 50% understanding tof the facts.

Then you must have less than 50% understanding.

While IR35 is a tax computed based on what a person should have paid in paye/ni, it is the miscreant Ltd co that hector pursues. Try reading up on the subject. It may help you understand better.

Now if the ltd co ain't there anymore...go figure.

[malvolio]

Then you must have less than 50% understanding.

While IR35 is a tax computed based on what a person should have paid in paye/ni, it is the miscreant Ltd co that hector pursues. Try reading up on the subject. It may help you understand better.

Now if the ltd co ain't there anymore...go figure.

IR35 is a personal tax that is your liability. It is usually paid for by the company that, in Hector's eyes, exists merely to avoid paying employee levels of taxation. If you close the company down, you have to get their approval to do so. If they suspect you are in breach of IR35 rules, they won't let you until the case has been cleared. If you deliberately close a company down in order to avoid a legitimate tax bill, you are potentially commiting a criminal offence.

FWIW, I've been studying IR35 since it first came out and like to think I'm reasonably up to speed on the rules. Under your scenario, you logically should open a new company for each contract (plus bank account and perhaps VAT registration) and close it on completion. Do you not think that Hector might see that as not having any commercial justification and hence it is purely a tax evading measure?

You do it your way, nodoby's stopping you. But it's not the right one.

[ruth11]

OK, that's good. Out of interest, have you asked this question on their fora?

No, but I will now you mention it.

[TheFaQQer]

Under your scenario, you logically should open a new company for each contract (plus bank account and perhaps VAT registration) and close it on completion. Do you not think that Hector might see that as not having any commercial justification and hence it is purely a tax evading measure?

Purely out of interest, and not stirring this deliberately, BUT......


If I adopted this approach, and was investigated by HMRC, how much support could I reasonably expect from the PCG to help defend my case?

[SueEllen]

Then you must have less than 50% understanding.

While IR35 is a tax computed based on what a person should have paid in paye/ni, it is the miscreant Ltd co that hector pursues. Try reading up on the subject. It may help you understand better.

Now if the ltd co ain't there anymore...go figure.

Insolvency Act 1986

[malvolio]

Purely out of interest, and not stirring this deliberately, BUT......


If I adopted this approach, and was investigated by HMRC, how much support could I reasonably expect from the PCG to help defend my case?

Good question. The PEI is predicated on defending you against tax assessment investigations (not just IR35). I'm fairly sure that the trigger for the investigation itself wouldn't be a parameter; the deal is you're covered for any aspect enquiry. If anyone gets into that position, then we'd get a definitive answer.

[Turion]

For the experts out there it's question time

Insolvency Act 1986 - Name an IR35 case where this is involved

Closed Companies - Name an IR35 case where HMRC has challenged a dissolved company or a ex-director of a disolved company.

Please provide links to backup your evidence.
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I go by facts only. Fact is IR35 is a lottery. A low profile will reduce chances of being caught. If you are caught/investigated circumstances beyond your control may screw you. For instance:

The recent lost IR35 cases for Dragonfly Consulting and MKM Computing relied on dubious information obtained from permies of the client co's. Both Ltd co's had operated for many years and were jucy targets (Dragonfly got stung for 99k).

Remember that you (1 man bands) are not business men and that the ltd co is just a method of working that is 'relatively' tax efficient.

I don't advocate closing a co every contract. Every 2 - 3 years is enough and you can use capital allowance to get your cash. Don't use terms like 'computing' or 'Consulting' in your co name. They specifically target such names. Keep contracts short. The shorter and more clients you have the better. Certainly if you stay in one place for 2 yrs+ you deserve to pay permie taxes.

[Fred Bloggs]

Your opinions are as valid mine. Unlike other posters I will not pretend to be an "expert" in every aspect of this foul legislation. What I will do is continue to work in genuine outside of IR35 contracts, terminating them if actual working conditions do not reflect the contractual conditions. This has happened once. Furthermore, I will limit my IR35 liability by not working more than a year on any single contract (so far my maximum is 10 months). Thus limiting my potential liability if a contract was tested and found failed. You can continue to live in your lala fairytale land where the law applies to single person contracting companies in a fair and equitable manner. The blunt truth is that compliance or not with IR35 is now a lottery with the weight tilted firmly in favour of the Gov't. If you want to pretend that by closing down your company five years before it is investigated will protect you as a Director of that company then please feel free to carry on. I'm happy with my strategy, presumably you remain happy with yours. Passing browsers will decide for themselves.

[Fred Bloggs]

For the record, I largely agree with that post above mine.