Working and paying inside IR35 (Ltd Co)

[ASB]

Paying the tax doesn't bother me, should I end up inside. What bothers me is the potential flag I may raising. Despite having PCG insurance and being happy that my other contracts have all been legitimately outside, I don't want to be investigated purely as a result of admitting that this current contract is inside.
I don't suppose anyone really knows what raises the alarm bells for HMRC.
One suggestion from the PCG forum is to just pay myself a larger salary to cover the tax that would be due and not tick the box. Following any investigation, there would be no tax due and apparently therefore no penalties.
But then how would it look when I go back to small salary at the end of the contract? Nice idea, but still not sure of the effect it may have.

A couple of points.

1) It was only necessary to "tick the box" if there was a deemed payment due. Thus if salary - over the year in question - at least covered 95% of the income from any contracts you accepted were caught there was no need to tick the box. The wording of the question is changing, either for this year or next, this is such that the box should be ticked if you have received any income from a "PSC", so everybody should ticke it when this happens. [Yes, there is an argument that it is unanswerable since the entity it refers to is not legally defined but it is quite clear the question it is asking]

2) yes, penalties are calculated on a percentage of the tax owing. No tax = no penalty. Statutory penalties - like not filling in P35 etc - are a fixed value. Failure to fill in a self assessment return is 100 quid, then a %age of tax owing. It used to be the case (and may still be) that the penalty was not allowed to be charged if there was no tax owing in some cases.

3) How would they know you have gone back to a small salary at the end of contract without investigating? The information available to them is essentially what you provide. Your accounts will only show an annual salary of X. They have no idea if this was zero for 11 months and X for one month.

[ruth11]

Thanks ASB, number 3 in particular is a very helpful comment and something that I was obviously missing in my head!

[Sockpuppet]

Don't tick the box.

If you do get investigated and have paid the correct tax what are they going to do.

[SueEllen]

A couple of points.

1) It was only necessary to "tick the box" if there was a deemed payment due. Thus if salary - over the year in question - at least covered 95% of the income from any contracts you accepted were caught there was no need to tick the box. The wording of the question is changing, either for this year or next, this is such that the box should be ticked if you have received any income from a "PSC", so everybody should ticke it when this happens..

There is no legal definition of a PSC nor is there a dictionary definition so no-one can tick the box as they don't exist.

[ASB]

There is no legal definition of a PSC nor is there a dictionary definition so no-one can tick the box as they don't exist.

Here is the current wording of the question:-

Are you a Service Company?
If 'Yes', have you operated the Intermediaries
legislation (sometimes known as IR35) or the
Managed Service Companies legislation?

For more detailed information, see CWG2 Employer Further Guide
to PAYE and NICs.

---------------------------------------------------------

There is no legal definition of a service company either.

It is perfectly conceivable that ignoring the question could be justified on linguistic grounds, but I rather imagine it does fall very much into the "having a laugh" category.

Admittedly it would be quite comical to watch somebody argue the toss on the "I'm sorry this is unanswerable due to definitions" tack.

[pisces]

Many people have stated IR35 is on a contract to contract basis so I would guess it doesn't matter when you switch status providing you have the IR35 proof contracts to back you up.

Queue arguments that IR35 has nothing to do with contracts.......

[Fred Bloggs]

Is a plumber or a shoe repairer or a window cleaner a service company?

[SueEllen]

Here is the current wording of the question:-

Are you a Service Company?
If 'Yes', have you operated the Intermediaries
legislation (sometimes known as IR35) or the
Managed Service Companies legislation?

For more detailed information, see CWG2 Employer Further Guide
to PAYE and NICs.

---------------------------------------------------------

There is no legal definition of a service company either.

It is perfectly conceivable that ignoring the question could be justified on linguistic grounds, but I rather imagine it does fall very much into the "having a laugh" category.

Admittedly it would be quite comical to watch somebody argue the toss on the "I'm sorry this is unanswerable due to definitions" tack.

What will happen at some point the lack of definition will go to the House of Lords and Nu Liebour will just change the law so that every business of any type providing services to other businesses is caught.

[malvolio]

Right now the "definition" - as in the bit int eh draft notes for the 2008 SA form - mean that anyone who provides service to a Ltd Co and who own shares in that company should tick the box. So that's everyone in a comapny share scheme for instance...

PCG are trying to get unambiguous legal advice on this whole area. However, since the source material is deliberately ambiguous in a truly NL manner, this may not be possible!