IR35 loses appeal case

[ruth11]

You're not the first, IIRC. Can some kind PCG member search their forums to find out?

I think the answer is: NO!

A conversation with my accountant (one of the ones that post on here) suggests that the answer is in fact yes....

Said that if subsequently found inside IR35, the amount of tax owed would be offset against the amount already paid in CT.

Just telling the info I got, I've no idea if it's true.

[malvolio]

A conversation with my accountant (one of the ones that post on here) suggests that the answer is in fact yes....

Said that if subsequently found inside IR35, the amount of tax owed would be offset against the amount already paid in CT.

Just telling the info I got, I've no idea if it's true.

That was also my understanding. Despite the pretence of IR35 being a corporate tax - which is only so they can legally do you for ErNICs instead of having to go to your agency or your client for them - I think you'll find Hector will ignore the company if you have the assets and the company doesn't. IR35 is illogical as well as pernicious.

That said, it's never been tested to my knowledge; although with Dragonfly and his £90k bill I suspect we might be about to find out.

[pisces]

And therin lies the point, you can have all the clauses you want in the contract, if those clauses do not mirror actual working practices you may still be IR35 caught.

If you are being told what to do and when to do it, and you have to request time off, then you are a disguised employee and IR35 caught, regardless of what 'cunning clauses' you have in your contract. In an investigation you will loose.

In an ideal world for Hector yes but contrary to that there have been plenty of cases lost by HMRC when this has been the case. Such is the ambiguity of IR35 which is why it needs changing.

[Lewis]

I think it is me you are quoting regarding HMRC not being able to attack you personally. In fact Mal has always maintained that IR35 is a personal tax which is, of course, incorrect.

Ooops. Sorry Mal.

[DonkeyRhubarb]

Such is the ambiguity of IR35 which is why it needs changing.

Be careful what you wish for!

[BrilloPad]

Such is the ambiguity of IR35 which is why it needs changing.

Be careful what you wish for!

by changing I assume scraping was meant?

[malvolio]

by changing I assume scraping was meant?

Perhaps - or we could get it scrapped...

[IR35 Avoider]

In which case, why are we worried about IR35 at all? With such an easy get-out, who cares if they win?

I think you are probably meaning to imply that ThePuma must be wrong, however I've know for many years that a salary tax bill cannot necessarily be passed to an employee (even though it's his tax bill on his income) so I think ThePuma is right, and I do genuinely want to know whether making sure there are no funds in the company is a potential defense strategy. I reckon you should set up a different company for every contract as a perfectly legitimate defense strategy against the commercial risk of yourself as a director making a wrong IR35 decision. The justification would be not to defend the caught money, but to defend uncaught money from being raided retrospectively to pay the tax bill from a different contract. Of course in practise there would, unfortunately, be no money in the companies for caught contracts either, by the time an investigation was decided.

[Integrity]

I reckon you should set up a different company for every contract as a perfectly legitimate defense strategy against the commercial risk of yourself as a director making a wrong IR35 decision.

This demonstrates that the company would only exist as a vehicle for payment, rather than being a business with its own identity, and the supplier actually providing the services.

How does this help to demonstrate being in business on your own account?

[IR35 Avoider]

HMRC can only recover monies from you personally if it can show that you conspired with the company to "wilfully fail to deduct tax.

Although I agreed with you when you posted this, I did vaguely remember there was another condition under which they could pursue the employee, if the employer had made an error in good faith. I found the following language on the web.

However, in certain circumstances Her Majesty's Revenue and Customs can pursue the employee rather than the employer for the unpaid tax or NICs. Those circumstances are where:

Her Majesty's Revenue and Customs are satisfied that the employer took reasonable care and the tax under-deduction involved resulted from an error made in good faith;
Her Majesty's Revenue and Customs are of the opinion that an employee received a payment of income knowing the employer had wilfully failed to deduct any or sufficient tax from the payment;
Her Majesty's Revenue and Customs are satisfied an employee knew of the employer’s wilful failure to pay primary NICs, and those NICs were not deducted from the employee’s earnings.

I think this does mean the limited company contractors could be pursued personally. The difference from the MSC case is that MSC's were run by accountants and HMRC would have made a fool of itself if it tried to argue that accountants made IR35 assessment errors in good faith. A contractor would have to insist the error was in good faith (so that he wasn't seen as colluding with himself in his role as employee) and thus be forced to impale himself on the alternative condition.

http://www.generalcommissioners.gov....fing_notes.htm