Can Taxman get money removed from company

[alf13]

Hello All

1st post....

My accountant tells me that if i have removed money from my limited company via dividends, that the taxman cant then come after it from an ir35 point of view as it is in my personal bank account etc.

As long as i have legitimately tried to prove/check my ir35 status.

Is that correct?

If so it implies i could just take all the cash out as dividends and not worry about it...

That does not sound correct to me?

Cheers

[Flubster]

Hello All

1st post....

My accountant tells me that if i have removed money from my limited company via dividends, that the taxman cant then come after it from an ir35 point of view as it is in my personal bank account etc.

As long as i have legitimately tried to prove/check my ir35 status.

Is that correct?

If so it implies i could just take all the cash out as dividends and not worry about it...

That does not sound correct to me?

Cheers

Correct.

[AZZIK]

mmmhh sounds a bit funny I guess the top accountans should advice SJD, NW, QDOS

[BrilloPad]

If it is correct - dont we use a ltd for a year - take out the cash as dividends - then close it down.

[alf13]

if it is correct why just we dont do that all the time???

Or is it all about leaving the money in the company and taking it out at company closing time?

[simondolan]

Hello All

1st post....

My accountant tells me that if i have removed money from my limited company via dividends, that the taxman cant then come after it from an ir35 point of view as it is in my personal bank account etc.

As long as i have legitimately tried to prove/check my ir35 status.

Is that correct?

If so it implies i could just take all the cash out as dividends and not worry about it...

That does not sound correct to me?

Cheers

No, it's not correct.

If the taxman finds you are inside IR35 then the dividends that you declared would be deemed illegal (as there wouldn't have been sufficient funds within the company after deduction of the deemed salary), and therefore you would technically become a debtor to the company. At that point the Revenue could quite legitimately come after you personally for recovery of the debt.

[alf13]

hmm, i must chase this up with my accountant and see what he has to say, he has seemed adamant that is the case.

my posts might be delayed as i am new to the board...

[Jubber]

No, it's not correct.

If the taxman finds you are inside IR35 then the dividends that you declared would be deemed illegal (as there wouldn't have been sufficient funds within the company after deduction of the deemed salary), and therefore you would technically become a debtor to the company. At that point the Revenue could quite legitimately come after you personally for recovery of the debt.

Here is a link to a very good example.

The proof of this IMHO is once again down to whether you know you are inside or outside of IR35 and hector proving negligence.

If the Revenue can prove that you knew you were inside IR35, or could prove that you acted negligently in paying dividends then yes, of course you would be liable. My argument is that it is a much harder task to prove negligence than creating some hypothetical employment state between an invidual and a client.

It's one thing determining IR35 status and a completely different thing proving negligence.

I still say that if you have your paperwork in tip top condition and running your company outside of IR35 and can prove it to the best of your knowledge and ability etc etc that you were - a judge would find it very hard to rule against you. I'm doing exactly what I am allowed to do - which is running a business. What should I do not to be negligent? Get written statements from prospective clients about working conditions signed by the board? Even then I bet if Hector wanted to he could find someone who would poo poo the whole thing.

Maybe we need a couple of poor souls to be dragged through the courts over this very matter to see what happens.

[BolshieBastard]

Here is a link to a very good example.

The proof of this IMHO is once again down to whether you know you are inside or outside of IR35 and hector proving negligence.

If the Revenue can prove that you knew you were inside IR35, or could prove that you acted negligently in paying dividends then yes, of course you would be liable. My argument is that it is a much harder task to prove negligence than creating some hypothetical employment state between an invidual and a client.

It's one thing determining IR35 status and a completely different thing proving negligence.

I still say that if you have your paperwork in tip top condition and running your company outside of IR35 and can prove it to the best of your knowledge and ability etc etc that you were - a judge would find it very hard to rule against you. I'm doing exactly what I am allowed to do - which is running a business. What should I do not to be negligent? Get written statements from prospective clients about working conditions signed by the board? Even then I bet if Hector wanted to he could find someone who would poo poo the whole thing.

Maybe we need a couple of poor souls to be dragged through the courts over this very matter to see what happens.

I think you may find current \ new HMRC legislation shifts the burden of proof onto the individual \ ltd co ie you cant just say 'I'm outside IR35' etc. Therefore HMRC dont need to 'prove' anything or as much as they used to.

[Jubber]

I think you may find current \ new HMRC legislation shifts the burden of proof onto the individual \ ltd co ie you cant just say 'I'm outside IR35' etc. Therefore HMRC dont need to 'prove' anything or as much as they used to.

I agree. If I just say I am outside IR35, that is not 'reasonable care' at all. What is the level we need to take it to to achieve reasonable care? If Hector tells me the reasonable level, I will run my company accordingly.

What should I do?

I can get a contract and working conditions outside of IR35, is that enough? Do I have to get every contract reviewed by the revenue and B&C is that enough? Get the client to write an email agreeing working conditions before a contract start? Or do I just roll over and pay a lot of unecessary tax because the IR35 scare tactics have got to me?

Unless the revenue come up with clear cut pointers for IR35, I'll continue to run my company with what I think is reasonable care. That's all I can do. The revenue will have to prove differently if and when they ever have to.