IR35 Dragonfly : The fallout

[JonC]

I suppose everyone has heard of the Dragonfly case by now and is wondering how it may potentially affect them, but I wondered what the implications were for Dragonfly Consulting and the chap who was/is the director ?

How does anyone hope to pay £99k back to the taxman ? What I was wondering was who owes this money ? Is it the company or the individual or both ? I would guess that if the company owed the money then he would just close down the company and make himself redundant from the company. Not sure on this one. Anyone know how this mess gets unravelled ?

Cheers

Jon

[Fred Bloggs]

Endless debate on liability for IR35 cases. My take is that he pays. Others wil disagree.

[JonC]

I wasn't disputing whether he paid or not really, but more how does anyone pay ? I don't know many with 99k in their back pocket. Is it his liability or his companies ?

[Fred Bloggs]

I wasn't disputing whether he paid or not really, but more how does anyone pay ? I don't know many with 99k in their back pocket. Is it his liability or his companies ?

Sorry I meant, he personally as opposed to ltd co pays AFAIK.

[manstein]

I've wondered about this as well. Say I was approaching retirement. What's to stop me filing my taxes late for the last year, not paying any corporation tax, VAT, etc. so basically have up to 2 years money in my account, give it all to myself as a nice juicy dividend then just throw my hands up and say "Sorry, company's bankrupt, has no assets and so can't pay any liabilities."

I imagine HMRC would come after your house, etc. but then on the other hand how many of Lehman's Brothers directors were sleeping in the street last night? I really don't know much about it but it's something I and a colleague theorise about here with no conclusion reached.

The only conclusion we ever reach debating HMRC issues is that you can't be sure of anytihng until the dice fall.

[QwertyBerty]

I've not read anywhere exactly what that 99k is made up of... could be sum of taxes (PAYE) over the 3 years (some of which he would have already paid as CT) plus fines/penalties.

He would be able to pay it off by instalments I would have thought.

QB.

[FSM with Cheddar]

Doesn't matter if your liability is limited etc. If you are the director of the company they can come after you.

[deckster]

Doesn't matter if your liability is limited etc. If you are the director of the company they can come after you.

Only if you have been negligent in carrying out your duties. If you can show that you have been diligent in eg getting contracts professionally reviewed and complying with current accepted practices to put yourself outside IR35 then negligence will be hard to prove.

However that real question is whether IR35 is a personal or a corporate tax. As income tax and Ee's NI are personal taxes, and you personally are ultimately responsible for ensuring that you pay the correct amount, HMRC would I suspect argue that you are liable irrespective of any of the above. Er's NI might well be different as the company is liable for that.

IANAA

[Turion]

The company owes the money. He just needs to liquidate the company to absolve that debt.

Problem is in this case is - IR would only have started the investigation, having seen a big stash of cash already in it's accounts. There will have been enough in there for them to grab, and after the start of the investigation he could not take that money without a big risk of having personal liability to pay it back as Director.

Trick is to close the company to prevent large build up of cash if you are worried about IR35. You can remove excess cash by divi's or entrepreneurs relief.

[Qdos Contractor]

The tax debt lies with the limited company. HMRC would object to any winding up of the company whilst the debt remains outstanding so winding up is not an option. The impact of the debt would be offset, to a degree, by the corporation tax relief due to the deemed payment, i.e potential corporation tax repayments.