What are the chances of actually being investigated?

[Hex]

If I know my last contract would fail an IR35 investigtion, what happens if I close my LtdCo and start a new LtdCo and carry on contracting?

Am I then immune from an IR35 investigation?

Roger Sinclair of egos commented on this (10/09/08) as follows:

"IR35 is a responsibility of the company, and therefore once a company is struck off, that is the end of it. "

The full text is here (you need to register to see his response to the question, but it's free): http://www.shout99.com/contractors/s...1;id=54119;n=0

His response seems a bit abrupt to me. You can certainly see HMRC trying to come after the directors if they decided a closed company owed IR35 dues, but then again, once the company is struck off, how are they going to get any info on contracts etc? You could shred them all. They'd have to go to the client/agency to get contracts. Can you see them doing this when there must be easier target companies that aren't struck off?

Even then, I understand they can only come after directors if they can prove that the directors knew the contracts were inside IR35 and didn't pay. If the directors took guidance and were told the contracts were outside IR35 then I think HMRC would find it hard to get money from the directors after the company has been closed.

It has been discussed on CUK before as well. Search for posts by THEPUMA.

See here for example (and read the entire thread): http://forums.contractoruk.com/accou...uestion-2.html

[malvolio]

Might I just point out there is no such thing as an IR35 investigation. It always starts as an aspect query on some part of your tax return, corporate or personal. So if you ensure your returns are accurate, on time and reasonable, there's no reason for an aspect inquiry to be started, hence no risk of an IR35 case

There are a small number of random inquiries launched every week, of course. But assuming you're not doing something stupid, solid insurance such as PCG Plus will almost certainly deal with it.

It all depends if an incoming government can be persuaded that it is economically unviable. No matter who is driving in June, they will be very reluctant to drop any tax measure that brings in any kind of income (and given the number of numpties who go umbrella as an IR35 defence, that's actually quite a lot of undeserved revenue for Hector). My guess is that IR35 will persist but not be invoked except in blatant cases, mainly to keep the umbrella trade - and its associated income stream - alive and healthy. And after all, the Friday-to-Monday aspect of it is actually quite valid.

[bollox]

Might I just point out there is no such thing as an IR35 investigation. It always starts as an aspect query on some part of your tax return, corporate or personal. So if you ensure your returns are accurate, on time and reasonable, there's no reason for an aspect inquiry to be started, hence no risk of an IR35 case

There are a small number of random inquiries launched every week, of course. But assuming you're not doing something stupid, solid insurance such as PCG Plus will almost certainly deal with it.

It all depends if an incoming government can be persuaded that it is economically unviable. No matter who is driving in June, they will be very reluctant to drop any tax measure that brings in any kind of income (and given the number of numpties who go umbrella as an IR35 defence, that's actually quite a lot of undeserved revenue for Hector). My guess is that IR35 will persist but not be invoked except in blatant cases, mainly to keep the umbrella trade - and its associated income stream - alive and healthy. And after all, the Friday-to-Monday aspect of it is actually quite valid.

quite valid ? been contacting best part of 20 years never seen anyone do the friday-monday thing - to inflict ir35 on us because of a handful of high profile BBC cases is anything but valid - grrr!

[XLMonkey]

Think my earlier post got lost with a dicky internet connection.

To add some figures to malvolio's comments.

There are roughly 1 million active small businesses in the UK (small means <250k turnover).

HMRC conduct roughly 3-5,000 investigations from its small business compliance team each year.

So your theoretical chances are (very roughly) 0.3-0.5% pa.

However, HMRC do not generally conduct random investigations. Your chances of investigation are much increased if you:
- miss more than one PAYE return
- have wildly fluctuating corporation tax from one year to another
- miss a VAT return (though generally the VAT team are not interested in IR35 compliance issues).
- miss a corporation tax return

Provided you keep your nose clean, then the chances of investigation are relatively low. BUT, the costs of dealing with an investigation will quickly run into tens of thousands - hence insurance is a good idea.

[XLMonkey]

quite valid ? been contacting best part of 20 years never seen anyone do the friday-monday thing - to inflict ir35 on us because of a handful of high profile BBC cases is anything but valid - grrr!

Aye, but the whole point of the IR35 regulations was to deter companies from tax motivated firing of staff and then rehiring them as contractors the next day.

The real issue was that HMRC then tried to use this rule to go after people who were genuinely self-employed, which was not the intention of the legislation.

I think that the IR35 rules will continue indefinitely, and will continue to be a factor to consider when entering into a contract. But, it is straightforward to avoid it, provided you know what you are doing.

[bollox]

Aye, but the whole point of the IR35 regulations was to deter companies from tax motivated firing of staff and then rehiring them as contractors the next day.

.

that's what i was referring to by BBC - Greg Dyke etc doing exactly that

[XLMonkey]

that's what i was referring to by BBC - Greg Dyke etc doing exactly that

On that we are agreed. I hope HMRC come down on them like a ton of brix

[StellaFan]

been contacting best part of 20 years never seen anyone do the friday-monday thing

I pretty much did it. I was a permie and had been offered a contract elsewhere. Told my (then) boss and he panicked and asked me to do a contract for him until they got someone else in. It did lead to more work but I was eventually booted out into the real world

[gingerjedi]

Roger Sinclair of egos commented on this (10/09/08) as follows:

"IR35 is a responsibility of the company, and therefore once a company is struck off, that is the end of it. "

The full text is here (you need to register to see his response to the question, but it's free): http://www.shout99.com/contractors/s...1;id=54119;n=0

His response seems a bit abrupt to me. You can certainly see HMRC trying to come after the directors if they decided a closed company owed IR35 dues, but then again, once the company is struck off, how are they going to get any info on contracts etc? You could shred them all. They'd have to go to the client/agency to get contracts. Can you see them doing this when there must be easier target companies that aren't struck off?

Even then, I understand they can only come after directors if they can prove that the directors knew the contracts were inside IR35 and didn't pay. If the directors took guidance and were told the contracts were outside IR35 then I think HMRC would find it hard to get money from the directors after the company has been closed.

It has been discussed on CUK before as well. Search for posts by THEPUMA.

See here for example (and read the entire thread): http://forums.contractoruk.com/accou...uestion-2.html

So you think your contract may fail IR35 but you don't want to be 'inside' for obvious reasons, do you get advise and incriminate yourself?

You're banged to rights if QDOS say it fails, not a leg to stand on.

Hmmm what would you do...

[Hex]

So you think your contract may fail IR35 but you don't want to be 'inside' for obvious reasons, do you get advise and incriminate yourself?

You're banged to rights if QDOS say it fails, not a leg to stand on.

Hmmm what would you do...

I'd get the professional advice. It won't really cut it if you say to HMRC "Oh - but I always presumed this contract was outside IR35 - it just sort of felt outside".