Qdos 42 questions - IR35 Assessment: Has anyone done it already?

[jamesbrown]

Maybe but it won't work. The can lift the corporate veil because the change in company has been done just to avoid liabilities so if the worst did come to pass they can see through the sham of changing companies and go for the director personally.

Eitehr way, it's a terrible idea.

They can only operate within the legislative framework available. Outside of the MSC legislation, it's actually very hard to transfer a debt to an individual. If due diligence has been performed for IR35, it's essentially impossible in that context. Closing a business to mitigate risk is perfectly fine (insofar as it works). As long as no debts or taxes are being avoided (and HMRC has an opportunity to test this upon closure, which is the real reason I don't think it necessarily works), then there is really no problem. Again, it is not a strategy I would adopt - I would prefer to mitigate risk by not dealing with UK clients - but closing/opening companies is not legislated against, except when avoiding debt or taxes (and HMRC must be notified and can object). The TAAR is a completely separate issue and not relevant unless a capital distribution was obtained.

[ShandyDrinker]

Eitehr way, it's a terrible idea.

They can only operate within the legislative framework available. Outside of the MSC legislation, it's actually very hard to transfer a debt to an individual. If due diligence has been performed for IR35, it's essentially impossible in that context. Closing a business to mitigate risk is perfectly fine (insofar as it works). As long as no debts or taxes are being avoided (and HMRC has an opportunity to test this upon closure, which is the real reason I don't think it necessarily works), then there is really no problem. Again, it is not a strategy I would adopt - I would prefer to mitigate risk by not dealing with UK clients - but closing/opening companies is not legislated against, except when avoiding debt or taxes (and HMRC must be notified and can object). The TAAR is a completely separate issue and not relevant unless a capital distribution was obtained.

I'm unlikely to be doing this but I don't necessarily think it's a terrible idea. The liability rests with the fee payer and not the contractor's limited. Sure, fee payer may have clauses to pursue the limited but if it is already closed then they are on a hiding to nothing. Even if they, as NLUK says, lift the corporate veil, I wasn't aware of HMRC being in a position to use commercial contract terms between say my limited and a fee payer in order to pursue a debt they have with said fee payer.

However, as someone who typically takes a risk averse approach, I'm most likely to avoid any contract which has liability transfer clauses in full stop.

[jamesbrown]

I wasn't aware of HMRC being in a position to use commercial contract terms between say my limited and a fee payer in order to pursue a debt they have with said fee payer

They can’t. They will only pursue your company directly under Chapter 8 or under Chapter 10 when there is evidence of fraud. The bigger risk under Chapter 10 is from the client reclassifying status before the first payment to the Fee Payer and closing your company probably isn’t going to reduce that risk. Again, I don’t think it works as a strategy for mitigating the biggest risks, but there is no law against opening/closing companies to carry on the same trade, except in specific circumstances.

[jamesbrown]

However, as someone who typically takes a risk averse approach, I'm most likely to avoid any contract which has liability transfer clauses in full stop.

And, yes, that is the best strategy to mitigate risk, other than avoiding UK clients.