What Happens When HRMC Knocks On Your Door!!

**Euro-commuter** · 20 February 2007, 10:54

What Happens When HRMC Knocks On Your Door!!

You're nicked! Unless you have friends in government, in which case they complain that you were woken up too early.

**Hector** · 20 February 2007, 10:59

All IT Contractors are inside IR35.

Best advice is just to pay up in advance and save yourself the headache and worry of being investigated.

HTH

**rootsnall** · 20 February 2007, 11:09

Originally posted by Flat Eric

Ok,

I'd like to try and understand the process subsequent to HMRC having decided you are inside IR35.

Say, for instance that I believe I am outside and have therefore been using the small-salary/large-dividend model. HMRC come along and check me out and I'm deemed to have fallen foul of IR35.

1) will the demand the back tax immediately.

2) should I leave the IR35 portion of the tax in the company, even if I believe I'm outside IR35. This seems to be a bit excessive as HMRC may never contact me..

3) I understand that the IR35 rules are on a per contract basis. Does this mean that if I take a 6mth contract which is inside and then take a 6mth contract which is outside that I will only be penalised for the inside one or will they pull out all the stops and get me for both

4) Given option 2 is a yes, how long would I have to leave the money in the company before I could "safely" remove it. Could I close the company down regularly, thus extracting the money, and would HMRC still be able to make a claim on the money...

5) I'm going to join the PCG initially for their IR35 insurance. I understand that this won't cover the tax element. Can anyone, succinctly, describe the process which I would go through when HMRC calls...

6) Honestly, given our collective experience, what is the likelihood of being targetted. My company has me as sole shareholder. My wife will not draw a salary. I'll probably try and draw a small-ish salaray and top it up with dividends. I can't afford, at the moment, to leave large amounts in the company to offset my tax liability with taper relief.

Thanks
Mark.

1) No, it starts with a National Insurance investigation and then can lead to a full IR35 investigation. It'll take a long time if you fight it.

2) No, but I make sure I've got enough personally to cover the worst case scenario.

3) It's contract by contract so I guess any investigation would have to address each contract individually but not sure how it has worked in practice. The opinion I have formed ( may or may not be correct !? ) is that if you have lots of short contracts you are a target they won't bother with. If you've done a few years on one site you are a juicier target.

4) There is no safe time limit but 6 years is the time a director should keep records.

5) Ring the PCG when they send you a letter, PCG+ covers the initial NI investigation also and the theory is to head off an IR35 investigation at this stage. If you haven't yet filed any accounts I would wait until next year to pay your subs, no accounts means no investigation.

6) The chances of getting done for IR35 at the moment appear low but there is no certainty.

**Flat Eric** · 20 February 2007, 11:09

Originally posted by Hector

All IT Contractors are inside IR35.

I kind of knew this but didn't want to really believe it. I suppose the best thing to hope for is that you leave the IR35 tax in your company, hoping you'll not get investigated, and after a period of time close the company, extract the money and buy yourself a small country somewhere

I'm not a mercenary type by any means but I'd rather not have to give Mr brown any more money than I really, really have to

**XLMonkey** · 20 February 2007, 12:39

Originally posted by Flat Eric

I kind of knew this but didn't want to really believe it. I suppose the best thing to hope for is that you leave the IR35 tax in your company, hoping you'll not get investigated, and after a period of time close the company, extract the money and buy yourself a small country somewhere

I'm not a mercenary type by any means but I'd rather not have to give Mr brown any more money than I really, really have to

you have soooooo........ been spammed

**xoggoth** · 20 February 2007, 12:57

Six years is the maximum they can go back barring criminal proceedings for fraud however one is not obliged to keep records for that long and without records it is hard to see how they can make a case. The period will be on their webtulipe somewhere. Have had two visits and despite initially claiming various tax underpayments they only wanted to see records for three years.

**Flat Eric** · 20 February 2007, 13:46

Thanks xoggoth.

I guess then, that if I close the company periodically and dispose of the documentation it's unlikely they'll be able to extract said tax...

A quick google produced this

Looks like you have to keep records for 6 years... Blimey..!!

m.

**ASB** · 20 February 2007, 13:53

Originally posted by xoggoth

Six years is the maximum they can go back barring criminal proceedings for fraud however one is not obliged to keep records for that long and without records it is hard to see how they can make a case. The period will be on their webtulipe somewhere. Have had two visits and despite initially claiming various tax underpayments they only wanted to see records for three years.

An individual is only 22 months after the end of the tax year. http://www.hmrc.gov.uk/pdfs/sabk4.htm#a2

I believe the statutory period for starting an enquiry is 12 months from the end of the tax year or return filing.

But if they then want to go back and you no longer have the records you will have a hard time disproving the assertions that you how them say 20k from the previous year.

The of course if they are too late to start an enquiry then can generally just start an investigation anyway. Bit of a bummer if the records are all on the bonfire since the burden of proof lies with the taxpayer :-(

**rootsnall** · 20 February 2007, 15:05

Originally posted by ASB

An individual is only 22 months after the end of the tax year. http://www.hmrc.gov.uk/pdfs/sabk4.htm#a2

I believe the statutory period for starting an enquiry is 12 months from the end of the tax year or return filing.

But if they then want to go back and you no longer have the records you will have a hard time disproving the assertions that you how them say 20k from the previous year.

The of course if they are too late to start an enquiry then can generally just start an investigation anyway. Bit of a bummer if the records are all on the bonfire since the burden of proof lies with the taxpayer :-(

If you are a director of a Ltd pretty sure its 6 years, you are deemed to be carrying on a business.

What Happens When HRMC Knocks On Your Door!!