IR35 is dead

[malvolio]

It's been a long time since IR35 was discussed like this.

There was a belief that the IR would decide on who to investigate via a PAYE audit based on salary to dividends ratio, since those on big bucks and tiny salaries would yield the most in tax and NI should the IR successfully win an IR35 case.

So it gave many contractors a safe feeling to pay themselves a very high salary (like £20K). However, if you are going to do that you are not much better off than ticking the IR35 box in the 1st place.

Snag is, if you've started on that path, how do you stop? The most likely trigger for an investigation, especially now they are throttling back on them, is a sudden shift in your SA. If next year you drop your salary by 75% while retaining the same gross income by adding in divis, someone will notice and decide to have a look.

And the threat is not just economic, it's the 2-3 years that most investigations drag on for, plus the uncertainty, plus the hundreds of repetetive questions you will have to answer on top of the likely £15k cost, just to prove you're doing nothing wrong.

I've said all along that IR35 is a voluntary tax. Let's just ignore it now and it will fade away until only the wallies are paying it.

[VectraMan]

I don't see how they can anything more than they have so far. The problem for them doesn't seem to be the legislation itself, more the cost-benefit equation of using trained investigators to go after (by definition) lots of very small limited companies on a contract by contract basis with a very low chance of getting the few hundred or few thousand pounds of tax/NI they think they should have paid. Better to use staff to concentrate on areas like VAT which are leaking at the rate of millions a week ... or Philip Green... sorry SIR Philip Green... who hardly pays a penny in tax.

But if the rules hadn't been written in such a vague way and left up to case law to work out what it actually meant, then they wouldn't have had to go after contractors as most of us wouldn't engage in tax evasion. It doesn't seem very difficult to define us: i.e. working more than 50% of the time at a single site, for example. The worse thing about IR35 is the uncertainty: you might have to pay X in tax or Y in tax, but we're not going to tell you which.

[Bagpuss]

Snag is, if you've started on that path, how do you stop? The most likely trigger for an investigation, especially now they are throttling back on them, is a sudden shift in your SA. If next year you drop your salary by 75% while retaining the same gross income by adding in divis, someone will notice and decide to have a look.

And the threat is not just economic, it's the 2-3 years that most investigations drag on for, plus the uncertainty, plus the hundreds of repetetive questions you will have to answer on top of the likely £15k cost, just to prove you're doing nothing wrong.

I've said all along that IR35 is a voluntary tax. Let's just ignore it now and it will fade away until only the wallies are paying it.

Mal, I thought you were an advocate of not paying minimum wage? i.e. pay a reasonable salary. How many of those investigated were on low salary? I know of two people audited and both were low salary, could be coinicidence!?

[oraclesmith]

I would have thought from a cost-benefits point of view, someone with a combination of low salary, large dividends and a long contract would be at the top of their list. ie. only one client to investigate, obvious 'tax efficiency' measures in place, lots of back-tax from a single win. Even if IR35 is de-prioritised, there are clearly going to be a few Ltd's which will stand out as good targets, not least because clever tax avoidance may mean there's something to hide.

Also, IMHO it's relatively easy to throttle back in a controlled way. ie. pay less salary but also less dividends and retain more in the company, or pay a bit less salary and bit more final dividend.

[pickle]

[QUOTE=oraclesmith] Even if IR35 is de-prioritised, there are clearly going to be a few Ltd's which will stand out as good targets[QUOTE]

Maybe, but the ones with PCG insurance will blink on their radar like a big feck-off neon "beware of the dog" sign. So just get the insurance and relax. Have you seen the current PCG win rates?

[Jesus]

[QUOTE=pickle][QUOTE=oraclesmith] Even if IR35 is de-prioritised, there are clearly going to be a few Ltd's which will stand out as good targets

Maybe, but the ones with PCG insurance will blink on their radar like a big feck-off neon "beware of the dog" sign. So just get the insurance and relax. Have you seen the current PCG win rates?

You give the impression that being investigated is not a problem - my son.

[wendigo100]

[QUOTE=pickle]

So just get the PCG insurance and relax. Have you seen the current PCG win rates?

The latest is PCG 1251, HMRC 3. If it were a boxing match, the referee would have stepped in and stopped it ages ago.

S660 is the next problem - there's an important test case going through the courts now. I think the PCG won the last round, and HMRC are appealing it.

[stackpole]

You give the impression that being investigated is not a problem - my son.

Get back on your cross!

[Jesus]

Those statistics show they have gone after a lot of contractors.

It may be a great win rate but;

How long does the average investigation last?

How much hair do you have left at the end of it?

[Diestl]

Why pay tax when you don't have to?