Inside IR35 & I Want to Stay

[rootsnall]

No, IR35 is a company liability, not a personal liability. It is a failure to operate PAYE/NICs correctly (deemed payments). If you get it wrong, your company pays, not you personally. Transfer of debt from a company to an individual, such as a director, has a high bar (negligence).

I know I should understand this but sadly don't. So if HMRC have accepted your final accounts and the company is closed you have escaped ( barring negligence ). What happens if the company is still open but not trading and has limited funds ?

[jamesbrown]

I know I should understand this but sadly don't. So if HMRC have accepted your final accounts and the company is closed you have escaped ( barring negligence ). What happens if the company is still open but not trading and has limited funds ?

In practice, probably yes. In theory, they could reopen the company, but it wouldn't get them anywhere, barring negligence.

If the company is open, then any proven liability would stand, but the same principle applies about transferring it to a director (i.e., it's hard). Obviously, if you continue trading, the debt stands. Also, for a company still trading, they may be able to claw-back any dividends paid after an IR35 investigation was opened (would need to talk to a professional about that).

[GhostofTarbera]

Get your Clint not to assess you and just inform you they no longer take on limited compNy contractors

You then go via umbrella


Sent from my iPhone using Contractor UK Forum

[rootsnall]

In practice, probably yes. In theory, they could reopen the company, but it wouldn't get them anywhere, barring negligence.

If the company is open, then any proven liability would stand, but the same principle applies about transferring it to a director (i.e., it's hard). Obviously, if you continue trading, the debt stands. Also, for a company still trading, they may be able to claw-back any dividends paid after an IR35 investigation was opened (would need to talk to a professional about that).

So if someone was closing their Ltd via the <£25K route and had already distributed the funds then even if HMRC rejected the final accounts ( and opened an IR35 investigation ) they'd be struggling to claw back any IR35 liabilities down the track !?!

[jamesbrown]

So if someone was closing their Ltd via the <£25K route and had already distributed the funds then even if HMRC rejected the final accounts ( and opened an IR35 investigation ) they'd be struggling to claw back any IR35 liabilities down the track !?!

Whether a company is opened or closed or how it was closed isn’t the main issue here, that’s a sideshow. Yes, if the director applied due diligence in operating PAYE, such as a professional status review and evidence of working practices, it would be difficult for HMRC to transfer any PAYE debt to the director were that contract to be subsequently found inside. Likewise for NICS, but the legislation is different in each case. But if the contractor had done their due diligence, it’s extremely unlikely that they were wrong to begin with!

[rootsnall]

Whether a company is opened or closed or how it was closed isn’t the main issue here, that’s a sideshow. Yes, if the director applied due diligence in operating PAYE, such as a professional status review and evidence of working practices, it would be difficult for HMRC to transfer any PAYE debt to the director were that contract to be subsequently found inside. Likewise for NICS, but the legislation is different in each case. But if the contractor had done their due diligence, it’s extremely unlikely that they were wrong to begin with!

Not all Directors are diligent all of the time

[jamesbrown]

Not all Directors are diligent all of the time

Right, so then the risk is greater.

I mean, if a contract were blatantly inside all along and the director didn't conduct any due diligence and it can be shown (e.g., through their posts on CUK ) that the director knew about all this and suspected that the contract were inside, then a transfer of debt might be possible.

[SimonMac]

So if someone was closing their Ltd via the <£25K route and had already distributed the funds then even if HMRC rejected the final accounts ( and opened an IR35 investigation ) they'd be struggling to claw back any IR35 liabilities down the track !?!

IANAL/A but IR35 liabilities will be on the person, not the company. So the company closed and they come after you for the liabilities as they are not the companies

[Paralytic]

IANAL/A but IR35 liabilities will be on the person, not the company. So the company closed and they come after you for the liabilities as they are not the companies

Did you even read the posts above?

[rootsnall]

Right, so then the risk is greater.

I mean, if a contract were blatantly inside all along and the director didn't conduct any due diligence and it can be shown (e.g., through their posts on CUK ) that the director knew about all this and suspected that the contract were inside, then a transfer of debt might be possible.

I am building my arguments as we speak and going through old emails for evidence. Some decent pointers and also some less decent ones. I can also pass a CEST and have saved it but only recently, and it's so subjective. CEST didn't exist when I started the contract in question. So I wouldn't say its blatant, but I wouldn't would I.

This old post covers the liability issue.

https://www.contractoruk.com/forums/...35-caught.html