• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

You are not logged in or you do not have permission to access this page. This could be due to one of several reasons:

  • You are not logged in. If you are already registered, fill in the form below to log in, or follow the "Sign Up" link to register a new account.
  • You may not have sufficient privileges to access this page. Are you trying to edit someone else's post, access administrative features or some other privileged system?
  • If you are trying to post, the administrator may have disabled your account, or it may be awaiting activation.

Previously on "Role Change - Potential Working Arrangements"

Collapse

  • northernladuk
    replied
    In the legislation it says

    'The main purpose test is applied by reference to intentions known at the time the decision was made to wind up the company. However, this will be evidenced by what happens after the winding up occurs and it is likely that, in order to test assertions in relation to the main purpose, officers will review all available evidence.'
    So it's the fact that less than 12 months later you are outside at the same client that completely screws you.

    Leave a comment:


  • northernladuk
    replied
    Originally posted by Costa View Post

    Thanks. Noted that regarding Condition C.

    Just touching upon the point 1b from my initial post again -
    b) In fact, when I decided to close the company last year, the main purpose was not tax saving. I was closing the company only because I no longer needed it. So, I think Condition D also should not apply?

    May I please ask why you reckon Condition D applies here?
    You did need it. You are a contractor working on many short term gigs for different clients. One contract does not dictate the way a contracting business should go. You might not needed to use it for the rest of the time of that contract but the lifecycle of your LTD isn't dictated by one contract.

    In any case where a contractor winds up their company because they are going inside when there is still clearly outside work on the market can't be construed as anything but an opportunity to gain a tax advantage. The argument you MVL'd because there were no future outside prospects will fall on very deaf ears. The new legislation was to correct tax issues where they existed, not to force the entire industry inside. The decision to go inside in MVL was a very poor one on behalf of the contractor. There were outside contracts available and at some point in a long career the contractor is going to find another. No way will anyone believe it was a reasonable decision to say there would be not more outside work so shutting the company was the only option. Making it dormant until the dust settles was has been suggested endlessly on here by accountants and contractors alike.

    You saw a chance and you jumped at it. The very fact you want to go outside again so quickly is evidence of this. I am sure you believe you did what you did was for a good reason, many of us don't think so and we said this many times as the legislation approached. We also advised many people not to take this course of action well before the legislation hit.

    To satisfy Condition D they will also look at what's happened after the event and what has happened is that you've stayed with the same client and in less than a year been offered outside work. It's entirely justified to ask why the contract business did not plan for this and stay open rather than a knee jerk reaction to claim a tax advantage. The fact this is all with the same client and in the same area of work isn't going to help your case. You are, and always have been, selling your skills to the same client but are flipflopping your business vehicle. The 'business' is still going on. There might be (but there isn't IMO) an argument if you went to one client that was inside then went to get more work at a different client that was outside you might get away with D but to stay at the client, doing exactly the same thing just makes it worse.

    IMO the client moving you to umbrella only is not enough justification that the company and it's business has ended so D is met.

    You might think it's complicated with many nuances but put it in a simple paragraph and, IMO, it really isn't.
    You were outside, client said umbrella only for the rest of the term of that contract, less than a year later you get a new role with the same client outside all while carrying on the same trade with the client. That's it.
    You want your tax advantage but you want to keep doing business with the client, now under a new LTD. Not a chance that's gonna pass even the most basic investigation. That's a bad business decision due to the tax benefits, not a justified reason the LTD closed.

    One contract does not determine a contractors career so even the most casual observer will wonder why on earth people are MVL'ing just because of one single contract in a long career. If you say tax advantage they will all nod and say 'ahhh that makes sense'
    Last edited by northernladuk; 18 March 2022, 00:53.

    Leave a comment:


  • Costa
    replied
    Originally posted by jamesbrown View Post

    None of that matters. To provide some perspective, HMRC would still consider that you'd breached condition C of the TAAR if you went from IT consultancy to selling computers. There is literally no prospect of moving from one IT role to another and that not being "the same or a similar trade or activity" if you continue to purse as a trade. Again, Option 1 is only an option in your head.
    Thanks. Noted that regarding Condition C.

    Just touching upon the point 1b from my initial post again -
    b) In fact, when I decided to close the company last year, the main purpose was not tax saving. I was closing the company only because I no longer needed it. So, I think Condition D also should not apply?

    May I please ask why you reckon Condition D applies here?

    Leave a comment:


  • Costa
    replied
    Originally posted by WTFH View Post

    In your first post you said that the potential new contract was direct.
    If it's direct, then why is an agency involved?
    Also, if you are going through an agency, I'd advise you to get independent IR35 advice, as I strongly suspect the agency advisors will provide carefully worded advice that is the best result for the agency.
    Thanks.

    Good question. Yes, the client calls them "direct" contractors, but actually the client has a tie-up with one of the contractor agencies, and all "direct" contractors need to go via that agency (for compliance, background checks etc). (While for the previous contract, I was with a separate consultancy altogether)

    And yes, good point regarding independent IR35 advice. Have always done that for all my contracts. And will note it for this time too.

    Leave a comment:


  • WTFH
    replied
    Originally posted by Costa View Post

    Regarding the IR35 status of the new contract, will await further clarity from the client, agency and their IR35 advisors.
    In your first post you said that the potential new contract was direct.
    If it's direct, then why is an agency involved?
    Also, if you are going through an agency, I'd advise you to get independent IR35 advice, as I strongly suspect the agency advisors will provide carefully worded advice that is the best result for the agency.

    Leave a comment:


  • Costa
    replied
    Originally posted by jamesbrown View Post

    You're being nominally polite, but you aren't really listening. Again, best of luck to you, but you will be caught by the TAAR. There are plenty of ambiguous situations, but the TAAR was really made for the situation you describe.

    Likewise on your IR35 status, I highly doubt the proposed contract is outside IR35, regardless of what you or the client choose to believe, but I doubt you will listen on that either.

    The strong advice you've been given by several knowledgeable people is to go via an umbrella.
    Thanks.

    Your input on TAAR has been noted.

    Regarding the IR35 status of the new contract, will await further clarity from the client, agency and their IR35 advisors.

    Leave a comment:


  • Costa
    replied
    Originally posted by northernladuk View Post

    Sorry but you don't seem to be listening. You say..


    Why is this still an option? Not one single person has agreed the role change makes one iota of difference and have all pointed out it's covered yet you are still touting this as your main option.

    Dunno why I'm replying really I'm done with this one. Nothing else I can add.
    Thanks.

    Oh, reading ".. yet you are still touting this as your main option", I can now guess where the confusion may be.
    I never intended the three options to be in the order of decreasing preference from my own viewpoint. So, Option 1 has not been the "main" option, even before I started the discussion here.

    I just listed three options, and numbered them, so that they are easier to refer to, in subsequent discussions. And I have retained that numbering in further comments, to ensure there is no confusion about which option we are referring to.

    As I mentioned earlier, intention was to discuss the pros and cons of all options (that's why I provided few initial points also for all options). May be I should have called them X, Y, Z instead of 1, 2, 3.

    Leave a comment:


  • jamesbrown
    replied
    Originally posted by Costa View Post

    Thanks.

    Not sure what your reference is to padding and not believing my own arguments (and where that inference comes from). I simply copy pasted the same info that I had provided in an earlier response to NLUK (which was also included in my original post, but just summarised that to make it clearer).

    And yes, operating via consulting firm, or contracting directly with the client, may not be relevant (and can be ignored, if not relevant). I was just trying to provide as clear a picture of my situation as I could (as generally, providing as much info as possible upfront helps the forum members provide their inputs accordingly).
    You're being nominally polite, but you aren't really listening. Again, best of luck to you, but you will be caught by the TAAR. There are plenty of ambiguous situations, but the TAAR was really made for the situation you describe.

    Likewise on your IR35 status, I highly doubt the proposed contract is outside IR35, regardless of what you or the client choose to believe, but I doubt you will listen on that either.

    The strong advice you've been given by several knowledgeable people is to go via an umbrella.

    Leave a comment:


  • northernladuk
    replied
    Originally posted by Costa View Post

    Thanks.

    I think I have listened to everyone, and thanked and politely responded to all comments, with due respect.

    There is no specific answer I want to hear (and I won't follow any answer blindly anyway, as ultimately I have to take the responsibility of the decision, not any forum member).

    And that is precisely the point. I want to hear all views (from those who wish to respond of course), to ensure there is no point I am missing in my thought process, and will then make an informed decision accordingly.
    Sorry but you don't seem to be listening. You say..

    If TAAR is not a significant risk, due to the role change (and wider circumstances around company closure), then may go with Option 1 (new Limited Company).
    Why is this still an option? Not one single person has agreed the role change makes one iota of difference and have all pointed out it's covered yet you are still touting this as your main option.

    Dunno why I'm replying really I'm done with this one. Nothing else I can add.

    Leave a comment:


  • Costa
    replied
    Originally posted by jamesbrown View Post

    I think you probably don't believe your own arguments, hence your attempt to "pad" your explanation, as though operating via a consulting firm versus contracting directly to the client is relevant here. A "trade" is very clearly defined. An "activity", not so much, but that only makes the TAAR more broadly drawn, not less. You are continuing a "trade", so that part is indisputable.

    If you are continuing a trade across an MVL (within two years of the last distribution) and using a professional skillset that is broadly related to the skillset used previously (like, I don't know, consulting for the same client! ), you are going to be a fantastic test case for HMRC. Again, you are among a large number of people that come here looking for comfort rather than actual advice. That is your prerogative, of course, and good luck to you, but Option 1 is only an option in your head.
    Thanks.

    Not sure what your reference is to padding and not believing my own arguments (and where that inference comes from). I simply copy pasted the same info that I had provided in an earlier response to NLUK (which was also included in my original post, but just summarised that to make it clearer).

    And yes, operating via consulting firm, or contracting directly with the client, may not be relevant (and can be ignored, if not relevant). I was just trying to provide as clear a picture of my situation as I could (as generally, providing as much info as possible upfront helps the forum members provide their inputs accordingly).

    Leave a comment:


  • Costa
    replied
    Originally posted by northernladuk View Post

    What's the point. You haven't listened to a single thing anyone has said so yeah that's a good idea so go fill your boots. You really aren't going to find the answer you want to hear here.
    Thanks.

    I think I have listened to everyone, and thanked and politely responded to all comments, with due respect.

    There is no specific answer I want to hear (and I won't follow any answer blindly anyway, as ultimately I have to take the responsibility of the decision, not any forum member).

    And that is precisely the point. I want to hear all views (from those who wish to respond of course), to ensure there is no point I am missing in my thought process, and will then make an informed decision accordingly.

    Leave a comment:


  • Costa
    replied
    Originally posted by eek View Post
    Just use an umbrella, throw as much as you can into your pension and use some of your savings.

    Trust me you will be quids in.
    Thanks.

    Yes, that is certainly an option under consideration.

    Just that I have already made enough contributions to pension, so not overly keen on adding more (though I might add some, if I go down this route).

    Slight diversion, but may I please ask (if you readily know, as that is a topic I planned to research over the weekend, as part of my due diligence) -
    What are the taxation rules for the excess part of the pension (in SIPP) that goes above the Lifetime Allowance (currently £1.073m)?

    My rough understanding is that excess would be taxed at 55% if we take it as a lump sum; and 25% + Marginal Income Rate if we take that as Drawdown.

    However, what are the rules for handling that "excess" (above the Lifetime Allowance), in the event of death before 75 or after 75?
    For example, I think normal SIPP amount (below Lifetime Allowance) gets passed on free of IHT if death is before 75; does the same apply to the "excess" part too, or will that have the 25% tax applied before being passed on?
    What about death after 75, will the 25% tax be applied on the excess there too, and then the rest taxed when taken out as per the beneficiary's Marginal Income Tax rate?
    Last edited by Costa; 17 March 2022, 16:25.

    Leave a comment:


  • jamesbrown
    replied
    Originally posted by Costa View Post

    Thanks.

    Just to clarify - The new role is not IT. It is a Risk Manager role.

    So, in summary:
    Previous Role - IT BA Consultant via a Consulting firm
    New Role - Risk Manager directly contracting with the Client
    I think you probably don't believe your own arguments, hence your attempt to "pad" your explanation, as though operating via a consulting firm versus contracting directly to the client is relevant here. A "trade" is very clearly defined. An "activity", not so much, but that only makes the TAAR more broadly drawn, not less. You are continuing a "trade", so that part is indisputable.

    If you are continuing a trade across an MVL (within two years of the last distribution) and using a professional skillset that is broadly related to the skillset used previously (like, I don't know, consulting for the same client! ), you are going to be a fantastic test case for HMRC. Again, you are among a large number of people that come here looking for comfort rather than actual advice. That is your prerogative, of course, and good luck to you, but Option 1 is only an option in your head.

    Leave a comment:


  • northernladuk
    replied
    Originally posted by eek View Post
    Just use an umbrella, throw as much as you can into your pension and use some of your savings.

    Trust me you will be quids in.
    That's not the answer he wants to hear though.

    Leave a comment:


  • northernladuk
    replied
    Originally posted by Costa View Post

    Thanks.

    Few people suddenly left the Business side, so there was an urgent requirement there. Given the timeframes involved, I was considered the best choice.

    No, haven't made up my mind yet (new contract is not finalised yet). Hence, the discussion / due diligence.

    My current thought process roughly is -

    If the new contract is Inside-IR35, then -
    Option 3 (Umbrella) is the default choice.

    If the new contract is Outside-IR35, then -
    If TAAR is not a significant risk, due to the role change (and wider circumstances around company closure), then may go with Option 1 (new Limited Company).
    Else, may go with Option 2 (existing Limited Company), or Option 3 (Umbrella).

    Just looking into the pros and cons of all options before making a decision next week (new contract situation should also be clarified by then).
    What's the point. You haven't listened to a single thing anyone has said so yeah that's a good idea so go fill your boots. You really aren't going to find the answer you want to hear here.

    Leave a comment:

Working...
X