Reply to: Need advice on IR35

[Lance]

just catching up on this one.

My summary skim read is :

OP has a questionable outside determination.
OP is concerned about the cost impact.

My suggestion. For what it's worth.

• Move on to a new client. The further away in time you are, the less risk of investigation. After 6 years have gone there is virtually no risk other than due to fraud (the decision is questionable as opposed to wrong, and made in good faith so fraud not really in the mix).
• Join either IPSE, or Federation of Small Business. Anything which will provide legal cover.
• DO NOT. EVER. TALK TO HMRC. Use a professional to do that. See note abut IPSE/FSB above
• chill out. It's done now. Best plan a calm exit and risk reduction from now on.

[humucagir]

---

[jamesbrown]

So if HMRC can notice that I moved Inside IR35 that's pretty much guaranteed investigation right?

They cannot easily notice that you've changed treatment for the same client. In other scenarios, they can (e.g., UK agency reporting), but that isn't relevant to you. The risk is not so much that they can identify the specifics, but that you get investigated for tangential reasons (e.g., check of business records) and that leads to an IR35 investigation and then it comes to light that you deliberately avoided paying the tax you knew was owed, which is then firmly in penalties territory. In other words, unless you pay the back taxes you know are owed (based on the contract review), there is always some risk. It may be low (e.g., because HMRC are more focused on Chapter 9 and 10 where they can pursue a large number of contractors behaving similarly all at once), but you may be unlucky.

[humucagir]

---

[jamesbrown]

If I paid out as Outisde IR35 until now, is sole trading the most tax efficient legal thing I can do?

Moving to Bulgaria is potentially legal and more tax efficient.

If I just start operating Inside IR35, will my accountant report me to HMRC?

No.

Can HMRC notice anything?

Yes.

[northernladuk]

Thank you everyone for your replies and sorry for spinning this up again.
Assuming the US litigation risk is minimal.

If I paid out as Outisde IR35 until now, is sole trading the most tax efficient legal thing I can do?
If I just start operating Inside IR35, will my accountant report me to HMRC? Can HMRC notice anything?

Jesus. The paranoia is strong in this one.

[humucagir]

---

[jamesbrown]

He meant self-employed, i.e., a payment directly to you. That generally doesn't work for UK clients or agents because they risk being left with a tax bill.

[humucagir]

---

[jamesbrown]

Unless I'm doing something like stealing company secrets or anything on that scale, which I'm not planning to, I don't really think there is that much risk.



So compared to Inside IR35, it's basically 15% more tax efficient. Then why do people go Inside IR35 rather than just doing DPNI scheme and paying less tax?

Hmm, I read up on this. Apparently for DPNI I need a proper employment contract, not the consultant one I have. And they won't give me a proper employment contract. What are the risk of sole trading?

DPNI is a very low % situation. It only applies when you have an overseas employer that has no UK presence and elects not to create a UK-based payroll via a payroll company. I expect that a tiny, tiny fraction of UK workers are on DPNI schemes. It is basically intended for embassy staff and international organisations without a UK presence.

Regarding, a "proper employment contract", I have no idea where you read that, but I think that is incorrect since there is no relationship between PAYE and employment status. You get a DPNI scheme by calling HMRC and asking them to stand one up. The hard part is getting through to someone who has the remotest clue about what a DPNI scheme is, who will then try to persuade you that you should file a SATR instead. At one time, you could call the relevant team directly, but I don't think so anymore.

[northernladuk]

I just got off a call with an accountant. They said, that even if the contract is Inside IR35, there's no ErNI to pay if you run a payroll. They said you can just run a payroll from LTD an pay yourself all the salary, but you won't have to do a ErNI deduction because the client is overseeas and it's not through an umbrella.
Do you guys know anything about it? My understanding is that whatever you do, if you're LTD and operate payroll you pay ErNI and doesn't matter the source of income

Very few clients/agents will allow payment to LTD company so it's a very unlikely scenario. There is a risk if you don't pay your tax they will be on the hook, plus they can't skim of it.

Google it though. Plenty of chat about this on these forums and out in the bigger world

[humucagir]

---

[eek]

Unless I'm doing something like stealing company secrets or anything on that scale, which I'm not planning to, I don't really think there is that much risk.



So compared to Inside IR35, it's basically 15% more tax efficient. Then why do people go Inside IR35 rather than just doing DPNI scheme and paying less tax?

Hmm, I read up on this. Apparently for DPNI I need a proper employment contract, not the consultant one I have. And they won't give me a proper employment contract. What are the risk of sole trading?

Lack of knowledge, hassle and perceived risk would be my guess

[humucagir]

---

[jamesbrown]

Well, I've never been to US and I don't think I'll ever go. So what can they do?

There are mechanisms to recover debt across borders and, should they succeed, the additional fees will be enormous, I expect.

And there's no employment status consideration? i.e. that'll be perfectly legal with all the due tax paid to HMRC?
Because I thought I have to pay ErNI as well.
What about just sole trader? i.e. doing my own SA. If rate of NI is reduced. Is that 100% ok with HMRC?

Again, employment status and DPNI are orthogonal. But there is no risk of IR35 or a false self-employment claim, no.

Again, there is no Employer NI if your nominal employer has no UK presence and that is well established, so zero risk there.

If you're a sole trader, there is a risk that you would be considered falsely self-employed by HMRC, but the liability would not rest with you in the first instance (although you would need professional advice on that regarding an overseas client).