Regulation 80/Section 8 - Do HMRC Make Mistakes?

[Dorkeaux]

Would you expect an accountant to red flag that?

Mine wouldn't.
They advise me on tax, how to arrange the companies finances and prepare the returns, mainly.

They are not lawyers, and are very keen not to be seen as a managed services company.
So they would leave the running of the company and how it makes money up to the director.

[woody1]

They see invoices going in and out - why would they care about this type of detail..

Hypothetically, what if the OP had provided details to the accountant of what they were doing (using ltd and sole trader subbies)? Would you expect an accountant to red flag that?

PS. just noticed the OP has erased their post, whatever that means

[eek]

OP said he/she has an accountant. Shouldn't accountants be aware of this agency stuff?

They see invoices going in and out - why would they care about this type of detail..

[woody1]

So the immediate leap out to me is that you haven't been reporting what you've been paying people via agency reporting.

Your second issue is that as an agency you shouldn't have been paying people as a sole trader..

Get yourself a decent tax advisor and get them to speak to HMRC..

OP said he/she has an accountant. Shouldn't accountants be aware of this agency stuff?

[hobnob]

Following up on my previous post:

Since 2015 I have been carrying out ad-hoc quality engineering work myself for various clients. Jobs will be solitary days here and there, maybe assignments for a few weeks at a time, the odd longer-term job which may last around a year but always working for various clients on various jobs at any one time so very much legitimately self-employed and I'd say safely outside of IR35.

Just to clarify, "self-employed" means "sole trader". However, I assume that you've been working through your limited company. I don't want to be pedantic, but you need to be careful about this to avoid confusion.

I received the letter today saying that for the year 2020/21 I owe £35k in NICs and £82k in PAYE!

I've just remembered that the IR35 rules changed in April 2021. I.e. if your clients were in the private sector then they wouldn't have issued an SDS (so ignore my previous question about that).

[eek]

So the immediate leap out to me is that you haven't been reporting what you've been paying people via agency reporting.

Your second issue is that as an agency you shouldn't have been paying people as a sole trader..

Get yourself a decent tax advisor and get them to speak to HMRC..

[hobnob]

I think the "third party" is the limited company for your subcontractors. I.e. HMRC are saying that those people are actually inside IR35 rather than outside, and therefore you should have been paying them as employees (and then paying the appropriate PAYE/NI to HMRC).

Have they given you a breakdown of the figures? ("£35k in NICs and £82k in PAYE") If not, that seems like a good place to start. I.e. does this apply to everyone who's been a subcontractor for you or only to specific work?

The situation you're in is why most agencies put in "clawback clauses", saying that the contractor is liable if HMRC dispute the IR35 status, i.e. they don't want to be stuck with the same bills that you've received.

Regarding the ad-hoc days, you said that they're doing work for your clients (rather than for you specifically), e.g. you haven't hired them to do your company accounts. Did the end clients issue an SDS? Or are they small companies (so that the subcontractors would be responsible for the determination)? You mentioned ITEPA chapter 8 rather than chapter 10, but it's worth clarifying this point.

[inspectorgadget]

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