Hypothetical situation - HMRC / IR35 review, deemed inside - tax bill? Who pays?

[Larsen Howie]

So lets say HMRC investigate someones IR35 practices within their PSC, they go through due process and come to the conclusion you should have been declared inside IR35 and been taxed accordingly.

So basically they've went through this process -

https://ww w.larsenhowie.co.uk/industry-news/2017/12/21/unlucky-13-ir35-investigation-process/]Unlucky 13 - The Dreaded IR35 Investigation - Larsen Howie

They deem your PSC is due to pay �25,000. Your LTD Co has no funds and is no longer actively trading / is dormant.

What can HMRC legally do at that point?

well ... If the contractor has demonstrated that they carried out the requisite IR35 due diligence then HMRC are impotent to collect the PAYE & NIC liability as the debt is owed by the company.

In the case of Larkstar Data Ltd, in which HMRC successfully appealed a decision by the General Commissioners, by the time the matter was settled, the contractor, Alan Brill, had retired & there was £130 left in the company bank account which it is believed to be the final settlement figure.

HMRC can issue a director with a Personal Liability Notice to collect the debt, if they feel that the failure to deduct & pay PAYE tax & NIC was attributable to the fraud or wilful failure of the individual to do so. We have never known HMRC to use these powers in an IR35 scenario but they are available to the department if they need them.

But of course, HMRC and their powers (how they use them) are a massive talking point recently throughout the contractor sphere and beyond into the mainstream!

I trust this answers your question!

[MrButton]

I’m not an expert! But from what I’ve read there’s not loads they can do with the current laws/legislation.

There is an argument to say they’re more likely to go the distance with a case where the company has significant funds or assets (property etc)

[daemon]

So lets say HMRC investigate someones IR35 practices within their PSC, they go through due process and come to the conclusion you should have been declared inside IR35 and been taxed accordingly.

So basically they've went through this process -

https://w ww.larsenhowie.co.uk/industry-news/2017/12/21/unlucky-13-ir35-investigation-process/]Unlucky 13 - The Dreaded IR35 Investigation - Larsen Howie

They deem your PSC is due to pay �25,000. Your LTD Co has no funds and is no longer actively trading / is dormant.

What can HMRC legally do at that point?