Contractors: IR35 & general discussion

[zippy3x]

tighnamara said:

Clockwork Cupcake said:

tighnamara said:

Of course an investigation would be a worry but if you have been sensible in how you run the company the implications of a future large tax bill will be reduced so less worry.

Your naivety is very endearing.

Certainly not being naive as I have been deemed out by the end user so will continue as limited ( this could change before April 5th though)

If you think running your company sensibly will exempt you from HMRC's attention, you're being spectacularly naive.

Spoiler for you here, HMRC think every PSC is an artificial construct to avoid tax. Using the definition of fraud you yourself quoted, it's not even a stretch to believe HMRC could at any time decide any contractor-client relationship is in their opinion "fraudulent" and worthy of an investigation.

[Clockwork Cupcake]

zippy3x said:

If you think running your company sensibly will exempt you from HMRC's attention, you're being spectacularly naive.

Spoiler for you here, HMRC think every PSC is an artificial construct to avoid tax. Using the definition of fraud you yourself quoted, it's not even a stretch to believe HMRC could at any time decide any contractor-client relationship is in their opinion "fraudulent" and worthy of an investigation.

Exactly. This has been an ongoing worry for every PSC since 1999. And more than a few other small businesses too.

No matter how "outside" you are, no matter how well insured, no matter how squeaky clean you run your company, it hangs over you like the aforementioned Sword of Damocles.

Plus, HMRC can just suddenly decide to retrospectively "clarify" existing laws, like they did with Section 660a.

Edited by Clockwork Cupcake on Wednesday 19th February 21:49

[mondeoman]

tighnamara said:

Certainly not being naive as I have been deemed out by the end user so will continue as limited ( this could change before April 5th though)

I don’t believe HMRC carried out many investigations into contractors who were limited and moved over to PAYE in the public sector 3 years ago.
Wouldn’t there be massive uproar in the private sector if HMRC now start doing something they didn’t attempt 3 years ago in the public sector.

If HMRC had set a precedent and carried this out over the last 3 years in the public sector then yes there would be real worry. This hasn’t happened and would be suicide if the government allowed it to happen only in the private sector.

Again, only my opinion and you may think I am being naive but a certain level of calm is required unless you have been taking the ”mickey” in how you have run your company.

They've been waiting for everyone to get classified as in, public sector and private, and then they'll go after everyone all at once. I expect a lot of phishing emails to come out in April/May/June.

[tighnamara]

mondeoman said:

tighnamara said:

Certainly not being naive as I have been deemed out by the end user so will continue as limited ( this could change before April 5th though)

I don’t believe HMRC carried out many investigations into contractors who were limited and moved over to PAYE in the public sector 3 years ago.
Wouldn’t there be massive uproar in the private sector if HMRC now start doing something they didn’t attempt 3 years ago in the public sector.

If HMRC had set a precedent and carried this out over the last 3 years in the public sector then yes there would be real worry. This hasn’t happened and would be suicide if the government allowed it to happen only in the private sector.

Again, only my opinion and you may think I am being naive but a certain level of calm is required unless you have been taking the ”mickey” in how you have run your company.

They've been waiting for everyone to get classified as in, public sector and private, and then they'll go after everyone all at once. I expect a lot of phishing emails to come out in April/May/June.

So public sector would get of lighter than private sector, doesn’t make sense.

[tighnamara]

Clockwork Cupcake said:

I do. You are justifying your assertions by implying you are talking from a position of experience. I'm questioning your level of experience.

Too many

[mondeoman]

tighnamara said:

mondeoman said:

tighnamara said:

Certainly not being naive as I have been deemed out by the end user so will continue as limited ( this could change before April 5th though)

I don’t believe HMRC carried out many investigations into contractors who were limited and moved over to PAYE in the public sector 3 years ago.
Wouldn’t there be massive uproar in the private sector if HMRC now start doing something they didn’t attempt 3 years ago in the public sector.

If HMRC had set a precedent and carried this out over the last 3 years in the public sector then yes there would be real worry. This hasn’t happened and would be suicide if the government allowed it to happen only in the private sector.

Again, only my opinion and you may think I am being naive but a certain level of calm is required unless you have been taking the ”mickey” in how you have run your company.

They've been waiting for everyone to get classified as in, public sector and private, and then they'll go after everyone all at once. I expect a lot of phishing emails to come out in April/May/June.

So public sector would get of lighter than private sector, doesn’t make sense.

They can go back twenty years if they want to. No one ne gets out alive...

[wombleh]

mondeoman said:

They can go back twenty years if they want to. No one ne gets out alive...

Only if they suspect fraud.

Although it appears their definition of fraud sets the boundary quite low, slightly below “disagreement”.

[768]

mondeoman said:

tighnamara said:

If HMRC had set a precedent and carried this out over the last 3 years in the public sector then yes there would be real worry. This hasn’t happened and would be suicide if the government allowed it to happen only in the private sector.

They've been waiting for everyone to get classified as in, public sector and private, and then they'll go after everyone all at once. I expect a lot of phishing emails to come out in April/May/June.

I thought I'd heard in the last few weeks that they have started going after those who were in the public sector three years ago?

[Bluedot]

768 said:

mondeoman said:

tighnamara said:

If HMRC had set a precedent and carried this out over the last 3 years in the public sector then yes there would be real worry. This hasn’t happened and would be suicide if the government allowed it to happen only in the private sector.

They've been waiting for everyone to get classified as in, public sector and private, and then they'll go after everyone all at once. I expect a lot of phishing emails to come out in April/May/June.

I thought I'd heard in the last few weeks that they have started going after those who were in the public sector three years ago?

There's a lot of rumours and whispers flying around at the moment. I believe Dave Chaplin also posted similar a few weeks back as in 'he heard something' and was asking for evidence.
I've yet to see anything posted as fact though ?

Backed up by this from AR Tax:
https://www.linkedin.com/posts/ar-tax-accountants-...

[Ceeejay]

So come the first week in April Mr HMRC is going to have a shock.... Suddenly all those contracts that have switched from outside to inside are going to throw a load of NIC's and Income tax at them... They're going to be like pigs in st for a few months... They'll proudly announce the effect tof the change in legislation, saying how much fairer the system is.... But like any greedy piggy, they're just going to want more...

So how do they get it...

Well like any business they are going to go for the easy cash first... They arent going to want to start opening up accounts and business practices of the 1 man band Ltd's to see if they can scrape some retrospective cash.. Well not straight away...

They're going to go back to the end clients, and take another look at any determination statements that were on the edge of inside and outside, and give the clients a quick prod saying, are you sure you got this right ? You know we can fine you loads if youve got this wrong ?? Once theyve flushed a few more conracts inside its going to be focus on the small players...

But where do you start ???

Well lets ask the clients if they have any contractors who went straight from outside to inside... thats looks like easy pickings to go retrospective.... Thats going to take a while to pick through !! How do we pick the best ones to go for... hmmm... I know, lets do it on turnover... Best to pick on the guy who's been invoicing 6 figures a year rather than one only on 5.... ooooh and while we're here lets go and have a closer look at whether they've been paying their fair share of corporation tax.....

How longs all that going to take !! Years I bet.......


But in the mean time other effects have started to occur.... Big projects are suffering... They lost a load of key skills when some subbies refused to transfer to inside contracts... 1 man Ltd's start dissolving, and lese and less corporation tax starts coming in... The end clients are now having to pay more NIC's and higher wages, so their corporation tax starts to drop... Mr HMRC starts getting twitchy... why arent we getting all this tax. !! What can we do to change this..... and off we go again !!!

Edited by Ceeejay on Thursday 20th February 07:55

[aeropilot]

So........

PSC engages a well known IR35 legal services company to check contract is IR35 compliant as outside at start of contract.......

Roll forward to this current situation, and PSC's current end client and preferred supply chain appointed agency happens to engage the same legal services company to run checks on a number of PSC's in the project team and same legal services company comes up with an outside determination for the PSC that they have already given an inside determination to.....

Interesting conflict of interest?
Or just proof that the guy with the biggest stick/deepest pockets always wins......

[g7orge]

Countdown said:

g7orge said:

It is avoiding tax (not evading) Legally lowering your tax bill - The same as contractors do..

So would you say paying your wife £12,499 pa when she does no work for the company is tax avoidance or tax evasion? What about expensing everybody’s laptops/mobile phones/car lease payments (when they’ve not done any work for the PSC)?

This is when you are now confusing an employee of a limited company and an employer. - As an employee of the limited company (on PAYE) I claim the same tax allowances as you do - as an employer of the limited company I claim the same tax allowances as your employer does. - Are you annoyed that your employer can claim tax allowances?

[Clockwork Cupcake]

Countdown said:

Paying your wife £12.5k when she does no work for the company isn't "claiming tax allowances". Expensing items that aren't used for company business isn't "claiming tax allowances". It's fraud. It's no different to processing dummy invoices through your PSC, diverting income to other bank accounts, getting paid cash in hand, or any of the one thousand other methods of tax evasion.

So your point is that people who commit fraud are committing fraud?

Well, that really moves the debate on. Thanks for your insight.

[Gazzab]

Spotted an article this morning that shows a dip in agency billing in January.

[Countdown]

zippy3x said:

Countdown said:

So would you say paying your wife £12,499 pa when she does no work for the company is tax avoidance or tax evasion?

Neither, it is perfectly legal. HMRC attempted to stop "income shifting" as thay called it by taking Arctic Systems to court. After 6 years, the court of appeals ruled in favour of Arctic Systems and deemed income shifting legal.

https://www.contractorcalculator.co.uk/house_of_lo...

and

https://www.taxinsider.co.uk/arctic-systems-the-go...

For those claiming "HMRC won't come after me for moving outside to inside", I'd have a read of those articles.

That relates to dividends not salary.

[Countdown]

Clockwork Cupcake said:

Countdown said:

Paying your wife £12.5k when she does no work for the company isn't "claiming tax allowances". Expensing items that aren't used for company business isn't "claiming tax allowances". It's fraud. It's no different to processing dummy invoices through your PSC, diverting income to other bank accounts, getting paid cash in hand, or any of the one thousand other methods of tax evasion.

So your point is that people who commit fraud are committing fraud?

Well, that really moves the debate on. Thanks for your insight.

g7orgy doesn't think it IS fraud. He seems to think it's "claiming tax allowances"

[Tim330]

Countdown said:

zippy3x said:

Countdown said:

So would you say paying your wife £12,499 pa when she does no work for the company is tax avoidance or tax evasion?

Neither, it is perfectly legal. HMRC attempted to stop "income shifting" as thay called it by taking Arctic Systems to court. After 6 years, the court of appeals ruled in favour of Arctic Systems and deemed income shifting legal.

https://www.contractorcalculator.co.uk/house_of_lo...

and

https://www.taxinsider.co.uk/arctic-systems-the-go...

For those claiming "HMRC won't come after me for moving outside to inside", I'd have a read of those articles.

That relates to dividends not salary.

Indeed. Gifting spouse shares to split the dividend is fine. Dividends come from post CT profits. Paying her a salary when she doesn't do any work for your company is not OK.

[Clockwork Cupcake]

Countdown said:

g7orgy doesn't think it IS fraud. He seems to think it's "claiming tax allowances"

No, they're saying that using legitimate allowances legitimately is legitimate tax mitigation.

Fraudulently using allowances that you should not use is always fraud.

Your implication seems to be that all use of such allowances is fraudulent, which is disingenuous at best and total bks at worst.

[g7orge]

Countdown said:

Clockwork Cupcake said:

Countdown said:

Paying your wife £12.5k when she does no work for the company isn't "claiming tax allowances". Expensing items that aren't used for company business isn't "claiming tax allowances". It's fraud. It's no different to processing dummy invoices through your PSC, diverting income to other bank accounts, getting paid cash in hand, or any of the one thousand other methods of tax evasion.

So your point is that people who commit fraud are committing fraud?

Well, that really moves the debate on. Thanks for your insight.

g7orgy doesn't think it IS fraud. He seems to think it's "claiming tax allowances"

Income shifting is legal (I don't do it myself) - Claiming for expenses that are not incurred in the running of your business wouldn't be - (I don't do that myself either and I don't know anyone else that would - maybe you should stop hanging around with dodgy people.. )

[Countdown]

Clockwork Cupcake said:

No, they're saying that using legitimate allowances legitimately is legitimate tax mitigation.

No they're not. They're being rather vague, which i why I gave specific examples that were clearly fraud

Clockwork Cupcake said:

Fraudulently using allowances that you should not use is always fraud.

Your implication seems to be that all use of such allowances is fraudulent, which is disingenuous at best and total bks at worst.

To avoid any disingenuousity I'll be clear - I don't believe the use of all such allowances is fraud. As an Accountant Im supposed to know what the allowances are for and ensure that clients make maximum use of them. But equally I know of self employed people who consider what we both agree to be "fraud" as "maximising their tax allowances". They're the ones that seem to get most upset when you ask them whether claiming for XYZ is legitimate and appropriate. I also believe it's the latter ones who are most worried about the potential of a HMRC investigation.