Contractors: IR35 & general discussion
Discussion
I know contractors who got caught up in the loan charge scheme, HMRC sent them bills demanding they pay back tens of thousands of pounds within 14 days. Of course the contractors went legal and it dragged on for years but HMRC can and will send out bills to you personally demanding back taxes. I know people who had to sell assets, get loans etc, people have even committed suicide over it.
I'm not saying this is the same thing but HMRC have precedent. As the director of a Ltd company, you can be held personally liable for tax evasion.
Yes they've said they won't persue previous off payroll discrepancies and then punched a massive whole in that statement with there get out clause.
Even if you win a case, the investigation and legal process would be an absolute nightmare. Personally there is no way I'd take the chance of going from outside to in at the same place even if the risk is small but at my current client, lots of people are doing exactly that.
I'm not saying this is the same thing but HMRC have precedent. As the director of a Ltd company, you can be held personally liable for tax evasion.
Yes they've said they won't persue previous off payroll discrepancies and then punched a massive whole in that statement with there get out clause.
Even if you win a case, the investigation and legal process would be an absolute nightmare. Personally there is no way I'd take the chance of going from outside to in at the same place even if the risk is small but at my current client, lots of people are doing exactly that.
Deep Thought said:
Gazzab said:
Deep Thought said:
You said it, you back it up. 
Just Google. ‘Sell my house to pay tax Bill’. There are, for example, many loan charge ‘victims’ who have sold their house to pay their tax bill. How many times have you to be told this?
If, for example, a contractor cannot demonstrate that they have applied the necessary due diligence when determining their IR35 status then HMRC would be able to transfer the debt to the contractor personally.
The stress and legal costs related to fighting hmrc would not be something I would want to risk happening. An inside determination with an existing client would mean au revoir. If you are comfortable taking the risk if caught red handed then that’s fine by me.
Per contractor calc:
One concern the contractor may have, as they transition past April 2021, is the client tells them that they think historically the contract should have been treated an inside IR35. If the contractor ignores this, and doesn't pay IR35 taxes for the period prior to April 2021, does this mean they are wilfull, triggering potential regulation 72 exposure?
The answer is maybe, and depends on the facts
One concern the contractor may have, as they transition past April 2021, is the client tells them that they think historically the contract should have been treated an inside IR35. If the contractor ignores this, and doesn't pay IR35 taxes for the period prior to April 2021, does this mean they are wilfull, triggering potential regulation 72 exposure?
The answer is maybe, and depends on the facts
Deep Thought said:
Any tax bill regarding IR35 is not against the individual, it is against the limited company.
How many times have you to be told this?
And if you don't successfully overturn it, and then you don't pay it (and try to wind up your company to avoid paying it) then HMRC can come after you personally. Because it is an unpaid tax. As per the links I provided. How many times have you to be told this?
Honestly, I think we are all having a Heated Agreement here. We're all basically saying the same thing, but from slightly different viewpoints.
Guvernator said:
I know contractors who got caught up in the loan charge scheme, HMRC sent them bills demanding they pay back tens of thousands of pounds within 14 days. Of course the contractors went legal and it dragged on for years but HMRC can and will send out bills to you personally demanding back taxes. I know people who had to sell assets, get loans etc, people have even committed suicide over it.
I'm not saying this is the same thing but HMRC have precedent. As the director of a Ltd company, you can be held personally liable for tax evasion.
Yes they've said they won't persue previous off payroll discrepancies and then punched a massive whole in that statement with there get out clause.
Even if you win a case, the investigation and legal process would be an absolute nightmare. Personally there is no way I'd take the chance of going from outside to in at the same place even if the risk is small but at my current client, lots of people are doing exactly that.
Agreed.I'm not saying this is the same thing but HMRC have precedent. As the director of a Ltd company, you can be held personally liable for tax evasion.
Yes they've said they won't persue previous off payroll discrepancies and then punched a massive whole in that statement with there get out clause.
Even if you win a case, the investigation and legal process would be an absolute nightmare. Personally there is no way I'd take the chance of going from outside to in at the same place even if the risk is small but at my current client, lots of people are doing exactly that.
The loan charge scheme was personal tax evasion and HMRC can pursue individuals directly for that.
An incorrect determination of IR35 status by your limited company (or you acting as a representative of that limited company) is not personal tax evasion. It is something they have to pursue the limited company for. They will absolutely make your life, as a director of that limited company miserable for potentially years but it is the limited company they are pursuing.
If a limited company makes a determination, in good faith at the time, that HMRC subsequently disagree with, that is not fraud or tax evasion.
They "could" potentially go down the Regulation 72 route but they would have to prove the limited company chose to act fraudulently (which is difficult to do) to a judge IIRC, so they rarely attempt to invoke it.
It is another reason why it is very rare for HMRC to actively pursue a PSC via a full investigation for IR35 discrepencies because it is relatively costly for them to do, the effort / cost versus return is relatively low and the PSC may not have the money in the company account to pay the bill anyway.
It is important to know that distinction.
Edited by Deep Thought on Wednesday 10th March 09:50
Clockwork Cupcake said:
Deep Thought said:
Any tax bill regarding IR35 is not against the individual, it is against the limited company.
How many times have you to be told this?
And if you don't successfully overturn it, and then you don't pay it (and try to wind up your company to avoid paying it) then HMRC can come after you personally. Because it is an unpaid tax. As per the links I provided. How many times have you to be told this?
Honestly, I think we are all having a Heated Agreement here. We're all basically saying the same thing, but from slightly different viewpoints.
If you think of what they are doing going forward - they are reinforcing the message with the company you are engaging with that if you get the IR35 determination wrong, then the company is liable for the tax debt.
Thats the same for our PSCs. Its the limited company that is liable.
It is important to be aware of that distinction.
Edited by Deep Thought on Wednesday 10th March 09:48
Gazzab said:
Per contractor calculator they can.
If, for example, a contractor cannot demonstrate that they have applied the necessary due diligence when determining their IR35 status then HMRC would be able to transfer the debt to the contractor personally.
Uh huh. Now read on at how they would have to do that and how difficult it would be for them and unlikely to be granted. It is by no means a given.If, for example, a contractor cannot demonstrate that they have applied the necessary due diligence when determining their IR35 status then HMRC would be able to transfer the debt to the contractor personally.
Gazzab said:
The stress and legal costs related to fighting hmrc would not be something I would want to risk happening. An inside determination with an existing client would mean au revoir. If you are comfortable taking the risk if caught red handed then that’s fine by me.
I have never disagreed with that. You are again, moving the goalposts rather than admit your broad brush statements were wrong - they cant bill you on a whim, they cant take your house and car based on that whimsical bill.Deep Thought said:
Gazzab said:
Per contractor calculator they can.
If, for example, a contractor cannot demonstrate that they have applied the necessary due diligence when determining their IR35 status then HMRC would be able to transfer the debt to the contractor personally.
Uh huh. Now read on at how they would have to do that and how difficult it would be for them and unlikely to be granted. It is by no means a given.If, for example, a contractor cannot demonstrate that they have applied the necessary due diligence when determining their IR35 status then HMRC would be able to transfer the debt to the contractor personally.
Gazzab said:
The stress and legal costs related to fighting hmrc would not be something I would want to risk happening. An inside determination with an existing client would mean au revoir. If you are comfortable taking the risk if caught red handed then that’s fine by me.
I have never disagreed with that. You are again, moving the goalposts rather than admit your broad brush statements were wrong - they cant bill you on a whim, they cant take your house and car based on that whimsical bill.We are agreeing ie they can come after your company and in turn after you (the latter being harder). People do end up selling assets to pay their tax bills. These are facts.
Why anyone would stay with their client if they change to ‘inside’ - because they hope or because they have closed their co or because the tax liability might be difficult to pin on them ... we seem to be playing to those that want to hear it’s ok. Many contractors historically have just taken the contract they are offered and in blind faith accept that it’s outside because that’s what they want to hear. I have just been through this and had to get the agency lawyers (and my professional contract reviewer) involved etc to make sure my contract was properly constructed. Clearly no previous contractor via this client / agent have done this before. Suspect that this sort of historical behaviour will make it easier for hmrc. But I await your disagreement.
Gazzab said:
You have again just gone back to your silly try and have an argument. You are splitting hairs.
We are agreeing ie they can come after your company and in turn after you (the latter being harder). People do end up selling assets to pay their tax bills. These are facts.
Why anyone would stay with their client if they change to ‘inside’ - because they hope or because they have closed their co or because the tax liability might be difficult to pin on them ... we seem to be playing to those that want to hear it’s ok. Many contractors historically have just taken the contract they are offered and in blind faith accept that it’s outside because that’s what they want to hear. I have just been through this and had to get the agency lawyers (and my professional contract reviewer) involved etc to make sure my contract was properly constructed. Clearly no previous contractor via this client / agent have done this before. Suspect that this sort of historical behaviour will make it easier for hmrc. But I await your disagreement.
You've clearly backed away from your original incorrect statement and the above is broadly aligned now with my and everyone elses view.We are agreeing ie they can come after your company and in turn after you (the latter being harder). People do end up selling assets to pay their tax bills. These are facts.
Why anyone would stay with their client if they change to ‘inside’ - because they hope or because they have closed their co or because the tax liability might be difficult to pin on them ... we seem to be playing to those that want to hear it’s ok. Many contractors historically have just taken the contract they are offered and in blind faith accept that it’s outside because that’s what they want to hear. I have just been through this and had to get the agency lawyers (and my professional contract reviewer) involved etc to make sure my contract was properly constructed. Clearly no previous contractor via this client / agent have done this before. Suspect that this sort of historical behaviour will make it easier for hmrc. But I await your disagreement.
Gazzab said:
Why anyone would stay with their client if they change to ‘inside’ - because they hope or because they have closed their co or because the tax liability might be difficult to pin on them
Or because in the current Covid climate, it's the only option for them to pay the bills and keep a roof over their head.Those I know who were able to stay working this past 12 months have been careful and built up funds in past 12-18 months so as to be able to walk away from contracts at the end of the month in the knowledge that they may well be out of work for some time.
In my industry though, contractors are not on the silly rates that many on here take as the norm, and aren't in such a comfortable position....and why being 'forced' to take a huge hit in their pockets by going PAYE is equally hard, but something is better than nothing at all.
aeropilot said:
Gazzab said:
Why anyone would stay with their client if they change to ‘inside’ - because they hope or because they have closed their co or because the tax liability might be difficult to pin on them
Or because in the current Covid climate, it's the only option for them to pay the bills and keep a roof over their head.Those I know who were able to stay working this past 12 months have been careful and built up funds in past 12-18 months so as to be able to walk away from contracts at the end of the month in the knowledge that they may well be out of work for some time.
In my industry though, contractors are not on the silly rates that many on here take as the norm, and aren't in such a comfortable position....and why being 'forced' to take a huge hit in their pockets by going PAYE is equally hard, but something is better than nothing at all.
There was a debate post the budget regarding corp tax last week. I haven’t studied this but it seems a marginal rate of 26.5% will apply for any profits above £50k.
https://www-contractoruk-com.cdn.ampproject.org/c/...
https://www-contractoruk-com.cdn.ampproject.org/c/...
HMRC can go after the individual if they’ve extracted all the money via dividends as that means the director has over stated profit so the company returns aren’t valid. They’d consider that fraud, reopen the accounts and bill the director for the missing cash.
Otherwise everyone would just extract all the cash from the company and not worry about it.
Otherwise everyone would just extract all the cash from the company and not worry about it.
So according to that link on HMRC's site:
Still unclear how this applies for those staying with the same client but moving to a PAYE contract, where the client has just moved everyone to PAYE to avoid the risk and hassle of making determinations then logically speaking that means you haven't switched from inside to outside at all, that's just a blanket change in T&Cs and contract nature mandated by the client. I presume HMRC don't follow that sort of logic though.
HMRC said:
HMRC will not open a new compliance enquiry into a contractor’s return for tax years before 6 April 2021 in circumstances where:
a client decides that a contract is within the off-payroll working rules (IR35)
a contractor changes the way they work from providing and invoicing services through an intermediary entity to now being paid via a client or end user’s payroll
a contractor ends a contract because they disagree with a client decision on status
So based on the last point, and their caveat about "suspecting fraud", the advice to terminate your contract before the rules change doesn't seem to be of much help?a client decides that a contract is within the off-payroll working rules (IR35)
a contractor changes the way they work from providing and invoicing services through an intermediary entity to now being paid via a client or end user’s payroll
a contractor ends a contract because they disagree with a client decision on status
Still unclear how this applies for those staying with the same client but moving to a PAYE contract, where the client has just moved everyone to PAYE to avoid the risk and hassle of making determinations then logically speaking that means you haven't switched from inside to outside at all, that's just a blanket change in T&Cs and contract nature mandated by the client. I presume HMRC don't follow that sort of logic though.
Well it looks like another one is about to succumb to IR35 changes.
I started a contract in December. The client had assessed contract roles this time last year as outside IR35. I was only meant to be working for the client for 2 months but they've asked me to stay until May except today they've declared they'll only deal with umbrellas from April onward.
Really irritating as it's a really enjoyable contract and the way the engagement has worked really has been in the full spirit of outside but I guess HR have decided they'd rather not carry any risk. Rate isn't that amazing as an outside role and it's pretty shocking as an inside role, particularly when you factor in all my software license costs.
Just drafting a polite thanks but no thanks now.
Really annoys means that HMRC have put the frighteners on everyone with this.
I started a contract in December. The client had assessed contract roles this time last year as outside IR35. I was only meant to be working for the client for 2 months but they've asked me to stay until May except today they've declared they'll only deal with umbrellas from April onward.
Really irritating as it's a really enjoyable contract and the way the engagement has worked really has been in the full spirit of outside but I guess HR have decided they'd rather not carry any risk. Rate isn't that amazing as an outside role and it's pretty shocking as an inside role, particularly when you factor in all my software license costs.
Just drafting a polite thanks but no thanks now.
Really annoys means that HMRC have put the frighteners on everyone with this.
Still waiting on my determination but my 3 colleagues on the same project have been determined outside IR35. The end client is using a third party for determinations. They're using Kingsbridge who seem to be a QDOS rival. Should here by the end of the week.
Saw this article also.
Flurry of outside IR35 determinations pleasantly surprises contractor sector
https://www.contractoruk.com/news/0014967flurry_ou...
Saw this article also.
Flurry of outside IR35 determinations pleasantly surprises contractor sector
https://www.contractoruk.com/news/0014967flurry_ou...
PushedDover said:
Pop Quiz
If you were a consultant charging £120k pa, through your Ltd.
What would be the equivalent or PAYE Salary you'd expect to become Permie?
https://www.contractorcalculator.co.uk/ir35calcula...If you were a consultant charging £120k pa, through your Ltd.
What would be the equivalent or PAYE Salary you'd expect to become Permie?
Edited by Clockwork Cupcake on Wednesday 17th March 22:41
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