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IR35, what if....

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    IR35, what if....

    Hi, theoritical situation:

    I'm trading as a ltd company for 10 years and I get investigated and found to be "caught" by IR35.

    I am taken to court and told to pay a huge tax bill, interest, and a penalty.

    There is no chance of me being able to pay this. Next comes insolvency? So they would cease any monies and/or assets the company has and close it down. My house and personal finances would be ok though? No ones going to prison because they can't pay or anything. Am I right in assuming this ?

    Thanks.

    #2

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      #3
      Doesn't some recent legislation give HMRC the power to get the money from you before it has even gone to court? Guilty until proven innocent and all that..

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        #4
        IR35 is personal taxation, so you are liable.

        If you want your company to be liable for the tax just keep money there.

        Someone did point out rightly that there is nothing to stop you keeping the money in the company, of course you pay corporation tax and then taking it out later.
        I'm alright Jack

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          #5
          It depends.....

          https://www.whitefieldtax.co.uk/web/...-a-individual/

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            #6
            Originally posted by wurzel View Post
            Doesn't some recent legislation give HMRC the power to get the money from you before it has even gone to court? Guilty until proven innocent and all that..

            Yes GG, they created some legislation to issue APN to the avoiders. It was an easy way for HMRC to take the money now rather then later when court cases have been dealt with.
            Vote Corbyn ! Save this country !

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              #7
              Originally posted by ljc View Post
              I am taken to court and told to pay a huge tax bill, interest, and a penalty.
              Does it come down to this? Whether HMRC believes that you wilfully misled them?

              Scenario 1: Contractor had all their contracts reviewed, made every effort to distinguish themselves from the permies but the client turned up in court and said that in their minds they were just part of a resource pool. Ruling went against them. Would the OP likely face tax bill plus interest but no penalties since they had acted in good faith based on professional advice?

              Scenario2: Contractor stuck head in sand, no contract reviews or even worse failed but decided to blag it. Ruling goes against them. OP faces tax owed plus interest plus penalty.

              Scenario 1 -> HMRC takes company reserves only
              Scenario 2 -> HMRC pursues them personally for the cash

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                #8
                Originally posted by BlasterBates View Post
                IR35 is personal taxation, so you are liable.

                If you want your company to be liable for the tax just keep money there.

                Someone did point out rightly that there is nothing to stop you keeping the money in the company, of course you pay corporation tax and then taking it out later.
                The tax isn't calculated on the money that you pay yourself; the tax is calculated on the money the company earns as if you'd earned it personally. So that wouldn't work. Correct me if I'm wrong.
                Will work inside IR35. Or for food.

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                  #9
                  Originally posted by VectraMan View Post
                  The tax isn't calculated on the money that you pay yourself; the tax is calculated on the money the company earns as if you'd earned it personally. So that wouldn't work. Correct me if I'm wrong.
                  that doesn't sound right to me?

                  IR35 is about clawing back personal tax you have avoided/evaded. If it hasn't been paid out, you haven't avoided/evaded it yet.

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                    #10
                    Originally posted by Pondlife View Post
                    Does it come down to this? Whether HMRC believes that you wilfully misled them?
                    If you are found out to have deliberately "dodged" IR35 you can be fined up to 100% of the tax owed.

                    Thank you everyone. I will get contract reviews and insurance to be on the safe side. I wish they'd just scrap this regulation and be done with it. Sleepless nights just trying to make an honest living.

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