Falling Foul of IR35

[Pondlife]

As mentioned by Mal in another post, somebody recently lost an IR35 investigation because a client who was called to the hearing went back on a working practises confirmation letter written 4 years previously.

This means that it's still out there and although investigation Ins is a must-have IMHO, there are no guarantees that you won't be one of the unlucky ones, dispite the statistics and get lumbered with a hefty tax bill.

This being the case, how much (if any) do people keep aside to cover these possibilities? Basically, what's the % difference between being caught (so I assume no expenses either) and not?

[malvolio]

About 20% of gross earning for up to 6 years... Worrying, isn't it.

[Old Greg]

About 20% of gross earning for up to 6 years... Worrying, isn't it.

But presumably you'd only get 'done' for the whole 6 years if there was a ruling aganist every contract within the 6 year period, or you only had a single contract for 6 years (which might be part of the problem, some might think)?

[malvolio]

But presumably you'd only get 'done' for the whole 6 years if there was a ruling aganist every contract within the 6 year period, or you only had a single contract for 6 years (which might be part of the problem, some might think)?

Clearly. The question was "Worst case scenario".

[Old Greg]

Clearly. The question was "Worst case scenario".

That's pretty worst case alright.

[kingshuk]

or you only had a single contract for 6 years (which might be part of the problem, some might think)?

yes, from what I have read in the forums long term in the same place could be a pointer - though it still is surprisingly common. There is a guy in my team who had been here in the same project for almost 10 years now. 5 years in the same place is quite usual in some of the IBs I have seen.

[mjshrimpton]

how much (if any) do people keep aside to cover these possibilities?

Nerdy I know, but I work in IT so what the hell.

I went to an IR35 calculator, plugged in exact figures for my salary, company pension contributions and decided that the minimum I would retain each year if possible would be double the results it said were the likely missing PAYE and NIC payments.

Then when I eventually close the company, hopefully gaining from taper relief, if not just withdrawing a divi, the plan is that goes into the offset mortgage, and remains in there working in my favour until the period of investigation might have gone.

Then I blow it on crack, crisps and video games etc.

This money will therefore be available to me for drawing as divis if I want it, covers bench time, and when finally withdrawn from the company provides me with a useful purpose.

I suppose the <0.5% chance of Hector getting his hands on it has caused me to work on something sensible which I should have done anyway!

The circumstances of that recent loss sound galling, but the fact that the PCG members ratio is 1427:4 still should shame the people who dreamt up the legislation in the first place.

Are you listening GB, you property settling on your wife hypocrite.

[kingshuk]

Apparently just because a case is lost doesn't mean that you will have to pay the money. According to this post -

http://forums.contractoruk.com/threa...tml#post212790

THEPUMA had mentioned this point a few times in this forum

[malvolio]

Apparently just because a case is lost doesn't mean that you will have to pay the money. According to this post -

http://forums.contractoruk.com/threa...tml#post212790

THEPUMA had mentioned this point a few times in this forum

Well yes, that is quite correct, but I would be a bit nervous about using this as anything other than a safety net when all else fails...

Of course, the downside is that is if you bankrupt YourCo, you will be barred from being a doirector for a number of years, which might put a dent in your earning capability: you can use an umbrella, but that's back to employee-level taxation again, or you can use someone else's company. Can't say either one appeals overmuch!

[Old Greg]

Well yes, that is quite correct, but I would be a bit nervous about using this as anything other than a safety net when all else fails...

Of course, the downside is that is if you bankrupt YourCo, you will be barred from being a doirector for a number of years, which might put a dent in your earning capability: you can use an umbrella, but that's back to employee-level taxation again, or you can use someone else's company. Can't say either one appeals overmuch!

So if you close down your Co. revery couple of years (and do the whole taper tax relief thingy assuming that continues) and open a new one, do you resuce your exposure - i.e. are they unable to come after you (assuming you've not behaved dishonestly over IR35)?