Dragonfly tax bill and corporation tax

[mr magoo]

Evening all,

Apologies if this is a daft question but just trying to understand

Dragonfly now has a tax bill of £99k which looking at his daily rate and the fact it was over 3 years I am guessing this would be the total tax dues on the deemed payment as if he had always been operating inside IR35

As this guy has been operating outside IR35, he will have already paid some Tax, NI (depending on his level of salary) and a large chunk of corporation tax.

Is any allowance made for the tax he has therefore already paid or does he have to pay the lot again meaning paying tax twice!!

[Sockpuppet]

Is any allowance made for the tax he has therefore already paid or does he have to pay the lot again meaning paying tax twice!!

IANAA but corp tax + NI etc are taken into account.

Bear in mind the £99k includes stuff such as fines, interest etc.

[Urban Ruth]

Bear in mind the £99k includes stuff such as fines, interest etc.

It would be very interesting to see a full breakdown of the Dragonfly fines.

Does anyone have a full breakdown report available? I could not see one in the court ruling.

[Andy2]

If someone does not pay up or declare himself bankrupt , can they seize his assets/bank account?

[Diver]

If someone does not pay up or declare himself bankrupt , can they seize his assets/bank account?

If you are director of your Ltd, they can come after you personally

The court may, on application by the liquidator of a company which is being wound up, order directors to make "such contribution . . . to the company's assets" as it thinks proper. A director may also be liable to third parties under the Common Law (of tort) if he acts negligently or recklessly.

Where a company fails to pay National Insurance Contributions in respect of its employees, and the failure is due to the fraud or neglect of a director or other officer, the unpaid NIC may be recovered from that director (Social Security Administration Act 1992, s.121C)

Any one, including a director, who signs "any bill of exchange, promissory note, endorsement, cheque or order for money or goods in which the company's name" is not "mentioned in legible characters" will be personally liable for the amount involved if the company does not pay (Companies Act 1985, s.349(4)).

A director or shadow director of a company which has gone into insolvent liquidation can be personally liable for debts of any other company with a confusingly similar name which he runs within five years after liquidation of the first company (Insolvency Act 1986, s.217).

[Fred Bloggs]

If someone does not pay up or declare himself bankrupt , can they seize his assets/bank account?

It has been suggested in the past here that if the Ltd co bank account has no money then Mr Dragonfly doesn't have to pay personally. I've always thought that sounded a bit odd, but maybe we'll now find out what happens? How many of us have >£100k just sitting there in the Ltd co account?

[Lewis]

It has been suggested in the past here that if the Ltd co bank account has no money then Mr Dragonfly doesn't have to pay personally. I've always thought that sounded a bit odd, but maybe we'll now find out what happens? How many of us have >£100k just sitting there in the Ltd co account?

See above post by Diver ...

"Where a company fails to pay National Insurance Contributions in respect of its employees, and the failure is due to the fraud or neglect of a director or other officer, the unpaid NIC may be recovered from that director (Social Security Administration Act 1992, s.121C)"

The argument goes that if you have a contract review and you are told by a professional that you are outside IR35 then this isn't fraud or neglect. Therefore cost can't be passed on. The same applies to PAYE. I don't know if it will work but that is the theory that has been posted on here before.

[malvolio]

Jon Bessel wasn't charged penalties, so HMRC are clearly taking the view that he was simply mistaken about his understanding of the position and has filed erroneous returns. AIUI but ICBW, that also leaves the door open for a phased settlement. If he were to claim lack of company money to pay the balance, then they get him under the neglect provision.

While terrifying, the 99k isn't that far out though, for the whole contract, with interest...

[ASB]

Jon Bessel wasn't charged penalties, so HMRC are clearly taking the view that he was simply mistaken about his understanding of the position and has filed erroneous returns. AIUI but ICBW, that also leaves the door open for a phased settlement. If he were to claim lack of company money to pay the balance, then they get him under the neglect provision.

While terrifying, the 99k isn't that far out though, for the whole contract, with interest...

That is consistent with what the PMG said in the house and with what the IR have to say.

http://www.hmrc.gov.uk/IR35/penalty.htm

"A return that does not include the correctly calculated tax and NICs due, is incorrect, and a penalty, which is based on the tax and NICs omitted from the return, can be charged when an incorrect return is made as a result of the employer's fraud or neglect. So, if you, in your capacity as employer, act prudently by taking all reasonable steps to understand and ensure that your intermediary service company or partnership meets its obligations under the service company legislation, no penalty will be imposed should an incorrect return (P35) be submitted."

I'm not sure that simply being wrong - if proper review was undertaken - could be construed as neglect, thus it does seem as though the transfer provisions might be difficult to enforce. Perhaps that will be the next instalment.

[BarneyOwl]

Is this IR35 calculator wrong then?

Using http://calculator.contractoruk.com/ to calculate the differences between tax liability says that for a £50 per hour rate, being caught by IR35 results in an extra tax burden of £ 7,399 (33% increase) per year.

So why is Dragonfly's tax bill £99k for 3 years? Surely it should be more like £21k ish???

Or is the IR35 calculator wrong?