IR35 question

[hammerman]

I have recently found out i am inside IR35 and not sure whether to close my company and work under an umbrella or stay how i am and take the chance. I have been told that if i was investigated then HMRC could only recover assets within my company which are none. Also i could liquidate the company and they would not be able to come after myself as everything was done under the company.

Anyone have any experience of this or could advise me? Thank you.

[DiscoStu]

I have recently found out i am inside IR35 and not sure whether to close my company and work under an umbrella or stay how i am and take the chance. I have been told that if i was investigated then HMRC could only recover assets within my company which are none. Also i could liquidate the company and they would not be able to come after myself as everything was done under the company.

Anyone have any experience of this or could advise me? Thank you.

You heard wrong. If you're found to be inside IR35 then the income that you've taken in dividends is deemed liable for PAYE / income tax, which is a debt that you are held responsible for, not your company.

As to whether to keep your company or go umbrella, the choice is yours. Do you intend to keep contracting after your current contract ends? If this is the case then it may be worth keeping your Ltd and just paying yourself PAYE for this contract (you'll still be marginally better off than going through an umbrella).

Alternatively, if you don't want the extra work associated with a Ltd for a marginal gain while you're in an IR35 caught gig, then close the company and go umbrella. Your call!

[NotAllThere]

Why do you think you're inside IR35?

[hammerman]

Thanks for the replies. My contract is ongoing and i have been there nearly 2 years. No idea when it will end. I tried to get insurance through Qdos and was told that as I could not supply another worker in my place at the site incase i was ill for example then they couldnt insure me.

I would prefer to stay Ltd but dont want a big tax bill coming my way. Umbrella seems the safer option so i may try Parasol.

[centurian]

Thanks for the replies. My contract is ongoing and i have been there nearly 2 years. No idea when it will end. I tried to get insurance through Qdos and was told that as I could not supply another worker in my place at the site incase i was ill for example then they couldnt insure me.

I would prefer to stay Ltd but dont want a big tax bill coming my way. Umbrella seems the safer option so i may try Parasol.

Firstly, being in or out of IR35 is not a black and white thing. A long contract doesn't automatically put you inside - although it probably increases the likelihood of HMRC pursuing things because there is a bigger yield to be had on longer contracts (they pursue each contract individually).

If you are investigated, then HMRC will come after you, not the company.

[Maslins]

I would prefer to stay Ltd but dont want a big tax bill coming my way. Umbrella seems the safer option so i may try Parasol.

Even if you are deemed inside IR35, you'll still have a slightly lower total tax liability than you would under an umbrella...but yes, I agree it could come as a nasty surprise if you did get rumbled, so start putting a bit aside each month.

[SueEllen]

Thanks for the replies. My contract is ongoing and i have been there nearly 2 years. No idea when it will end. I tried to get insurance through Qdos and was told that as I could not supply another worker in my place at the site incase i was ill for example then they couldnt insure me.

Do you mean you cannot as you are a one man limited, or are not allowed to due to the terms of the contract with the client not allowing you a right of substitution?

In the first case you are not automatically under IR35 as there are more ways then one of getting a another worker to take your place.

[hammerman]

Firstly I do not have anyone who would take my place if i wasnt there and secondly the client wouldnt accept someone else. I havent asked them but I just know they wouldnt accept that. That seems to be an issue and I think there are several other things that come into it.

Does anyone know of anyone that has been investigated? It seems quite rare but maybe I'm wrong?

[ASB]

You heard wrong. If you're found to be inside IR35 then the income that you've taken in dividends is deemed liable for PAYE / income tax, which is a debt that you are held responsible for, not your company.

I'd personally be inclined to think that the transfer of obligations rules may enable them to transfer the debt to the individual, however there are at lease question with whether they can do that (particularly with regard to ER's NI). THEPUMA, if I recall correctly, gave details why transfer of the debt might at best be difficult and at worst impossible (though personally I wouldn't like to assume I could "get away with it").

[centurian]

I'd personally be inclined to think that the transfer of obligations rules may enable them to transfer the debt to the individual

That's how I thought it worked now - because prior to the MSC legislation people could just set up a 2 Ltd's, keep the cash in one, but the liability in the other and just tank the latter if HMRC came knocking.

Now they can transfer the debt to pretty much any entity connected with the company - even the agent and ClientCo, which is why agents now insist that you are not an MSC.