Staying under the IR35 radar

[indie]

Is there any sense in being conservative with how much tax one saves in order to avoid being targeted by HMRC for IR35 compliance?

i.e. does taking more salary and less dividends make it less likely to be investigated?

It's certainly one of the points made in an article on this site, but was wondering if anyone here does this.

Such was the warning yesterday from Bob Jones, an ex-Inland Revenue tax inspector, who outlined the typical appearance of a taxpayer the agency's IR35 inspectors might approach.

"Someone operating through a limited company who has relatively low turnover; is the sole director; has minimal expenses; pays [themselves] the minimum wage but has large dividends."

[SueEllen]

There is loads of threads on this.

The long and short of it is you can't stay off their radar.

If HMRC randomly selects you to do say a PAYE investigation if they feel like it they may probe deeper and start an IR35 investigation.

The best thing you can do is:
1. Get an accountant, ask them lots of questions and follow their advice.
2. Read up on HMRC things that are brought up on here, and ask the accountant if you aren't sure.
3. Keep your bookkeeping in good order
4. Take out tax investigation insurance in case you are randomly selected for a PAYE or VAT inspection.

[Greg@CapitalCity]

Risk

From what I have seen, the size of salary vs dividends has no bearing on whether you get a compliance visit from the HMRC, or not.

If you are worried about IR35, you should think about getting a decent contract review done (PCG, Bauer & Cottrell etc - my personal opinion is don't get an IR35 review done by an accountant unless they outsource it to one of the specialists) and get some IR35 insurance. If after that you still feel IR35 is a problem for you, then I think you should either;
(1) Pay yourself a high salary to minimise the PAYE/NI impacts in the event you are caught by IR35;
(2) Or maybe you simply are caught by IR35 and either should pay yourself 100% salary and no dividends, or else use an umbrella;


Good luck!

[centurian]

It short, it depends who you ask - as people have vastly different views on this.

It will make no difference to a random PAYE enquiry - who will report any apparent under payment, regardless of the amount.

Will paying more salary prevent a full blown IR35 inquiry - or how far HMRC will push it. IR35 investigations are very complex and time confusing. One theory is that HMRC will go for the bigger yields first - and so may target those paying min salary with long contract renewals. Their compliance manual states that they should not do this, but I think the evidence has shown that they do go after the bigger targets. To my knowledge, all of the main cases they have won have been for bigger chunks of cash.

So I am sure that it reduces the odds of HMRC slightly - but how much - no-one can say...

[Pacciae]

i'd go to Qdos for my contract checks I stopped using Bauer & Cotterill becuase they work for the Revenue as IR35 experts and IMO too close to HM revenue.

[psychocandy]

There is loads of threads on this.

The long and short of it is you can't stay off their radar.

If HMRC randomly selects you to do say a PAYE investigation if they feel like it they may probe deeper and start an IR35 investigation.

The best thing you can do is:
1. Get an accountant, ask them lots of questions and follow their advice.
2. Read up on HMRC things that are brought up on here, and ask the accountant if you aren't sure.
3. Keep your bookkeeping in good order
4. Take out tax investigation insurance in case you are randomly selected for a PAYE or VAT inspection.

So if your not PAYE registered does this mean you've got less of a chance of being investigated? LOL.

I'm not paying anything in salary this year (I already had a 12K payment from my last employer as a PILON payment so my minimum salary for NI etc has already been paid/used up).

[northernladuk]

i'd go to Qdos Qdos Consulting - Taxation & VAT, Employment Law, Insurance, IR35 for my contract checks I stopped using Bauer & Cotterill becuase they work for the Revenue as IR35 experts and IMO too close to HM revenue.

And what is your problem with this? You are worried they will review it and then dob you in it?

Surely if they work as experts for the HMRC on IR35 they are the best placed people to make sure you duck it? They may consult HMRC but I don't think they work for them.

[Sockpuppet]

i'd go to Qdos Qdos Consulting - Taxation & VAT, Employment Law, Insurance, IR35 for my contract checks I stopped using Bauer & Cotterill becuase they work for the Revenue as IR35 experts and IMO too close to HM revenue.

Kate used to be an inspector of taxes long before she started to advise HMRC on IR35 or reviewing contracts. As said above I can absolutely guarantee you that she is not bothered about dobbing you in to HMRC over IR35. Kate is probably the most knowledgeable person in the UK on IR35 bar none.

[SueEllen]

So if your not PAYE registered does this mean you've got less of a chance of being investigated? LOL.

I'm not paying anything in salary this year (I already had a 12K payment from my last employer as a PILON payment so my minimum salary for NI etc has already been paid/used up).

There is no point in investigating you until you have a load of money from them to take off you. So I expect they will wait a few years yet.

I only actually know people who have had VAT inspections. One of them screwed up by not doing things properly there as the rest found it a walk in the park.

[BolshieBastard]

There was an IR35 investigation where, the amount of money involved being 'caught' was literally about 3 grand.

HMRC justified going through the full rigmaroll of an investigation by saying it wasnt the amount of tax avoided \ gathered, it was a question of ensuring people comply with the legislation.

To put it simply, they're a bunch of twats who dont give a **** about wasting more public money than the spend on the office christmas party.