IR35 outside to inside, is there really a risk?

[eek]

I think, even in the case of outside to inside at the same client, that the likelihood of an investigation at all is very low if the company is closed. They'd have to open that investigation, knowing the company is closed, with the hopes of being able to pursue debt transfer.

For the amount of money in a typical IR35 case, I'd consider that unlikely. They'd have to have some relative confidence, before the investigation even begins, that debt transfer would succeed.

If debt transfer comes into play, it would more likely come into play when the company is still open but doesn't have the funds. I think we are moving into a target-rich environment for HMRC and I don't see them chasing closed companies.

Of course, I may be mistaken but to chase closed companies would seem to be foolish.

The initial fishing letters won't be to the limited company, it's going to be to the contractor personally... Does anyone know if the GSK letters went to the contractor's companies or were they addressed to the individual..

[BlueSharp]

Remember there is a whole sub section on this site for those who saw QC approved schemes as being with minimal risk.

As a Director who could be held liable with a transfer of risk, how will you prove, as the burden of prof is now firmly on, you accepted the inside position and nothing has changed to your working practices but you declared it was outside previously was not a deliberate attempt at tax avoidance. - Independent contract & working practice reviews would be an absolute minimum, but judging by some comments from new posters even these basics have not been done, and they are considering outside - inside switching!

I would at least wait to see the direction of travel for APNs before even considering doing this unless the sums I would be liable for are less than six months of back tax and I had the independent evidence to support my case.

[WordIsBond]

The initial fishing letters won't be to the limited company, it's going to be to the contractor personally... Does anyone know if the GSK letters went to the contractor's companies or were they addressed to the individual..

According to Chris Maslins, the GSK letters went to the PSC.

The couple we've seen have been addressed to the PSC, no mention of the personal name of the director/shareholder.

Which makes sense, IR35 is a company liability.

[WordIsBond]

As a Director who could be held liable with a transfer of risk, how will you prove, as the burden of prof is now firmly on, you accepted the inside position and nothing has changed to your working practices but you declared it was outside previously was not a deliberate attempt at tax avoidance.

If you don't have sufficient evidence to prove you honestly thought it was outside, you shouldn't have been declaring it outside in the first place.

If you have that evidence, then the fact that you chose to accept the role, with it having been declared inside by the client, is certainly not proof of historical tax evasion (and yes, I used "evasion" not "avoidance", it would have to be evasion to pierce the corporate veil). It may be proof of nothing more than, out of economic necessity, having to accept an unfair working situation. It happens to people all the time.

I believe you are at very high risk of historical investigation if you accept an inside determination on a role you've been operating outside, for the reasons you've discussed. But it's one thing to say it increases the risk of losing the case -- obviously, it does. It's quite another to say you'll also be subject to transfer of liability / piercing the corporate veil. That's a very high bar and rarely attempted on anything. As far as I know, it's never been done on an IR35 case. You'd have had to have been both blatant and stupid to make yourself vulnerable to that, I suspect.

[jamesbrown]

You'd have had to have been both blatant and stupid to make yourself vulnerable to that, I suspect.

Arguably, going from outside to inside under the same hypothetical contract is both of those things. I wouldn't want to be the one testing it!

[LondonManc]

That's pure conjecture. What you accept there is that you and the client disagree about your working practices. HMRC could come in, investigate and swing one way or the other but they can't use this disagreement as the basis to pierce the corporate veil unless there was obvious negligence going on. That obvious negligence is what would have to be proven in court even if the contractor is found to be inside IR35.

If you've got a QDOS confirmation of outside (or equivalent) for your contract and working practices then I would suggest that for your new contract, you get your contract and working practices assessed against the CEST tool.
If it's inside, then something must have changed within WP or contract since QDOS determined you to be outside;
If it's outside, then take this to your client and explain your case. You are carrying out due dilligence and HMRC have stated on their website that they'll stand by the CEST tool result. Not sure where you go if the client don't accept that - IANAL.

[cannon999]

If you don't have sufficient evidence to prove you honestly thought it was outside, you shouldn't have been declaring it outside in the first place.

If you have that evidence, then the fact that you chose to accept the role, with it having been declared inside by the client, is certainly not proof of historical tax evasion (and yes, I used "evasion" not "avoidance", it would have to be evasion to pierce the corporate veil). It may be proof of nothing more than, out of economic necessity, having to accept an unfair working situation. It happens to people all the time.

I believe you are at very high risk of historical investigation if you accept an inside determination on a role you've been operating outside, for the reasons you've discussed. But it's one thing to say it increases the risk of losing the case -- obviously, it does. It's quite another to say you'll also be subject to transfer of liability / piercing the corporate veil. That's a very high bar and rarely attempted on anything. As far as I know, it's never been done on an IR35 case. You'd have had to have been both blatant and stupid to make yourself vulnerable to that, I suspect.

That is exactly it. The outside/inside situation can be debated and you could win or lose the case but if you believed that you were outside before and acted in good faith - I see no chance of HMRC coming close to lifting the corporate veil. There would have to be some evidence of tax fraud to do that. Disagreeing with your client about working practices is not tax fraud.

[eek]

That is exactly it. The outside/inside situation can be debated and you could win or lose the case but if you believed that you were outside before and acted in good faith - I see no chance of HMRC coming close to lifting the corporate veil. There would have to be some evidence of tax fraud to do that. Disagreeing with your client about working practices is not tax fraud.

But if you tax return shows you outside, HMRC feel you are inside and the limited company no longer exists?

what happens then?

[BABABlackSheep]

But if you tax return shows you outside, HMRC feel you are inside and the limited company no longer exists?

what happens then?

Then theorecially HMRC can reopen the company. If they wanted to go after you though, it would happen when your company was being closed down(strike off). Reopening a company for IR35 avoidance .. never happened I believe.

Given the fact HMRC want everyone to go PAYE, then I see no logic in why they would go after anyone closing a limited company down. They have gotten what they want, and unless you have done something extremely foolish, then why scare people, especially when they have stated explically that they won’t.

Personally, I decided to not stay at the same client as an Umbrella employee, but most decided they would. I did it because I had been there a long time and I thought the even smallest chance of being investigated as an out to in, simply
wasn’t worth it.

Oh..also, there’s going to be a massive number of companies going through MVL and liquidation at the moment. If HMRC go after any of them, it will then be time to sweat.