IR35 outside to inside, is there really a risk? IR35 outside to inside, is there really a risk?
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    Default IR35 outside to inside, is there really a risk?

    As already discussed, contractors going from outside to inside with the same client are risking an HMRC investigation.

    However if the contractor has done the due diligence (even when going from outside to inside with the same client), i.e. had relevant insurances, had contract assessments etc, what stops them from drawing down the company funds upon the switch from outside to inside? Yes there is the obvious dividend tax that would need paying (32 or 38 depending on the money stash) but still beats searching for a new contract when you are happy where you are. Even if the investigation is not in their favour - there would be nothing to collect from the company.

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    Quote Originally Posted by cannon999 View Post
    Even if the investigation is not in their favour - there would be nothing to collect from the company.
    The barrier to transfer of debt to the individual is reasonable care. Yes, if the contract was outside before, then it is unlikely that HMRC will win, but you still need to undergo the stress and hassle. Conversely, if it wasn’t clearly outside before and your working practices don’t change, and HMRC do indeed win, then there is a risk that carelessness has prevailed and, under those circumstances, it seems to me that transfer of debt is a realistic possibility. Bottom line, you really need to see a clear change in contractual terms and working practices.

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    Quote Originally Posted by jamesbrown View Post
    The barrier to transfer of debt to the individual is reasonable care. Yes, if the contract was outside before, then it is unlikely that HMRC will win, but you still need to undergo the stress and hassle. Conversely, if it wasn’t clearly outside before and your working practices don’t change, and HMRC do indeed win, then there is a risk that carelessness has prevailed and, under those circumstances, it seems to me that transfer of debt is a realistic possibility. Bottom line, you really need to see a clear change in contractual terms and working practices.
    Whether the contract was outside IR35 or not is a separate discussion to HMRC being able to go after the contractor's money personally. Even if the contractor believed that the contract was outside IR35 in error, as long as it was in good faith - I don't see how HMRC could pierce the corporate veil.

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    Quote Originally Posted by cannon999 View Post
    Whether the contract was outside IR35 or not is a separate discussion to HMRC being able to go after the contractor's money personally. Even if the contractor believed that the contract was outside IR35 in error, as long as it was in good faith - I don't see how HMRC could pierce the corporate veil.
    you need more than good faith - the responsibility was yours as a director - if you can't show evidence that you checked in good time that things were correct that veil could be broken.

    and if you decide to continue in April with the same contractual terms and conditions as before April but inside IR35 rather than outside IR35 I think HMRC would regard your previous agreement as a lie which would give them good reason to pierce that corporate veil.
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    Quote Originally Posted by cannon999 View Post
    Whether the contract was outside IR35 or not is a separate discussion to HMRC being able to go after the contractor's money personally. Even if the contractor believed that the contract was outside IR35 in error, as long as it was in good faith - I don't see how HMRC could pierce the corporate veil.
    It's not a separate discussion when you're found to be inside, which was the whole point of the quote to which I replied ("who cares, they won't recover the money anyway").

    You think that knowingly moving from outside to inside without a clear change in contractual terms and working practices points to reasonable care in the past? Good luck with that. Either way, it's perfectly obvious that you're moving closer to the threshold whereby transfer of debt becomes possible.

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    Quote Originally Posted by jamesbrown View Post
    It's not a separate discussion when you're found to be inside, which was the whole point of the quote to which I replied ("who cares, they won't recover the money anyway").

    You think that knowingly moving from outside to inside without a clear change in contractual terms and working practices points to reasonable care in the past? Good luck with that. Either way, it's perfectly obvious that you're moving closer to the threshold whereby transfer of debt becomes possible.
    It is deffinitely a separate discussion. There is a difference between incorrectly identifying yourself outside/inside based on good faith or bad faith.

    IR35 taxes uncollectable if contractors’ company has no money

    Exercising IR35 due diligence
    Vessey continues: “If you take the first circumstance, most contractors will exercise reasonable due diligence with their contracts and take professional advice about whether IR35 applies.

    “So, when you have the situation that a contractor genuinely believes in good faith that IR35 does not apply, then they will not go through the process of calculating the deemed payment or make any tax deductions.

    “HMRC may then come along and say ‘we disagree and believe that IR35 does apply so you need to pay the income tax’. If the contractor had made the decision not to pay tax in good faith based on their IR35 due diligence, and the company can’t pay the ensuing tax bill, then HMRC can’t apply Regulation 72 because there was no error in the first place.”
    Just because HMRC prove that the contractor is inside IR35 - this does not mean that taxes are collectable from the director assuming that:
    - The director has had the contract assessed
    - The director has insurance
    - The director has challenged the client's inside assessemnt (even if unsuccessfully)

    Just because your working practices do not change, it is perfectly possible that your original belief that you are outside of IR35 still stands (even if legally it's on the client now). There is no reason why you can't claim that you believed that the client has made the determination incorrectly. Unless there is case law for this already, I don't see how HMRC could break the veil just because the contractor is found inside.

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    Quote Originally Posted by cannon999 View Post
    It is deffinitely a separate discussion. There is a difference between incorrectly identifying yourself outside/inside based on good faith or bad faith.

    IR35 taxes uncollectable if contractors’ company has no money



    Just because HMRC prove that the contractor is inside IR35 - this does not mean that taxes are collectable from the director assuming that:
    - The director has had the contract assessed
    - The director has insurance
    - The director has challenged the client's inside assessemnt (even if unsuccessfully)

    Just because your working practices do not change, it is perfectly possible that your original belief that you are outside of IR35 still stands (even if legally it's on the client now). There is no reason why you can't claim that they have made the determination incorrectly. Unless there is case law for this already, I don't see how HMRC could break the veil just because the contractor is found inside.
    You're kidding yourself.

    If you move from outside to inside without a significant change in WPs, you are literally saying "I accept that I was inside all along", even if you are explicitly arguing to the contrary. If you are implicitly arguing that you were inside and the client is explicitly arguing that you were inside (because they are defending their SDS for the new contract), then you're in a world of hurt, both for the outcome of your investigation and for defending any move to transfer the debt to you personally. The barrier to doing the latter just got significantly easier, I suspect.

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    Quote Originally Posted by jamesbrown View Post
    If you move from outside to inside without a significant change in WPs, you are literally saying "I accept that I was inside all along", even if you are explicitly arguing to the contrary.
    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.

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    Quote Originally Posted by cannon999 View Post
    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.
    What is pure conjecture? That you've accepted working as an effective permie under the same terms you worked as a contractor?



    Seriously, good luck.

    You do understand that the whole point of IR35 is to build a hypothetical contract, right? Any tribunal judge will look at the contractual terms as window dressing and attempt to discover the reality. Moving from outside to inside under the same WPs will provide very valuable context, I think.

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    Quote Originally Posted by cannon999 View Post
    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.
    Let me repeat my post from earlier

    and if you decide to continue in April with the same contractual terms and conditions as before April but inside IR35 rather than outside IR35 I think HMRC would regard your previous agreement as a lie which would give them good reason to pierce that corporate veil.

    Your client has determined (at the very first point they were responsible) that the contract is inside and that your working practices are inside.
    You then had a right to appeal - during which time you should have provided evidence why were felt the contract was outside - whether you took that up has an impact on the end result.
    -whether you take it up and the end client still keeps you inside will equally probably has an impact on the end result.
    And you've continued to work with the same people in the same job as you did prior to April "outside IR35" inside IR35.

    So you eventually are going into an IR35 tax tribunal with the end client saying they've felt you've always been inside and evidence to show that even when presented with your facts they still felt it's an inside engagement having happily worked inside IR35 and still you think were you to lose that HMRC won't seek to pierce the veil.

    I suspect just the fact you continued working inside IR35 would be enough reason to pierce that veil.
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