What are the dangers of not operating IR35 correctly?

What are the dangers of not operating IR35...

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There have been a few debates on here recently, regarding the responsibilities of contractor companies declaring themselves as service companies, which I dont really want to get into.

I'd like to know what are the REAL risks to the client?

Assume HMRC levy a large PAYE/NIC bill on the company, we re-prepare the accounts to obtain a CT credit, however the Company goes into Liquidation anyway as the extra tax and penalties are excessive.

Are HMRC likely to pursue the directors personally? Would they pursue for the gross, or net of the CT deduction?

Has anyone here acted for a company that was challenged, and lost?

Fellowcraft

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DougScott
By Dougscott
04th Dec 2008 17:27

I don't know.
Yes, I'd like to know the downside to advise my own clients. One assumes that HMRC could treat it as underpaid PAYE plus interest and penalties.

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By User deleted
04th Dec 2008 16:09

Exactly Doug
It's not clear cut.

All we can really advise the client of what the legislation is, and what the pitfalls are for non compliance.

And what I'm trying to establish is - what exactly are the pitfalls?!

What do you think?

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DougScott
By Dougscott
04th Dec 2008 13:52

Problem
Phil the problem is it is difficult to know whether it applies or not. I understand the Professional Contractors Group has details of 2000 contractors that have been challenged by HMRC over whether they should be under IR35 but HMRC has only successfully shown that 4 of them should come under IR35. Quite frankly the law is an [***] and it needs changing so it is clearer for everyone, not least accountants.

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By AnonymousUser
04th Dec 2008 13:21

Are HMRC likely to pursue the directors personally?

As an honest taxpayer myself, I would be very disappointed with them if they did not.
You may not like IR35 but, if it applies and you have not dealt with things properly, the directors are personally liable.

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