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IR35 and corporation tax arrears

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Due to the onset of IR35 and being forced into off payroll work a number of clients are now refusing to pay any corporation tax outstanding.  They say they havent the monies (even though taken it all in dividends) and think its just a case of submitting a DS01.  It then all goes away.  Anyone else experiencing this?

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By thomas34
04th Mar 2020 13:13

No, but this could prove to be one of the unintended consequences of (new) IR35. HMRC won't be able to cope with large numbers of potential enquiries. What with the loss of dividend tax going forward I'm beginning to wonder whether there will be much increased tax revenue. But it doesn't matter because at least HMRC can spend public money pursuing IR35 cases completely uncaring as to whether they have a good case or not.

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Replying to thomas34:
Hallerud at Easter
By DJKL
04th Mar 2020 13:24

Small change, just look how much HMRC lost on this one Justin kindly posted.

https://www.accountingweb.co.uk/any-answers/interesting-case-on-what-con...

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By Matrix
04th Mar 2020 13:26

Well the dividends must be illegal then since dividends can only be paid out of profits after tax, leaving money to pay the tax.

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RLI
By lionofludesch
04th Mar 2020 13:30

I haven't much sympathy for HMRC here.

They create an artificial situation which almost inevitably leads to annual losses.

It's not really open to them to whinge that there's nothing in the kitty to pay out the Corporation Tax.

IR35 is an utter, illconsidered bodge-job.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
04th Mar 2020 14:06

And so pointless.

Germany covers professional service providers with a distinct beast designed for purpose, my son looked into this and was registered by advisers there when he was contracting in Frankfurt.(Freiberufler)

https://www.contractoruk.com/overseas_guides/contractors_guide_contracti...

It is not beyond the wit of man to agree there is a beast between employee and self employed and write a tax code that taxes appropriately said beast given the restrictions in employee benefits/rights that accrue- the issue is not going away, why not face it and deal with it rather than try to squeeze individuals into the existing structures which are often just not suitable.

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Replying to DJKL:
RLI
By lionofludesch
04th Mar 2020 14:15

DJKL wrote:

It is not beyond the wit of man to agree there is a beast between employee and self employed and write a tax code that taxes appropriately said beast given the restrictions in employee benefits/rights that accrue- the issue is not going away, why not face it and deal with it rather than try to squeeze individuals into the existing structures which are often just not suitable.

Or - why not make the taxation of the self employed and owner managed companies more neutral ? Increase tax on companies or reduce tax on the self employed. Take your pick.

Government policy always seems to be based on "when we decided to do this, who'd've thought that would happen?"

Everybody !!

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
04th Mar 2020 14:29

Because when the chancellor say wants to target something particular his broad brush change in say CT rate flows through to all companies, including certain activities he maybe does not wish to target, my approach allows specific targeting of applied rates- it is akin to say choosing who gets dividends using alphabet shares, it adds precision.

The concept could be applied further, perhaps as Chancellor I decide that for all employees on zero hours contracts they pay less employee NI or less tax, as they too do not enjoy all the protections/benefits of employment.

The catch is life is changing. patterns of life and economic activity are changing, taxation though is still moribund in what it taxes and how it taxes, this can also be seen re online business entities, vat supply rules and place of supply etc,the tax systems are out of kilt with the economies they are intended to serve.

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Replying to lionofludesch:
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By C Graham
09th Mar 2020 12:29

'IR35 is an utter, illconsidered bodge-job.'

totally agree - summed up in a sentence.

cost HMRC more in trying to prosecute and failing

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By Roland195
04th Mar 2020 13:50

In theory, HMRC will object to the striking off of the companies in question and pursue the tax due by whatever means, even up to going after the directors personally if they have wrongly accessed the cash for want of a better phrase.

In practice however, I doubt HMRC will get round to objecting to most of these in the first place, let alone actively following it up. The SARs we will all submit in these circumstances will all either be too late to be acted upon or just ignored like the rest.

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By sawebs
05th Mar 2020 07:49

Absolutely serves HMRC right. I hope the majority of contractors refuse to pay their corporation tax or their last VAT payments. I bet they never factored that into the calculations of revenue raised. Add that to the lost VAT from financial services clients, the loss of income due to work being off-shored, the huge cost to business of administering IR35, the amount of Universal Credit and Housing Benefit claimed, the reduction in income from people taking much lower paid permie roles, the loss of tax from their accountants and the VAT and economic impact of reduced spending power etc. The losses are going to be enormous. What a farce. All this for a predicted amount equal to 1/10 of a penny on the basic rate and for which the OBR gave their estimate a rating of "highly uncertain".

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Replying to sawebs:
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By meadowsaw227
05th Mar 2020 10:32

Well "I hope" the government set up a whole new department to chase the IR35 AND loan defaulters.
Have not had nor will ever have either of the above 2 cases.
Principles and all that .

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Replying to meadowsaw227:
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By sawebs
06th Mar 2020 08:21

Not going to happen.
When they've taken away people's livelihoods and destroyed careers they totally deserve it.
Home repossessions and all that.

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7om
By Tom 7000
09th Mar 2020 12:37

Teaming and lading your company about 10% of the clients...

You need to do an MVL and distribute the o/d DLA in specie to clear the balances down.

Then he just has the issue of having to pay via his tax return the 10%? tax ( subject to the budget)

at least its not 32.5%

If they send in DS01 and dont pay the tax... thats not good ....HMRC may object? ...a MLR needed....

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Replying to Tom 7000:
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By Matrix
09th Mar 2020 16:34

I am taking the circumstances to include submission of the accounts and CT600 to HMRC so they have all the information at their disposal to object. In that case I don’t think a SAR would be required. If, alternatively, the contractor doesn’t authorise the preparation or submission of the CT600 showing the tax due then a SAR should be filed after disengaging.

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Replying to Tom 7000:
Hallerud at Easter
By DJKL
10th Mar 2020 18:09

"Teeming" surely?

It is years since I have seen the expression "Teeming and Lading", certainly an expression from my long distant past.

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Replying to DJKL:
RLI
By lionofludesch
10th Mar 2020 18:30

DJKL wrote:

"Teeming" surely?

It is years since I have seen the expression "Teeming and Lading", certainly an expression from my long distant past.

Teeming, yes. As in the verb "to teem" - to pour.

As in "sitha, it's teeming dahn" - look, it is raining heavily.

From the Icelandic toema, apparently.

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