It comes down to fundamentals
Is there anyway I can force HMRC to accept a payment plan ?
He should make a formal offer to pay and then tell HMRC that if they don't like it they can take him to court and if summonsed he will offer exactly the same payment terms to the court.
HMRC know full well that their demand for the taxpayer to pay 20k immediately are probably unreasonable in most contexts and a court would recognise that, so they will end up having to accept such terms.
Provided the payments are completed on schedule without delay over 6-months there is very little HMRC can do other than to accept it with good grace.
Still don't think much of your client though and the point made by "the_Poacher" is a fair one.
Given the above, I don't think you have anything to worry about.
One thing you don't mention though is wife and/or children. Are there any? If there are, will they be expatriating with you?
You might have some trouble with HMRC over the 20 working days in the UK as this is above their de minimis limit of 10 working days, such that they may argue that a return is necessary to ensure that UK income tax due is paid on this.
Any possibility of reducing the 20-days?
A Couple of questions then...
On what basis have you become non-resident (as opposed to temporarily living in a foreign country)?
Have you filled out a P85 form, notifying HMRC of your future non-residence?
If HMRC are satisfied that your non-residence is genuine, then they should take the necessary steps (may need prompting), to close down your self assessment returns on the basis that you are no longer subject to them since you have either taken a foreign job based outside of the UK and/or are have moved abroad for a "settled purpose".
You then need to make sure that you limit your visits to the UK, preferably not visiting at all during the first tax year and substantially reduce if not completely curtail contact with family and friends in the UK, such that HMRC cannot argue that the UK remains the centre of your vital interests (to use their particular gross terminology)
Something else to think about
After informing them of their error, also inform them that any further attempts to collect debts that are non-existent/disputed/not due will be subject to a formal police complaint under section 40 of the Administration of Justice Act 1970.
The following are useful points to remember when dealing with 3rd party debt collection agencies claiming on behalf of HMRC:
Section 40 of The Administration of Justice Act 1970 makes it a Criminal Offence for a debt collection agency to make demands for money, which are aimed at causing 'alarm, distress or humiliation, because of their frequency or publicity or manner'. Equally, a debt collection agency will be committing an offence if they falsely imply that non-payment of the debt will lead to criminal proceedings; or they pretend to be someone they are not e.g. HMRC staff, court officials or bailiffs. It is also an offence to send a person a document which looks like it has been sent from a court.
The Protection from Harassment Act 1997
If you or your client feel you are subject to harassment from a debt collection agency then this too could be classed as a criminal offence. Harassment can be verbal or in writing and would include making repeated calls to your workplace or in anti social hours. The Protection from Harassment Act 1997 makes it a Criminal Offence for any person to pursue a course of action "which they know, or ought to know, amounts to harassment of another person". If you categorically state to the caller that you consider their actions to be harassment then they have been put on notice.
If you think a debt collection agency has broken the law you should first raise it with the debt collection agency concerned. To start this process you will need to gather evidence. The first step is to record the times and contents of visits and calls, and to save any threatening letters. You should then write a letter of complaint informing the debt collection agency that you believe they are in breach of section 40 of the Administration of Justice Act. Ask them to stop what they are doing. You must however, tell the debt collection agency how you would prefer yourself or the client to be contacted. If the situation does not improve you can make a more formal complaint against a creditor.
If the debt collection agency continues to harass you, your staff or your client then you can contact the following for further advice:
Trading StandardsCitizens Advice BureauOffice of Fair Trading
If the behaviour of the debt collection agency becomes at all violent or extremely threatening the Police should be informed immediately.
P A Holdings and ITEPA 2003 s447
Need to be careful here as it is possible for HMRC to attack these as employment related securities under the PA Holdings decision and/or ITEPA 2003 s447 as defined in s421B (8)
Whether you believe either of these apply is a judgement you and your client will have to make between you as it is a very grey area, but these would be my main concerns.
I have dealt with this previously by having them as directors only and not employees and have alphabet shares issued in different proportions on a pari passu basis, this means that they have the same rights as ordinary shares (just fewer in number, possibly a few percent of the voting stock), but dividends can be issued on them based upon the majority stockholders.
You can then pay these directors a low salary with the remainder as a dividend and this will be tax efficient.
They should purchase these shares in the first instance based upon a reasonable valuation, reflecting the minute value of the company they own. They may feel uncomfortable not having any employment rights, but when shown the difference between what they would receive as an employee and what they would receive as no non-employed office holding director, most people will jump at the chance.
Not really "Gamey"
FATBOYONADIET wrote:Although it seems a bit "gamey", it doesn't necessarily mean that it's not ok.
Any thoughts folks?
All bog-standard stuff for husband with non-working wife, done the same setup hundreds of times over the years.
Just make sure that he is aware of IR35 do's and don'ts and that IR35 risks are with him (i.e. contract reviews, non-IR35 compliance, etc.), make sure you have a signed disclosure acknowledging this as it can come back to bite you.
Do this through an expenses claim
If as suggested, the temporary workplace rules apply, then until the contract with the client exceeds the two-year limit applicable, your husband should raise an expense claim against his own limited company and be paid by cheque or electronic payment from the limited company bank account to his own personal account.
He needs to keep a mileage log for these journeys to justify the expenses claim in the event of an enquiry, but other than that it is plain sailing.
Remember the temporary workplace rules only apply until your husband knows that he will be in attendance at the client workplace for more than two years. I'm presuming this is not London where different interpretations apply, due to the close proximity of various different clients.
What are you comparing?
There are a number of options available for short term contracting, typically those being:
Self-employed basisVia a limited company of which you are shareholder, invoicing the clientVia an umbrella company of which you are an employee, which invoices the client
If the client is happy for you to undertake work on a self-employed basis, then this is probably easiest as it does not require the establishment of a limited company and tax returns and PAYE are simple matters for any suitably qualified high-street accountant.
However, you should be aware that many companies will not deal with temporary staff on a self-employed basis as PAYE liability would remain with the client company and therefore will require 3rd parties to operate via their own limited companies or via umbrella companies.
An umbrella is a useful stop-gap for those needing to operate through a limited company, but who feel they are not ready to operate it for themselves. In an umbrella, you become an employee of the company and they invoice the client on your behalf, deduct PAYE (less expenses), deduct their own costs (typically around £65 per week) and they pay you the remainder.
An umbrella is an easy mechanism for invoicing a client, but not very tax efficient.
The PCG (Professional Contractors Group) is a trade association for people involved in, or considering contracting and more details on these options are available in their detailed "Guide to Freelancing" which is a comprehensive overview of all the aspects in relation to these matters.
Another source of useful information is the Contractor Calculator, which provides an illustration of the costs of operating on a Limited Company basis (i.e. low PAYE + Dividends) versus pure PAYE. The biggest difference tends to be the impact of Employees and Employers NI.
There is an equivalent for umbrella's called an Umbrella Calculator, but you need to know the associated costs for the operation of the umbrella as these vary. There may be both initial and weekly/monthly costs for operating the umbrella.
If you opt for setting up your own Limited Company, there are initial fees for the setup as well as accountancy costs for operating PAYE, VAT, Corporation Tax, etc.
For a small company this can vary between £600 - £1,000 per year (depending upon size and location)
It comes down to whether HMRC will pursue or not
If the amount due, but uncollected is significant (i.e. in the tens of thousands in tax) then HMRC may consider restoring the company to pursue the debt, but they seem reluctant to do this, presumably because their actual success rate in such cases is so low.
If the amount due is below this threshold, then HMRC is unlikely to act as they are unlikely to recover sufficient funds to cover their costs in such an action.
Another client who thinks he's a fiscal nomad?
Where is your client tax resident?
Because if he can't prove he is tax resident outside of the UK HMRC may well determine that he is tax resident here on the basis of the UK being the centre of his vital interests (compared with anywhere else).
The statutory residence test provides clarity in many circumstances, but there are still grey areas where HMRC are likely to challenge, we'd need more information to advise you further.
As HMRC guidance on residence attests (and has been proven in court), there is an adhesive quality to tax residence, which does not go away because someone buys a plane ticket.
To have lost UK tax residence in the first place, your client would have had to have left the UK to take up a foreign job or moved abroad for a settled purpose (i.e. to live with a foreign spouse in her home country), such a move being permanent or indefinite.
When undertaking such a transition, they should have acquired tax residency in that foreign country and have appropriate documentation to demonstrate this (i.e. tax references from the foreign country or even a certificate of tax residence)
If he cannot demonstrate this then HMRC are likely to challenge him on the basis of his never having lost UK tax residence or indeed having reaquired it, it would then be up to your client to prove that this is not the case.