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Surely there is now a link between the proposed extension of IR35 and the measure concerning shareholder joint and several liability for tax debts. Since IR35 was introduced the use of a company as an intermediary was advisable because if the worst happened and HMRC successfully challenged employment status the potential liability died with the company. Now, as the revenue will, almost certainly, regard successful challenges to employment status to evidence avoidance activity the potential liability will no longer die with the company. This seems to represent a danger not only for the contractor who may now become personally liable (just as though this was a managed service company) but for any adviser involved who will, almost certainly, be regarded by the client as being at fault. At best you lose the client, at worst you are sued for negligence...
Don't these new rules apply only to existing tax debts when the company is liquidated as opposed to potential ones? Otherwise, directors of any company of any size could be affected years after it has been liquidated for any reason.
If no IR35 investigation is under way when the company is liquidated and the director had good reason to believe IR35 did not apply (as is often the case), would that not be exempt?
It seems to me the people most at risk here are those who take all the money out of their company as dividends or other taxable income, but have good reason to believe they are outside IR35, such as a contract review, so there is no cavalier behaviour.
At present, you can't be made to personally pay your company's IR35 bills if it has insufficient assets to do so itself unless you have been negligent. Even then, it is very unlikely they would do so as it would be so hard to prove. I haven't heard of any cases where they've gone down this route.
Sounds to me like all that's going to change, but surely they would still have to prove there was negligence, in the sense that the engagement was caught by IR35 hook line and sinker; e.g. a classic Friday to Monday case.
Ditto advisors. They could always say they relied on the director's assurances as to the control they had over the work, etc. At the end of the day the decision is theirs, not the accountant. We can only advise them based on what they tell us. So long as you don't give them false hope of avoiding IR35 when they've been totally frank about the limits to their freedom of action under the contract, it seems to me you're in the clear.
Wish I had your confidence - the most likely circumstance runs like this... Individual sets up company to work through, believes outside IR35; several years later HMRC challenge, after several years case reviewed, couple of years later eventually reaches Tribunal who find for HMRC. At this point the company is now insolvent and the individual decides to abandon the company. HMRC use new provisions to chase the individual who sues his adviser - you... of course he might not win but your professional indemnity insurer decides that the case isn't worth fighting and settles... leaving you...?
You are more or less saying that Ltd liability no longer applies to crown debts...
That will be a concern to many people, I would have thought?
I think we're getting a bit carried away here. For one thing, we are up against a bunch of clueless plonkers who consistently lose when it matters most a.k.a. the HMRC IR35 unit.
As long as you've documented the evidence you have that client X is outside of IR35 - which I do, and every year I raise any weakness issues with each client - then there is not much to worry about.
I mean, if you imagine you are Novak Djokovic and you're drawn against the number 200 player in the world and think you will lose, then worry. Because that's what I feel like these days in tax enquiries against HMRC. i.e like I am Novak up against a raw 17 year old kid who's just left the juniors.
Part of the problem is that those useless plonkers have discovered a wheeze so that they no longer have to battle. It will now be large companies and medium sized companies who, just like the public sector since 2017, who will have the responsibility and contractors could find themselves pitted against their engagers. I hope we're not getting carried away but the new powers HMRC have taken to transfer liabilities to others, both in last year's Finance Act and now the draft bill means that you MUST keep the evidence as you've suggested and become more proactive in looking after client's affairs. Of course if people don't...