About IR35

IR35 legislation has proved controversial since its inception in April 2000.

 

Contractors need to review their contract in earnest, ensuring they avoid the traps that could make their contracts fail IR35 tests, and as a result cost them heavily financially.

 

The financial impact is often, however, just the start of IR35 nightmares, with IR35 problems leading to a great deal of stress-inducing intrusion.  A contractor subject to an IR35 investigation by HMRC will often find every aspect of their business and private life being put under the microscope.  If a Company fails the IR35 tests HMRC will issue an (often significant) assessment, being a large tax bill, which often the Company cannot pay.

 

The Directors then have a number of options, mainly:

• Introduce personal funds to the Company and pay the tax bill; or
• Obtain funding from an alternative source; or
• Seek insolvency advice and where relevant close the IR35 Company, via Insolvent Liquidation (‘Creditors Voluntary Liquidation’) - hence the creation of ‘IR35insolvent.co.uk.

 

Even if your business is not subject to, or affected by, an IR35 investigation as with all owner-reliant Companies, at some point, every contractor trading through a Personal Service Company will need to close down their Limited Company and will want to do so in the most cost effective and tax efficient way.

 

Many Contractors coming out of contract or embarking upon retirement have substantial sums of money remaining in the Company bank account.  The most common way to close down a Company is to take any retained profit as a dividend and then dissolve the Company.  However, depending upon how much profit is available for distribution it may be more effective to take out the Company’s capital by way of a Solvent Liquidation (‘Members Voluntary Liquidation’) and benefit from the personal taxation advantages of Entrepreneurs Relief - hence the creation of ‘IR35solvent.co.uk’.

 

The number of Contractors we are advising is on a dramatic increase we believe this will intensify from 6 April 2016, should the Chancellor be successful in changing the rules for tax relief on travel and subsistence expenses for workers engaged via intermediaries.  A current HMR&C consultation suggests changing the IR35 goal posts, so that any worker subject to the right of supervision, direction or control would be caught.

So if you are a Contractor, or an advisor to a Personal Service Company, and require some advice with your problems, then please get in touch, we are here to HELP.