Freelance Forum UK - View Single Post - Closing a company

Dave Marples · 05-06-2009, 12:26 PM

Simply closing a company does not prevent HMRC from starting an enquiry or a review of the old Company. The Company will need to submit a Return detailing the accounts to cessation and HMRC will have an enquiry window of 12 months from the date of submission of the Return during which an enquiry can be started. Furthermore, HMRC could undertake a Compliance Review of the PAYE records of the Company; this would be the normal route for an IR35 enquiry to commence. A PAYE Compliance Review typically considers the operation of PAYE in the current and previous tax year and so there would still be a period of time before you would be free from an HMRC challenge on the old Company.

If HMRC were to conduct an enquiry or review of OldCo after it had closed, it does not automatically follow that IR35 will apply. HMRC have not been hugely successful in imposing the legislation but on the assumption that HMRC were successful in your case, the liability would initially be charged to OldCo but could then be passed on to you under transfer of debt provisions.

If HMRC were to conduct an enquiry or review of the new company and found that IR35 applied this would only relate to the contract(s) considered in respect of the new company and could not be carried back into OldCo without a review or enquiry being conducted into that company. Clearly with the passage of time, a review of OldCo will not be possible given the enquiry window.

However, if you systematically close companies down, this may attract HMRC's interest; especially if there is any outstanding duty owing. This would be viewed as 'Pheonixism' by HMRC and likely to be challenged.

05-06-2009, 12:26 PM	#2 (permalink)
Dave Marples Expert In His Field User type: Freelance services provider Join Date: Mar 2009 Posts: 9 Thanks: 0 Thanked 1 Time in 1 Post	Closing a Company Simply closing a company does not prevent HMRC from starting an enquiry or a review of the old Company. The Company will need to submit a Return detailing the accounts to cessation and HMRC will have an enquiry window of 12 months from the date of submission of the Return during which an enquiry can be started. Furthermore, HMRC could undertake a Compliance Review of the PAYE records of the Company; this would be the normal route for an IR35 enquiry to commence. A PAYE Compliance Review typically considers the operation of PAYE in the current and previous tax year and so there would still be a period of time before you would be free from an HMRC challenge on the old Company. If HMRC were to conduct an enquiry or review of OldCo after it had closed, it does not automatically follow that IR35 will apply. HMRC have not been hugely successful in imposing the legislation but on the assumption that HMRC were successful in your case, the liability would initially be charged to OldCo but could then be passed on to you under transfer of debt provisions. If HMRC were to conduct an enquiry or review of the new company and found that IR35 applied this would only relate to the contract(s) considered in respect of the new company and could not be carried back into OldCo without a review or enquiry being conducted into that company. Clearly with the passage of time, a review of OldCo will not be possible given the enquiry window. However, if you systematically close companies down, this may attract HMRC's interest; especially if there is any outstanding duty owing. This would be viewed as 'Pheonixism' by HMRC and likely to be challenged.