Closing a company - IR35 investigation?

[Pistachio]

I'm looking at closing my ltd down and starting a new one as I have been told that this will stop HMRC investigating it under IR35. Is this true, or can they transfer any debt to the new company?

My other concern is: what's the chances of triggering an investigation as I'm closing the company down?

Cheers

[Dave Marples]

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.

[PhilAtBFCA]

Pistachio

You may want to read this about Reg 72. This is the legislation that could be used by HMRC to make a director personally liable for the paye and nic's due on an inside IR35 contract, without time limit or even if the company is closed.

So debt transfer to the new company, no. To you personally, possibly.

If a person closed a company deliberately intending to avoid tax and nic's that should have been paid then Reg 72 may be applied.

Phil