Penalties - IR35

[agbrfas]

Both I and my client are reasonably confident that a new engagement, through a new limited company, would not be caught by IR35. However because he does have alternative options for a business structure (the tax/NI consequences of which I have evaluated) we nonetheless want to understand the penalties that might accrue if he were found non-compliant several years down the line. Over and above interest, I'm struggling to find a basis on which to provide an estimate for him of what these might amount to.

Could anyone help?

Many thanks


Alan

[section 44]

presumably penalties of up to 100%, depending on the behaviour

[agbrfas]

I think it can be taken that we will be able to argue successfully that all reasonable care has been taken in deciding to go down the non-IR35 route - contract review, way of working, other contracts etc.


Alan

[robbob]

Hello agbrfas

Are you solely talking about penalties or the about the whole amount of additional tax/ni penalties and interest that could be charged/extracted if HMRC were to successfully argue IR35 at a later date?

[agbrfas]

I'm talking about all penalties - including "incorrect" P35: I have assessed the amount of additional tax & NI payable if we were to accept IR35 at the outset, and so this is presumably the amount extra that would be payable if so assessed later. I'm also assuming interest at 3%pa (though haven't checked if that's still current).

Thanks for your help -

Alan

[agbrfas]

Have now looked at HMRC's guidance on the new penalty system introduced in the 2007 and 2008 Finance Acts, which says:

"There is no penalty if a person can demonstrate they have taken reasonable care to get their tax right, but despite this, submit an incorrect return."

So given that a decision not to included an IR35 deemed payment in PAYE or SA returns was taken in good faith and with good advice, does that mean no penalty, only interest?