£400,000 tax bill......it could be a lot worse!

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#1

If IR35 was a border between two countries it would not be clearly defined as The Donald would like between Mexico and the USA…it would be undefined by any fencing… but guarded by a minefield.

In this analogy…Christa Ackroyd, a presenter for the BBC… has just stepped on one of those mines. She has just lost her appeal with HMRC, found to be inside IR35 and hit with a tax bill of £400,000. As the title states, it could be a lot worse. HMRC have the right to add up to 100% in penalties, making this an £800,000 “mine”

No business can operate with this level of uncertainty…which means, if we allow this situation to continue, there will be no freelancers working as knowledge based businesses. They will become “gigsters” working for the large consultancies, paying tax as if they were employed, without enjoying the rights afforded those who PAYE.

And for every Christa Ackroyd working direct there are a 1000 working through agencies with no sight of the contractual chain… stepping in the same minefield.

Which is one of the reasons I started The Project Pool.

I think freelancers, working as genuine businesses through their own Ltd Co, would like to do their stuff without worrying about the confusion that is IR35. Which is why we asked John Chaplin from E&Y to draft us a contract which takes us away from this dangerous border area and allows us to indemnify the freelancer from any Tax and penalties. If Christa Ackroyd had been working through The Project Pool…we would be picking up her Tax bill.

If you are a freelancer, join us and help change the way we work.


Ltd Company: Entrepreneur or "White collar tax cheat"?
#2

I was subject to an IR35 investigation despite having three separate contracts with different companies in the year I was investigated and IR35 compliant . Took two years to win and lots of fees. Cost me 9 months lost work, and the reality on a net basis all they are doing is driving contractors to lower paid perm work which over time will reduce the tax take.


#3

Thanks for the feedback @plhdale1. There is no question that the threat of such action is a massive worry for freelancers. You had a clear cut case and yet it still took two years to resolve. Even with Tax investigation insurance in place such that the professional fees to protect you are covered…it is still a massive worry for anyone to have to go through. As you have clearly experienced.

As I say in my article: No business can operate with this level of uncertainty.

If you were working through The Project Pool you would just point the HMRC inspector in our direction and if we have got it wrong…we pay the Tax and NIC’s


#4

Dear Andy

Which is why it is interesting. But given I source my own business largely, how do we work together to our mutual benefit

Do you also source work for those in Fin Services who charge 1500 – 2250 per diem

All the best

Peter


#5

Hi Peter. The simple answer is I do not know at this stage, but we are just about to start discussing that in our Online Conference room. It would be great if you join up and be part of that conversation; https://community.goprojectpool.com/groups/Members