Out of interest, how are agencies etc still allowing drivers to work via their own LTD companies when the clients are not defined as “small companies”? I have a pal who is still doing this and he insists that IR35 changes do not affect him and what’s more, his accountant claims that he is right. He supplies nothing but his labour, is told when his shift starts and where he’s going and is paid an hourly rate. What am I missing?
Tedge:
What am I missing?
The fact that they probably don’t expect anything will happen. And they may well be right…right up to the point the government decides they’re really short of money and command HMRC to go after every penny they can get.
There is a solution already where a driver could continue to be self employed without them, the agency or their client worrying about IR35. IR35 doesn’t apply to sole traders because they’re not able to use the low salary and dividends model to avoid employer and employee NI so you could still work self employed as a sole trader instead of Ltd, still be able to claim all the same expenses as Ltd, still take advantage of the flat VAT scheme and IR35 wouldn’t apply. But with no hint of irony agencies won’t accept sole traders, even with a UTR number, because they are worried about being liable for tax if the s/e worker doesn’t pay their tax bill but apparently they’re absolutely fine with being liable for the tax bill if the Ltd company driver who claims they’re outside of IR35 turns out to be in it. 
My agency made it really simple, they told the Ltd drivers they all had to go on PAYE or find work elsewhere. As the Ltd rate they paid was actually a proper one that took into account holiday pay, employers NI, employer workplace pension contributions etc and not just an extra quid an hour for the agency the Ltd drivers going on PAYE didn’t cost them a penny extra.
He’s getting away with it because the big customer end user (the agency’s customer) bottled it when all the drivers suddenly disappeared.
A lot of big companies said PAYE only, then quietly dropped this requirement when they couldn’t get all the agency drivers they wanted.
I may be wrong but isnt most of the risk on the employee?
Seems they are more likely to target the employee over the employer. So if that is the case then maybe these often offshore companies take the risk knowing they can just pack it in and restart under another name just like with the umbrella drama a few years ago.
idk.
Cheers for the replies.
It feels like he is going to get spanked when HMRC start their investigations etc but he tells me that I’m talking out of my arse because he’s been getting along just fine for the past three years. I mentioned, in passing, that April last year to April this year hasn’t even completed yet and that the three years prior to it aren’t really a gauge to measure the new rules by… but what do I know?
Tedge:
Cheers for the replies.It feels like he is going to get spanked when HMRC start their investigations etc but he tells me that I’m talking out of my arse because he’s been getting along just fine for the past three years. I mentioned, in passing, that April last year to April this year hasn’t even completed yet and that the three years prior to it aren’t really a gauge to measure the new rules by… but what do I know?
My mate, like quite a few others, thought he was fine using that Lincoln based accountants right until HMRC sent him a letter and a bill for £5k. And that wasn’t anywhere near the highest. This is a letter one of the members on this forum posted…a demand for over £15k when HMRC decided that the person should have been paid as an employee so couldn’t use the small salary and dividend model so owed a load of tax, employer and employee NI.
My mate who works in construction as LTD has just been handed a nice demand for £12k by HMRC. He and others thought it was fine to be LTD and stay with the same construction firm for 4 years running.
Conor:
Tedge:
Cheers for the replies.It feels like he is going to get spanked when HMRC start their investigations etc but he tells me that I’m talking out of my arse because he’s been getting along just fine for the past three years. I mentioned, in passing, that April last year to April this year hasn’t even completed yet and that the three years prior to it aren’t really a gauge to measure the new rules by… but what do I know?
My mate, like quite a few others, thought he was fine using that Lincoln based accountants right until HMRC sent him a letter and a bill for £5k. And that wasn’t anywhere near the highest. This is a letter one of the members on this forum posted…a demand for over £15k when HMRC decided that the person should have been paid as an employee so couldn’t use the small salary and dividend model so owed a load of tax, employer and employee NI.
Jesus wept! Can you point me in the right direction to find the full version of this photograph please? I’ll show it to him and drum some sense into the numpty.
msgyorkie:
My mate who works in construction as LTD has just been handed a nice demand for £12k by HMRC. He and others thought it was fine to be LTD and stay with the same construction firm for 4 years running.
That’s terrible! The poor swine.
£12k tax on what he’s probably made, cost of doing business I’d say.
Sent from my R19 using Tapatalk
Conor:
Tedge:
Cheers for the replies.It feels like he is going to get spanked when HMRC start their investigations etc but he tells me that I’m talking out of my arse because he’s been getting along just fine for the past three years. I mentioned, in passing, that April last year to April this year hasn’t even completed yet and that the three years prior to it aren’t really a gauge to measure the new rules by… but what do I know?
My mate, like quite a few others, thought he was fine using that Lincoln based accountants right until HMRC sent him a letter and a bill for £5k. And that wasn’t anywhere near the highest. This is a letter one of the members on this forum posted…a demand for over £15k when HMRC decided that the person should have been paid as an employee so couldn’t use the small salary and dividend model so owed a load of tax, employer and employee NI.
That letter from HMRC states: “A J Logistics (UK) Ltd is an MSC”.
MSC means Managed Service Company.
You can see on the companies house website that an HGV Class 1 driver called Ashley Joice had his company A J Logistics (UK) Ltd managed by a management firm called New Wave Accounting Ltd.
So Ashley Joice wasn’t managing his own Ltd company, but the management firm called New Wave Accounting Ltd was. Hence, Ashley fell foul of the MSC regulations, so had to pay income tax, employee’s NI, and employer’s NI as though he was an employee of his own Ltd company.
Most LTD drivers didn’t have their Limited Company managed by a service company so wouldn’t have received that letter from HMRC demanding backdated taxes.
I worked as a contract software engineer for 20+ years through my own limited company. I also did some agency class 1 driving, again through my own limited company.
When IR35 rules got enforced the main stumbling block to being able to say that a worker is ‘outside IR35’ was the ‘right of substitution’ clause.
The substitution clause is meant to stop a client employing contractors as ‘disguised employees’ - giving contractors none of the benefits associated with being permanent (paid holidays, conditions of employment etc.) and to some extent allowing the client to minimise the number of permanent drivers on its books. Perhaps a bad effect was the loss of flexibility ie. when it’s unusually busy or someone’s not turned up.
The main IR35 change that focused the clients attention was that if an HMRC investigation deemed that a limited company workers IR35 determination was incorrect (they said they were outside IR35 when they were really inside) then the client would be liable for the unpaid tax - not the limited company of the contractor. Previous to the changes the clients did not care about IR35 determination because they were not liable. When tax liability moved from the contractor to the client most clients stopped using limited company drivers.
However, some agencies and their clients are now starting find ways around it - I’ve seen it in computing and driving.
Specifically to driving, the agency (that I signed with) and contractor use a computer app in which is accessed by all the contractors working through the agency. The contractor specifies his/her availability and preferred shifts. At any time (within reason) a contractor may decide to decline that shift and it is offered to the other available contractors and reallocated. This system appears to provide the required disconnect between a client and a specific contractor.
Not all clients accept this ‘workaround’ to IR35 but quite a few big well known clients do.
I wondered how they did it as well that’s why I signed up with an agency which said they accepted limited company drivers.
I’ve not done and work for them yet but its a big well known agency and its got a few ‘blue chip’ clients that take limited company drivers although, the majority of its clients don’t
Just thought that I would share my ‘findings’ !
B… b …b…but I had an accountant. He said it was fine.
Your accountant can ‘advise’ you. Doesn’t mean it’s legal. It’s still your responsibility to check with HMRC before using a scheme.
I had this issue back in the 1990’s where my accountant left me out to dry with HMRC. They have (((special))) immunity for their advice. If it gets questioned, they run a mile and you’re left holding the baby.
NEVER trust an accountant. Always get EVERYTHING in writing or email including actual names not generic company replies.
Watch them squirm when you try and pin their name to the advice.
adam277:
I may be wrong but isnt most of the risk on the employee?
idk.
In a word, Yes.
You took the money and accepted the terms.
Their legal and accountant firms are far bigger than you.
You’ll be rinsed by HMRC with no come back. It’s not like you can disappear to Romania after 8 months is it.
Build5:
adam277:
I may be wrong but isnt most of the risk on the employee?
idk.In a word, Yes.
You took the money and accepted the terms.
Their legal and accountant firms are far bigger than you.
You’ll be rinsed by HMRC with no come back. It’s not like you can disappear to Romania after 8 months is it.
This is correct up until April 2021. The contractor had to determine their own IR35 status and any HMRC investigation saw the contractors limited company as accountable. Any tax discrepancies had to be settled by the contractors limited company.
This was not working very well for HMRC though. Large companies that employed lots of contractors were exposed to no risk whatsoever.
If a contractor was investigated and determined to be inside IR35 then only the contractors limited company was deemed liable, and usually had a large tax bill.
Also HMRC only investigated contractors on a piecemeal basis so the whole system was quite inefficient.
After April 2021 HMRC changed the rules so that the hiring company had to determine the IR35 status of the contractors it used. It also meant that the hiring company was now accountable. Any tax discrepancies had to be settled by the hiring company and not the contractors limited company.
This is why all companies initially stopped using limited company contractors as they were now liable.
Also this was good for HMRC because now a single investigation could cover a single hiring company with sometimes hundreds of contractors.
It should be noted that tax investigations can go back up to six years so even though the rules have changed there is still a chance that an investigation could uncover a historical liability.
Build5:
B… b …b…but I had an accountant. He said it was fine.Your accountant can ‘advise’ you. Doesn’t mean it’s legal. It’s still your responsibility to check with HMRC before using a scheme.
I had this issue back in the 1990’s where my accountant left me out to dry with HMRC. They have (((special))) immunity for their advice. If it gets questioned, they run a mile and you’re left holding the baby.
NEVER trust an accountant. Always get EVERYTHING in writing or email including actual names not generic company replies.
Watch them squirm when you try and pin their name to the advice.
Absolutely rubbish
If your accountant hasn’t advised you in writing and put their professional indemnity insurance behind it then they haven’t advised you. So why don’t you stick to driving trucks. It appears that you know nothing about accountants.
Self employed truck driver by definition means owner driver.
stu675:
Build5:
B… b …b…but I had an accountant. He said it was fine.Your accountant can ‘advise’ you. Doesn’t mean it’s legal. It’s still your responsibility to check with HMRC before using a scheme.
I had this issue back in the 1990’s where my accountant left me out to dry with HMRC. They have (((special))) immunity for their advice. If it gets questioned, they run a mile and you’re left holding the baby.
NEVER trust an accountant. Always get EVERYTHING in writing or email including actual names not generic company replies.
Watch them squirm when you try and pin their name to the advice.
Absolutely rubbish
If your accountant hasn’t advised you in writing and put their professional indemnity insurance behind it then they haven’t advised you. So why don’t you stick to driving trucks. It appears that you know nothing about accountants.
I think your under the assumption that accountancy sector does not have cowboys lol.
Not every accountant has even a degree. I am unsure of the level of certification required but I imagine a few cowboy accountants can get around that by putting a disclaimer saying they are not responsible or whatever nonsense.
accountancydaily.co/hmrc-tu … ccountants
"French Duncan is accusing HMRC of losing billions of pounds in tax revenue because of a refusal to tackle ‘cowboy accountants’, who work without accounting qualifications and perform sub-standard work. "
So why dont you stick to driving trucks Stu? You seem to know nothing about accountants?
ps.
Just trying be as patronizing as yourself 
.
rhudson:
I worked as a contract software engineer for 20+ years through my own limited company. I also did some agency class 1 driving, again through my own limited company.When IR35 rules got enforced the main stumbling block to being able to say that a worker is ‘outside IR35’ was the ‘right of substitution’ clause.
The substitution clause is meant to stop a client employing contractors as ‘disguised employees’ - giving contractors none of the benefits associated with being permanent (paid holidays, conditions of employment etc.) and to some extent allowing the client to minimise the number of permanent drivers on its books. Perhaps a bad effect was the loss of flexibility ie. when it’s unusually busy or someone’s not turned up.The main IR35 change that focused the clients attention was that if an HMRC investigation deemed that a limited company workers IR35 determination was incorrect (they said they were outside IR35 when they were really inside) then the client would be liable for the unpaid tax - not the limited company of the contractor. Previous to the changes the clients did not care about IR35 determination because they were not liable. When tax liability moved from the contractor to the client most clients stopped using limited company drivers.
However, some agencies and their clients are now starting find ways around it - I’ve seen it in computing and driving.
Specifically to driving, the agency (that I signed with) and contractor use a computer app in which is accessed by all the contractors working through the agency. The contractor specifies his/her availability and preferred shifts. At any time (within reason) a contractor may decide to decline that shift and it is offered to the other available contractors and reallocated. This system appears to provide the required disconnect between a client and a specific contractor.
Not all clients accept this ‘workaround’ to IR35 but quite a few big well known clients do.I wondered how they did it as well that’s why I signed up with an agency which said they accepted limited company drivers.
I’ve not done and work for them yet but its a big well known agency and its got a few ‘blue chip’ clients that take limited company drivers although, the majority of its clients don’tJust thought that I would share my ‘findings’ !
That’s really helpful, thank you.