I was reading that article in the Sunday Times about BBC employees switching to using limited companies to avoid paying 50% tax. Assuming, perhaps unfairly, that the journalist got it right, I was rather less than impressed. Is HMRC really suggesting that people commit tax evasion…?
Has anyone heard of IR35 in HMRC, I wonder? Surely if someone is currently a full-time employee of a company and then leaves, sets up their own company and contracts themselves back to their previous employer doing the same job, they absolutely have to pass the criteria for “deemed employee”. Hence IR35 must apply.
If IR35 applies, as it surely must, then how do they intend paying themselves in dividends? They have to take 95% of their gross as PAYE/NIC salary. Hence no saving in tax (or a very small one, at least).
Or, of course, we assume that their shiny new contracts contain all the relevant IR35-friendly options regarding Direction, Mutuality and Substitution. Snag is that the Dragonfly appeal, while perverse in several respects, did establish finally that the contract and reality must align (which they didn’t in Dragonfly’s case since it seems the contract changed over time while the working arrangements didn’t).
So sorry but no cigar. You ain’t going to save any taxes by taking this route and someone is telling you porkies. And if you do, you’re breaking the law.
However, I’m not going to hold my breath waiting for the first challenge from HMRC to one of these contracts. Far simpler and less controversial for them to focus on us little people who don’t have nice profile roles in a publicly funded body…
yes they should be investigated under the IR35 rules but you and I know pigs will fly before that happens ?