Could you claim over £10,000 redundancy
from the Government?
IR35
Dr J G Perez, Hastings
“The IR35 changes left me in a difficult position and ultimately it made sense to close the limited company down. The outstanding debts have been cleared and I have been able to move on with minimum fuss.”
We are rated 9.6 out of 10 on Trustpilot
Intermediaries legislation (but more commonly referred to as IR35) was introduced in 1999 by HMRC with further tax changes affecting public sector contractors implemented from 6 April 2017.
The amount of tax contractors pay through their Personal Service Companies (PSCs) has been a target for HM Revenue & Customs (HMRC) for some time and IR35 aims to prevent workers from setting up a limited company as a ‘middle-man’ which enables both the employer and employee (withdrawing their money via dividends) to save tax
Under the reforms public sector organisations now have to deduct tax and NI at source rather than allowing workers to work out their own tax contributions and pay them through a limited company. It has been estimated that public sector workers could be anything between13% and 30% worse-off if their contracts are deemed to breach the new rules.
Ultimately up to 5.5m businesses (a typical IR35 contractor may be a contract engineer, IT contractor, oil or gas contractor, HGV driver or a public sector contractor) could be affected by the legislation and many directors are being forced to close their company down.
Public sector organisations are ending contracts and no longer allowing contractors to work through their own limited company and as a result many contractors are seeking employment instead or joining dubious offshore umbrella schemes.
Given the intense scrutiny into such companies and significant increase in tax investigations from HMRC (if yours fails their IR35 test this could result in a large tax bill and fines) closing down the company looks like a sensible option for many. The method you use to close the company will depend if the company is solvent or insolvent.
Free Advice
For Faster free insolvency advice request an Express Callback.
Closing your IR35 company
If your limited company is solvent and has assets over £25,000 then a Members Voluntary Liquidation (MVL) is probably the best way to close it down. The main advantage of a Members’ Voluntary Liquidation (MVL) is that it can be a tax efficient way of extracting the remaining funds from the company.
This is because distributions made in an MVL are treated as capital receipts rather than income and are therefore subject to capital gains tax (CGT) rather than income tax. This is particularly beneficial when Entrepreneurs’ Relief is available. An MVL can only be completed by using a licensed Insolvency Practitioner and at The Insolvency Helpline we have assisted dozens of contractors in completing a successful MVL.
If your company is in debt (perhaps you have been hit with a large tax demand from HMRC, or a lucrative contract has come to an end and cannot be replaced) then a Creditors Voluntary Liquidation could be the solution. As well as clearing any company debt and giving the directors a clean break you could also be entitled to a redundancy payment of over £10,000 from the Government.
Voluntary Liquidation need not be daunting or intimidating – the process can now be completed online and there are no restrictions on a contractor forming a new limited company and resuming work.
IR35 changes have created much uncertainty and confusion but at the Insolvency Helpline we can help you navigate the legislation and limit any personal liability. The number of contractors we are advising has increased dramatically since the changes took place and we are now helping over 100 directors month.
Why not try our Free 60 Second Test and find out what your options are or simply call us on +44 77 1566 4532 for a free and confidential chat!
Worried about IR35?
Try our free 60 second test & find out what
your options are!
Copyright © Debt Panda
© 2020 Debt Panda