Q. My Limited Company ceased to trade in 2013. After that HMRC began a 2 and a half year investigation which has ended with them finding me caught by IR35. I still dispute this and had planned an appeal. HMRC prevented my company from being dissolved however on the same day as I received a bill from HMRC for money they deem I owe, I received a letter from Companies House saying the company is now dissolved. Where do I stand?
A. If the IR35 enquiry began before your application to have the company dissolved then I am surprised that the dissolution went ahead because ordinarily HMRC will object to such an application until their enquiries have been concluded.
When you say you have received a bill from HMRC, presumably you are referring to Notice of Regulation 80 Determination (tax assessment) & NIC Decisions? If you disagree with these assessments then you have 30 days in which to lodge an appeal with HMRC stating the reasons why you believe they are incorrect. It is not enough to simply say that you disagree. Before any appeal ends up in the Tax Tribunal you can ask HMRC for an independent review, ie for another Status Inspector who has not been involved with your case to review it or apply for Alternative Dispute Resolution (ADR). Details of the ADR process can be found here.
The IR35 tax & NIC liability rests with the company & as this has now been dissolved you may wish to point out to HMRC that to continue the IR35 enquiry will be a pointless & fruitless exercise as even if you were to accept their opinion there is no chance of them recovering the tax & NIC arrears. However, HMRC has the power to transfer unpaid PAYE debts of the company to a director and seek recovery from them personally in relation to any payments they received knowing that the employer had “wilfully failed” to deduct tax.
HMRC also has the power to seek recovery of unpaid NICs from an individual director by way of the issue of a Personal Liability Notice (PLN). A PLN may be issued when there has been a failure to pay the NIC due and that failure is attributable to the fraud or neglect of that director.
If therefore you carried out IR35 due diligence for each of the contracts under enquiry & were of the firm belief they were outside of IR35 then HMRC should not be able to transfer the tax & NIC liability to you personally.
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