Recovery of tax and NI from individual
In a reply to a posting "Composites and liability", Barry Roback advises the Revenue can pursue the individual personally in the event that the "intermediary" fails to make good the tax difference.
What is the legislation that provides this? It is not easy to find any reference to it on the IR website.
Barry goes on to state:
"However, I see no reason why the Revenue would not use this power to pursue an individual whose composite company also failed to pay any tax due."
Pursuit of the individual seems reasonable where the contractor is also the director of the personal service company. But where there is a composite company involved - the composite company makes the decision as to whether the contract falls within IR35, so it would seem unreasonable to be able to pursue the individual contractor for the mistake of the composite company. It would be interesting to know what legislation gives the Revenue the right to pursue the individual personally and whether this power could realistically be used by them where a composite company is involved.
In addition, insurance can be taken out against a liability under IR35, but is that insurance available to a contractor operating through a composite company? On the face of it, he has no insurable interest, since he has no contract - the contract being between the Composite and the agency or client. The insurance, I guess, would normally be taken out by the intermediary (in this case the composite company). So, can the insurance policies available on the market be purchased by an individual and are they worded to cover him for the recovery of IR35 tax etc the Composite Company should have deducted, assuming Barry is right about the Revenue's ability to use their power to pursue the individual even where there is a composite?
Clarification on these points would be greatly appreciated as many Composite Company services seem to be sold as being a solution to IR35 and, if the composite company reviews the contract and confirms they consider it to be outside IR35, I would not then expect to take out insurance against IR35.
Thanks
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GRJ