Getting away with it versus being legal.
The difference between these two approaches is often ignored.
Much advice is based on what you will get away with and you often hear that the only crime is getting caught. That is all very well and if you feel lucky, then who am I to discourage you.
I'd like to make the following suggestion though. Be informed. If you rely on "getting away with it" at least be aware that this is what you are doing and make your own choice.
What do I mean by "getting away with it"?
Joe the contractor is offered a 12 month contract in Munich. The agent tells him that he can do everything through his UK company and there will be no problem. So, off he goes. It's great, he has a buddy working there already. This guy shows Joe the ropes and lets him sublet the spare room in his flat.
Joe has a great time, Germany never even notices that he is there. He doesn't worry about IR35 and he returns to the UK with a load of good tales and a decent wad saved up. Like hundreds of others, Joe got away with it.
The fact that it worked for him, does not mean that it was legal or that it will work for the next man.
Consider ways in which Joe may have been caught:
One Sunday afternoon in August, Joe played the stereo a bit too loud and, as it was a hot day, the windows were open. His neighbour's windows were also open and they did not like the noise. They remembered that Joe's UK reg'd car had been parked outside since New Year and, like most Germans, they knew the law and the phoned the police.
There were a lot of contractors where Joe worked and the local authority knew this. They gave one of their staff a hand-help computer and sent him round every fortnight to type in the registration numbers of all of the foreign cars in the car park. After seven months, the computer printed out a ticket for the police to go and check up on Joe.
The tax authorities suspected that there might be a couple of covert Brits working at Joe's site. So, they planned a raid. They got a list of all persons registered as working there and paying tax. Then, they turned up one day with a warrant. They walked in and demanded to see the internal phone directory and all of the company's email addresses. They also toured the building writing down names from doors. They then compared their list of who was actually there with who was legally there and Joe's name popped up.
I have seen each of these happen over the last few years.
So, what happened to Joe when he was unlucky?
The likely consequences of getting caught vary from being told to sort things out properly to having the book thrown at you.
My friend with the car who was informed on by his neighbours was first spoken to by a couple of policemen. They said that, had it been up to them, they would have told him to get the car registered or removed from Germany within a month. However, as the case had already made it's way into the system, they were having to follow the full procedures.
He was made to pay full German road tax for the whole time that he had been living in Germany. (As the vehicle did not have the latest catalyst, this was quite expensive and meant that he had paid road tax for the car in England and Germany for the same period.) He was also fined 1500 German Marks and given one month to register the car locally or remove it from Germany. All of his other affairs were completely in order.
If you fail to register when you should, you will pay a small fine for that but, if you failed to pay taxes or would not have been allowed to register then the penalties are worse.
As far as having the book thrown at you, I can speculate but I have not seen it happen. The reason is that, when it is clear that everything is about to get really nasty, the obvious course of action is to leave the country very quickly. I know of cases where that has happened.
Since the Schengen treaty came into operation, that is no longer such a good strategy. Imagine that you worked in Frankfurt for two years and then did a runner when you realised that the locals had found out about you and were going to chase you for unpaid taxes, failure to register etc etc. Then, two years later, you get off the plane in Portugal for the start of your two weeks in the sun. You join the queue at the passport desk but, while everyone else is waved through, when they hold your passport up to the scanner, there is a beep and faces darken. You are told that the Schengen computer (Slogan: a terminal at every point of entry) says that the Germans would like to talk to you about offences concerning tax, illegal trading and vehicle registrations. Now that could spoil your holiday.
A programmer that I knew, once spent half a day in a cell because he had a similar name and the same birthday as a man that the German police wanted to speak to about car thefts.