Contract nearing 24 months
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  1. #11

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    Quote Originally Posted by WordIsBond View Post
    The earlier advice is only correct if "reasonable expectation" == "you got a sniff they might extend you". I'd say "reasonable expectation" sets a rather higher bar than that.

    Chances of HMRC challenging, if he quits claiming at 22 months, are virtually nil. How are they going to prove he had a "reasonable expectation" before then? This is not intended to catch whether or not your crystal ball tells you something.

    Even if OP agrees to extend, he still doesn't know he'll be there 24 months. The project could be cancelled tomorrow, or he could hit on the managing director's wife and get marched off site, never to return. But once he signs a new contract, he has a reasonable expectation he'll be there. That's the point at which reasonable expectation can be proven.
    Yes, but read all of my post. If it turns out you haven't blown the 24 month rule, you can sort it retrospectively. There's nothing saying you have to pay expenses the second they are incurred or that YourCo has a time limit on claims made.
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    Quote Originally Posted by WordIsBond View Post
    The earlier advice is only correct if "reasonable expectation" == "you got a sniff they might extend you". I'd say "reasonable expectation" sets a rather higher bar than that.
    Same. I have no "reasonable expectation" of a contract being extended until I have a copy of the extension signed by the client in my hands. Until then, I reasonably expect the contract will end on the date originally agreed, no matter what noises the client might be making about extending.

    How on earth could HMRC prove when you might "reasonably expect" the job to last longer than 24 months other than once you've got a signed contract to that effect?

  3. #13

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    Quote Originally Posted by TheCyclingProgrammer View Post
    Same. I have no "reasonable expectation" of a contract being extended until I have a copy of the extension signed by the client in my hands. Until then, I reasonably expect the contract will end on the date originally agreed, no matter what noises the client might be making about extending.

    How on earth could HMRC prove when you might "reasonably expect" the job to last longer than 24 months other than once you've got a signed contract to that effect?
    How can you not?

    Like I said, if there's any doubt, stop claiming and sort it out when you do know.
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  4. #14

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    Quote Originally Posted by northernladuk View Post
    Another suggestion would be to do some more research in to the way you work and the legislation surrounding it. Thinking 24 months and IR35 are related is a pretty fundamental mistake. A better understanding of IR35 and what it covers should have made it clear these aren't related.

    That level of knowledge and 2 years in to a gig through Capita I'd bet you you've got more IR35 problems than whether 24 months affects it.

    Is this client a PS one per chance?
    Off topic, but could you expand on this? Any articles that might be of use...?

  5. #15

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    Quote Originally Posted by le3ky View Post
    Off topic, but could you expand on this? Any articles that might be of use...?
    Best start a new thread asking this question then can point to links.
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  6. #16

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    Quote Originally Posted by malvolio View Post
    Yes, but read all of my post. If it turns out you haven't blown the 24 month rule, you can sort it retrospectively. There's nothing saying you have to pay expenses the second they are incurred or that YourCo has a time limit on claims made.
    I read it.

    By your reading, if a guy is taken on for a 5 year project, and after three months they say, "Man, we really like your work, hope you'll stick around until this is done," he should stop claiming expenses, and then charge them back if he doesn't stay more than 24 months.

    By my reading, he claims expenses up until the time he is offered an actual contract that takes him past 24 months. Arguably, he could keep claiming until he signs that contract. Until that point there is no reasonable expectation, because he can clearly just walk away, and if he can find another contract in another location so he doesn't lose T&S expenses, he probably will walk away.

    It would be almost impossible for HMRC to prove there is a reasonable expectation before a contract is signed. They MIGHT be able to argue it's there once the contract is offered. They might even be able to argue it is there if letters have been exchanged saying, "We're going to offer to extend you," on one side and "I'll be glad to do that," on the other side.

    The purpose of the "reasonable expectation" clause is not to base your taxes on reading your tea leaves and whether you think maybe you'll get an extension. It's so that if someone signs a contract that is going to take them past 24 months, they could be expected to have moved rather than get a tax break on their T&S. It's so people at 21 months don't sign a contract that takes them to 23 months and 29 days, with a wink and a nod that they will extend again after that.

    Your approach on this is certainly safe, but also costly. The guy who extends for six more months after 21 months on site should lose his T&S from 21 months on. If he ends up being terminated before 24 months, he should then claim expenses from 21 months to termination.

    But he shouldn't lose expenses from 18 months on because someone said to him, "I think we're going to want to extend you when the 21 months is up." Or because he knows they are likely to offer it based on the state of the project. That's all speculative.

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    No, someone's word is not the same as having a contract for the period, ie, if they issued a contract after 3 months for the full 5 years then yes, they should stop claiming it at the 3 month point. But, you'd be a fool to take such a contract anyway, better it be broken down into 6 month blocks at least, and there's nothing to stop you suggesting that to the client.

    By taking the 5 year contract, even if you expect to leave before the 2 year mark, you should still not claim the expenses as you've agreed to work on the 5 year contract. regardless of what's in your head.

    Simple really, if HMRC wanted to look into your expenses, when did you start working with the org and what does you current contract state as the end date? If end date >= 2 years from start then stop claiming as that is what will make HMRC kick up, and rightly so
    Last edited by SuperZ; 10th May 2017 at 21:22.

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    Quote Originally Posted by malvolio View Post
    How can you not?

    Like I said, if there's any doubt, stop claiming and sort it out when you do know.
    Quote Originally Posted by WordIsBond View Post
    I read it.

    By your reading, if a guy is taken on for a 5 year project, and after three months they say, "Man, we really like your work, hope you'll stick around until this is done," he should stop claiming expenses, and then charge them back if he doesn't stay more than 24 months.

    By my reading, he claims expenses up until the time he is offered an actual contract that takes him past 24 months. Arguably, he could keep claiming until he signs that contract. Until that point there is no reasonable expectation, because he can clearly just walk away, and if he can find another contract in another location so he doesn't lose T&S expenses, he probably will walk away.

    It would be almost impossible for HMRC to prove there is a reasonable expectation before a contract is signed. They MIGHT be able to argue it's there once the contract is offered. They might even be able to argue it is there if letters have been exchanged saying, "We're going to offer to extend you," on one side and "I'll be glad to do that," on the other side.

    The purpose of the "reasonable expectation" clause is not to base your taxes on reading your tea leaves and whether you think maybe you'll get an extension. It's so that if someone signs a contract that is going to take them past 24 months, they could be expected to have moved rather than get a tax break on their T&S. It's so people at 21 months don't sign a contract that takes them to 23 months and 29 days, with a wink and a nod that they will extend again after that.

    Your approach on this is certainly safe, but also costly. The guy who extends for six more months after 21 months on site should lose his T&S from 21 months on. If he ends up being terminated before 24 months, he should then claim expenses from 21 months to termination.

    But he shouldn't lose expenses from 18 months on because someone said to him, "I think we're going to want to extend you when the 21 months is up." Or because he knows they are likely to offer it based on the state of the project. That's all speculative.
    AFAIK (I've asked on here before and googled a lot) no one has ever had to pay back tax for less than 24 months under the "reasonable expectation" rule. Certainly it's wooly enough they couldn't enforce a penalty on it so the worst possible case if you keep claiming right up to 24 months is you pay the tax you would have paid anyway on those last few months expenses (+a couple of percent interest)

    IMO IANAL IANAA

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