IR35: Planning for April 2021 – should I stay or should I go?

[BlueSharp]

If you were to stay on in an inside role then it looks like Brolly or Payroll is the likely route. There is now the question what to do with the PSC. Would closing the company at this point contain the risk, has HMRC ever stopped a closure to look at IR35 or reopened a company once it has closed?

I'm surprised there has been no 'expert opinion' on what to do with the PSC and the IR35 risk if you do switch.

[cojak]

I would close my Ltd, but at a new client while using a brolly. I think that the risk of an investigation is small in this scenario.



(Although there'll be a massive backlog at the MVL companies. Maslins has said that he's increasing staff, but still...)

[Maslins]

@BlueSharp there was a thread re this recently. We've not seen any evidence at all to suggest trying to close a company (whether by MVL or strike off) is triggering investigations. Accountants may be a bit nervous of responding too formally to confirm this, as of course your case could be the first.

If you did want an expert opinion specifically re IR35 and closure, I'd suggest the likes of QDOS/similar rather than contractors accountants may make more sense to ask.

@cojak FWIW extra staff is mainly for the Maslins side. Whilst we're anticipating losing a fair few clients over the next ~12 months due to IR35 changes, in the short term that means more work for Maslins. It's quite staff time intense, discussing final position and options, doing all the de-registrations, final sets of accounts etc. Less effort generally if most contractors are just ticking along nicely.

At the risk of setting us up for a fall, I'm toying with the idea of us having a specific "closure package". For clarity I don't mean an MVL (though that could well be a bolt on), I just mean dealing with all the tidy up bits and bobs. I would imagine lots of the other big contractor firms will also see an upturn in client demands for things to be sorted as circumstances are changing, and some of the ones with more frugal staffing levels may struggle. Ie it may be that there are contractors who just want the closure of their company dealt with, and potentially the accountant they've been paying is struggling to do it on a reasonable timescale, or even disappears completely.

MVL-wise, could be wrong, but I don't see a massive upswing. Over-generalising, my view is that high earning/skilled contractors will have sufficient clout to get outside IR35 gigs. It'll be the lower earning/skilled contractors that don't. More modest earners are less likely to want an MVL. Eg if you don't max out your basic rate band dividends where they suffer 7.5%, why would you voluntarily pay 10% via CGT.

...but yeah, I guess if IR35 is really brutal to the Maslins side (ie virtually all contractors struggle to get outside roles) then it would be a temporary boost for MVLO. After that potentially both companies struggling though, so selfishly this isn't what we're hoping for!

[All the above is just my speculation/opinion]

[PK2]

I would close my Ltd, but at a new client while using a brolly. I think that the risk of an investigation is small in this scenario.



(Although there'll be a massive backlog at the MVL companies. Maslins has said that he's increasing staff, but still...)

So if I get the slightest suspicion that my existing client will deem all contractors inside IR35 it would make sense to find a new client roughly before the new year to avoid being charged retrospectively?

But what will stop HMRC looking back at my history after observing that my former company went inside IR35, even when I'm not longer there? I find this very unfair!

[northernladuk]

Nothing but what people forget is that HMRC can, and do go back and look at your situation now. That's not something that is only going to happen in April so it beggars belief the number of people suddenly popping up not realising this

The only difference in April is they have a line in the sand where the client catagorically says inside so easy pickings.

April changes aren't fair I agree but if people are doing gigs that are clearly inside because they haven't done their diligence and got insurance then it's difficult to feel too sorry for them.

[cojak]

So if I get the slightest suspicion that my existing client will deem all contractors inside IR35 it would make sense to find a new client roughly before the new year to avoid being charged retrospectively?

But what will stop HMRC looking back at my history after observing that my former company went inside IR35, even when I'm not longer there? I find this very unfair!

As I said in the OP:

There is no problem if your outside IR35 contract ends before April 2020. It was reviewed and your working practices show that the outside review was a valid one.

I’m assuming that you DID get your contract reviewed and that your working practices show that you are outside IR35.

While it is possible that HMRC will want to see this pre-April 2020 contract, it’s unlikely because you can defend it up until then because YOU made the decision correctly based on the review and working practices.

[PK2]

As I said in the OP:
I’m assuming that you DID get your contract reviewed and that your working practices show that you are outside IR35.

Damn it, I never bothered asking my accountant because my recruitment agency (a very well known one) said it was and after doing my own research and reading the contract I trusted it is outside.
Good point because if you don't ask your accountant to review it than the IR35 protection insurance may become invalid?

[northernladuk]

Damn it, I never bothered asking my accountant because my recruitment agency (a very well known one) said it was and after doing my own research and reading the contract I trusted it is outside.

Believing everything an agent says when it's your neck on the block is a bit of a newbie mistake.
You know enough about Ir35 to make that determination? Unfettered RoS and the whole nine yards?
Hays are one of the biggest and they've had an unfriendly contract for many years. They don't care about your tax position.

Good point because if you don't ask your accountant to review it than the IR35 protection insurance may become invalid?

It should do IMO. Not sure why my premiums should be so high when others don't do basic diligence. Even more so when people think their accountants are the best people to ask.

Sorry but there you go.

[kryten22uk]

In their 'factsheet' the HMRC said that:

The reform is not retrospective. As was the case in the public sector, HMRC will focus on ensuring businesses comply with the reform for new engagements, rather than focusing on historic cases. HMRC will not carry out targeted campaigns into previous years when individuals start paying employment taxes under IR35 for the first time. Organisations’ decisions about whether workers are within the rules will not automatically trigger an enquiry into earlier years.

Doesn't this suggest that there isn't going to be an issue with sticking around until your client determination date? Or were your reading between the lines as they use phrases like "no targeted campaigns" and "not automatically trigger", which isnt the same as stating that it won't happen?

[cojak]

In their 'factsheet' the HMRC said that:

The reform is not retrospective. As was the case in the public sector, HMRC will focus on ensuring businesses comply with the reform for new engagements, rather than focusing on historic cases. HMRC will not carry out targeted campaigns into previous years when individuals start paying employment taxes under IR35 for the first time. Organisations’ decisions about whether workers are within the rules will not automatically trigger an enquiry into earlier years.

Doesn't this suggest that there isn't going to be an issue with sticking around until your client determination date? Or were your reading between the lines as they use phrases like "no targeted campaigns" and "not automatically trigger", which isnt the same as stating that it won't happen?

That.