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

[cojak]

So, it’s (nearly!) October 2019 and if you haven’t already, now is the time to start planning for the IR35 changes in April 2020. [Note: The Government delayed this by a year, so I've updated the dates in the following post.]


Just to be clear – IR35 itself isn’t changing; the change is who decides whether your role is inside or outside of IR35. It is the client who decides that, not you (or your contract reviewer).

First, here are the new rules from the Horse’s Mouth. Read them:
Understanding off-payroll working (IR35) - GOV.UK
April 2020 changes to off-payroll working for clients - GOV.UK


Awareness, not guidance

In this thread I am NOT going to tell you what to do. Your decision comes down to your attitude to risk. If you think it’s unlikely that HMRC are going to start looking closely at your tax position in the future, then you don’t really need to do anything.

But if you feel uneasy about this, maybe it’s time to take stock and decide what you are going to do.


What is the problem?

There is no problem if your outside IR35 contract ends before April 2021. It was reviewed and your working practices show that the outside review was a valid one.


The problem as I see it is if you are currently in an outside IR35 contract but your client decides that your role will be inside IR35 at your next extension or after 6th April 2021. HMRC may look at the months before the switch: “if you are inside IR35 now, you should have been inside IR35 then”.

There is evidence that this happened in the public sector when things changed for them
IR35 inspectors to probe public PSCs retrospectively


What can I do?

Basically, if you think that your client is going to decide that you are inside IR35, you need to consider whether to leave that client.

We need to remember that none of this is definite, but I’ve been around long enough to have a fair idea where this is all going, hence this thread.

I don't know that this is actually going to happen, or when it might happen. I make my own determination of the situation based on previous observation of HMRC's ethics, methods and tactics, and the risk that they will be applied in the future with regard to the new world of IR35.

If people ARE in business on their own account, they should be familiar with calculating risk versus reward and determine their own manner of mitigation in light of being informed of the possibilities.

Basically - contractors are big and ugly enough to decide for themselves once they have the information.

It's called making an informed decision.


Note: I've removed the invoicing dates to make the post clearer, as that became out-of-date due to HMRC clarifications in 2020, there are references to that in the posts below though (just in case anyone gets confused...)

[jamesbrown]

Nice, thanks.

Minor quibble

It is the feepayer who decides that, not you (or your contract reviewer).

I would update that to client. The end client always determines status and issues the SDS, and the fee payer always deals with a fee payment based on status. The end client and fee payer may be the same in some cases.

[cojak]

Nice, thanks.

Minor quibble



I would update that to client. The end client always determines status and issues the SDS, and the fee payer always deals with a fee payment based on status. The end client and fee payer may be the same in some cases.

I’ll change it.

[jamesbrown]

Cool. Thanks for creating this - will be great to have somewhere to point folks in the first instance.

[Alchemy Accountancy]

Basically, if you think that your employer is going to decide that you are inside IR35, you need to consider whether to leave that client

Do you mean client, rather than employer?

[jamesbrown]

Do you mean client, rather than employer?

Employer for tax deeming purposes

[cojak]

Do you mean client, rather than employer?

Dammit you’re right. I’ll change...

(Thanks Alchemy.)

[rambaugh]

Thanks cojak for raising this thread.

I've also thought about the risk you've highlighted and discussed it with other contractor colleagues. Some have said the way to reduce the risk is to agree a role change at client co. I'd imagine this would need to involve terminating existing contract and signing up to a new one with client but do you think it is a legitimate way to reduce the risk of HMRC arguing that you had retrospectively been inside IR35 when you had assessed yourself to be outside with client ?

Others have said that the length of time with client also contributes to the risk. Is length of time at client also a factor with the risk you've highlighted?

[jamesbrown]

Thanks cojak for raising this thread.

I've also thought about the risk you've highlighted and discussed it with other contractor colleagues. Some have said the way to reduce the risk is to agree a role change at client co. I'd imagine this would need to involve terminating existing contract and signing up to a new one with client but do you think it is a legitimate way to reduce the risk of HMRC arguing that you had retrospectively been inside IR35 when you had assessed yourself to be outside with client ?

Others have said that the length of time with client also contributes to the risk. Is length of time at client also a factor with the risk you've highlighted?

Think about it in reverse. If your IR35 status changes from outside (self-declared) to inside (client-declared) and there is no change in working practices, does that increase the risk that you would be found inside all along? Surely, yes, assuming the client took reasonable care in making their assessment, as they are required to do by (draft) law. On the other hand, if there was a change in working practices, then their more recent assessment can surely be argued (by you) to depart from the earlier status, which you declared.

So, yes, I would say that helps.

In terms of duration of a contract, this is not directly a factor, but it can become a factor, indirectly, if you become part & parcel of the client's operation (the risk of that increases with time, unless you are careful).

[cojak]

IR35: Planning for April 2020 – should I stay or should I go?

An IR35 investigation is painful even if you win, so unless the client confirms your outside status (thus leaving the existing contract in place) I would avoid the conversation with HMRC altogether and leave the client.

Your view of risk will probably be different to mine.