Blanket Assessments - tax risk back to Client?

[DrStrange]

If the client makes a blanket determination then:

"They do not constitute ‘reasonable care’ – They breach a requirement of the legislation section 61T(6)(c), resulting in the tax risk passing back up to the hirer from the agency (‘fee-payer’)."

I assume this means that say the client deems inside but the agent disagrees and settles my invoices gross. If I'm later investigated and I lose, then it's the client that's liable. But I can't see that clearly in the rules (which admittedly I struggle to follow!)

Can anyone explain how the risk transfers back to the client if they don't take reasonable care?

(P.s. I know no agent will do this - just trying to understand the rules, to maybe scare the client a little...)

[GhostofTarbera]

The big private sector clients are not blanketing everyone inside, they have decided not to engage limited company contractors, only people via umbrellas or PAYE agency

That’s how - thus avoiding any IR35 guff


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[Peoplesoft bloke]

The “risk” that transfers back to the client is that they will have to pay employer’s NI. HMRC are unlikely to go looking for cases where an organisation wrongly deemed a contractor inside IR35, no matter how shoddy the assessment- they will only be looking for any chance to grab tax from an incorrect (or inadequate) outside assessment. Since caselaw shows HMRC have no actual clue and persue obviously hopeless cases, employers have decided it’s not worth the risk, so are not blanket assessing - they aren’t doing any assessments.


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[DrStrange]

The big private sector clients are not blanketing everyone inside, they have decided not to engage limited company contractors, only people via umbrellas or PAYE agency

That’s how - thus avoiding any IR35 guff


Sent from my iPhone using Contractor UK Forum

Yes, but not in this case (bizarrely enough)

[DrStrange]

The “risk” that transfers back to the client is that they will have to pay employer’s NI. HMRC are unlikely to go looking for cases where an organisation wrongly deemed a contractor inside IR35, no matter how shoddy the assessment- they will only be looking for any chance to grab tax from an incorrect (or inadequate) outside assessment. Since caselaw shows HMRC have no actual clue and persue obviously hopeless cases, employers have decided it’s not worth the risk, so are not blanket assessing - they aren’t doing any assessments.


Sent from my iPhone using Contractor UK Forum

How is the risk transferred back?

What happens if an agency for example ignored the client and still settled gross, on the basis the client didn't assess properly? If HMRC investigate and I lose, and if I can prove the client didn't take reasonable care but the agent and I did (albeit incorrectly in this case) are we saying the client is liable?

I get that that sounds ridiculous but if it's not true, how can the client have any risk on the reasonable care side?

[Peoplesoft bloke]

How is the risk transferred back?

What happens if an agency for example ignored the client and still settled gross, on the basis the client didn't assess properly? If HMRC investigate and I lose, and if I can prove the client didn't take reasonable care but the agent and I did (albeit incorrectly in this case) are we saying the client is liable?

I get that that sounds ridiculous but if it's not true, how can the client have any risk on the reasonable care side?

As I understand it, Clientco would have to show their working (a printout from CEST where they fed in data and determined that you were outside IR35), along with other evidence. But your scenario makes no sense at all - if cleintco determined you are inside IR35, there is no way for agentco to magically "re-gross" your payments as the deductions will have been made by clientco. Any clientco determining contractors inside IR35 is going to have to add them to payroll instead of paying invoices from PL. Which is why they are all saying "stuff it". The link you posted earlier is instructive - it refers to cases in the Public Sector where this legislation has applied for some time. One locum had eight separate determinations of being outside IR35 including from CEST, but the NHS trust still refused to offer her employment on that basis and insisted she was inside IR35. HMRC and others accept that such blanket determinations are illegal - but they don't really care as it fits in with their plans.

[DrStrange]

So, in reality, there's no obligation at all for ClientCo to take any reasonable care if they deem inside?

But if they deem outside with no reasonable care they'll take all the tax risk?

[eek]

So, in reality, there's no obligation at all for ClientCo to take any reasonable care if they deem inside?

But if they deem outside with no reasonable care they'll take all the tax risk?

Yes - HMRC have transferred all risk to the most risk adverse people they can find.