Is SDS retrospective?

[Finance Contractor]

I, like many on here, have a contract that expires pre IR35 change but I am paid post IR35 change. I have been doing some research on the risks of carrying on the contract into March.

So I am clear on the client needing to issue an SDS. But what happens when the client has already engaged the contractor? Does the client determining a contract to be inside IR35 and issuing the SDS apply to the whole contract that has been and gone? Or does the contract need to be terminated at that point and a new one issued?

My confusion is this - if I carry on into March, the last invoice is paid on April 15. However, what happens if I am determined to be inside IR35 on March 15? I can’t see how this can be done without terminating my current contract as the terms of that are obviously not inside IR35 and therefore can the client really make deductions on the April 15 payment for any work completed pre SDS on March 15?

[northernladuk]

We had a post asking exactly this yesterday. It's in the IR35 section of the forums.

https://www.contractoruk.com/forums/...st2718871.html

[Finance Contractor]

Thanks.

I’m still confused on what happens if a determination of inside IR35 is made after the point the contractor has begun work towards his/her final invoice. Can the client issue the SDS and determine an inside status for pre SDS work completed? I would have thought changing status in March would mean the current contract being terminated as it is not on inside IR35 terms therefore SDS would not be retrospective to work already completed prior to it being issued?

[northernladuk]

You are applying some one dimensional thinking here. It would all be done above board with the proper contracts including dates, payment terms and the lot so it will be very clear when and to what it applies.

The SDS would not be retrospective however the risk that the client had admitted you are really inside meaning your previous work is inside is still there. You'd need an investigation by HMRC to prove it but shouldn't be difficult if the client has all but confirmed it.

[SimonMac]

TL;DR

We don't know, HMRC have said they won't pursue anything retrospectively but it all depend so n how much you trust them

[Finance Contractor]

Thanks. I’m going to have to have a think about whether it is worth staying on past end of Feb as the client’s policy is to allow the agencies it uses to handle the IR35 change and it looks like the agency I am using may make a determination in March rather than bring forward its payment date from 15 April.

[NeedTheSunshine]

TL;DR

We don't know, HMRC have said they won't pursue anything retrospectively but it all depend so n how much you trust them

It's not retrospective if you were always inside and were declaring yourself (incorrectly in HMRC's view) outside. And I assume that they think most contractors should be declaring inside.