Contract Extension

[eek]

Thank you, I appreciate it.

Just been talking to the agent this am, and have been told that they can work on ending the contract on 22/3, I had pre planned holidays anyways from 24/3 - 3/4 so this works perfectly.

On 6th April or beyond, new contract starts which reflects the change in the role, new title etc etc. They have also offered a FTC directly with the company - I am now considering taking break and then start new contract (as oppose to extending current) in April. I wonder, that along with a direct FTC may be a better option/alternative to that of extension?

Direct FTC does remove the agency from the equation which is one of our main worries.

A different role with highlighted differences would also protect you a bit as well.

[WordIsBond]

Definitely want a new role / title. Definitely want a new contract and want to make all discussions of "extending" go away. "I am willing to enter into a new contract but not extend this one, since this is a completely different role." Get that in writing.

It's possible a short break helps, but unlikely. Take it anyway, you probably can use it.

NLUK mentioned penalties above. That's worst case and probably unlikely. You had a contract review, etc. Interest would apply but not penalties, in all probability. Ask the client to withdraw the inside determination, if they've actually issued one, and just offer a FTC or brolly role instead, try to get that SDS off the table.

If you are going FTC or brolly, close your company. My guess is you are not going to be in the first category of people they will pursue. The first category is clients who give a lot of outside determinations, they will want to lock that down first of all. The second is people who were outside before and stay with an inside determination, that's easy pickings for them. People who were outside and now are perm, brolly, FTC? They might go after you but the others will come first, almost certainly. No one can predict how HMRC will behave, but logically, first they want to stop the bleeding by going after clients who haven't done what they wanted them to do, make an example of somebody to scare everyone else. You're really small fry, after all. Chances are you'd be able to close your company long before they came after you. That's IMO only and I could be wrong, and if you have have several years at this client at risk you might be very risk averse.

I think the risk on your prior client is virtually nil. Again IMO only. But they have so many other things to chase. I don't expect them to ever open another investigation on any contract that finished before 1/1/2020 except for those extended into this year. There's no reason for them to go that far back anymore, there are so many other easier ways for them to find money.

Again, no one knows what HMRC will do, and your risk tolerance may vary. But the risk of your prior contract becoming a target is probably less than your risk of a heart attack in the next month. Your current contract is more vulnerable, but I think by just closing your company as quickly as you can once it is finished you significantly mitigate that risk.

[WordIsBond]

Direct FTC does remove the agency from the equation which is one of our main worries.

I agree with this.

[thesquaremile]

The first category is clients who give a lot of outside determinations, they will want to lock that down first of all

What if those outside determinations are genuine - with working practices that match? Surely, with a large buffet of targets HMRC don't have the resource or inclination to pursue cases with a considerable possibility of losing?
Assuming that was the priority landscape, if one happens to be in a position where they could actually 'influence' the actions of the client - what is considered to be the least risky outcome (at the same client) - continuing on a self-assessed and now client-assessed OUTSIDE basis with genuinely outside WP, OR, continuing on a self-assessed but now client-assessed INSIDE basis with a new contract, new role, new WP etc.

[WordIsBond]

What if those outside determinations are genuine - with working practices that match? Surely, with a large buffet of targets HMRC don't have the resource or inclination to pursue cases with a considerable possibility of losing?

Been paying attention over the last 20 years? They pursue a lot of cases they lose. It's called 'deterrent.' If they drag clients through lengthy and expensive cases it scares clients off of outside determinations. And all they need is one high profile win where ABC Plc has to pay £23 million in back taxes, penalties, and interest because they gave outside determinations they shouldn't have and BCD Plc, CDE Plc, and all the way through to XYZ Plc, will think twice and three times before giving a lot of outside determinations.

Although taking that into consideration, if one happens to be in a position where they could actually 'influence' the actions of the client - what is considered to be the least risky outcome (at the same client), continuing on a self-assessed and now client-assessed OUTSIDE basis? or continuing on a self-assessed but now client-assessed INSIDE basis with a new contract, new role, new working practices etc.

The former (outside) is relatively risk free for the contractor. The only likely risk, IMO, is of HMRC coming in with a heavy hand and convincing the client they were wrong. At that point the client (or agency) may have to pay back taxes but you'll be forced to either move inside or leave. So there's a risk your contract could go pear-shaped, but probably not a tax risk.

The latter is a risk in that HMRC might argue it isn't a new role and new working practices, and you should have been inside all along. So the risk there is A) that you will be investigated (we can't quantify that but if you go from outside to inside at the same client it might be high) and B) that you will be unable to prove to HMRC or a tribunal that it really is a new role (this will depend on the facts of the case but I'd want a very, very clear delineation, personally).

The latter is probably less risky if instead of going inside, you go brolly and close your company. IMO. We can't know but I strongly suspect you wouldn't be the first target and so would be able to close the company, and once that happens you'd almost certainly be in the clear.

[thesquaremile]

Been paying attention over the last 20 years? They pursue a lot of cases they lose. It's called 'deterrent.' If they drag clients through lengthy and expensive cases it scares clients off of outside determinations. And all they need is one high profile win where ABC Plc has to pay £23 million in back taxes, penalties, and interest because they gave outside determinations they shouldn't have and BCD Plc, CDE Plc, and all the way through to XYZ Plc, will think twice and three times before giving a lot of outside determinations.

Yes, cognizant of HMRCs bullish strategy to scare more and more clients into the INSIDE domain. But as I said, the landscape has changed/is constantly changing. Do HMRC need to spend time and resource to pursue this cause? Don’t think so, clients have willingly obliged anyway in form of en masse blanket assessments/no-psc policies. Provides HMRC plenty of opportunity to switch course and start targeting genuine offenders.
Thank you for your views on the out-out and our-in scenarios.

[WordIsBond]

Do HMRC need to spend time and resource to pursue this cause? Don’t think so, clients have willingly obliged anyway in form of en masse blanket assessments/no-psc policies.

My view, FWIW, is they will want to spend resource targeting clients who give outside determinations. Why? Human nature.

Right now, most clients are doing what they want, but not all. That means that those who are dishing out some outside determinations are going to be getting better contractors at better rates. Some of those risk-averse clients are going to see that. And if they see that those people get away with it, then they'll get more aggressive at what they do, too.

It's not enough for HMRC to bully people into behaving as they have, they have to keep bullying them to do so. Because simple rules of supply and demand say that those who give outside determinations are going to be better off. So that has to be counterbalanced by the threat of problems with HMRC, or the outside determinations will grow in number, which they certainly don't want.

[rp83]

Thank you everyone for your comments, it sure as hell helps understand this mess better and better navigate this rough waters.

I have spoken to my boss on moving to FTC but with that, my salary would become team knowledge and it would cause chaos (her words not mine) among other directs, plus the fact, there is no "budget", haven't we heard that one before!). So options now - 1) continue with extension and brace myself or 2) end the contract 20/3 or so and then start a new one from 6/4 with being inside IR35. I am inclined to go with the latter (providing client approves, which I am sure they will).

With all that going on, strongly considering closing the Ltd company down and have gotten a quote to do so. That said, with all the moving pieces to IR35, am I right in assuming, I should leave it open because if/when HMRC decides to knock on the door, my Ltd company will be liable to pay Employer Tax and Employer NI? Any views will be appreciated.

Lastly, I just checked Insurance policies I have in place with Kingsbridge which covers for £25k in relation to IR35 disputes etc; which I am guessing ain't going to cut it. I am going to query with them that if they can increase that with additional premium!


Limit of indemnity any one claim £100,000
Limit of indemnity in the aggregate in respect of sections 2d and 2e £25,000

OPERATIVE COVERS


Sect ion 2 - Commercial


c. IR35 Status Enquiries Operative
d. IR35 Status Enquiry Taxes and Interest Operative
e. IR35 Status Enquiry Penalties Operative

[amanwhoisquiet]

You've only been there since Sep. Unless you've been drawing everything straight out to yourself, you might be able to run some numbers yourself and put aside enough to cover any unpleasantness from the war-chest.

There'll be contractors who've got more than a decade in probably more open and shut situations than yourself. Not an ideal way to look at it, but I don't imagine you'll be at the very top of any lists and unless HMRC start some blanket measures then you might just be able to wait it out with the money to one side.

[psychocandy]

OP you know that, based on the same rate, you're take home is going to be massively less through umbrella/inside?

Did you ask for an increase? You're gonna need about 35%.....