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Inside IR35 tax Liability

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    #61
    Based on the limited information provided, this seems pretty straightforward to me. The client has not supplied an SDS. An SDS is only an SDS when it is timely and reasonable care has been taken in its preparation. Reasonable care means that, minimally, reasons are provided that support the determination. If the client has not issued an SDS, Chapter 10 ITEPA is perfectly clear that the liability rests with the client, not the Fee Payer ("as if for any reference to the fee-payer there were substituted a reference to the client"). The Fee Payer cannot eliminate this liability simply by correcting their PAYE/RTI returns, because they failed to take reasonable care, and I think this will be found to be true.

    Essentially, it sounds as though the Fee Payer is playing ball in covering the client's **** and you are, so far, playing along because there isn't a tremendous amount you can do about it. Ultimately, you always have the route of correcting this mistake via your SATR (but you will need advice on how to do that properly), which will then trigger an investigation.

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      #62
      Originally posted by jamesbrown View Post
      it sounds as though the Fee Payer is playing ball in covering the client's **** .
      100%. Fee payer wanted to bury their head in the sand and just hope it would go away. End Client was asking for monthly updates on how this was being resolved which is what got any action. Fee payer stated multiple times that the larger agent between them and the end client was at fault, but as bigger and got work from them, didn’t want to challenge. Although not sure it would change my outcome right now as I think the larger one would still do the BR code / 20% tax rate (I suspect the advice came from the larger recruitment firm to do this in the first place). But it does prove lack of care throughout the chain above me. I assume their liability is not capped at the 20% tax rate though?

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        #63
        Originally posted by malvolio View Post

        I've raised exact; that same point elsewhere, since there are potentially thousands of people at the same risk, especially if HMRC start chasing the private sector the same way that they have the public one*. So far, no response. At all. I find that very dispiriting
        Thats my fear, I was lucky to a certain extent that I spotted it fairly early. Lots of people won't. Or what happens if HMRC investigates and to comply end client just changes the SDS decision. 50% of the retro bill is with you not the fee payer based on my experience.

        Can I ask where else you have raised? Thinking about raising in a few places for all round awareness once full set of facts are clear. PM if easier.

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          #64
          Originally posted by eek View Post

          This wasn’t an issue previously it’s brand new since April (under the old rules SDS was always done before the contract began) but as I said before I want to investigate things before I go panicking people.
          For clarity, SDS was done by End Client before any work started, it was just not properly manged by the recruitment agents and never implemented at all as inside by the fee payer (my recruitment agent). Their failing saw it set up as outside.

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            #65
            Originally posted by Keanu2020 View Post

            For clarity, SDS was done by End Client before any work started, it was just not properly manged by the recruitment agents and never implemented at all as inside by the fee payer (my recruitment agent). Their failing saw it set up as outside.
            Yes but prior To April the agency would have made 100% certain that an SDS had been received - prior to April this screw up couldn’t have occurred.
            merely at clientco for the entertainment

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              #66
              Originally posted by eek View Post

              Yes but prior To April the agency would have made 100% certain that an SDS had been received - prior to April this screw up couldn’t have occurred.
              umm, appologies if mislead somewhere. This was pre April, although 'resolution' only happened last week. Public Sector though so my understanding was inside rules already under operation? Does this change anything?

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                #67
                Originally posted by Keanu2020 View Post
                For clarity, SDS was done by End Client before any work started, it was just not properly manged by the recruitment agents and never implemented at all as inside by the fee payer (my recruitment agent). Their failing saw it set up as outside.
                Ah, well this is important information. For this reason alone, it's quite hard to offer advice as the facts matter and the facts are being drip-fed and perhaps you don't know all of the facts (hearsay). It really is best that you speak to a professional who can review the facts, as you currently understand them, and then engage with the intermediary that contracts with YourCo on your behalf. However, as soon as you involve a third party, expect things to explode - the client will probably terminate (I'm somewhat surprised they haven't already).

                There are several outfits that could help with this. Good ones for contractors, in my experience, are Markel Tax and Egos. There are others mentioned in this thread, such as WTT of whom I am personally not a huge fan, but YMMV. That said, if another intermediary failed in this episode of pass-the-parcel with the SDS, then whomever failed to carry out their duties (you seem to mention two recruitment firms in the OP) is the de facto Fee Payer and deemed employer and they will carry the can, by default. Again, the rules are quite clear that the liability (for all PAYE/NICs and the AL) rests with the intermediary that failed to pass on the SDS, if there is an intermediary that failed to pass it on. If an error was made with the deemed payment itself, then it will depend on the facts, but I doubt reasonable care was taken.

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                  #68
                  It is not my intention in any way to drip feed or withhold. Probably more a case that I don’t know what is key and what is not. Where I’ve read something and I’ve worried about not providing enough information I’ve tried to post right away. Happy to answer anything need. I read this as fee payer got the determination wrong, yet liability passed to me through 20% rate. It is also me and my own Ltd that is impacted, I’m talking about myself here. The bit I’m unsighted on (not surprisingly), it what the two recruitment companies have been cooking up between themselves, such as the voluntary disclosure I knew nothing about until the letter last week. As a pure layman, the biggest surprise to me was the way IR35 now worked and realisation that ‘fee payer is liable now’ is not actually the case. I’m grateful for all the comments received, and particularly the firms you mentioned to speak to. Another mentioned to me was https://david-kirk.co.uk/, if anyone has experience with them?

                  I discussed with End Client on Friday. They have been pretty good about the whole thing. They were equally shocked that the resolution they had been chasing would see me pay part of the liability. This was news to them and they also didn’t understand how if the fault way not mine I would get a tax bill. Up until now, its just been bubbling away slowly with no resolution, which is probably why it’s not been an issue. Now the resolution has happen and I have to take action I suspect you are right though on how it will play out. The End Client had no idea the larger recruitment company was subbing work out either.

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                    #69
                    Fair enough, but the best you can do is to speak with a professional and let them help to gather the facts. There are still some significant unknowns (perhaps to you too, but in any case, to this thread), such as whether the client really issued a timely SDS that indicated your work was inside or whether they, in fact, issued an SDS that indicated your work was outside and failed to take reasonable care, reversed, and now one or more of the other intermediaries are covering for them. It's also unclear to me under what legislation this mistake was made (all pre-April 21 or all after April 21 or a mixture)

                    Based on your engagement with the client, however, it sounds like they issued a timely SDS indicating "inside" and the error lies with the other intermediaries. To be clear, the Fee Payer does not make a determination, that is the SDS, which comes from the end client. Whether the failure by one of these intermediaries was to (not) pass on the SDS to another intermediary (the erstwhile Fee Payer) or the error was a failure to operate PAYE correctly themselves (the deemed payment) also matters, and the answer to that is likewise unclear.

                    However, the mile high view is that the supply chain above you screwed up and, in that case, the legislation was designed such that the liability rests with the supply chain above YourCo, absent fraud (and I doubt that is relevant here), not YourCo or you personally. Precisely where in the supply chain and "how much" will depend on the facts, but simply amending the PAYE RTI returns and pushing the liability on to you ain't gonna work, I think, else some important parts of the legislation (like "reasonable care") would've been circumvented.

                    Comment


                      #70
                      Originally posted by jamesbrown View Post
                      Fair enough, but the best you can do is to speak with a professional and let them help to gather the facts. There are still some significant unknowns (perhaps to you too, but in any case, to this thread), such as whether the client really issued a timely SDS that indicated your work was inside or whether they, in fact, issued an SDS that indicated your work was outside and failed to take reasonable care, reversed, and now one or more of the other intermediaries are covering for them. It's also unclear to me under what legislation this mistake was made (all pre-April 21 or all after April 21 or a mixture)

                      Based on your engagement with the client, however, it sounds like they issued a timely SDS indicating "inside" and the error lies with the other intermediaries. To be clear, the Fee Payer does not make a determination, that is the SDS, which comes from the end client. Whether the failure by one of these intermediaries was to (not) pass on the SDS to another intermediary (the erstwhile Fee Payer) or the error was a failure to operate PAYE correctly themselves (the deemed payment) also matters, and the answer to that is likewise unclear.

                      However, the mile high view is that the supply chain above you screwed up and, in that case, the legislation was designed such that the liability rests with the supply chain above YourCo, absent fraud (and I doubt that is relevant here), not YourCo or you personally. Precisely where in the supply chain and "how much" will depend on the facts, but simply amending the PAYE RTI returns and pushing the liability on to you ain't gonna work, I think, else some important parts of the legislation (like "reasonable care") would've been circumvented.
                      And it’s the last part that I’m off to investigate on Monday and then raise with a certain senior minister that I have the direct contact details for ( he’s also my neighbouring MP for Richmondshire).

                      as for the rest I do believe the OP has a call organised with WTT and they already have the details in this thread - I avoided suggesting merkel and egos because we don’t know who the other parts of the chain have used (and WTT are way less likely to be involved). Being blunt all I was after was someone suitably qualified to say to the OP’s agent “Nope, try again and get the chequebook out”. Although in reality I think it’s going to be one of either the end client (SDS was done, but not sent to the top agency or the top agency who is guilty here).

                      but the issue here seems to be that if the SDS has been failed to be passed on it seems ( according to the HMRC’s manual as quoted) that the deemed payment part of the tax bill (I.e. employee NI and income tax) can end up back with the contractor and I want go through that with someone at HMRC line by line and preferably get their actual manual rather than the trusting what we are hearing here. And if that does end up being the case it will be raised rather quickly to be double checked.

                      now there is a strong possibility that this is simply a misunderstanding of the rules but it also wouldn’t surprise me if there is a niche case they actually haven’t thought of that needs to be tweaked.

                      we will then have a secondary issue of finding out which agency is to blame or whether the issue is with the public sector end client that simply failed to pass on the information - and that’s going to be a pain because the bills are such that outright lying could save you £x0,000.
                      Last edited by eek; 9 October 2021, 21:32.
                      merely at clientco for the entertainment

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