Inside IR35 tax Liability

[Keanu2020]

Hoping someone can advise me.
I started a contract role. End client was public sector, then a large well known recruitment firm, then a smaller recruitment firm I was through. It was labelled outside. I doubled checked in writing it was outside, and operated for a number of months like this before it was discovered that it was inside from the start and the recruitment agents got it wrong. I’ve been paid to my ltd.

End client says it wasn’t my fault, and even the recruitment firms put that in writing.

The recruitment firms solution has been to do a voluntary disclosure to HMRC. I’m told it will act like a P60. However, they have just paid a normal 20% tax rate, saying that’s what the IR35 legislation states. This of course will create a massive tax liability for me in due course at higher rates once it appears on my PAYE record. They have stated my personal tax is not their issue.

Is this even legal would be my first question? The error is theirs, admitted in writing, yet I end up paying the largest amount to fix it. What options (if any) do I have?

And surely the point of the new IR35 rules was that the end client is liable? If it can just be transferred back to me like this, does that not defeat the whole purpose of the rule change?

[Fred Bloggs]

It's dead simple. It's your responsibility to pay the correct tax on your income. The circumstances may be unpleasant but that fact does not change.

[Keanu2020]

Appreciate the quick response. Is it still true when you double checked everything and the error has been owned by other companies?

How does that reconcile with the IR35 changes? Are you saying its meaningless then and companies can just transfer it back to you as its your responsibility?

[eek]

Hoping someone can advise me.
I started a contract role. End client was public sector, then a large well known recruitment firm, then a smaller recruitment firm I was through. It was labelled outside. I doubled checked in writing it was outside, and operated for a number of months like this before it was discovered that it was inside from the start and the recruitment agents got it wrong. I’ve been paid to my ltd.

End client says it wasn’t my fault, and even the recruitment firms put that in writing.

The recruitment firms solution has been to do a voluntary disclosure to HMRC. I’m told it will act like a P60. However, they have just paid a normal 20% tax rate, saying that’s what the IR35 legislation states. This of course will create a massive tax liability for me in due course at higher rates once it appears on my PAYE record. They have stated my personal tax is not their issue.

Is this even legal would be my first question? The error is theirs, admitted in writing, yet I end up paying the largest amount to fix it. What options (if any) do I have?

And surely the point of the new IR35 rules was that the end client is liable? If it can just be transferred back to me like this, does that not defeat the whole purpose of the rule change?

I will need to hunt through the legislation but I don't remember anything about it being 20% tax - it should be a lot more than that, as the tax paid by DWP and co seem to be all National Insurance and Income tax and the full amount paid to the contractor (i.e. your limited company).

It's going to be a mess I'm afraid but that's because you are one of the first people in this position.

[Keanu2020]

It was the recruitment companies’ tax advisors along with the larger recruitment companies IR35 specialists that have come up with this. Claim to have run it all past HMRC.

Clearly the tax liability will be massively more than 20%

[jamesbrown]

If the supply chain above you has made a mistake with supplying a timely and accurate SDS, then that supply chain is liable, in principle, the fee payer by default/first, at least from the point the first payment is made by the client.

[Keanu2020]

Talking to accountants, I gather the issue is something to with PAYE not joined up. New joiner go on BR Code I think.

https://www.gov.uk/guidance/fee-paye...-working-rules

So client, or their agent, has taken responsibility, but seems able to transfer back to me due to PAYE rules.

[eek]

It was the recruitment companies’ tax advisors along with the larger recruitment companies IR35 specialists that have come up with this. Claim to have run it all past HMRC.

Clearly the tax liability will be massively more than 20%

I don't believe them but I'm not 100% sure who to point you towards to get decent advice - probably worth giving WTT a call (simply because we don't know who is given the crap advice so I'll pick a firm that probably wasn't used).

[eek]

Talking to accountants, I gather the issue is something to with PAYE not joined up. New joiner go on BR Code I think.[/FONT]

https://www.gov.uk/guidance/fee-paye...-working-rules

So client, or their agent, has taken responsibility, but seems able to transfer back to me due to PAYE rules.[/FONT]

Get a different accountant and definitely get a second opinion on that.

[Keanu2020]

I think the bulk of the advice they got came from the big recruitment firms inhouse IR35 people. They are one of the household names everyone knows. The smaller recruitment firm used a smaller 14 person accounting firm. Yep, half the reason posting here was to try and find out where to go for help.