Tax - Inside or Outside

[cojak]

Indeed. But how do you know or protect yourself? its listed as outside, you have SDS before start saying outside, dare I say it even operates as outside. HMRC come along, client rolls straight over, and as it stands right now to the best of my knowledge, no clarity on who pays the delta.

Ultimately you have to make an inside/outside determination based on your own circumstances and perceived level of risk.

We can't help you with that.

[BlasterBates]

Was the whole point of the new legislation not that the tax liability sat with the fee payer so that it changed the behaviour (everyone inside is HMRC wish). If the contractor is still liable why does the whole inside / outside conversation exist, as it makes no difference if the fee payer is not liable.

The liability is with the fee payer, he's now responsible to collect the tax from the contractor. It works like PAYE. In PAYE if there is under payment it's still the employee who ultimately foots the bill. The whole point is that the contractor pays the right amount of tax.

[northernladuk]

I see what Eek has put but I don't understand the change mid contract bit. It's entirely possible for the client to complete and assessment and give and SDS determination for that contract. It's then possible something changes, they won't accept a sub, they realised they want D&C etc and change it inside. It's still possible the initial work was done outside and the working arrangements have change so the new contract going forward is on different terms to the old so the old one can stay outside. I'm not quite getting why the whole contract goes inside in some circumstances.

[Keanu2020]

Ultimately you have to make an inside/outside determination based on your own circumstances and perceived level of risk.

We can't help you with that.

100% get that and accepted risk on current outside role. Its more understanding the landscape and level of risk. I wasn't clear on liability, although this thread is pointing a clear way.

[WTFH]

I suspect we have asked the same part and I’ve asked a number of times and never had the same answer.

Based on this thread, I suspect you've asked variations of questions hoping to get one answer, but never getting the answer you liked.

[eek]

I see what Eek has put but I don't understand the change mid contract bit. It's entirely possible for the client to complete and assessment and give and SDS determination for that contract. It's then possible something changes, they won't accept a sub, they realised they want D&C etc and change it inside. It's still possible the initial work was done outside and the working arrangements have change so the new contract going forward is on different terms to the old so the old one can stay outside. I'm not quite getting why the whole contract goes inside in some circumstances.

Because it was always inside - say for instance the behaviour of the contractor was such that they needed supervision like an employee.

Or the initial SDS was a complete and utter lie to get someone in...

[eek]

I suspect we have asked the same part and I’ve asked a number of times and never had the same answer.

I have a very consistent answer from HMRC - which is that in the circumstances that an outside IR35 determination is shown to be incorrect the appropriate amount of tax will need to be paid.

And as a "Fee payer" when I ask that question and follow up on how do I pay the bill, the answer is always get it / recover it from the contractor.

[malvolio]

It is horribly unclear, sadly. Leave aside the issue of can the fee-payer reclaim all the monies from the end contractor (or their company...), with or without a clause (probably unenforceable but who knows) saying that they can should the IR35 position change. IMHO that is an irrelevance.

At the end of the day the Contractor will have paid over various bits of tax on an outside IR35 basis, including an amount of personal taxes and NICs. Logically that should be properly classified into ErNIC, EeNIC, AL and PAYE and credited to the recalculated tax bill that now applies as inside IR35.

What should not happen is that the fee payer pays HMRC the new tax calculations and then invoices/bills/sues the contractor for that whole amount. Their losses stop at the additional amount they should have paid had the contract been accounted for as Inside all along, and the balance has already been paid by the contractor

Sadly that relies on fee payers being honest, the contractor understanding the new reality and HMRC accepting that the taxes to be paid do not simplistically equal the recalculated tax bill but should be reduced by what has already been paid.

How that all works at the various accounts levels and how if affects any CT calculation is another issue of course.

And of course that all also assumes that the various monies have been paid in full at the appropriate times. Mid-accounting year, that is unlikely, adding another layer of complexity.

But until someone somewhere gets dragged into the whole situation we will never know...

[northernladuk]

Because it was always inside - say for instance the behaviour of the contractor was such that they needed supervision like an employee.

Or the initial SDS was a complete and utter lie to get someone in...

So exactly the same situation as when the legislation hit and contractors went outside to inside and the reality was their contract was outside all the way through. I see that. It is possible, albeit slim, there is a fundamental change to the contract which makes the new one different to the old? Is it worth getting a client to explain exactly why they are changing their stance to see if there is a case?

We've seen a couple of examples of contractors with no SDS find out the bad news at first invoice but have we had any situations that this outside swapped to inside will happen. Will it be a real and regular thing or is the OP just picking a hypothetical situation for now?

[eek]

So exactly the same situation as when the legislation hit and contractors went outside to inside and the reality was their contract was outside all the way through. I see that. It is possible, albeit slim, there is a fundamental change to the contract which makes the new one different to the old? Is it worth getting a client to explain exactly why they are changing their stance to see if there is a case?

We've seen a couple of examples of contractors with no SDS find out the bad news at first invoice but have we had any situations that this outside swapped to inside will happen. Will it be a real and regular thing or is the OP just picking a hypothetical situation for now?

I suspect it's only hypothetical until HMRC start calling end clients and scaring the living daylights out of them.