Moving from outside to inside - same company/role

[jmercer]

So I’m in a contract for a large multinational (outside IR35) and I’ve been informed that the company is moving to inside IR35 wholesale in a few months which falls when my contract is up for renewal.

I’m wary that if I were to accept the change in my contract that there could be a risk that as I’m doing the same role and simply moving to inside could that open me up to a HMRC investigation and potentially backdate my tax liabilities to cover my period outside for the current role?

Personally there are other considerations also and I’d be unlikely to accept an offer, but I’d like to fully understand the implications.

thanks

[Ketto]

Difficult to comment without knowing all the ins and outs of why they determined the role to be outside before and inside now, but i think your best bet is to leave ASAP.

[malvolio]

So I’m in a contract for a large multinational (outside IR35) and I’ve been informed that the company is moving to inside IR35 wholesale in a few months which falls when my contract is up for renewal.

I’m wary that if I were to accept the change in my contract that there could be a risk that as I’m doing the same role and simply moving to inside could that open me up to a HMRC investigation and potentially backdate my tax liabilities to cover my period outside for the current role?

Personally there are other considerations also and I’d be unlikely to accept an offer, but I’d like to fully understand the implications.

thanks

HMRC will argue with some justification that you have been inside IR35 all along. The implications of that are that you should get your previous relevant SARs and company records re-assessed and you should pay the "missing" tax to HMRC plus any accrued interest. The fact that it is your client doing the stupid, ill-educated thing by arbitrarily changing your status is irrelevant.

IT depends how strong your original IR35 defence is, of course. You could argue with the client that you remain an external supplier of services and so should be outside IR35, and would expect an SDS to that effect. Chances of that are slim, to be honest.

Personally (perhaps you and others will have a different view) I would not want to work with an ill-informed client who is ignoring reality to the extent that it will harm my business and would not want to renew.

It depends of several factors, such as how much leverage do you have with the client (as in does losing you materially damage their delivery) and how likely are you to get mew work in a difficult and shrinking market.

[jmercer]

Difficult to comment without knowing all the ins and outs of why they determined the role to be outside before and inside now, but i think your best bet is to leave ASAP.

i don’t think it’s my specific role, it’s a blanket change for all contractors so I’m thinking this will be huge in terms of contractors leaving.

I think ideally they’re looking to move towards perm and they have offered a perm role, but the package is considerably lower than my day rate.

[jmercer]

HMRC will argue with some justification that you have been inside IR35 all along. The implications of that are that you should get your previous relevant SARs and company records re-assessed and you should pay the "missing" tax to HMRC plus any accrued interest. The fact that it is your client doing the stupid, ill-educated thing by arbitrarily changing your status is irrelevant.

IT depends how strong your original IR35 defence is, of course. You could argue with the client that you remain an external supplier of services and so should be outside IR35, and would expect an SDS to that effect. Chances of that are slim, to be honest.

Personally (perhaps you and others will have a different view) I would not want to work with an ill-informed client who is ignoring reality to the extent that it will harm my business and would not want to renew.

It depends of several factors, such as how much leverage do you have with the client (as in does losing you materially damage their delivery) and how likely are you to get mew work in a difficult and shrinking market.

To be honest you’ve confirmed what I thought so the risk is too great and the financial implications for me would be painful.

It’s much easier to leave and take your chance that risk a lot by staying.

[hobnob]

i don’t think it’s my specific role, it’s a blanket change for all contractors so I’m thinking this will be huge in terms of contractors leaving.

In theory, the client shouldn't make a blanket determination. However, there is some nuance: are they issuing you with an SDS which says that you're now inside, or are they imposing a ban on PSCs (personal service companies) and saying that you need to use an umbrella instead?

[jmercer]

In theory, the client shouldn't make a blanket determination. However, there is some nuance: are they issuing you with an SDS which says that you're now inside, or are they imposing a ban on PSCs (personal service companies) and saying that you need to use an umbrella instead?

No reason has been provided, but I believe they are just moving away from PSC’s and trying to reduce their risk.

[jamesbrown]

No reason has been provided, but I believe they are just moving away from PSC’s and trying to reduce their risk.

It may be a technicality, but it matters somewhat, because they aren’t moving everyone “inside IR35” by mandating the use of an umbrella, they are merely rendering IR35 moot, as you will become an employee of the umbrella. They will not be issuing any IR35 determinations in that scenario. This is a completely legitimate way to manage risk and fully compliant because IR35 polices the use of an intermediary and there is no longer an intermediary. Regarding legacy risk, it’s hard to say. HMRC may smell a rat. OTOH, it ultimately comes down to your working practices and evidence for them. Perhaps the biggest risk would be that the client immediately accepts liability, regardless of the reality, but then tries to pursue you or your company for that liability, depending on what the contract says, but there’s little you can do about that now. The legacy risk is what it is.

[jamesbrown]

Obviously, if they are instead documenting your future WPs as being “inside IR35” via correspondence etc. and your WPs haven’t changed, then they are morons. Chances are they are not taking a revised/different view on your historical WPs, at least until they are touched by HMRC , but merely mandating a change in contractual terms.

[woody1]

If we're talking hundreds of contractors here working for the same company, all transitioning from PSC to brolly at the same time, then that might pique HMRC's interest.

However, they'd need to investigate every single contractor individually, and that definitely wouldn't appeal to them. They like situations like CK/Boox where they can nail everyone in one fell swoop.

And, besides, this company is falling into line with what HMRC wants everyone to do ie. go PAYE. Why penalise them for that?

Could it even be possible that the company has been "nudged" into doing this by HMRC themselves?