Contract has been retrospectively declared inside IR35

[consultMe]

Need to get every step very clear here. Why is consultancy no longer making the determination and what does QDOS think about this.

I have tried to get answers from the consultancy but they haven't been entirely forthcoming. I think they'd rather throw me under the bus than do anything that would upset their client. The end client is a large corporation and it's difficult to get any meaningful response from them. I didn't think to speak to QDOS so I will definitely pursue that line of enquiry.

[TheGreenBastard]

I have tried to get answers from the consultancy but they haven't been entirely forthcoming. I think they'd rather throw me under the bus than do anything that would upset their client. The end client is a large corporation and it's difficult to get any meaningful response from them. I didn't think to speak to QDOS so I will definitely pursue that line of enquiry.

My instinct with these things is that they'd expect you to meekly conform due to prospect of losing the role. Sounds a bit of a shambles on their part if you're reporting it right.

Do what northernladuk says above in regards to QDos etc.,

On that topic do you have insurance through QDos or IPSE membership?

Really interesting situation TBH, so keep us informed if you can.

[Sub]

few days ago the end client has stated that my role is, after all, inside IR35 and that this is effective from the beginning of last April. Accordingly, the consultancy want to make arrangements to pay me on a PAYE basis. This involves making retrospective adjustments to the invoice payments that have already made this financial year meaning they will recoup the tax &NI from what I have already received and adjust this month’s PAYE payment to me. My invoice was for a substantial sum so it’ll blow out my tax free allowance and have other impacts if they do this.

Such cases inevitably will arise, I am sorry to hear that you been hit by it. Largely, the reform should have shifted all the risks - but your case is kind of grey area at the moment. I have tried to explore that issue by contacting various experts dealing with IR35 issues, but could not get any definitive answer (free or paid) about position it leaves contractor in - probably contacted wrong people. QDOS refused to give any advice or review my contract in this context, saying I need to contact lawyer. Also, I raised the question here.

So, this is my non-professional view on the matter:
1. Unless there are specific provisions in your contract, contract signed as "Outside IR35" cannot be converted into inside without your agreement and allow any retrospective deductions. By refusing to pay your invoices in full (for work provided before announcement), consultancy breaching the contract and you should be able to recover unpaid monies.

2. It would be very good if you could stop services immediately as they announced change of determination, however if you haven't done it you need to consider yourself operating inside IR35 from the announcement day. They certainly can change status at any time.

3. Do not provide any information that will allow them to pay you to your personal bank account (obviously, unless you planning to continue work for them).

4. In case your contract contains indemnity provisions for taxes arising from determination, drain all company reserves using all available methods, so if you will lose the argument, there will be no money to pay them.

While I hope that it will be resolved to everyone's benefit, you already well may be in all-out dispute mode with your client - do not give them any additional information, record all conversations if possible and seek professional advice.

[GhostofTarbera]

What exactly does your contract say on payment terms and changes to contact

has the agent given you notice to change the contract, if so what does new contract say

I would issue final invoice and inform agent you will take them to court for non payment

then if you want to stay inside IR35 going forward get another new contract saying so

[eek]

Such cases inevitably will arise, I am sorry to hear that you been hit by it. Largely, the reform should have shifted all the risks - but your case is kind of grey area at the moment. I have tried to explore that issue by contacting various experts dealing with IR35 issues, but could not get any definitive answer (free or paid) about position it leaves contractor in - probably contacted wrong people. QDOS refused to give any advice or review my contract in this context, saying I need to contact lawyer. Also, I raised the question here.

So, this is my non-professional view on the matter:
1. Unless there are specific provisions in your contract, contract signed as "Outside IR35" cannot be converted into inside without your agreement and allow any retrospective deductions. By refusing to pay your invoices in full (for work provided before announcement), consultancy breaching the contract and you should be able to recover unpaid monies.

2. It would be very good if you could stop services immediately as they announced change of determination, however if you haven't done it you need to consider yourself operating inside IR35 from the announcement day. They certainly can change status at any time.

3. Do not provide any information that will allow them to pay you to your personal bank account (obviously, unless you planning to continue work for them).

4. In case your contract contains indemnity provisions for taxes arising from determination, drain all company reserves using all available methods, so if you will lose the argument, there will be no money to pay them.

While I hope that it will be resolved to everyone's benefit, you already well may be in all-out dispute mode with your client - do not give them any additional information, record all conversations if possible and seek professional advice.

Well it's not a grey area because the ability for a decision to be made after the contract was signed was something IPSE and others fought for.

1) I don't think this is the case - remember tax law is separate to contract law.

2) Yep - I would have walked away the second the I had the determination.

3) that doesn't make any difference - as the deemed payment will be paid into the company bank account.

4) Yep but sadly removing money after the decision could mean you were trading illegally which would could result in you being asked to personally repay the money.

If the OP has IPSE membership I would be calling them immediately as this is the exact case they need to pick up and deal with today. Whether IPSE is willing to do so (or has the finances to actually do so) would be very revealing.

If you don't have IPSE membership my suggestion would be to walk away - so as to minimise the amount of money they can "steal" in tax from you and then seek legal advice.

[krytonsheep]

The end client is a large corporation

I wonder if someone at the end client was hoodwinked by the consultancy into thinking they didn't need to worry about IR35. Then a few months later someone else at the end client got wind of what was going on and was like "Uhhhhhhhhh, no. We're responsible, lets fire up the CEST tool".

[BlueSharp]

Have you appealed the decision?

[consultMe]

If you don't have IPSE membership my suggestion would be to walk away - so as to minimise the amount of money they can "steal" in tax from you and then seek legal advice.

I don't have IPSE membership. In retrospect I probably should've walked immediately I received the determination from the end client but I carried on thinking I'd carry on for a couple of weeks when my contract ends anyway (even though I'd been offered a renewal verbally).

I wonder if someone at the end client was hoodwinked by the consultancy into thinking they didn't need to worry about IR35. Then a few months later someone else at the end client got wind of what was going on and was like "Uhhhhhhhhh, no. We're responsible, lets fire up the CEST tool".

The end client had been through all this last year before the IR35 stay of execution. At the time some suppliers were deemed inside and some were outside. This time round it was (at least it seemed) a lot simpler as a lot of the groundwork had been done with the consultancy I work through already.

Have you appealed the decision?

Yes, the appeal is in process. They have 45 days to respond and they don't really have to consider it anyway.

[ComplianceLady]

Interesting issue (not for the OP I appreciate). Nothing in the contract can protect you as complying with statutory legislation trumps contractual obligations. Most contracts have a clause allowing for deductions when a change of status occurs anyway. This issue is baked in to the legislation as Eek says - not having to determine status until the first invoice is paid by the end client means this is inevitable in some cases.

Sounds like the Client who thought/were told they were receiving a managed service believe that not to be the case and so they have had to undertake an assessment for the first time.

I think the only option for recourse might be on rate - if the contract is inside IR35 the rate quoted has to be exclusive of ERNI & ERPEN. So it's going to cost the consultancy / end client a fair whack to retrospectively make you inside IR35 - have they mentioned that?

[eek]

Interesting issue (not for the OP I appreciate). Nothing in the contract can protect you as complying with statutory legislation trumps contractual obligations. Most contracts have a clause allowing for deductions when a change of status occurs anyway. This issue is baked in to the legislation as Eek says - not having to determine status until the first invoice is paid by the end client means this is inevitable in some cases.

Sounds like the Client who thought/were told they were receiving a managed service believe that not to be the case and so they have had to undertake an assessment for the first time.

I think the only option for recourse might be on rate - if the contract is inside IR35 the rate quoted has to be exclusive of ERNI & ERPEN. So it's going to cost the consultancy / end client a fair whack to retrospectively make you inside IR35 - have they mentioned that?

Um, any statute, law, case law or anything else to actually back that up?

As far as I'm aware every rate I'm seeing for inside IR35 contracts are Umbrella / Assignment rates where Employer NI / Pension / Apprenticeship Levy / Holiday Pay is rolled up into a single figure.