From outside IR35 to Inside IR35 during contract renewal.

[speaktofrodo]

Hi,

I've been on a contract with a company for 3 yrs now. They've renewed my contract this week for another 6 months. However, while until now I was classed as outside IR35, I've just had a call from the Agency to notify me that the end client have determined me to be inside IR35 for the renewed contract. I'd always thought I'd have to consider an inside IR35 contract when I completed this contract, but this has caught me off guard. Now I'm going to be continuing to work for the same end client but will be going from an outside IR35 status to an inside IR35 status.

I have a lot of questions that I dont expect anyone to have the answers so looking just for pointers on where I can perhaps start finding answers.
1. What happens to my LTD company if I'm inside IR35.
2. Do I still need all the insurance or can I cancel it given that it was linked to the limited company.
3. What are my options going forward, do I HAVE to accept whatever the agency is offering?
4. Is it as simple as I'm now in a job for the new contract?
5. The agency kept talking about holiday leave etc. but what else should I be looking out for ie pitfalls etc?
6. Can HMRC argue that I've been classed as inside IR35 for the same client for whom I've been working for until now and hence IR35 applies to the past years that I've been working with the client?

Any help will be much appreciated. Thanks in advance.

[eek]

I would be leaving because the client has clearly thought you were inside IR35 which means you chance of surviving an investigation is now very low.

There has been a lot of posts about this exact question so use google and search for "site:forums.contractoruk.com IR35 renewal" as the built in search engine on here is dire.

[northernladuk]

Hi,
I've been on a contract with a company for 3 yrs now. They've renewed my contract this week for another 6 months. However, while until now I was classed as outside IR35, I've just had a call from the Agency to notify me that the end client have determined me to be inside IR35 for the renewed contract. I'd always thought I'd have to consider an inside IR35 contract when I completed this contract, but this has caught me off guard. Now I'm going to be continuing to work for the same end client but will be going from an outside IR35 status to an inside IR35 status.

As Eek pointed out we've many many posts asking this exact question so use the search. Answer is always leave though. The chance of your old contract being outside after three years is questionable at best but irrelevant now as the client has screwed you by admitting it's been inside all along. Three years of penalties, missed tax etc is going to be eye watering. You really don't want to be messing around with that.

1. What happens to my LTD company if I'm inside IR35.

You've got options. Normally it just sits there not trading. Many accountants reduce their charges for not trading companies. You do have the option of shutting it down if you want but you need to look at how much is in there and whether you need to MVL. If you do and gain a tax advantage a whole host of other questions arise.

2. Do I still need all the insurance or can I cancel it given that it was linked to the limited company.

They could still find that some work you did via your LTD is wrong and sue you so I'd keep it going in cause of retrospective problems

3. What are my options going forward, do I HAVE to accept whatever the agency is offering?

No, you can say no thanks and leave, which, IMO, is your only option here. Can you challenge their decision? There is a process but it won't work, particularly because it's going to be difficult to prove the old gig is outside anyway so why would they re-visit the determination if you appeal.

4. Is it as simple as I'm now in a job for the new contract?

You are not in a job. Your job is being a contractor, you are in a contract. But yes, your options are to accept and carry on or leave.. <cough>leave<cough>

5. The agency kept talking about holiday leave etc. but what else should I be looking out for ie pitfalls etc?

6 figure demand from HMRC for paying the wrong tax for the last 3 years.

6. Can HMRC argue that I've been classed as inside IR35 for the same client for whom I've been working for until now and hence IR35 applies to the past years that I've been working with the client?

Abso-bleedin-lutely. Slam dunk, no arguments. Client has admitted it.

[northernladuk]

Sorry.. just realised... So you got a renewal, signed it all and started work? And after you've started the agent is saying it's inside? Seems a tad unfair that. You are now getting fully taxed on the work you are doing right now and you have also exposed the last three years to HMRC.

Seems very odd they've given you the paperwork which you've signed and then told you you are inside AFTER you've started. Really poor position that.

Or have I read it wrong and they are renewing you but you haven't started on the new contract yet?

[speaktofrodo]

Sorry.. just realised... So you got a renewal, signed it all and started work? And after you've started the agent is saying it's inside? Seems a tad unfair that. You are now getting fully taxed on the work you are doing right now and you have also exposed the last three years to HMRC.

Seems very odd they've given you the paperwork which you've signed and then told you you are inside AFTER you've started. Really poor position that.

Or have I read it wrong and they are renewing you but you haven't started on the new contract yet?

I was informed that my contract was renewed but the second day into the contract, the agency informed me about the status determination, so I immediately downed tools. The agency notified me that they had to issue me with a immediate termination notice which they have. I then informed them and the end client that I need to consider my options and will not be returning to work until I know the best way forward. Thanks everyone for your answers as it has certainly helped me with what I need to do next ie. LEAVE!

[GhostofTarbera]

I was informed that my contract was renewed but the second day into the contract, the agency informed me about the status determination, so I immediately downed tools. The agency notified me that they had to issue me with a immediate termination notice which they have. I then informed them and the end client that I need to consider my options and will not be returning to work until I know the best way forward. Thanks everyone for your answers as it has certainly helped me with what I need to do next ie. LEAVE!

won’t help you if HMRC investigate - client considered you inside IR35 all along

[northernladuk]

I was informed that my contract was renewed but the second day into the contract, the agency informed me about the status determination, so I immediately downed tools. The agency notified me that they had to issue me with a immediate termination notice which they have. I then informed them and the end client that I need to consider my options and will not be returning to work until I know the best way forward. Thanks everyone for your answers as it has certainly helped me with what I need to do next ie. LEAVE!

What an absolute crap shoot. I would normally ask if they are going to pay you the two days at outside? You should have signed a renewal before you started. Just turning up on the first day without signing anything is really bad form although the old contract does still carry on. It's still not something you should do though. Thinking about it though, doing any work when everyone is considering you inside isn't a good place to be in.

It's been six months since the legislation hit. They should have issued a determination back in April shouldn't they?

I'd be putting a fairly strongly worded letter of complaint in to the agency about this. Proper messed you about here.

[eek]

What an absolute crap shoot. I would normally ask if they are going to pay you the two days at outside? You should have signed a renewal before you started. Just turning up on the first day without signing anything is really bad form although the old contract does still carry on. It's still not something you should do though. Thinking about it though, doing any work when everyone is considering you inside isn't a good place to be in.

It's been six months since the legislation hit. They should have issued a determination back in April shouldn't they?

I'd be putting a fairly strongly worded letter of complaint in to the agency about this. Proper messed you about here.

Can I just point out that between the HMRC settlements with DWP and other departments alongside some additional "coffeeshop" chats HMRC have managed to put the fear of God into some end clients.