Staying in the same public sector contract after April 2017

[cojak]

Hi everyone, I'm after some advice...

I've been working for public sector in a contract I deemed as "outside IR35" and intended to work up until 31st March and receive payment for that week on 5th April. This contract was then going to be terminated since the client deemed it "inside IR35".

Unfortunately the agency failed to make the payment and so it will be made after 6th April and so PAYE and NIC should have been deducted at source by the fee payer - i.e. my public sector client - but it hasn't.

Does anyone know what will happen now?

Will I be asked to pay the PAYE and employees NIC retrospectively?
Will I be subject to investiation given I've worked previously outside IR35 and have received payment after the 6th with an "inside IR35" decision for the same contract?

I'm trying to get the agency to hold payment until this can be clarified.

Forget the retrospective aspect for a moment as there is no definitive statement by HMRC about this.

The rule does state that payments made after 5th April where contracts are deemed inside will have to have the appropriate tax and NI taken from it, which means that you will have money removed from your invoice (or will be expected to pay it back later I wold imagine...)

The fact that your agency is incompetent won't make this removal disappear - you will be expected to pay it.

[TheFaQQer]

Unfortunately the agency failed to make the payment and so it will be made after 6th April and so PAYE and NIC should have been deducted at source by the fee payer - i.e. my public sector client - but it hasn't.
...
I'm trying to get the agency to hold payment until this can be clarified.

The fee payer in this scenario is not your end client, it is the agency. If they have not paid your invoice yet then they "simply" need to deduct the appropriate level of tax and National Insurance that they are legally allowed to deduct before paying you your net amount.

If they have already paid your invoice then they need to declare the right amount on their RTI and you'll need to repay them for that last invoice.

[Seahorse17]

Hi everyone, I'm after some advice...

I've been working for public sector in a contract I deemed as "outside IR35" and intended to work up until 31st March and receive payment for that week on 5th April. This contract was then going to be terminated since the client deemed it "inside IR35".

Unfortunately the agency failed to make the payment and so it will be made after 6th April and so PAYE and NIC should have been deducted at source by the fee payer - i.e. my public sector client - but it hasn't.

Does anyone know what will happen now?

Will I be asked to pay the PAYE and employees NIC retrospectively?
Will I be subject to investiation given I've worked previously outside IR35 and have received payment after the 6th with an "inside IR35" decision for the same contract?

I'm trying to get the agency to hold payment until this can be clarified.

What others have said. Worth noting that the agency will be stung for the Employer's NI - they are not allowed to deduct this from your rate.

[meeko]

Thanks for your replies. If the agency subtracts the PAYE and NIC then won't this be a flag to HMRC that I've been working the same contract "outside" and now it's "inside"?

I'm considering asking them to cancel the invoice and refund payment up the chain to avoid the risk.

[jamesbrown]

Thanks for your replies. If the agency subtracts the PAYE and NIC then won't this be a flag to HMRC that I've been working the same contract "outside" and now it's "inside"?

I'm considering asking them to cancel the invoice and refund payment up the chain to avoid the risk.

Well, yes. The question is: was the earlier contract inside or are they just saying that (now)? If you had the contract reviewed as outside previously, chances are (with near-certainty) that it would be deemed outside if it ever came to tribunal, especially if everything was handled by a professional. However, I don't think anyone is going to tell you that your situation doesn't create a problem. It clearly does. Whether HMRC will pursue these cases, as a matter of priority, I don't know, but if I had a tiny team of status specialists and no good way of targeting cases, I'd be all over it...

Canceling the invoice is a little extreme though, and it may be too late already. Anyway, it doesn't really avoid the risk, it just avoids providing them with an administrative hook to catch you via the information reported on payments. If your contract was really inside, and you were declaring it outside, there's no way around that problem (but I doubt it was).

[cojak]

I'm afraid that our prediction is coming to pass that agencies and PSBs have been 'optimistic' (read 'lying') in their assurances to many contractors that they were outside IR35.

They only told you that to stop you from handing in your notice all at once.

There will be many more contractors in your position over the coming weeks.

[SueEllen]

Thanks for your replies. If the agency subtracts the PAYE and NIC then won't this be a flag to HMRC that I've been working the same contract "outside" and now it's "inside"?

I'm considering asking them to cancel the invoice and refund payment up the chain to avoid the risk.

You may as well do what the HMRC contractors did and walk out but do it tomorrow.

You can just argue the new contract terms are unacceptable and therefore you refuse to be bound by them.

[New]

This is a total mess.

My small company provides very intermittent (about 5 projects a year each taking just under a week ish each) support to a PSB. Each is different and there is no mutuality. I have an almost full time job elsewhere. The last block of work finished a while ago, I actually hired some people in to cover some of it as I was busy elsewhere, and there is nothing booked ahead but....still not been paid. Takes them somewhere between 30-40 days to actually pay an invoice, sometimes much longer.

My accountant (chosen for their conservative risk averse ways) says I'm out of IR35, the HMRC tool says out, IR35testing.co says out, I tried to throw money at QDOS for a review but they told me it was a waste of time as the PSB word was final and guess what the PSB says... IN.

So I now have quite a large amount effectively held to ransom, either send them an NI number or they won't pay. It's a real shame, if you are looking to build a business, develop it, maybe be able to take on staff in the future this sort of crap will make it impossible for it to get a start. I do believe the HMRC has managed to kill an entire enterprise sector in one go.

[TheFaQQer]

This is a total mess.

My small company provides very intermittent (about 5 projects a year each taking just under a week ish each) support to a PSB. Each is different and there is no mutuality. I have an almost full time job elsewhere. The last block of work finished a while ago, I actually hired some people in to cover some of it as I was busy elsewhere, and there is nothing booked ahead but....still not been paid. Takes them somewhere between 30-40 days to actually pay an invoice, sometimes much longer.

My accountant (chosen for their conservative risk averse ways) says I'm out of IR35, the HMRC tool says out, IR35testing.co says out, I tried to throw money at QDOS for a review but they told me it was a waste of time as the PSB word was final and guess what the PSB says... IN.

So I now have quite a large amount effectively held to ransom, either send them an NI number or they won't pay. It's a real shame, if you are looking to build a business, develop it, maybe be able to take on staff in the future this sort of crap will make it impossible for it to get a start. I do believe the HMRC has managed to kill an entire enterprise sector in one go.

Firstly, ask the client for the basis of their decision.

Secondly, ask the client what the method of appeal is. Provide them with evidence that you have gathered, particularly the results of the ESS. If possible, get them to work with you on this with your evidence to show how they are wrong in their assessment.

[fannyadams]

Firstly, ask the client for the basis of their decision.

Secondly, ask the client what the method of appeal is. Provide them with evidence that you have gathered, particularly the results of the ESS. If possible, get them to work with you on this with your evidence to show how they are wrong in their assessment.

And look at payontime for details of charging the b*st*rds interest for late payment!