HMRC decision tool: doubts about the selected answers, results, implications, ...

[mickael28]

Hi,

I've been contracting for the last 10 years and always concerned about the IR35 issue. My last contract is with the PS and now that they've released the decision tool I tried with a bunch of quite different combinations (like 10 reports), even putting details that up until now I considered were really important in this subject, like substitution and control:
* Would the end client accept the worker's business sending someone else to do this work instead? = No
* Can the end client move the worker to a different task or project than they originally agreed to do? = Yes - without the worker's agreement (if the worker doesn't want to change task or project, the end client would no longer engage them)

It turns out that somehow that tool always reports that we are out?

I have a few doubts:

1. If the PS client has agreed to declare us following the result of the HMRC decision tool, does it then matter that they've chosen that we don't have right of substitution and they've got control in our tasks, as HMRC is anyway saying we're outside IR35?
   
2. If we are investigated in the future, would we (contractors) be responsible for any payable tax/fine? or it will all go to the PS client or agency?
   
3. And if we are not responsible anymore from now on, do we require those expensive IR35 insurances, where they'll pay part of your tax bill if you end up being inside? or that's not needed anymore?
   
4. If they've choosen those 2 answers above, could HRMC investigate further contracts in the past and try to apply that you didn't have right of substitution and the client had control as you were doing a similar job, just trying to catch you inside IR35 in some of the previous roles?

I know some of these questions are more an opinion as we won't really know, but maybe you know about some of them and can help me decide. I am not sure if looking for a new role (and being on the bench for a while) because of those 2 answers or I'm worrying unnecessarily if the tool has returned outside anyway and I could just go ahead with the extension that we are being offered...

[teapot418]

Hi,

I've been contracting for the last 10 years and always concerned about the IR35 issue. My last contract is with the PS and now that they've released the decision tool I tried with a bunch of quite different combinations (like 10 reports), even putting details that up until now I considered were really important in this subject, like substitution and control:
* Would the end client accept the worker's business sending someone else to do this work instead? = No
* Can the end client move the worker to a different task or project than they originally agreed to do? = Yes - without the worker's agreement (if the worker doesn't want to change task or project, the end client would no longer engage them)

It turns out that somehow that tool always reports that we are out?

I have a few doubts:

1. If the PS client has agreed to declare us following the result of the HMRC decision tool, does it then matter that they've chosen that we don't have right of substitution and they've got control in our tasks, as HMRC is anyway saying we're outside IR35?
   
2. If we are investigated in the future, would we (contractors) be responsible for any payable tax/fine? or it will all go to the PS client or agency?
   
3. And if we are not responsible anymore from now on, do we require those expensive IR35 insurances, where they'll pay part of your tax bill if you end up being inside? or that's not needed anymore?
   
4. If they've choosen those 2 answers above, could HRMC investigate further contracts in the past and try to apply that you didn't have right of substitution and the client had control as you were doing a similar job, just trying to catch you inside IR35 in some of the previous roles?

I know some of these questions are more an opinion as we won't really know, but maybe you know about some of them and can help me decide. I am not sure if looking for a new role (and being on the bench for a while) because of those 2 answers or I'm worrying unnecessarily if the tool has returned outside anyway and I could just go ahead with the extension that we are being offered...

Are you interpreting the results correctly? If you 'fail' the substitution test, it moves on to SDC. Saying that you can be moved from task to task is a definite inside indicator on the tool. What are you answering to the other questions, and what does the final result screen actually say?

[mickael28]

Are you interpreting the results correctly? If you 'fail' the substitution test, it moves on to SDC. Saying that you can be moved from task to task is a definite inside indicator on the tool. What are you answering to the other questions, and what does the final result screen actually say?

What does SDC stand for?

'Client moving you from task to task' is not an inside indicator as far as I have seen as I've re-done the questions a lot of times and it keeps on saying we're outside. Their wording is:

"The intermediaries legislation does not apply to this engagement - Based on the information you’ve given the working practices of this engagement fall outside the scope of the intermediaries legislation.

The worker should pay tax and National Insurance as a self-employed person."

The other answers I picked a lot of different answers and always getting the same, which surprised me when the clauses for control and substitution were opposite to what I had always thought....

[northernladuk]

What does SDC stand for?

Hmm, really? Supervision, Direction and Control. I know it's an acronym nightmare here but that is a pretty fundamental one.

'Client moving you from task to task' is not an inside indicator as far as I have seen as I've re-done the questions a lot of times and it keeps on saying we're outside. Their wording is:

Blimey.. You sure? It should be. It's Direction and Control and messes with your Mutuality of Obligation. Two of the main pillars to IR35 defense in the past.

The other answers I picked a lot of different answers and always getting the same, which surprised me when the clauses for control and substitution were opposite to what I had always thought....

Difficult to say, could be your misunderstanding of some questions, the fact you answer them as you believe rather than a client etc.. It's only a guide as well.

[mickael28]

Blimey.. You sure? It should be. It's Direction and Control and messes with your Mutuality of Obligation. Two of the main pillars to IR35 defense in the past.

That's what I thought as well and which surprised me when I filled the form with those answers and still the tool kept on saying that we were out.

If you guys want to have a look, this is the one I was filling:
https://www.tax.service.gov.uk/check...tatus-for-tax/

[malvolio]

For one thing you shouldn't really be trying different answers until you get the result you want. You have to be accurate and honest, obviously. I started with a No to substitution and then ran through the SDC questions as though they didn't apply and got an "indeterminate" answer, so I can't see why it thinks you are out. So one of us is missing something!

[MrMarkyMark]

For one thing you shouldn't really be trying different answers until you get the result you want. You have to be accurate and honest, obviously. I started with a No to substitution and then ran through the SDC questions as though they didn't apply and got an "indeterminate" answer, so I can't see why it thinks you are out. So one of us is missing something!

The sub has always been an odd one to me, often you can be chosen after many candidates have been interviewed....

Especially for some senior / troubleshooter type role and they know exactly what (who) they want.
I have won contracts where 30+ contractors have been interviewed, on at least two occasions.

Obviously, not every role is the same, there have been some where I could have easily supplied a sub with no issues.

[malvolio]

The sub has always been an odd one to me, often you can be chosen after many candidates have been interviewed....

Especially for some senior / troubleshooter type role and they know exactly what (who) they want.
I have won contracts where 30+ contractors have been interviewed, on at least two occasions.

Obviously, not every role is the same, there have been some where I could have easily supplied a sub with no issues.

I have genuine sub clauses in my contracts but as you say the problem would be finding one that can do the job seamlessly...

[mickael28]

For one thing you shouldn't really be trying different answers until you get the result you want. You have to be accurate and honest, obviously. I started with a No to substitution and then ran through the SDC questions as though they didn't apply and got an "indeterminate" answer, so I can't see why it thinks you are out. So one of us is missing something!

I was not trying to pick answers to get a result outside. As mentioned, the client completed it for us and put the answers of control from their side and no right of substitution, which broke all the understanding I had been having about IR35. If the official tool doesn't even care about those 2 (up until now) important clauses, I don't really know if anyone know what's this IR35 about. For example, let me try an example of one of the many paths that gives out even though you don't have right of substitution and the client controls you totally:

Following the screens on the tool:
* worker
* yes
* limited company
* no office holder
* no-never happened
* NO SUBSTITUTION
* no pay any helper
* CONTROL FROM CLIENT: yes - client can change tasks without asking contractor
* client cannot decide how to do the work (highly skilled)
* agreed scheduled
* worker can partly decide location
* worker cannot claim other expenses only
* daily rate
* worker will have to put right his output, at his own cost outside usual hours

"The intermediaries legislation does not apply to this engagement

Based on the information you’ve given the working practices of this engagement fall outside the scope of the intermediaries legislation.

The worker should pay tax and National Insurance as a self-employed person."

And even I don't understand IR35 anymore, going back to the original doubts. If it turns out that they coded it incorrectly and further down the line we are caught inside, would the risk (fine/extra taxes) go to me personally or to the client/agency so I shouldn't even need to worry about it if client and agency are telling us that we are outside following the HMRC official tool?

[jamesbrown]

I was not trying to pick answers to get a result outside. As mentioned, the client completed it for us and put the answers of control from their side and no right of substitution, which broke all the understanding I had been having about IR35. If the official tool doesn't even care about those 2 (up until now) important clauses, I don't really know if anyone know what's this IR35 about. For example, let me try an example of one of the many paths that gives out even though you don't have right of substitution and the client controls you totally:

Following the screens on the tool:
* worker
* yes
* limited company
* no office holder
* no-never happened
* NO SUBSTITUTION
* no pay any helper
* CONTROL FROM CLIENT: yes - client can change tasks without asking contractor
* client cannot decide how to do the work (highly skilled)
* agreed scheduled
* worker can partly decide location
* worker cannot claim other expenses only
* daily rate
* worker will have to put right his output, at his own cost outside usual hours



And even I don't understand IR35 anymore, going back to the original doubts. If it turns out that they coded it incorrectly and further down the line we are caught inside, would the risk (fine/extra taxes) go to me personally or to the client/agency so I shouldn't even need to worry about it if client and agency are telling us that we are outside following the HMRC official tool?

The main reason you're getting the above determination is your answer to the following question:

* Other expenses – including significant travel and subsistence expenses (not including commuting) or the cost of a business premises outside of the home

If you've answered it correctly, fine.

However, the ESS bears little resemblance to case law and does not properly weight the importance of lack of D&C. It also weights this question on expenses far too highly, relatively speaking. Insofar as they will "stand by the decision" and you have answered that question correctly, knock yourself out, but the ESS is going to get absolutely hammered in any tribunal decision because it weights some core factors as trivial and some trivial factors as core.