IR35 Retrospective Tax Claims

[jk3838]

I'm currently in a private sector engineering type contract and am looking ahead to the off payroll changes coming in April 2020, with a view to me forming a strategy for what to do post April 5th and also more importantly to understand my risks of retro tax NI claims from before April 5th 2020

I've been on here reading through posts from the period when this was looming large for Public sector contractors to learn what I can, but would like some feedback from those more IR35 knowledgeable than me please Any help is greatly appreciated, and in all things, I bow to superior knowledge

The general feeling from the agent here, from initial meetings with client, is that the client wants to keep the current contractors post April 2020 but have them swap over to PAYE through the agent

For me this is 'admitting' the roles here were (are) inside IR35. Thoughts on this please ?

I've done the CEST and I'm 'outside' if that counts for anything ?

Contract here has rights of substitution and passes QDOS 'outside' criteria

Things to add that might make a difference. A while back I had myself and another employee in here both invoicing through my Ltd Co, but the employee left so just me in here. Contract is until Jan 2020. Agent doesn't have my NI number. Several hundred guys in here so worth a look for HMRC

I'm thinking to sack it off before April the 5th (I'm in the age range to retire early and could manage but wanted another 5 yrs contracting before I did) because of the retro risk rather than the drop in take home, but many (most) here are thinking to jump over to PAYE through the agent


My main concern is the retrospective thing, won't the above in bold cause a red flag a HMRC 'you're inside now, so you were inside then' type of investigation (and agent then has your NI number) ?

If so would this mean they'd look at all LTD Co the agent had in here prior to April 5th 2020 ? or just the ones who are still there PAYE post April 5th 2020 ?

What happened in the Public sector, has anyone had a retrospective claim against them based on staying in a public sector contract that went from 'outside' to 'inside' when the determination moved to the fee payer ?

If not, are HMRC waiting until they have the private data set as well as the public, (but obviously having the extra time gone by issue making the investigation into public sector mare difficult for themselves) ?

Would those going PAYE after April 2020 be better through a different agent ?

Once I've packed in, should I close the Ltd co down or with this raise a red flag, and therefore keep it and the insurance going ? If so for how long ?

[northernladuk]

No one has been caught by retro taxation to date so I wouldn't be making it a decision point in whether you retire or not.

It's an interesting point that you talk about admitting your gig is inside yet not once have you mentioned leaving the client and getting a gig elsewhere. This smacks of permie-tractor to me for a number of reasons so maybe the inside determination isn't as far wrong as you think?

[northernladuk]

PAYE through a different agent. Why would you think that makes a difference? Would that even be possible if it did?

[northernladuk]

What you could do is try work with the agent and, if you are close enough, with the client to try and make them aware of the implications of just moving everyone inside. For a start blanket approaches are illegal, many will leave, to stop them leaving they'll have to put the rates up and so on. Maybe that will give them enough reason to look in to it properly.

If you give Seb Marley, or anyone at QDOS, a call and ask them for their service offering to help clients with determinations. If a thsird part professional helps them with their determinations maybe they will be happier to consider at least some people outside.

[jamesbrown]

First, if you move to PAYE employment or to operating inside IR35 from being outside and there is no change in your working practices, then there must surely be a risk, yes. Second, if you’re moving to PAYE employment, there must be a change in your contract, as a minimum, and potentially your working practices too. Again, if there isn’t a change in working practices, the risk remains. Third, HMRC has stated publicly that their focus will be on enforcement of the new rules, rather than pursuit of historical cases, but I wouldn’t believe them. Fourth, even if they do use a change in status as a marker to dig deeper, it sounds like you have solid evidence of your current position.

In summary, there must be a risk, yes. If you stay there, you should seek to document how the working practices change as the status changes, but you also need to weigh whether the changes are meaningful and the headache is worthwhile (hint: they probably aren’t and it probably isn’t). Either way, it is premature to decide anything before you have a clear line from the client (and until the draft legislation is published).

[BrilloPad]

No one has been caught by retro taxation to date

For IR35 yes. Other schemes retrospection is becoming increasingly common.Maybe you post will be wrong retrospectively?

To the OP : why not get your client to look at QDOS insurance?

[northernladuk]

For IR35 yes. Other schemes retrospection is becoming increasingly common.Maybe you post will be wrong retrospectively?

To the OP : why not get your client to look at QDOS insurance?

That is very true. So the answer is no they haven't but we don't know if they will. HTH

[jamesbrown]

It’s contrived, at best, to talk about retrospection w/r to the proposed change in IR35 rules. These changes are administrative, not about the substance of whether a contract is inside or outside. All tax investigations are historical, by definition. There is no change in the ITEPA that is going to apply “retrospectively”. The point under discussion here is whether a change in status is likely to trigger a plain vanilla IR35 investigation, and it might - it is logical that it might be a trigger - but we know little about HMRC’s risk profiling, either in the past or future.

[BrilloPad]

we know little about HMRC’s risk profiling, either in the past or future.

Very true! There was that one chap with QDOS who got 2 investigations!

QDOS have won all they have ever been challenged on.

[JohntheBike]

For IR35 yes. Other schemes retrospection is becoming increasingly common.Maybe you post will be wrong retrospectively?

To the OP : why not get your client to look at QDOS insurance?

well, if the loan charge fiasco is anything to go by, then there will be retro taxation. For those who have been at a client for some time on the same contract, like me, this could clearly be a major issue. However, I'm not making any plans as yet, mainly because there are too many variables in my situation where the retro tax issue might not occur.