Client suddenly deems you inside before April

[jamesbrown]

Once the client says you're 'inside' to cover themselves, even if they're wrong, it has an affect on your individual case success rating for that current contract

This I don't like, hence my 'food for thought' comment, unless I'm understanding the above incorrectly

Your understanding is not wrong (now).

Insofar as tax liability cover creates a perceived comfort blanket and increases the risk that you fail in your due diligence, it is a bad thing. Just make sure you collect evidence during the contract so that you can point to the reality of your WP, as distinct from what the client is saying N years down the line. If it's he said/she said, you're stuffed.

[jk3838]

Your understanding is not wrong (now).

phew, northernlad will be pleased

Insofar as tax liability cover creates a perceived comfort blanket and increases the risk that you fail in your due diligence, it is a bad thing. Just make sure you collect evidence during the contract so that you can point to the reality of your WP, as distinct from what the client is saying N years down the line. If it's he said/she said, you're stuffed.

Understood

I constantly retain evidence

Thanks for your patience and help

[jamesbrown]

You're very welcome.

[WordIsBond]

This is confusing because there's OP's situation and jk3838's. And there's tax enquiry cover, and there's tax liability cover.

I can easily understand QDOS saying they aren't going to defend an undefendable case.

I think I'd have a hard time hearing them say they might not provide tax liability cover for prior months due to a change in circumstances that occurs today. Better go read some documents.

Or, Seb could answer on two scenarios. In both, QDOS has reviewed the contract, and there's a confirmation of working practices, and the engagement is clearly outside. There's a six month contract, and it is renewed again for six months. Three months into the extension, the client, as part of their preparation for April, makes a determination and comes up with 'inside'. The contractor disagrees but the client isn't going to be moved.

Scenario 1: Contractor says, 'Fine, I'm leaving. I don't agree with this determination.'

Scenario 2: Contractor says, 'I don't agree but I'm working out the contract, and leaving before April.'

In both cases, contractor informs QDOS. Also, HMRC gets wind of the situation and goes after the contractor for IR35, not just for the extension but for the whole time with the client.

Scenario 1 (contractor left rather than work under the changed circumstances):

Question 1A: If the contractor has tax enquiry cover, would you defend him? Yes, no, or maybe?
Question 1B: If the contractor has tax liability cover, and loses the case, would TLC35 pay out? Yes, no, or maybe?

Scenario 2 (contractor stayed despite the changed circumstances):

Question 2A: If the contractor has tax enquiry cover, would you defend him? Yes, no, or maybe?
Question 2B: If the contractor has tax liability cover, and loses the case, would TLC35 pay out? Yes, no, or maybe?

[jamesbrown]

I can easily understand QDOS saying they aren't going to defend an undefendable case.

Right, they won't. They will make a judgement. If there is a better than 50% chance of winning, they will proceed and incur fees defending you.

I think I'd have a hard time hearing them say they might not provide tax liability cover for prior months due to a change in circumstances that occurs today.

What do you expect them to do in the following circumstances?

Contractor thought there was a valid RoS (etc) and purchased tax loss cover on this basis.

T&Cs of tax loss cover says there must be a valid RoS that the client respects.

Client subsequently says there is no valid RoS and that the contractor was a disguised permie all along.

Qdos thinks it is not worth defending and does not agree to pay professional fees due to <=50% chance of success.

Contractor defends themselves (no fees supported by Qdos) and loses or does not defend themselves. Either way they lose.

What do you want Qdos to do?

The insurance comes with T&Cs that need to be read carefully.

[northernladuk]

Got to be careful not to get so hypothetical it gets impossible to answer. It'll get jk3838 worrying himself in an early grave as well.

[Royston1664]

This is confusing because there's OP's situation and jk3838's.

Negative, my situation is the same as jk's, I'm not particularly bothered what clientco change the contract to after April 2020 as I won't be there as my 2 years will have come to an end in March. My concern is regarding the retrospective taxation risk to the entire 2 years of work following an incorrect CEST determination by clientco (Potentially shared with HMRC although not enforced by clientco until April 2020) and my case is now indefensible.

My question was whether to get out NOW, BEFORE any assessment even takes place, in order to de-risk the above, or if I can slip in one last 6 month renewal to take me up to the line.

I think the Northern Lad answered it when he said this:

Chance of an investigation will be low as they've nothing to compare you on. You are in the same situation you are right now with the chance of a random investigation under the old rules. They happen but infrequently. You've dodged a bullet but will be looking over your shoulder for the next few years. Just don't do it. If you've already done it, don't do it again.

So in the OP's case I'd wait for the determination, find out why they've made that decision. If it's something that reflects the current contract meaning it's a sham then I'd be leaving as soon as possible to get a break before the run up and flick over to the new contract. If it's a change and well documented you should be safe to leave at the 24 months. If you are in any of the lower level points then good luck to you.

[webberg]

My concern is regarding the retrospective taxation risk to the entire 2 years of work following an incorrect CEST determination by clientco (Potentially shared with HMRC although not enforced by clientco until April 2020) and my case is now indefensible.

My question was whether to get out NOW, BEFORE any assessment even takes place, in order to de-risk the above, or if I can slip in one last 6 month renewal to take me up to the line.

I think the Northern Lad answered it when he said this:

How can your case be indefensible?

These rules apply for payments made after 6/4/20.

If the Client Co looks today and says that if they use CEST you were previously inside IR35, but they have treated you as outside, then there is absolutely no reason why they would share that with HMRC. They are not legally obliged to.

Further if you have the likes of QDOS with you, my bet is that they are far better at making the judgement than the Client Co and whilst the Client Co view would be unhelpful if HMRC ever got hold of it and thought that the facts etc were correct, so what?

I think you may be inventing ghosts to run away from here.

[Royston1664]

Thanks Webberg I think you are probably right, the five pages of info have been very helpful in coming to that decision.

[ComplianceLady]

How can your case be indefensible?

These rules apply for payments made after 6/4/20.

If the Client Co looks today and says that if they use CEST you were previously inside IR35, but they have treated you as outside, then there is absolutely no reason why they would share that with HMRC. They are not legally obliged to.

Further if you have the likes of QDOS with you, my bet is that they are far better at making the judgement than the Client Co and whilst the Client Co view would be unhelpful if HMRC ever got hold of it and thought that the facts etc were correct, so what?

I think you may be inventing ghosts to run away from here.

Why would the Client not share it with HMRC? Most Clients would see that as one of their implied obligations imo - if HMRC ask for something in good faith they aren't going to put their head above the parapet and say no, risking further scrutiny.

This will become a common issue - we are advising clients that by September they must have a plan, by December they must have a SDS and by February they must have everyone on new contracts. They'll have to reissue the SDS post April but it's important they have time to assess the contract as it is, make changes where necessary and when they actually assess it they already know the outcome.

The assessment prior to April will be of the current contract, so if that is deemed inside then it does, to my mind, create a problem for the retrospective assignment, though the risk is low if the contract is terminated prior to April. HMRC will have plenty to go after post April so I can't see this being on their radar.