Client "no longer using PCSs" vs "role is now inside IR35" - risk of investigation?

[dsc]

Why would HMRC look at any of that.

Agencies legally have to report all payments for work that are made to third parties including the name of the third party.
Where that third party changes but the NI / UTC code remains the same - you lookup the address of the NI / UTC account and send them a query letter. The result in a lot of cases will be a large cheque being sent in for the tax year 2019/20 with little work required.

For people who are direct, does it complicate things much? just out of curiosity trying to assess who's in a slightly better position, direct contracts or going via agency.

[NotSoCompliant]

Hi all

Is there a difference in the risk of HMRC IR35 investigation after staying on at a client post Apr 20 (switching to an Umbrella at contract renewal on the 2nd March) between the client saying (end of Jan likely) either:

a) they will no longer use PSCs and all contracts will be via Umbrella companies
b) they declaring that the role is 'inside' IR35

With the latter, I would have thought the risk was far higher as the client would now be saying the role is 'inside' and we've always said it was 'outside' so the taxman can say 'well surely it has always been inside then' and investigate and claim back tax etc.

However if the client simply says you must use an Umbrella, no one has 'flagged' that the role is 'inside' and raise HMRCs suspicions.

True, as pointed out in another post, you will be in the same role and same company but suddenly start paying more NI and HMRC will see this, but IR35 is for Ltd companies and surely many people will switch to Umbrellas so it's not an admission of saying 'oops our role has been classed as inside IR35' its just a 'the client needs me to work this way'. You could argue that's a subtle difference though. IR35 isn't really applicable to Umbrellas as you are operating on PAYE, plus I will have ensured the company is shutdown before April...

I think it's more likely the client will just say they will not longer use PSCs - it's a large client and they can't just blanket state 'inside', and it would be a ridiculous amount of effort for them to do individual assessments for all the contractors in many different roles across the business.

I've done the CEST test and my evaluation of it and my contract is that I'm outside of IR35, but there's always the risk HMRC won't see it that way.

Really would prefer not to leave the role (as per several colleagues) and just trying to understand risks. Happy to continue using an Umbrella company.

I understand that in the public sector there were some contractors who switched from Ltd to Umbrella and HMRC immediately send them a tax bill saying that they'd been inside all the time. Anyone know what exactly the client had started then? Did they determine that the roles were inside IR35 or just make a business policy change stating they'd only operate via Umbrellas?

Thanks

IR35 status is determined on a contract by contract basis so there is no way HMRC can just blanket assess previous contracts without knowing the facts for each contract. You may have 3 contracts in a year a each may have a different IR35 outcome (eg 2 in and 1 out etc)

[eek]

For people who are direct, does it complicate things much? just out of curiosity trying to assess who's in a slightly better position, direct contracts or going via agency.

In theory any company employing / using labour via a third party needs to record it - whether they have is a question only they could answer.