Assessed as Inside from April or a Blanket Ban - it's time to leave

[ScottW]

all the contractors i know are moving from outside to inside with the same client and same role
they have no idea they can be target for retrospective tax.

They're walking about with a massive target on their backs.

[Finance Contractor]

So even if you have a written SDS from the client and have a new contract issued on this basis and you're only engaging them due to this SDS confirmation, they can still welsh it and you're liable - YIKES!

So there literally is no comfort blankets here at all. So what is the point of having a written SDS if they can refute it?

Makes a mockery of the whole thing. Then if that is the case, why did all these firms blanket ban contractors (PSC), why wouldn't they just say everyone is outside and if they ever got an inquiry from the revenue, just say you got it wrong and push the liability back on the contractor?

The issue is only really an issue at cut over where they have the same contractors there pre SDS and post SDS. In the long term, clients would be crazy to pass the buck to the contractor if HMRC called because 100% liability for that contract rests with them and secondly they would open themselves up to every being investigated on every outside IR35 contract they have issued post 6 April 2020 if they just said ‘ok fair enough Mr Taxman, my bad’.

This is for me the crux of the issue and leads to two points for me to personally consider. One is, can any client be trusted at cutover for a contract extension? IMHO, no. The second is that given one failed ruling for a client in SDS gives HMRC a field day to open up every SDS they issued, is the PSC ban and blanket inside approach temporary because clients aren’t sure how risk averse to be or is this really HMRC’s checkmate to PSCs?

[ComplianceLady]

The issue is only really an issue at cut over where they have the same contractors there pre SDS and post SDS. In the long term, clients would be crazy to pass the buck to the contractor if HMRC called because 100% liability for that contract rests with them and secondly they would open themselves up to every being investigated on every outside IR35 contract they have issued post 6 April 2020 if they just said ‘ok fair enough Mr Taxman, my bad’.

This is for me the crux of the issue and leads to two points for me to personally consider. One is, can any client be trusted at cutover for a contract extension? IMHO, no. The second is that given one failed ruling for a client in SDS gives HMRC a field day to open up every SDS they issued, is the PSC ban and blanket inside approach temporary because clients aren’t sure how risk averse to be or is this really HMRC’s checkmate to PSCs?

As long as the client demonstrates that reasonable care was used even when the determination is wrong it's not their liability so I suppose they might be more likely to shrug if HMRC challenge it. Realistically though it would be an agency and client argument with HMRC - which is why I think any agency without insurance is foolish. All it takes for them to be on the hook is for the client to have taken reasonable care but accept it if HMRC challenge them.

[CompoundOverload]

It's just a scenario that might happen, some / most will probably stick to their assessment, but I can see how they would bail the moment HMRC comes knocking. And it's not like they are dropping you in it, they are still responsible for anything April onwards, it's just that if they do bail, it opens you up to an investigation as HMRC can turn around and say "well now that we know you are currently inside and not much has changed since pre-April, we shall have a look at your end as well".

IR35 has been in place for ages, it's just that previously every single contractor was deeming themselves outside and there was no extra info on whether it's correct or not (so you had to open up an investigation and argue that it's incorrect). Now that the client is responsible for the determination, it's the extra bit of info that HMRC can use to flag up potential incorrect assessments done by contractors themselves and use any client inside determination as ammo against contractors.

But the whole point of the new legislation post April is that the risk lies with the end client. If they bail on their decision, either way it should be them that foots the bill, isn't that the whole point of it? I.e if HMRC disagree with their SDS then the client has incorrectly classified you and thus should pay up. I can't see how this gets back to the contractor as you have basically followed the new law by letting the client make that determination and you have engaged with them on that basis and have a legal document that binds the arrangement. It's their tough sh!t if they go back on their initial decision.

I'm sorry but I just can't see how this would ever get back to the contractor if the client succumbs to pressure under an investigation.

[thesquaremile]

They're walking about with a massive target on their backs.

I have decided to risk it with an Outside-to-Inside plunge. Aware that the topic has been discussed a gazillion times here but would appreciate some blunt ,this-is-suicidal or not, feedback.

Client
Client want me to stay. Agreed a day rate increase (although still a step back from LTD income). Agreed to change the role - including job title, description. Will not be issuing a formal SDS, just asking contracts to go PAYE via brolly. I have made it clear that they will need to consider me 'an employee' (without permanent benefits) in practice. That means no restrictions to WFH, involved in company strategy meetings where relevant, etc. Client has recently been acquired by one of their clients, so the contract will now be with the parent company.

Agency
Claim they have never shared client details with HMRC ever. Recommend their own Umbrella and claim 'no-risk' as the payments will me made via a different entity. Claim HMRC are not going to go retrospective (as assured by them). Yeah, right.

TSM

[eek]

I have decided to risk it with an Outside-to-Inside plunge. Aware that the topic has been discussed a gazillion times here but would appreciate some blunt ,this-is-suicidal or not feedback.

Client
Client want me to stay. Agreed a day rate increase (although still a step back from LTD income). Agreed to change the role - including job title, description. Will not be issuing a formal SDS, just asking contracts to go PAYE via brolly. I have made it clear that they will need to consider me 'an employee' (without permanent benefits) in practice. That means no restrictions to WFH, involved in company strategy meetings where relevant, etc. Client has recently been acquired by one of their clients, so the contract will now be with the parent company.

Agency
Claim they have never shared client details with HMRC ever. Recommend their own Umbrella and claim 'no-risk' as the payments will me made via a different entity. Claim HMRC are not going to go retrospective (as assured by them). Yeah, right.

TSM

The agency is right, HMRC don’t care who their customers are just the contractors they pay.

and in March you will be on the agency report to HMRC with your NI number, your limited company details and a large sum on which little NI is paid
and I April you will be on the (same) agency report with the same NI number, a different company and a large NI payment.

To HMRC the end client doesn’t matter it’s the agency that ties everything together

[Kanaiya]

The agency is right, HMRC don’t care who their customers are just the contractors they pay.

and in March you will be on the agency report to HMRC with your NI number, your limited company details and a large sum on which little NI is paid
and I April you will be on the (same) agency report with the same NI number, a different company and a large NI payment.

To HMRC the end client doesn’t matter it’s the agency that ties everything together

True. Thats what is going to happen . HMRC is going to catch the easy fish.

[dsc]

If they bail on their decision, either way it should be them that foots the bill, isn't that the whole point of it? [...]
I'm sorry but I just can't see how this would ever get back to the contractor if the client succumbs to pressure under an investigation.

It would be the client footing the bill for anything April onwards and it's entirely upto the client / agency (or just client if direct) to sort it out. But if they do cave in and say, "ah sorry, we got it wrong, he / she is indeed inside", it's basically like saying that you are inside now, with you just carrying on regardless. The fact that you carried on past April on a contract which was deemed outside, but your client later on changed their mind due to HMRC pressure and says it's now inside, throws a huge shadow on the work you've done pre April. So most likely, HMRC will then turn to you for any engagement before April and say "well you were working inside from April onwards (even though client said you are outside, but that was incorrect, so is invalid) and your contract / role hasn't changed, which effectively means you were inside all the time, can we have some unpaid tax?

[Kanaiya]

I have decided to risk it with an Outside-to-Inside plunge. Aware that the topic has been discussed a gazillion times here but would appreciate some blunt ,this-is-suicidal or not feedback.

Client
Client want me to stay. Agreed a day rate increase (although still a step back from LTD income). Agreed to change the role - including job title, description. Will not be issuing a formal SDS, just asking contracts to go PAYE via brolly. I have made it clear that they will need to consider me 'an employee' (without permanent benefits) in practice. That means no restrictions to WFH, involved in company strategy meetings where relevant, etc. Client has recently been acquired by one of their clients, so the contract will now be with the parent company.

Agency
Claim they have never shared client details with HMRC ever. Recommend their own Umbrella and claim 'no-risk' as the payments will me made via a different entity. Claim HMRC are not going to go retrospective (as assured by them). Yeah, right.

TSM

The risk is all yours as you will have to pay the TAX if HMRC send's the tax bill. You will be an easy catch for HMRC

[Snooky]

They're walking about with a massive target on their backs.

Agreed.

It'd be so easy for me to stay at the current client as they have a load of work they need me to do and are very happy with me. But I know very well they're taking the easy route and classing everyone inside. So I've told them I'm leaving before April 6. I have nothing to go to as yet but the retrospective risk is just too great.

In conversations with a number of my contractor colleagues I've tried to gently point out this risk but they nod and I can tell they're just planning to switch to umbrella with the same client from April.

On a cynical note, I guess the more people who do that, the more easy money it is for HMRC to chase, which possibly means they're marginally less likely to come after me