1 month extension for March 2020 is it worth it.

[iguy2008]

Hi

I was all due to finish at the end of Feb 2020 to ensure payments were made well in time before new rules on April 6th.

I have been at the same client on and off for 9 years (with some breaks - most being 1 year).

All of my contracts and working practices have been reviewed by QDOS as outside IR35

I understand now that HMRC have tweaked the rules so that they now apply to work performed from April 6th (not payments made from April 6th).

The client has asked me to extend for 1 more month to complete the project im working on (the same role that QDOS has reviewed as outside IR35).

My understanding is that the client will not make an SDS statement but simply declare that they wlll not use PSC companies from April 6th.

I have no plans to continue with the client after March 31st.

I would appreciate any thoughts on whether it would be considered a low/medium/high risk to extend for the month of March 2020.

Many Thanks.

[GhostofTarbera]

Exactly same risk you have now


Sent from my iPhone using Contractor UK Forum

[ladymuck]

As Tarbie says, your risk hasn't changed.

[redman123]

Testing

[WordIsBond]

I have the same question with a slight difference
-current contract until end of feb
-extension expected for 1 month only
-sds "committed to be shared" not issued yet (expected to come within few days)
-rumours are everyone is going to be inside

Assuming its just an extension, I accept only until the end of March and not sign a new contract

If the SDS is issued (inside) and I leave before 6th April. Will the risk be higher accepting the 1 month extension?

No one knows. I think it probably doesn't increase your risk. The one argument to the contrary is that if you accept an extension, even for one month, after they've issued an SDS, HMRC could then use that to argue that you've accepted the role should be inside. So that MIGHT increase your risk, but who knows?

Of course, you could operate that one month as an inside contract. If you did that, your counter-argument would be, "I had a contract review that showed I was outside, and I believed it to be outside because of A, B, C, and D. But when the client said that going forward they were going to view this as an employment relationship, that was obviously a change of circumstances, so I operated it as inside from that point forward."

I think it is unlikely you will ever be investigated, if you actually leave before April. I think they'll have other targets. But there is a slight chance that the extra month does increase your risk, and there's a chance that operating that month as inside would mitigate that increased risk.

If it were me, I'd just extend and not worry about it, personally, unless I had been there for like 3 years and had loads of exposure.

[CompoundOverload]

No one knows. I think it probably doesn't increase your risk. The one argument to the contrary is that if you accept an extension, even for one month, after they've issued an SDS, HMRC could then use that to argue that you've accepted the role should be inside. So that MIGHT increase your risk, but who knows?

Of course, you could operate that one month as an inside contract. If you did that, your counter-argument would be, "I had a contract review that showed I was outside, and I believed it to be outside because of A, B, C, and D. But when the client said that going forward they were going to view this as an employment relationship, that was obviously a change of circumstances, so I operated it as inside from that point forward."

I think it is unlikely you will ever be investigated, if you actually leave before April. I think they'll have other targets. But there is a slight chance that the extra month does increase your risk, and there's a chance that operating that month as inside would mitigate that increased risk.

If it were me, I'd just extend and not worry about it, personally, unless I had been there for like 3 years and had loads of exposure.

Q1) What do you think the other targets will be?

Q2) had the OP been there for three years (and client hadn't been given an SDS but was still willing to extend by an additional month) would you still take it?

[redman123]

Testing

[WordIsBond]

Q1) What do you think the other targets will be?

Q2) had the OP been there for three years (and client hadn't been given an SDS but was still willing to extend by an additional month) would you still take it?

Other targets (IMO only):
1. Large clients who are offering lots of outside determinations. Because the proceeds will be hefty and the deterrent factor will be significant.
1. A. Large clients who offer a few outside determinations. Because the proceeds, while not large, will be more than chasing individuals, and the deterrent factor will be significant.

2. Contractors who go from outside in March to inside in April. Where HMRC can match these up easily, at the very least these people will probably receive letters like the ones sent to GSK peeps. Some will be ready and have a professional response ready, some will just pay up, others will respond stupidly and then end up in an investigation.

3. Contractors who go from outside in March to payroll via umbrella but through the same agency in April. HMRC will probably be easily able to match these up. Again, I don't think they'll necessarily chase all these but they might go on a fishing expedition like the GSK letters.

4. Contractors who go from outside in March to permie employment at their former client in April. I do not know if HMRC will be able to easily match these up, but if they can, they might chase this one.

I think all of those are likely to be targeted before someone who leaves before April. I do not know how HMRC would ever know about the inside determination in such a case, unless they previously opened an investigation, and I don't think the inside determination would make for a slam dunk case for HMRC anyway. I'm sure once they opened the investigation, they'd ask if a determination had been made, and use it against the contractor, so an inside determination is certainly detrimental, but I think it very unlikely that it increases the risks of an investigation starting.

I suppose if I were given an inside determination but was leaving before April, I'd try to use GDPR rules to get it expunged, so that if HMRC comes asking the client for ALL determinations mine wouldn't turn up. I'm no expert on GDPR but I'd try anyway, because the client might not consider it worth fighting even if GDPR doesn't really help. But I doubt it's really a risk.

HMRC's biggest target is client behaviour, current and future, not individual contracts in the past. Much more money to be gained by using their investigative resources insuring that clients keep everyone on payroll, then by chasing dribs and drabs from contractors over past contracts. As above, they might send some letters to shake the tree and see what falls out, but strictly from a tax-take perspective, that's not the big target.

[WordIsBond]

Q2) had the OP been there for three years (and client hadn't been given an SDS but was still willing to extend by an additional month) would you still take it?

And, question 2. If the client weren't going to give an SDS, why would you not extend, however long you've been there? Not sure I understand the question.

The risk of staying comes from the negative impact of an inside SDS. The impact of the risk is quantified in part by how long you've been there.

I personally do not think that the inside SDS, if you are leaving before April, pushes the risk level high. Others might disagree. But three years of history puts the impact of the risk quite high. The reward of one extra month on the contract is, in most cases, not that high.

In balancing risk/reward, you look at the reward, the level of risk, and the impact of the risk. In the scenario of 3 years at risk, the impact is high, the risk IMO is low but not nothing, and the reward is not significant. I probably would not take the extra month. If I did, I would probably mitigate by operating it inside IR35.

If someone had no reserves, and had another contract lined up to start in May, but no way to feed their family until then, then the reward of the extra month becomes high, doesn't it? So the risk/reward consideration might vary considerably from person to person.

[CompoundOverload]

Other targets (IMO only):
1. Large clients who are offering lots of outside determinations. Because the proceeds will be hefty and the deterrent factor will be significant.
1. A. Large clients who offer a few outside determinations. Because the proceeds, while not large, will be more than chasing individuals, and the deterrent factor will be significant.

2. Contractors who go from outside in March to inside in April. Where HMRC can match these up easily, at the very least these people will probably receive letters like the ones sent to GSK peeps. Some will be ready and have a professional response ready, some will just pay up, others will respond stupidly and then end up in an investigation.

3. Contractors who go from outside in March to payroll via umbrella but through the same agency in April. HMRC will probably be easily able to match these up. Again, I don't think they'll necessarily chase all these but they might go on a fishing expedition like the GSK letters.

4. Contractors who go from outside in March to permie employment at their former client in April. I do not know if HMRC will be able to easily match these up, but if they can, they might chase this one.

I think all of those are likely to be targeted before someone who leaves before April. I do not know how HMRC would ever know about the inside determination in such a case, unless they previously opened an investigation, and I don't think the inside determination would make for a slam dunk case for HMRC anyway. I'm sure once they opened the investigation, they'd ask if a determination had been made, and use it against the contractor, so an inside determination is certainly detrimental, but I think it very unlikely that it increases the risks of an investigation starting.

I suppose if I were given an inside determination but was leaving before April, I'd try to use GDPR rules to get it expunged, so that if HMRC comes asking the client for ALL determinations mine wouldn't turn up. I'm no expert on GDPR but I'd try anyway, because the client might not consider it worth fighting even if GDPR doesn't really help. But I doubt it's really a risk.

HMRC's biggest target is client behaviour, current and future, not individual contracts in the past. Much more money to be gained by using their investigative resources insuring that clients keep everyone on payroll, then by chasing dribs and drabs from contractors over past contracts. As above, they might send some letters to shake the tree and see what falls out, but strictly from a tax-take perspective, that's not the big target.

What about those clients (large and small) that have both contractors inside (umbrella, FTCs et al and outside) - would they still be seen as a target given they have a hybrid of both on their books?

My current client would be regarded a a medium sized house but doesn't have many contractors - not sure how they would be viewed as on your risk barometer?