IR35 deferral risk

[Joeo]

After the IR35 postponement, I am being offered an extension on my contract, which was timed to end on 3/4, when my plan was to retire.

I am very minded to take this, particularly as my pension has taken a battering.

It occurs to me though, is there a risk in doing this when the company has reviewed their roles and deemed it inside IR35?

It seems crazy having announced the postponement they might do this in the future...but is it a possible risk?

Regards,

Joe

[northernladuk]

Only 5 or 6 threads on exactly this going on right now. Have a browse of a few other threads.

But it's a very black and white situation as you did allude to.

It's still great income even if you are inside.

[mrrossi]

the company has reviewed their roles and deemed it inside IR35

Surely it's not a company's responsibility (or even right) to determine this though until after the reform comes it - i.e. now due April 2021.

Have they actually issued an SDS?

Surely it doesn't matter now. It's the PSC that has to determine whether it's inside or outside.

[northernladuk]

Surely it's not a company's responsibility (or even right) to determine this though until after the reform comes it - i.e. now due April 2021.

Have they actually issued an SDS?

Surely it doesn't matter now. It's the PSC that has to determine whether it's inside or outside.

Correct but making a self determination should be a no brainer. The client did it for you. All that has changed in this instance is who is determining. The determination is a foregone conclusion.

[simes]

After the IR35 postponement, I am being offered an extension on my contract, which was timed to end on 3/4, when my plan was to retire.

I am very minded to take this, particularly as my pension has taken a battering.

It occurs to me though, is there a risk in doing this when the company has reviewed their roles and deemed it inside IR35?

It seems crazy having announced the postponement they might do this in the future...but is it a possible risk?

Regards,

Joe

Following the new news, it really now comes down to what is being currently offered.

Companies will have their own reasons for staying with what was only very recently determined, and now that is officially undone, those same companies may just wish only to offer the same. i.e. all roles are Inside.

As a contractor, you now have the decision to make as to whether to accept or not.

This based on, current company not offering Outside vs (in time) other companies offering Outside.

For my part, test the waters. Chase Outside.

[WordIsBond]

Risk/benefit analysis.

What's the risk of losing if investigated? Probably very high. If investigated, they will find out about the inside determination and use it against you and you'll likely lose. You'd have to have pretty compelling evidence that they were ignoring facts and had not exercised due care in their evaluation.

What's the risk of being investigated? We don't know. I'm going to guess that clients may be asked for lists of contractors who are operating through PSCs and for whom an inside determination had been made. If they decide to do that the risk of being investigated is high.

What's the magnitude of the risk? You've not told us. If you've been there 6 months, not that much. Six years, it's pretty significant.

The imminent retirement does put a different twist on it, compared to the 798 other times we've discussed this in other threads. If you've already started drawing from your pension, you are limited in how much you can contribute to it. Otherwise, the fact that going forward is effectively to increase your retirement funds, and you are on the verge of retirement, I'd probably do the following:

1. Get your company closed.
2. Go brolly. If HMRC comes calling say, "I believed I was outside but once the client said it was inside I changed to payroll." They'll hopefully say, "Good boy, that's where we want you," pat you on the head, drop a few words about the evils of tax avoidance, and go away.
3. Choose a brolly that will let you salary sacrifice into your pension.
4. Keep your payments from the brolly to the basic rate band, shove the rest into your pension.
5. Do that for a year or whatever, then retire. Hopefully the market recovers that quickly -- I personally think it will.

There's a risk on your historical contracts with this client, but the greatest risk is to operating outside going forward. I think if you keep operating outside after getting an inside determination from the client you risk not just losing an IR35 case but being held personally liable, and for penalties as well.

The inside determination increases the risk for your historical contracts but it increases it probably exponentially for any new ones. IMO.

If you can get a comparable contract elsewhere (which seems unlikely in the current climate), that would be far better, obviously. If not, and you want or need to stay, I'd strongly recommend umbrella. And close your company ASAP.

[simes]

Risk/benefit analysis.

What's the risk of losing if investigated? Probably very high. If investigated, they will find out about the inside determination and use it against you and you'll likely lose. You'd have to have pretty compelling evidence that they were ignoring facts and had not exercised due care in their evaluation.

With respect, and if we Only follow the extrapolation of HMRC court case losses in the last 10 years, I disagree.

Once in court, and if the OP can suitably demonstrate being an Outside contractor, the Inside SDS will likely be seen as a knee jerk reaction, the defending council will rip apart the client's understanding of IR35, the client will be shown to solely be on the defensive in its determination, and the whole thing will be seen as a sham.

It is this sort of case which unfortunately, we will need to see sooner rather than later to motivate the clients to get their collective heads around IR35.

[northernladuk]

With respect, and if we Only follow the extrapolation of HMRC court case losses in the last 10 years, I disagree.

Once in court, and if the OP can suitably demonstrate being an Outside contractor, the Inside SDS will likely be seen as a knee jerk reaction, the defending council will rip apart the client's understanding of IR35, the client will be shown to solely be on the defensive in its determination, and the whole thing will be seen as a sham.

It is this sort of case which unfortunately, we will need to see sooner rather than later to motivate the clients to get their collective heads around IR35.

I don't see that at all. It was the official document that HMRC would honour so I don't think it can be ignored as easily as that. We rely on confirmation of arrangements which isn't even an official document so any evidence, particularly and SDS will hold great weight. To think the court will believe it's a knee jerk reaction is naive beyond belief.

If and SDS gets disregarded as a sham then HMRC's entire policy will be in question. As far as court will see it it was proper diligence applied by the client resulting in a determination. No way can that be called a sham. Arguments about knee jerk reactions just will not stand up in court.

[Guesstimator]

I don't see that at all. It was the official document that HMRC would honour so I don't think it can be ignored as easily as that. We rely on confirmation of arrangements which isn't even an official document so any evidence, particularly and SDS will hold great weight. To think the court will believe it's a knee jerk reaction is naive beyond belief.

If and SDS gets disregarded as a sham then HMRC's entire policy will be in question. As far as court will see it it was proper diligence applied by the client resulting in a determination. No way can that be called a sham. Arguments about knee jerk reactions just will not stand up in court.

Interesting point that from you and simes... and yes, surely this might well create a headache for HMRC policy. This u turn might well have created the very situation that was deliberately denied to contractors of having a mechanism to properly challenge a determination and establish an engagement is a b2b relationship (assuming it's exists).

The SDS certainly can't be ignored but being able to properly question how a company arrived at its SDS determinations is now on the table whereas it wasn't before. If it can be established that the method of determination didn't take into account genuine working practices then it could easily be argued due diligence wasn't applied.

It's not really any different to how this it works now as I understand it: HMRC requests representation from the client to put their end of the story and if that person isn't someone who had a direct working relationship with the Ltd then the defence pulls it apart/asks for their point of view to be ignored.

I'm not suggesting this is a get off the hook for everyone (and neither should it be.. If you're inside, you're inside, that hasn't changed) and it's a huge risk to take on, but I don't think it's as clearly in HMRC favour as some.

Regarding HMRC court cases and their win to loss ratio, it was pointed out to me by someone better placed than me to know (not narrowing the field much, I know) to not get mislead by that statistic since only HMRC knows how many settlements are made before it reaches that stage.

[Jolie]

With respect, and if we Only follow the extrapolation of HMRC court case losses in the last 10 years, I disagree.

Once in court, and if the OP can suitably demonstrate being an Outside contractor, the Inside SDS will likely be seen as a knee jerk reaction, the defending council will rip apart the client's understanding of IR35, the client will be shown to solely be on the defensive in its determination, and the whole thing will be seen as a sham.

It is this sort of case which unfortunately, we will need to see sooner rather than later to motivate the clients to get their collective heads around IR35.

Depends on how the client reached the SDS, and what details were given to the OP.

I know of a contractor that received an inside SDS, based on HR's analysis. They also received an internal analysis that also pointed to inside, based on answers given by the department head. Several of the questions answered in the SDS were at odds with the internal analysis, and vice versa.

The SDS is a complete sham, and much of the input given is done by people who don't even know we exist, and is based on perceptions of an employee.

And before you come back on this NLUK, yes I agree that the client is the one who will say what the working practices are, but if the contractor can prove that they are working to different practices, then that also proves the sham.