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Pre-payment before April 2021?

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    Pre-payment before April 2021?

    Hi,

    If a client ordered and paid upfront for a block of work - let's say support coverage - before April 2021, and then have it carried out at any point in time (March 2021, April 2021, May 2021, etc). Would this get around the IR35 April 2021 changes? I know it's a short term fix, but could it work for a couple of months of work.

    #2
    Originally posted by quantum77 View Post
    Hi,

    If a client ordered and paid upfront for a block of work - let's say support coverage - before April 2021, and then have it carried out at any point in time (March 2021, April 2021, May 2021, etc). Would this get around the IR35 April 2021 changes? I know it's a short term fix, but could it work for a couple of months of work.
    Nope.
    merely at clientco for the entertainment

    Comment


      #3
      Why not?

      Does the contract have to explicitly say when the work will be carried out? I thought the whole point was to aim for a deliverable (i.e. support coverage) rather than dictate when and where.

      Comment


        #4
        Because IR35 is based on the way you work. If you work like a perm you get taxed like a perm. Payment is for work done so that work should be taxed in line with how the work is considered for IR35. The SDS is role based, not payment date based.

        And chances of a client paying upfront becuase your tax situation is......

        So eek is right.
        'CUK forum personality of 2011 - Winner - Yes really!!!!

        Comment


          #5
          Originally posted by quantum77 View Post
          Why not?

          Does the contract have to explicitly say when the work will be carried out? I thought the whole point was to aim for a deliverable (i.e. support coverage) rather than dictate when and where.
          Switching to deliverable based would help....

          But support 9-5 M-F (and a couple hours that might fall outside this) is not a deliverable. That's paying for time whether it's prepaid in a block or not doesn't matter.

          Comment


            #6
            Originally posted by quantum77 View Post
            Hi,

            If a client ordered and paid upfront for a block of work - let's say support coverage - before April 2021, and then have it carried out at any point in time (March 2021, April 2021, May 2021, etc). Would this get around the IR35 April 2021 changes? I know it's a short term fix, but could it work for a couple of months of work.
            That’s an interesting question, actually, but my reading of the transitional provisions in the ITEPA is that a chain payment should be apportioned (treated as two separate chain payments) for services actually performed before and after April 6 in that case.

            Comment


              #7
              Originally posted by jamesbrown View Post

              That’s an interesting question, actually, but my reading of the transitional provisions in the ITEPA is that a chain payment should be apportioned (treated as two separate chain payments) for services actually performed before and after April 6 in that case.
              Having attended an HMRC seminar yesterday - it turns out the OP's approach is valid and my statement of nope was completely wrong.

              The requirements are and I quote here directly from the slide

              "For engagements where the client is a medium or large-sized non-public sector
              organisation.

              • The new rules will apply to any payment for services made on or after 6 April
              2021, and those services are provided by the worker to the end client on or
              after 6 April 2021"

              So if you can get a large prepayment prior to April 6th - no SDS is required until just prior to the first payment (by the end client) post April 6th 2021 for work done after April 6th 2021.

              For those looking from the outside yes this is rather insane but that wasn't the most clueless part of the workshop.
              merely at clientco for the entertainment

              Comment


                #8
                Yes, pretty insane. I do wonder though, eek. I find it hard to reconcile with what is written in the ITEPA. Another thing is that the recent budget alluded to some changes in the FA 2021, which is due to be published on 11 March. Specifically, there will be a TAAR to capture cases of deliberate avoidance. Not sure how such a strategy would sit with that. Still, I agree with what you say - the slides were absolutely clear. Correct? Not so sure. But that was indeed far from the least sane part of the workshop.

                Comment


                  #9
                  Originally posted by jamesbrown View Post
                  Yes, pretty insane. I do wonder though, eek. I find it hard to reconcile with what is written in the ITEPA. Another thing is that the recent budget alluded to some changes in the FA 2021, which is due to be published on 11 March. Specifically, there will be a TAAR to capture cases of deliberate avoidance. Not sure how such a strategy would sit with that. Still, I agree with what you say - the slides were absolutely clear. Correct? Not so sure. But that was indeed far from the least sane part of the workshop.
                  I would argue that while this is following the letter of the rules but is dubious that isn't an issue as it's only 1 off ( you can pay up front for up to say a year but beyond that it's impossible).

                  The TAAR is surely to tackle longer term abuse - why do you think I asked the question regarding the fee payer?
                  Last edited by eek; 6 March 2021, 10:10.
                  merely at clientco for the entertainment

                  Comment


                    #10
                    Originally posted by eek View Post

                    I would argue that while this is following the letter of the rules but is dubious that isn't an issue as it's only 1 off ( you can pay up front for up to say a year but beyond that it's impossible).

                    The TAAR is surely to tackle longer term abuse - why do you think I asked the question regarding the fee payer?
                    Yes, based on what we know now (from yesterday), I think it’s a realistic strategy to pay upfront, even if quite improbable that a client would agree to this. Will be interesting to see the new FA.

                    Comment

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