What happens if client doesn't respond to SDS appeal in time?

[dingdong]

I've read somewhere that if a client doesn't respond to an determination appeal within the mandatory 45 days then they become liable for the employment taxes an NI (so you'd in effect be considered outside IR35)

Is that correct?

And if so would it just apply for the period until they did eventually reply.... or are they then stuck with the liability for the remainder of the contract?

[eek]

Truthful answer - not a clue and no will anyone else have a clue until it went to court.

which it won’t do as it will be easier to minimizes risk by replacing the worker(s) involved

[Lance]

I've read somewhere......

citation needed. Sounds like rubbish. Interested to read the source.

[dingdong]

citation needed. Sounds like rubbish. Interested to read the source.

It was in the "Contractors can challenge IR35 decisions" paragraph on this page...

https://www.paystream.co.uk/helphub/...ads-an-agency/

[jamesbrown]

This is part of the amendments to 10(2) of the ITEPA in the FA 2020, Section 61T:

If the client fails to comply with the duty in subsection (2) before the end of the period of 45 days beginning with the date the client receives the representations, section 61N(3) and (4) has effect from the end of that period until the duty is complied with as if for any reference to the fee-payer there were substituted a reference to the client; but this is subject to section 61V.

In other words, the client becomes the de facto Fee Payer with associated responsibilities and liabilities until they do respond (absent fraud).

But that does not have the consequence that you'd be considered outside of IR35. It just means that, if the SDS originally said outside and there is a subsequent appeal and the client fails to respond, then the client is on the hook (not the Fee Payer) if there is a failure to deduct payroll taxes where the contract is subsequently found to be inside. In that case, HMRC has an incentive to police the supply chain because there is potentially missing tax. The reverse is not so obviously true, because HMRC won't be investigating a client that is deducting payroll taxes and it is pretty straightforward for the client to reconfirm their inside decision at any moment after the 45 days has expired. Moreover, there is no clear legal avenue to overturn that status decision (I believe that's what eek is referring to).

Anyway, IMHO, you should consider this a technical issue of no obvious relevance to you (the contractor/deemed employee) whereby the responsibility and liability has simply shifted around within the supply chain above you. Ultimately, you are still inside IR35 if the client issued an SDS previously to that effect.

[northernladuk]

I've read somewhere that if a client doesn't respond to an determination appeal within the mandatory 45 days then they become liable for the employment taxes an NI (so you'd in effect be considered outside IR35)

Is that correct?

Absolutely not. Do you think HMRC will set up a system that lets you take money out of their pocket because someone didn't follow process. Not a chance that would be the case.

And if so would it just apply for the period until they did eventually reply.... or are they then stuck with the liability for the remainder of the contract?

The silence is your answer and chances of successfully appealing are zero anyway. You are stuck with it.

Lets just hope you don't have a long period of outside before your inside determination.

[Lance]

It was in the "Contractors can challenge IR35 decisions" paragraph on this page...

https://www.paystream.co.uk/helphub/...ads-an-agency/

it doesn't say what you claimed it did though.
It says

If the contractor disagrees with the client’s assessment, they will be able to submit an appeal to the client. The client is required by the new legislation to respond to an appeal within 45 days, and provide either a new Status Determination Statement (SDS) with an updated conclusion or the reasons for standing by its original conclusion. If the client does not do so, this will result in the client becoming liable for any unpaid tax instead of the agency. This provision should act as a safeguard against clients trying to pass the buck by attempting to mislead the agency or failing to put a good IR35 determination process in place.

which is different to

I've read somewhere that if a client doesn't respond to an determination appeal within the mandatory 45 days then they become liable for the employment taxes an NI (so you'd in effect be considered outside IR35)

[dingdong]

OK thanks that all makes sense.

So realistically if a client makes an inside determination and then ignores an appeal and doesn't provide any response at all, there is no remedy in the legislation that would help the contractor (despite the fact someone might have strong evidence they are outside).

[eek]

Yep unless the agency started paying you as if you were outside (and they are not going to do that).

[northernladuk]

OK thanks that all makes sense.

So realistically if a client makes an inside determination and then ignores an appeal and doesn't provide any response at all, there is no remedy in the legislation that would help the contractor (despite the fact someone might have strong evidence they are outside).

Correct. If the client was a bit smarter they just respond immediately with 'your appeal has failed, original determination stands' and they've met their obligation to accept appeals. Doesn't leave you in any better situation. I don't believe any appeal is ever going to work, particularly in larger organisations.

Contractors also shouldn't get themselves in to this at this point. Outside to inside then appeal still leaves you at risk.

It would be interesting to know if HMRC get site of a gig that starts inside and is appealed and moved outside. Definitely one for a sniff for them.