IR35 Expenses

[dave748]

I'm currently in negotiations with my client regarding a contract renewal. I've contracted for them before and now they want to push us Inside IR35, obviously, the entire team is resisting heavily. I went through a determination with them today and I thought I had them on expenses as we have to front-run any travel expenses out of our own pocket and claim it back later. This was debunked as these do not count as they are reimbursable.

We are trying to find a way to maintain our outside IR35 status, we are thinking of asking them to change the contract so that we cannot be reimbursed for any expenses we incur and we take on all expenses out of our own Ltd Companies. This is still a hit to the pocket but, it's a lot better than being inside. Is there any reason why doing this would still not count as being outside IR35 that anyone knows of?

[ladymuck]

Expenses is a very small nail on which to hang your hat.

Remember the three pillars: ROS, MOO, SDC

Where do your contractual terms and working practices fit around these. Gold standard is that you have completed and unfettered right of substitution, there is no expectation that you will take on work not specified in the contract without a change to the contract, and the client does not tell you how, when or where you do your job.

That's a dumbed down view of the three but it gives you a rough idea of where to focus your challenge.

[eek]

I'm currently in negotiations with my client regarding a contract renewal. I've contracted for them before and now they want to push us Inside IR35, obviously, the entire team is resisting heavily. I went through a determination with them today and I thought I had them on expenses as we have to front-run any travel expenses out of our own pocket and claim it back later. This was debunked as these do not count as they are reimbursable.

We are trying to find a way to maintain our outside IR35 status, we are thinking of asking them to change the contract so that we cannot be reimbursed for any expenses we incur and we take on all expenses out of our own Ltd Companies. This is still a hit to the pocket but, it's a lot better than being inside. Is there any reason why doing this would still not count as being outside IR35 that anyone knows of?

You need to listen to LM as expenses have nothing to do with IR35 - IR35 is about how the end client perceives you (are you an external consultant or a temporary "employee" with a bum on a seat)

You then need to look at

ROS (Right of Substitution) - which means you can send a replacement to do your job
MOO (Mutuality of Obligation) - does the client need / offer you alternative work and do you have to accept it.
SDC (Supervision, Direction and Control) - do you control how the work is done or does the end client have a significant say in it.

Given that you've started talking about expenses I suspect the end client is correct in saying that you are all inside....

[northernladuk]

If you are going to push back you need to know what you are pushing back against and it doesn't sound like you do. Sounds like the blind leading the blind.
Why do you not already have an SDS? You should have had one when this hit back in April? You can push back as much as you want but if the client wants you inside you are done. The risk sits with them now and it sounds like they don't have much of a clue if they haven't already given you an SDS. If that's the case they will always pick inside as it exposes them to least risk.

'I thought I had them on expenses'. How cute...

[eek]

If you are going to push back you need to know what you are pushing back against and it doesn't sound like you do. Sounds like the blind leading the blind.
Why do you not already have an SDS? You should have had one when this hit back in April? You can push back as much as you want but if the client wants you inside you are done. The risk sits with them now and it sounds like they don't have much of a clue if they haven't already given you an SDS. If that's the case they will always pick inside as it exposes them to least risk.

'I thought I had them on expenses'. How cute...

They don't need to do an SDS until they make their first payment for work done post April 6th.

For a lot of firms that may be in late July.

[northernladuk]

They don't need to do an SDS until they make their first payment for work done post April 6th.

For a lot of firms that may be in late July.

But that's too late surely. If they make the first payment and deliver an inside statement that means the contractor has been inside all along and it's too late to do anything about it. They've lost money they expected and are at risk?

What contractor would work from April to whenever they get paid not knowing if that pay is going to be taxed as inside?

I haven't been following the exact dates it happens but that's a ludicrous situation is it not?

[ladymuck]

But that's too late surely. If they make the first payment and deliver an inside statement that means the contractor has been inside all along and it's too late to do anything about it. They've lost money they expected and are at risk?

What contractor would work from April to whenever they get paid not knowing if that pay is going to be taxed as inside?

I haven't been following the exact dates it happens but that's a ludicrous situation is it not?

This is not a new conversation... Yes it's rubbish but eek and JamesBrown shared this a little while back after they snuck into a HMRC webinar

[eek]

This is not a new conversation... Yes it's rubbish but eek and JamesBrown shared this a little while back after they snuck into a HMRC webinar

This is something HMRC changed from the public sector rules supposedly at the request of IPSE (and others) - as "how people work is only obvious after the contract begins"

[northernladuk]

This is not a new conversation... Yes it's rubbish but eek and JamesBrown shared this a little while back after they snuck into a HMRC webinar

Ah I vaguely remember seeing that. Surely it's up to the contractor to make sure they aren't in this position though. Yes that's what companies are allowed to do but the contractor is going to get a very bad surprise when they find out the month they've just worked is now taxed heavily and it's too late to leave and not be on HMRC's radar.

For the OP to be in this situation is a bit of a scew up no? Dave is now going to get more tax on the April work than he realised and all his history with that client is now at risk of being deemed inside. Not a great place to be at all.

I guess we won't be getting this question again past the end of May though.