IR35 change after contract started

[Millie]

Hoping someone can advise me.
I started a 6 month contract in construction, nearly a month ago under my limited company, to date have not received any payment after submitting 3 weekly invoices for weekly pay. Today was told it is likely I will have go PAYE under IR35, my pay is being withheld until a decision is made, is this legal?

[northernladuk]

The SDS can be issued any time up to the first payment as per this article

https://www.gov.uk/hmrc-internal-man...anual/esm10012

For the client, or any subsequent party in the chain, to discharge its liability the SDS should be issued on or before the date any payment is made. If payments are made before the SDS is issued, this will result in responsibility for tax, NICs and apprenticeship levy remaining with the person who hasn’t passed the SDS on.

Also here

https://www.lewissilkin.com/en/insig...rom-april-2021

The end-user must provide the SDS to the contractor before making the first payment to them. If there is an agency in the chain (see below), the SDS must also be provided to the agency. In practice, we expect that contractors accepting a new assignment are likely to want to know in advance whether they will be assessed as within the scope of IR35.

You should really have pushed for the SDS before you started. It's absolutely ludicrous system and many people, like yourself, are going to get some very bad news if it carries on like this.

So technically, they haven't paid you yet so they can still issue you with an SDS saying inside even if you thought it was outside all along. You can challenge it but there are rules around that and good luck with that.

Does raise an interesting point though. If you were supposed to be paid weekly and you are now three weeks late that's very unfair. You've technically not been paid as mentioned above but delaying payment before making the decision is very wrong.

eek Eek is our resident expert on this. What's the score with the client breaching payment terms to stay within the SDS rules?

[Millie]

Thanks for the reply I have done overtime for last 2 weeks too, can't believe they can do this, provided company details, PLI etc before I started. How long can they keep me hanging like this with no money ? A bit lost as to what to do now.

[northernladuk]

Thanks for the reply I have done overtime for last 2 weeks too, can't believe they can do this, provided company details, PLI etc before I started. How long can they keep me hanging like this with no money ? A bit lost as to what to do now.

It's essential you insist on an SDS before you start, so many people getting caught out. I'm waiting for Eek to give his opinion but if they are late with your payments you can send them a message outlining the payment clauses in the contract advising they are late and you will be starting to charge interest at 8% above the Bank of England interest rates. Link here https://www.gov.uk/late-commercial-p...ommercial-debt

If you've signed the contract as a LTD and not been told otherwise then it's a B2B debt. That might kick them in to paying quicker which means you'll get the bad news about the SDS quicker though.

Something very strange they are breaching their own payment terms over all this. You sure you are weekly? Says nothing about month in arears or anything? They are definitely late as per their own T&Cs?

Really need Eek to clarrify the situation though. I'll PM him.

[eek]

Hoping someone can advise me.
I started a 6 month contract in construction, nearly a month ago under my limited company, to date have not received any payment after submitting 3 weekly invoices for weekly pay. Today was told it is likely I will have go PAYE under IR35, my pay is being withheld until a decision is made, is this legal?

That's a mess but sadly not completely unexpected under the new rules as an SDS can be sent up to the time the end client makes its first payment (it's 1 reason why there are claw back clauses in outside IR35 agency contracts).

Are you working via an agency or directly with the company?

As for whether it's legal, the end client is working under HMRC rules but playing fast and loose with everything else to ensure HMRC are kept happy and it doesn't end up costing them money.

Sorry to be the bearer of bad news but I think you've been tricked and would suggest that you start to find another contract asap.

[eek]

Something very strange they are breaching their own payment terms over all this. You sure you are weekly? Says nothing about month in arears or anything? They are definitely late as per their own T&Cs?

Large companies are very willing to breach payment terms, but in this case it's really simple

8% annual interest on a late payment is way less money than 45% tax on an inside IR35 contract incorrectly paid.

[Millie]

Thank you, it's not through an agency but direct with a very large company. This is my first job in this industry, after spending a lot of money getting the required certicates to start this job so experience is very limited to find something else a month in.

[northernladuk]

Thank you, it's not through an agency but direct with a very large company. This is my first job in this industry, after spending a lot of money getting the required certicates to start this job so experience is very limited to find something else a month in.

Try renegotiating the rate on the new determination. Some companies are increasing the inside rates to cover.

[eek]

Try renegotiating the rate on the new determination. Some companies are increasing the inside rates to cover.

+1 - as that seems to be the only suitable outcome for you.

[jamesbrown]

You're a bit stuffed, I'm afraid. This was entirely predictable/predicted and has come to pass. The delay with other intermediaries and invoice factoring could be very long and the contractor would really have little clue about what was happening and would then be hit with an altered SDS and a bill and/or withheld monies from outstanding invoices.

Regarding invoice payments according to the contractual terms, that's almost a separate issue. You could try the usual dunning procedure but it probably won't help much because you know the underlying reasons.