Reply to: IR35 investigations in 2020/21

[TheInvoicer]

People would never go contracting at an old employer (Friday-Monday switch) but are seriously considering staying on at existing clients. Mental.

It’s insane but some people are oblivious to the risk and plan just to carry on...


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[northernladuk]

/thread

[cojak]

I spoke with the client and they are unable to give me any indication as to how it's looking, which isn't ideal.

They are going to tell me 2nd week of November as to what the determination will be. I leave at the end of December anyway, so worst case, if they did decide I was "in scope" then I will be leaving 4/5 weeks after that decision has been made anyway.

So i guess my question is, what should i do, wait for the decision and leave if it's inside (as i do not agree with it) or be very risk averse and hand notice in now so that I won't be there when the communication is sent around as to what my determination will be.

However, surely the fact that i am on their radar now and they are doing an assessment on me means that even if I left before the announcement they would have made a determination on me regardless?

Really CompoundOverload, you have asked for advice and it's been given to you (along with people's suggestions as to what they would do).

You have everything that you're going to get - it is now up to you to be the business person that you are and make the informed decision yourself.

[CompoundOverload]

I mean getting any formal SDS and staying after that. If you have a chat with the client and they say 'it's looking this way' and you leave then it's more difficult for HMRC to make a case.

But I think the easiesr mechanism to get info is from RTI post April so in your example the risk is higher than if you left pre SDS but lower than if you stayed and were paid PAYE.

I spoke with the client and they are unable to give me any indication as to how it's looking, which isn't ideal.

They are going to tell me 2nd week of November as to what the determination will be. I leave at the end of December anyway, so worst case, if they did decide I was "in scope" then I will be leaving 4/5 weeks after that decision has been made anyway.

So i guess my question is, what should i do, wait for the decision and leave if it's inside (as i do not agree with it) or be very risk averse and hand notice in now so that I won't be there when the communication is sent around as to what my determination will be.

However, surely the fact that i am on their radar now and they are doing an assessment on me means that even if I left before the announcement they would have made a determination on me regardless?

[ComplianceLady]

Re your point below:

Final point is that I only see it as a risk if you get an inside determination and stay. I can't see HMRC gathering information on people who were outside, told they would be inside and then left - there'll be too many other, better, targets.

When you say get an "inside determination and stay". Do you mean an inside determination pre April 2020 and stay post April?

What if you get a determination that is inside in November but stay until end of December and leave?

I mean getting any formal SDS and staying after that. If you have a chat with the client and they say 'it's looking this way' and you leave then it's more difficult for HMRC to make a case.

But I think the easiesr mechanism to get info is from RTI post April so in your example the risk is higher than if you left pre SDS but lower than if you stayed and were paid PAYE.

[northernladuk]

I would imagine that the client would say to HMRC that it was the contractors problem, and they’re not interested in getting involved.

That's never happened in the cases that have been to court so doubt it.

[Lance]

HMRC would communicate with the client if an enquiry was opened to ascertain the facts around working practices once they open an enquiry. They don't need the client to grass you up for HMRC to open an enquiry.

I would imagine that the client would say to HMRC that it was the contractors problem, and they’re not interested in getting involved.

[BlueSharp]

That would be the intelligent thing to do. There is no reason for them to make determinations on any contract that ends before April. Contracts that go past April will need determinations probably in February, early if they are renewals and the contractor won't renew without an outside determination.


This seems a reasonable guess. Although the one you have second could be their top priority. They will certainly want to go after any client which they deem is making too many outside determinations, if they can take a couple high profile scalps they'll be scaring everyone into blanket inside determinations.

They also run the very real risk of losing at tribuneral and loosing the scare tactics, there track record is pretty poor. No doubt there will be the usual blanket email to all client's trying to scare a switch. I think the priority is pretty correct.

[WordIsBond]

Until they have gone down every rabbit hole and get bored....

Right. I think under that scenario you're pretty far from the centre of the warren and in a really deep hole. They don't have that many IR35 teams and the clock will be running. There clearly is more risk than if you leave before the determination, though.

[CompoundOverload]

That's a risk but IMO not a high one. You can argue it in the tax tribunal that the client was just risk averse, but if that was their view you weren't going to provide your services to them any longer. If they want a disguised permie they can hire one but you aren't one.

And as noted above, there are likely other higher priority targets for HMRC to chase.

Until they have gone down every rabbit hole and get bored....

[WordIsBond]

We are encouraging clients to consult - not determine. That gives them the chance to give contractors a heads up without exposing them to risk (if the contractor leaves).

That would be the intelligent thing to do. There is no reason for them to make determinations on any contract that ends before April. Contracts that go past April will need determinations probably in February, early if they are renewals and the contractor won't renew without an outside determination.

Final point is that I only see it as a risk if you get an inside determination and stay. I can't see HMRC gathering information on people who were outside, told they would be inside and then left - there'll be too many other, better, targets.

My expectation is that you'll have a phishing approach - client determines everyone inside, letters sent to all contractors who now work inside saying 'we believe you got status wrong', some offer evidence, those that don't are given tax bills. Just taking that approach will net HMRC a fair amount. The difference in tax take in Year 1 of the reform v Year 2 is coming from historical cases in my view so I think it's wise to be wary, though I think it will be prioritised like this:

Pre 2020 Post 2020
Outside -> Inside, same client
Outside -> Outside, targetted sectors
Outside -> policy PAYE only, same client
Outside -> Outside, previous outside is now inside only client
Everyone else

This seems a reasonable guess. Although the one you have second could be their top priority. They will certainly want to go after any client which they deem is making too many outside determinations, if they can take a couple high profile scalps they'll be scaring everyone into blanket inside determinations.

[WordIsBond]

That's my worry. If you leave based on the inside determination you look guilty and could still get a pull.

That's a risk but IMO not a high one. You can argue it in the tax tribunal that the client was just risk averse, but if that was their view you weren't going to provide your services to them any longer. If they want a disguised permie they can hire one but you aren't one.

And as noted above, there are likely other higher priority targets for HMRC to chase.

[northernladuk]

Yes agreed IF an enquiry was opened.

I think HMRC are going to initially go after those who were acting outside, determined inside by the client but continued post April 2020.

But HMRC wouldn't be doing targeted campaigns retrospectively.... would they

The keyword there is initially....

And I think I already posted a link questioning HMRCs comment about not going retrospectively.

https://www.contractoruk.com/forums/...2020-21-a.html

[BlueSharp]

I'm under no illusions about that.

People would never go contracting at an old employer (Friday-Monday switch) but are seriously considering staying on at existing clients. Mental.

[CompoundOverload]

HMRC would communicate with the client if an enquiry was opened to ascertain the facts around working practices once they open an enquiry. They don't need the client to grass you up for HMRC to open an enquiry.

Yes agreed IF an enquiry was opened.

I think HMRC are going to initially go after those who were acting outside, determined inside by the client but continued post April 2020.

But HMRC wouldn't be doing targeted campaigns retrospectively.... would they