Reply to: Embarrassingly simple IR35/tax investigation question

[Kanaiya]

Comms which went out to contractors at one of the big banks stated that they had been reassured by HMRC they wouldn't actively be looking to pursue this sort of scenario. Which as we all know with the public sector, has turned out to be absolute bollocks.

If they were to go down this avenue, they'd have thousands upon thousands of these cases to investigate, on day one, at this single client alone.

The cynic might say that this would be like all their Christmases had come at once.

On the flip side, HMRC are incredibly under-resourced, so its probably not as simple as being able to open cases against all involved.

Well I agree they are under resource. But after 6th April when client decided’s that they are inside ir35 it’s piece of cake for hmrc to send letters to all the contractors for historic enquiry. They will not have to fight as client itself has said they are inside.

HMRC have taken the decision that they will only use information resulting from these changes to open a new enquiry into earlier years if there is reason to suspect fraud or criminal behaviour. Further reading can be found

HMRC issue briefing: reform of off-payroll working rules - GOV.UK



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[Paralytic]

Comms which went out to contractors at one of the big banks stated that they had been reassured by HMRC they wouldn't actively be looking to pursue this sort of scenario. Which as we all know with the public sector, has turned out to be absolute bollocks.

Can you provide evidence of this? One agency told me this never happened in the public sector and I'd like to provide them with this information.

[eek]

You are personally connected to the client via the intermediary report, so I think they still have all the required information, only twice removed. That said, it's also easier to conduct a compliance check at large clients post April and I expect HMRC will be doing a lot more of that (which gives them another, more direct, route).

All that said, I suppose it's only fair to point out that they have promised not to "focus" on historical cases; don't want to be accused of exaggerating the risk. But I would personally treat that guidance as worthless.

Not quite - the intermediary report doesn't cover the end client - it just asks the agency who it pays with the details of the intermediary limited company / umbrella and the NI number - so HMRC knows agency x has paid you.

The report (Employment intermediaries: report template - GOV.UK has the template) doesn't ask who the client who paid the agency is but it's possible that the client is also sending a report with the agencies details.

[eek]

Comms which went out to contractors at one of the big banks stated that they had been reassured by HMRC they wouldn't actively be looking to pursue this sort of scenario. Which as we all know with the public sector, has turned out to be absolute bollocks.

If they were to go down this avenue, they'd have thousands upon thousands of these cases to investigate, on day one, at this single client alone.

The cynic might say that this would be like all their Christmases had come at once.

On the flip side, HMRC are incredibly under-resourced, so its probably not as simple as being able to open cases against all involved.

As anyone who reads the Scheme Enquiries forum can tell you they can kick the cases off via a single report (say 100,000) and just see how that impacts self assessment returns for 2019/20 before investigating those who don't pay up and respond personally rather than via a tax advisor

They’ll probably just the friendly RPO to do all the leg work for them so they can send out some letters.

Yep - HMRC just need to kick the cases off (for which an obvious transition from inside to outside is probably reason enough) they don't actually need to start the real investigation work off until much later.

Also if you read the statement HMRC made the word automatically is actually superfluous especially when you know the report they would need to run to generate the information has to be kicked off and generated manually. Compare and contrast

Now I'm cynical but I don't think anything has played out any differently from what I suspected would occur back in 2015/6/7.

[Andy Hallett]

They’ll probably just the friendly RPO to do all the leg work for them so they can send out some letters.

[ascender]

Comms which went out to contractors at one of the big banks stated that they had been reassured by HMRC they wouldn't actively be looking to pursue this sort of scenario. Which as we all know with the public sector, has turned out to be absolute bollocks.

If they were to go down this avenue, they'd have thousands upon thousands of these cases to investigate, on day one, at this single client alone.

The cynic might say that this would be like all their Christmases had come at once.

On the flip side, HMRC are incredibly under-resourced, so its probably not as simple as being able to open cases against all involved.

[northernladuk]

I'll say it again, as I have on other threads.

benefits, basically everything that would make NLUK sick.

LOL

Behave as a permie. .

Hes one step ahead of you there. He's been doing that for years! Proactive thinking hey! Taps side of head and raises eyebrow.

[LondonManc]

I'll say it again, as I have on other threads.

Make sure that your current contract and working practices are deemed outside by someone qualified to do so (i.e. not your bloody agent!!!!!)
If they are and you're prepared to continue under a new inside contract, make sure that the wording within the inside contract is massively different and that you are inside SD&C, absolutely no substitution allowed, you have to have holiday leave authorised by your line manager, you have MoO, etc. Make it as IR35-hostile as possible so that it would be worst Outside Review fail ever. You want all the discretion of a sniper in a hi-vis jacket and santa hat that you're a permietractor. Make sure that your old contract is as far away from this pseudo-employment contract as possible and that your working practices also change. Become involved in office politics, say "now I'm a worker rather than a contractor" when starting sentences where it's relevant to drop it in, take advantage of employee benefits, basically everything that would make NLUK sick. Behave as a permie. Make sure there's a clear divide in behaviour between March and April.

[CompoundOverload]

So if I was working at HMRC, I'd watch for clients where a load of one or two-man bands were providing services before April 2020, but where the shareholder(s) / director(s) were now operating full PAYE, probably via an umbrella company. For all I know, umbrella companies also have to notify HMRC which clients their workers are working for.

Thing is, there are a lot of variables as to why a director of a LTD might go to PAYE. IF the director of the LTD was providing services to the same client pre and post April, then yes I'd fully understand why the revenue would go and question that. However, if it was a new company the director joined in a PAYE capacity and has jacked in contracting AND has never previously worked at that client, why would this raise a red flag? The revenue are getting exactly what they wanted. People jumping ship from PSC's to PAYE.

To simply say they will investigate anyone going from a PSC to PAYE is just plain scaremongering.

[DevUK]

It certainly concerns me and its not my income and livelihood that's on the line.

ok

[jamesbrown]

If this is reported by the agency, does this mean that this would not be flagged on HMRC's radar if a contractor went from outside (pre-March 20) to inside after April working with the same client but via a different agency?

You are personally connected to the client via the intermediary report, so I think they still have all the required information, only twice removed. That said, it's also easier to conduct a compliance check at large clients post April and I expect HMRC will be doing a lot more of that (which gives them another, more direct, route).

All that said, I suppose it's only fair to point out that they have promised not to "focus" on historical cases; don't want to be accused of exaggerating the risk. But I would personally treat that guidance as worthless.

[Scoooby]

They don't have sight of the contracts and working practices, correct, but they do have sight of a status change when moving from outside to inside at the same client/agent via the intermediary reporting regulations and RTI.

I think you'll agree that moving from outside to inside at the same client is a pretty good indication that something might have been amiss historically.

But, of course, having a hook doesn't mean you're going to catch a fish; the contract and working practices could reflect a real change in status and that the previous contract was legitimately outside.

FWIW, no one knows, in any detail, how HMRC targets companies or individuals for investigations (except that they often arise from routine investigations/records checks following submissions), so it's mostly speculation. But the intermediary reporting requirements were introduced for a reason and the draft legislation also updates RTI to identify where a deemed payment is being made. There are plenty of breadcrumbs in the system now.

If this is reported by the agency, does this mean that this would not be flagged on HMRC's radar if a contractor went from outside (pre-March 20) to inside after April working with the same client but via a different agency?

This could end up being my situation, as there may be future contract opportunities with the same client after my limited company's contract ends at the end of March (assuming last payment clears before 5th of April).

The contract with the agency has a 3 month restriction clause. I'm thinking it might make sense to have a gap of at least 3 months and then go through a different agency if the opportunity arises and no other decent options available.

Interested to hear if anyone else is thinking about this and if I've missed anything or over simplified this risk mitigation scenario?

[cojak]

Similarly, cynical me wonders whether they'll start putting the frighteners on the owners of the many thousands of small companies operating in specific industry sectors who have suddenly applied for closure in the months following April 2020. Given the manpower, they could very easily throw sand in the gears of a company closure and start poking around in the company's history. Or just make some random assessment which the directors/owners have to fight and win before they can get the company closed down.

I really really hope I'm completely wrong

I’ve already addressed this in my stay/go post.

HMRC could attempt to investigate but I can fight this as my contracts were correctly assessed to be outside of IR35, I have evidence of working practices and I have the insurance to back it all up.

There are far easier targets to go for than companies closing down as they stop trading in April.

[northernladuk]

Should it concern me that I've contracted for a few years now and not heard of this? It's possible my accountant's dealt with anything needed to have been dealt with in terms of RTI, but I doubt it.

It certainly concerns me and its not my income and livelihood that's on the line.

[Snooky]

I may be mistaken but I think agencies are obliged to send various information to HMRC about the contracting companies they deal with. Possibly also about which client that contracting company is providing services to.

HMRC know who the directors and shareholders of all companies are.

So if I was working at HMRC, I'd watch for clients where a load of one or two-man bands were providing services before April 2020, but where the shareholder(s) / director(s) were now operating full PAYE, probably via an umbrella company. For all I know, umbrella companies also have to notify HMRC which clients their workers are working for.

They have a lot of joined-up systems and I think their only issue is understaffing and low staff pay/morale. All they have to do is convince the Chancellor to hike their budget a bit so they can go after thousands of contractors who jumped ship from Ltd Co to full PAYE in March/April.

Similarly, cynical me wonders whether they'll start putting the frighteners on the owners of the many thousands of small companies operating in specific industry sectors who have suddenly applied for closure in the months following April 2020. Given the manpower, they could very easily throw sand in the gears of a company closure and start poking around in the company's history. Or just make some random assessment which the directors/owners have to fight and win before they can get the company closed down.

I really really hope I'm completely wrong