Reply to: Best business Structure post April

[ShandyDrinker]

You have to remember that HMRC don't care about the bigger picture - it's above their pay grade and in their eyes has nothing to do with them.

Hence, what to us is a big decision that needs to be made prior to work beginning (Umbrella or Limited company) isn't an issue for them - SDS decisions can occur later.

Equally - expenses are an issue for a different department so likewise while it's a big issue for us it's not a consideration for the IR35 team

Sadly all too true.

Anyone would have thought there would be some joined up thinking! Then again, this is from successive governments that brought us greatest hits such as employed for tax purposes but not employment rights. I don't blame any one political party for it as they've shown they're all the same.

Still, the end result is all too predictable, people will leave contracting, large consultancies will pick up some of the slack, companies will claim a lack of skilled people available, the floodgates will be opened. Rinse and repeat.

[eek]

As with the other thread from earlier today on passing Tax/NICs liability down the contractual chain, another nuts decision. In this case I do have slightly more understanding as it sometimes won't be apparent until someone is working in a contract. However, for me it beggars belief that anyone would be prepared to start a contract without a clear understanding as to whether the contract is inside or outside. How can anyone budget or plan, particularly if they have to work away from home requiring overnight stays - the decision could turn a contract from being marginally commercially viable to not a hope in hell.

You have to remember that HMRC don't care about the bigger picture - it's above their pay grade and in their eyes has nothing to do with them.

Hence, what to us is a big decision that needs to be made prior to work beginning (Umbrella or Limited company) isn't an issue for them - SDS decisions can occur later.

Equally - expenses are an issue for a different department so likewise while it's a big issue for us it's not a consideration for the IR35 team

[ShandyDrinker]

yep - to be clear the change is because working practices can only be identified after work has begun. And I can only report what I heard in a HMRC workshop for agencies that I am thankfully that JamesBrown also attended

As for ipse it was done with the best of intentions and it wasn't just IPSE who wanted this change. Heck I suspect they weren't even a consideration

As with the other thread from earlier today on passing Tax/NICs liability down the contractual chain, another nuts decision. In this case I do have slightly more understanding as it sometimes won't be apparent until someone is working in a contract. However, for me it beggars belief that anyone would be prepared to start a contract without a clear understanding as to whether the contract is inside or outside. How can anyone budget or plan, particularly if they have to work away from home requiring overnight stays - the decision could turn a contract from being marginally commercially viable to not a hope in hell.

[eek]

So to be politically incorrect, has IPSE really screwed things up, even if with the best of intentions? My understanding was (and still is) that an SDS must be produced before the contract starts but now you're saying it can be up until payments are made by the client? How on earth can this be progress as the main party it will screw over is the contractor?

yep - to be clear the change is because working practices can only be identified after work has begun. And I can only report what I heard in a HMRC workshop for agencies that I am thankfully that JamesBrown also attended

As for ipse it was done with the best of intentions and it wasn't just IPSE who wanted this change. Heck I suspect they weren't even a consideration

[ShandyDrinker]

So to be politically incorrect, has IPSE really screwed things up, even if with the best of intentions? My understanding was (and still is) that an SDS must be produced before the contract starts but now you're saying it can be up until payments are made by the client? How on earth can this be progress as the main party it will screw over is the contractor?

[Lance]

The original timeframe for determination was so much easier as it did made things easy - the client made a decision and you picked the appropriate payment mechanism.

The new rules mean you (currently) need to second guess what the SDS decision will be and pick what you hope is the most appropriate mechanism - knowing that if you are wrong you've got a large tax bill to pay.

Edit - as I missed the hidden question. It's easily possible that an agency could sell you a contract as outside IR35 and then for them to be "surprised" by an inside determination arriving 90 days later.

but that surprise would also be a breach of contract would it not?
Your LTD would still have a tax problem to sort out, but how are agencies going to avoid all sorts of crap when an uppity contractor decides to go after them for a material breach?

EDIT: Ignore me. I just spotted your last post.

[eek]

The question was where you actually get an outside determination on day 1 of a contract. Could then client, on, say, day 60, before first payment has been made, then issue a new inside determination? If so, would that then apply from day 1 with the resultant potential claim on taxes?

In that case yes the inside IR35 determination started at day 1 and the agency somehow needs to reclaim the money that was paid directly so that the appropriate deductions are made. Which is why you see contracts that contain claw back clauses that at first glance make little sense but they are there so the client can ask for the money that should have been paid in income tax to be returned.

[Paralytic]

Edit - as I missed the hidden question. It's easily possible that an agency could sell you a contract as outside IR35 and then for them to be "surprised" by an inside determination arriving 90 days later.

The question was where you actually get an outside determination on day 1 of a contract. Could then client, on, say, day 60, before first payment has been made, then issue a new inside determination? If so, would that then apply from day 1 with the resultant potential claim on taxes?

[eek]

Thanks for the clarification - I hadn't appreciated how agency factoring would play into this.

Whilst I doubt this will impact many people in actuality (I suspect most clients will want to get a determination in early), it's ludicrous that contractors could be put in this position of doubt. Or do you think this leeway would also allow a client to change a previous outside to inside between engagement start date and first client payment to agency?

If so, when do you expect your dodgy tax avoidance scheme to launch?

The original timeframe for determination was so much easier as it did made things easy - the client made a decision and you picked the appropriate payment mechanism.

The new rules mean you (currently) need to second guess what the SDS decision will be and pick what you hope is the most appropriate mechanism - knowing that if you are wrong you've got a large tax bill to pay.

Edit - as I missed the hidden question. It's easily possible that an agency could sell you a contract as outside IR35 and then for them to be "surprised" by an inside determination arriving 90 days later.

[cojak]

Love the idea of eek and JB sneaking into a Zoom conference call amongst recruiters.

[eek]

Thanks for the clarification - I hadn't appreciated how agency factoring would play into this.

Whilst I doubt this will impact many people in actuality (I suspect most clients will want to get a determination in early), it's ludicrous that contractors could be put in this position of doubt.

When do you expect your dodgy tax avoidance scheme to launch?

Oh quickly if it works - it only dawned on me overnight so I'm going through things at the moment

Sadly it won't be dodgy - it would be so much easier if I didn't have moral standards.

[Paralytic]

The deadline isn't the first payment by the fee payer, it's first payment by the party responsible for making the determination i.e. the end client which may be 120 days after you started the contract based on respective payment terms (monthly billing, with the end client on 90 day terms).

Thanks for the clarification - I hadn't appreciated how agency factoring would play into this.

Whilst I doubt this will impact many people in actuality (I suspect most clients will want to get a determination in early), it's ludicrous that contractors could be put in this position of doubt. Or do you think this leeway would also allow a client to change a previous outside to inside between engagement start date and first client payment to agency?

If so, when do you expect your dodgy tax avoidance scheme to launch?

[eek]

I still can't quite believe what I heard.... but I did hear it because eek heard it too.

More than that - I tried while in a state of complete shock to think of questions that would allow me to double check what we had heard was correct while still pretending to be a recruitment consultant. And the answers did match what I had thought I was imagining..

[jamesbrown]

I still can't quite believe what I heard.... but I did hear it because eek heard it too.

[ladymuck]

IPSE were one of the people who asked for this change - as a determination prior to starting work cannot reflect working practises.

You know the phrase be careful what you wish for....