Reply to: Inside IR35 tax Liability

[Keanu2020]

With HMRC, it is hard enough to get an answer, and when I do get one, it changes each time. It has been close to 5 months now and pretty much given up on getting an answer from HMRC. The current solution is based on (I believe wrong) advice given to the client and their recruitment agent direct from HMRC. As you say, it is their legislation as well.

[simes]

Good grief!

And the HMRC were of no help in clarifying to the client it is their responsibility, bearing in mind it is their legislation?

Ok, I see eek's point now. Thanks for that.

[Keanu2020]

Pretty much.

I begin questioning why anyone would contract outside if that’s the risk and you have no control over the determination at all.

Current role is illuminating where I see recruiters (it’s a large firm) clearly doing no real checks and just saying the roles can be outside in advice to client, mainly as it’s a competitive market and need to do this to attract people. The Client (having taken external advice!) and this is where it gets odd, are told if caught breaking the rules on IR35 it’s just an £8K to £10K fine, not the tax. The rush to attract talent, business pressures, bad advice, you can see why there are more outside roles.


Everyone seems to think it should be the hirer (client) that is responsible for the missing tax, but try finding that laid out clearly, particularly with reference to fixing an issue that may have been running for months / years.

[simes]

Can I ask what made you ask for an update? Similar issue?

Thanks for that.

In the State of the Market thread, I mentioned having recently started an Outside gig and someone commented that I 'must be brave'. Even though I was thinking an Outside gig was what everyone was looking for.

And then someone else found an Outside gig and linked your situation to what inspired the 'brave' comment.

Gulp! So, it is the clients' responsibility, unless they've made a mistake. And then it again reverts to being your responsibility. That it?

[Keanu2020]

In short, slowly.

Spoke with WTT and grateful for the time invested, but they got to the same place my accountant did. Which is I was ‘fortunate’ to a certain extent that it was discovered early. It means the tax bill due and what I would have had to pay through my ltd net out to about the same. So advice was kind of “your no worse off and chalk up to experience”. With the sum I’m owed not being massive as well, suspect for any advisors there is no major payday from resolving. Like I said, lucky found it early.

But it is still wrong. And I have been trying to resolve.

I tried HMRC but frankly its ridiculous. I have chat logs from their online help stating wildly different positions and answers from people there, some worse. They don’t respond in any meaningful timeframe. And the last response was along the lines of “share with us all your personal financial information from every source and we will see how we can help you”. Thanks, but I will pass on the kind offer of an unrequested investigation. I guess, no surprise, there sole concern is they might be able to collect more tax from someone, not that the right person paid it in the first place.

The general consensus is that this is not how it’s meant to work, but its near impossible to get clarity. One person who is well connected is trying to help me, and I’m grateful, but its very slow going for them with no clear answer yet either.

I think more people down the line are going to get hit with a much large bill (think 16 to 20 months inside) and it going to be life changing sums with no help or guidance anywhere on how to resolve.

Can I ask what made you ask for an update? Similar issue?

[simes]

Newly introduced to this thread, please can I ask what the latest might be? Thanks.

[northernladuk]

Good, please keep us updated, this is one of the more interesting (and concerning) threads around here in a long time.

Even more interesting than the one from the guy that's been with an umbrella 5 years and is now asking how pension work with brollies?

[jamesbrown]

I'm on it and don't intend to. Main worry is whats buried in the contracts, but getting professional help to look at that.

Good, please keep us updated, this is one of the more interesting (and concerning) threads around here in a long time.

[Keanu2020]

Anyway, if I were the OP, I would definitely not be taking this lying down. There are existing avenues to dispute/correct for taxes owed (such as your SATR), but that needs professional advice.

I'm on it and don't intend to. Main worry is whats buried in the contracts, but getting professional help to look at that.

[jamesbrown]

Well I've spoken to HMRC

Given the scenario - contract was supposedly outside, worker has now left and I have an SDS saying inside - the answer was go back to the worker and reclaim the money.

Not something I suspect anyone would want to hear.

In reality it does seem that the PAYE debt should be being paid by the deemed employer and the recovery mentioned above is a separate process to ensure the agency is not left out of pocket paying the PAYE tax bill but I'm not 100% sure how you (as the poor contractor / worker) would go about ensuring the feepayer actually pays the bill.

Mind you I can see why your agency is annoyed because according to ESM10031 - Employment Status Manual - HMRC internal manual - GOV.UK (www.gov.uk) as the debt is prior to April 2021, the debt doesn't move up and down the chain it sits with the feepayer.

Sorry for the news not being great - let's hope that WTT is of use and if not see what Merkel say (I'm wouldn't recommend ETC for reasons connected with Felicitas and the mess they seem to have made there).

This may well be HMRC's opinion (or, at least, the opinion of someone at HRMC), but that does not make it correct. In fact, they have a history of not understanding the legislative underpinning for the policies they enforce, so that is no real surprise. This is why I asked about whether you know someone there that actually understands the legislation.

To me, this opinion seems contradictory to some of Chapter 10 ITEPA (the first/2017 iteration thereof), which clearly identifies where within the supply chain the liability should fall in certain circumstances (such as the failure to issue a determination). I accept that the situation described by the OP is less about whether a determination was issued/communicated and more about an error in applying the deemed payment, so it is less clearcut, but I don't think the legislation ever intended for the liability to be passed down the supply chain (to the worker's intermediary, let alone the worker - edit: absent fraud, that is), only up the supply chain, and I think this will bear out (if pursued).

Aside from the legislation, the main complication is any contractual terms that seek to pass down liability for unpaid tax. This is a private law matter and there are differing opinions about whether such clauses can succeed.

Anyway, if I were the OP, I would definitely not be taking this lying down. There are existing avenues to dispute/correct for taxes owed (such as your SATR), but that needs professional advice.

[Keanu2020]

You never know, you might end up with a group of like minded contracting professionals banding together ...

Let's not get carried away!

[ladymuck]

My MP has voted against IR35 and supported questions. However, not Tory so suspect limited option to really impact. . . . .

I wouldn't underestimate the amount of noise an MP can raise if motivated. If they ask a question in parliament, that could lead to others in the same situation as you coming forward which could draw more attention and more noise.

You never know, you might end up with a group of like minded contracting professionals banding together ...

[Keanu2020]

The biggest issue here is that, to escape the very large bill, the feepayer needs to prove that the party above them failed to send an SDS determination - which is going to be hard when there are 50,000 reasons for the client above to deny screwing up.
.

I have the emails from my recuitment agent asking me to pass them the SDS as they have never seen and want to get a copy. . . .

[Keanu2020]

Decide first off what you want your MP to do. I think they should ask a question of HMT / HMRC to determine if the changes to IR35 is having the desired effect in this scenario. Based on what eek says the answer may be a yes. With a bit of luck your MP may be outraged on your behalf (check their IR35 voting record to see the likelihood of that) and may be willing to raise questions in parliament.

My MP has voted against IR35 and supported questions. However, not Tory so suspect limited option to really impact. . . . .

[Keanu2020]

Another option is to approach IPSE and see if they'd be willing to take the case on if you do go legal. You don't necessarily have to be a member to get their backing - it's more about the case and whether the result will advance things for the greater good. This is less likely with the more commercial and less activist approach they now have but you've nothing to lose by asking. See if Andy Chamberlain there will talk to you as he might be a good advocate.

I did try contacting IPSE via contact form (not ideal i know), just got a generic reply saying see our IR35 helps section. Member in the recent past, but not now. I guess its a case of finding the right person who sees the big picture.