Reply to: IR35 blanket assessment from 2017 - what to do?

[Protagoras]

Thanks again for your posts and views on this thread.

The invoice was submitted Mon 3rd April 2017 and approved by end-client for payment 5th April 2017. There had been no notice of any dates or deadlines for payment or IR35. SAco was only informed when query was raised for non-payment of the outstanding invoice.

I am minded to accept the payment net of the NI and Tax and put it down to experience - as to be honest I am too overrun with work to be doing the small claims court thing - albeit there could be just £20 owed and it would still irk me. I do believe what comes around goes around on these things.

Also wondering whether it was expected that an invoice raised on 3rd April would be paid before 6th April, given that the rules clearly covered contracts entered into, or payments made, on or after 6 April 2017? (This was covered in UK Gov publications).

i.e. were contract terms such that Client needed to approve and the Agency make payment within 2 working days of invoice?
If this was contractually the case then it may be possible to argue that the losses arise as a result of failure to perform to payment terms.

That said, the best I was ever able to negotiate was 4 working days for payments.

Pragmatically, accepting the net payment seems sensible. Not sure what the impact of a personally attributable NI deduction may be though.

[northernladuk]

To be clear SAco does not and has never conducted any work inside IR35.

Not according to HMRC. You got paid after the 6th so all the work done on the last invoice will be inside according to them. Yes it's bollocks but that is HMRC for you.

Work on the contract with Agency-crappo was suspended on Friday 31st March 2017 which probably cost the end client and ultimately the tax-payer rather alot of money, but that is their problem.
The invoice was submitted Mon 3rd April 2017 and approved by end-client for payment 5th April 2017. There had been no notice of any dates or deadlines for payment or IR35. SAco was only informed when query was raised for non-payment of the outstanding invoice.

Very unfortunate but it's when it's paid.

I am minded to accept the payment net of the NI and Tax and put it down to experience - as to be honest I am too overrun with work to be doing the small claims court thing - albeit there could be just £20 owed and it would still irk me. I do believe what comes around goes around on these things.

It really is your only option. Fair dinkum for fighting for what is right but there are limits where it's just not worth it and this is one of them. No one else will care so not worth you getting worked up about it.
I do wish what goes around comes around was real and that it did but sadly it doesn't seem to happen in most cases.

[jamesbrown]

I am minded to accept the payment net of the NI and Tax and put it down to experience - as to be honest I am too overrun with work to be doing the small claims court thing - albeit there could be just £20 owed and it would still irk me. I do believe what comes around goes around on these things.

Sensible.

[Elansofar]

Thanks again for your posts and views on this thread.

To be clear SAco does not and has never conducted any work inside IR35. Work on the contract with Agency-crappo was suspended on Friday 31st March 2017 which probably cost the end client and ultimately the tax-payer rather alot of money, but that is their problem.
The invoice was submitted Mon 3rd April 2017 and approved by end-client for payment 5th April 2017. There had been no notice of any dates or deadlines for payment or IR35. SAco was only informed when query was raised for non-payment of the outstanding invoice.

I am minded to accept the payment net of the NI and Tax and put it down to experience - as to be honest I am too overrun with work to be doing the small claims court thing - albeit there could be just £20 owed and it would still irk me. I do believe what comes around goes around on these things.

[northernladuk]

Notwithstanding arguments about whether taxes may wrongfully have been deducted, I have seen mention of an approach whereby individuals may reclaim taxes 'wrongly' deducted, via SATR, but I've never seen the details of how this approach is supposed to work. I imagine it would be subject to an interesting level of scrutiny, 'poking the bear' as NL would say.

But they haven't been wrongly deducted. Client/agent said inside so they took the right taxes. His issue is the blanket inside determination. He has to get that reversed first then he can be paid as outside. He's been paid correctly for the determination he has.

I may have missed the detail, but it seems unclear whether SAco undertook any work after 'Off-Payroll Day' or whether services were suspended before then, while the payment date was after 'Off-Payroll Day', hence the deductions. Some people may consider that there is a risk in accepting a role has gone 'outside-in' which may create a retrospective risk to the 'outside' work, as mentioned; that's why many stopped work before hand.

Interesting point that. The OP says

When SAco did not get paid an invoice by 7th April 2017, an enquiry was raised with Agency-crappo and they advised that they were unable to pay SAco and would only pay the person working on the job directly (which was me), because the end client Govt Dept had unilaterally deemed the appointment inside IR35. This came a surprise to SAco, as no notice of any contractual changes were notified from Agency-crappo as required under the passing contract - there had been no communication whatsoever. SAco immediately suspended work on the contract and walked away as there were other clients on the books the same week (NHS and a charity) and plenty of work to fill the gap.

It doesn't mention at what point the issue was raised so could possibly have worked past the 7th and is expecting pay for that as well. But it's a bit irrelevant. The rules say he must be paid as inside if it's after Apr 6th regardless if work was done before that date so he's technically outside to inside already.

[northernladuk]

I thought he said he hadn't had any money from the agency

First post

Having contacted Agency-Crappo, they have stated that they are happy to pay SAco the monies owed directly, but insist that they must deduct the national insurance and tax due to the end client's assessment etc and so they want my own NI details etc.

I assume he refused it 5 years ago with a view to challenging it so they are still holding it

[Protagoras]

Alternatively, I have read somewhere that there is a HMRC form that SAco can fill out to reclaim the monies wrongly deducted (due to lack of a formal SDS/ lack of reasonable care) should payment net of NI etc be accepted- but i can't find any information about this, and the small accountant SAco uses has no idea whatsoever and has suggested a rather expensive IR35 specialist- which may not be VFM.

Notwithstanding arguments about whether taxes may wrongfully have been deducted, I have seen mention of an approach whereby individuals may reclaim taxes 'wrongly' deducted, via SATR, but I've never seen the details of how this approach is supposed to work. I imagine it would be subject to an interesting level of scrutiny, 'poking the bear' as NL would say.

I may have missed the detail, but it seems unclear whether SAco undertook any work after 'Off-Payroll Day' or whether services were suspended before then, while the payment date was after 'Off-Payroll Day', hence the deductions. Some people may consider that there is a risk in accepting a role has gone 'outside-in' which may create a retrospective risk to the 'outside' work, as mentioned; that's why many stopped work before hand.

I think you have two realistic options
(a) Accept net payment, accepting any 'outside-in' risk, your accountant advising whether this should be SAco or personal income
(b) Put it down to experience and forget it; SAco should have ceased providing services earlier and SAco should have been paid before 'Off-Payroll Day'

[Snooky]

He's already got 1, so 4 isn't going to happen.

I thought he said he hadn't had any money from the agency

[northernladuk]

Doing some very rough sums. Assuming one month at 500 quid a day

Outside IR35 net - 6022
Inside net - 4959
Difference is £1063

So all this is for 1063 which is likely to be lower once you factor in his tax codes and everything so doesn't seem a lot to be fighting the goverment for TBH.

Added to that he says his work was flexible so it's highly likely he isn't billing for a full month either.

Also there is a thought that if he was outside and the client has (albeit wrongly) marked him inside and he's had one payment go through then he's gone outside to inside. We don't know if he will be succesful fighting the determination (well we do really) but we also don't know HMRC will see his outside to inside status and want to take a much closer look thinking he was actually inside all along. Is it worth poking that bear for less than 1k from 5 years ago? IMO? No on your nellie.

If OP does still want to keep banging this drum they need to work out the exact figure they think they've lost.

[northernladuk]

If nobody completed an SDS, your contract doesn't say that PAYE taxes can or will be deducted, and you weren't notified of any change in that, it seems that the agency could be in breach of contract. They admit that your company is due money for the work which was done so there's no dispute there, the only sticking point is that they want to deduct PAYE taxes from it.

No SDS this early on. And I don't think a change in legislation invalidates the contract. They will pay him XX a day but now they are required by law to pay it to him taxed. I am not sure where breach of contract will help here. Payment is only a minor breach as well so won't stand even if the payment terms have changed.

A few possible options:

1. Take the payment net of PAYE on the basis that some money is better than no money and just treat the rest as your kind contribution to the nation's wellbeing
2. Take the payment net of PAYE, making it clear you're accepting it as part payment, and then sue for the unpaid remainder in the Small Claims Court - you may well lose unless you can present your case very well but, depending on the amount, the fees may be low enough to be a reasonable gamble
3. Sue the agency for the full amount, possibly a more difficult option than (2); depending on the amount, Small Claims track with its relatively low fees and no need for solicitors may still be a useful route
4. Do nothing and the debt may become impossible to recover once the 6 years are up

If you're thinking of letting (4) happen, at least do (1).

He's already got 1, so 4 isn't going to happen.

If he takes 2 I reckon the matter will be seen as closed. Often if you accept an offer you have little recourse afterwards.

Also on both 2 and 3 what do you call full amount? It will be the difference in tax between gross and net and bearing in mind there are taxes on the gross until it hits his pocket via corp tax, divi tax and VAT how much do you think the actual amount he's missing is?

Also on 2 and 3 it's pointless sueing them. They've done nothing wrong and paid him as per the law. I've had experience of small claims and it's a shoddy affair. They don't go in to detail and there is just you, the agent and the judge and he will be looking for the fastest exit out. The agent will say we paid him as per the law and the judge will end the proceedings there and then. You need to go to higher courts to get the law looked at and challenged.

And again, he's got to challenge the legislation here, not sue the agency. He needs the decision of blanket ban over turning first before he gets anything his due. Sueing the agent for complying with the law is just pointless.

The only thing that 'might' happen is the agent rolls over and gives him the tiny bit of money difference between the two to not have to turn up in court but I very much doubt they will do that.

[Snooky]

If nobody completed an SDS, your contract doesn't say that PAYE taxes can or will be deducted, and you weren't notified of any change in that, it seems that the agency could be in breach of contract. They admit that your company is due money for the work which was done so there's no dispute there, the only sticking point is that they want to deduct PAYE taxes from it.

A few possible options:

1. Take the payment net of PAYE on the basis that some money is better than no money and just treat the rest as your kind contribution to the nation's wellbeing
2. Take the payment net of PAYE, making it clear you're accepting it as part payment, and then sue for the unpaid remainder in the Small Claims Court - you may well lose unless you can present your case very well but, depending on the amount, the fees may be low enough to be a reasonable gamble
3. Sue the agency for the full amount, possibly a more difficult option than (2); depending on the amount, Small Claims track with its relatively low fees and no need for solicitors may still be a useful route
4. Do nothing and the debt may become impossible to recover once the 6 years are up

If you're thinking of letting (4) happen, at least do (1).

[northernladuk]

I just meant from the aspect of it was 5 years ago, mentally almost written off (presumably, otherwise why would you wait 5 years), so passing over to debt collection turns it into a no-win-no-fee low-stress way of potentially getting some money. I understood it that OP was rejecting the inside decision and chasing the full invoice (and had so far received £0)

But he says in the first post

Having contacted Agency-Crappo, they have stated that they are happy to pay SAco the monies owed directly

So it's not been written off mentally at all. They are going to get what they are due so why is a debt collector the perfect candidate? You are both talking about debt collector to go after the outside money which I pointed out isn't a debt, it's a legislation issue.

Glad to know you've been reading as carefully as I have NLUK :-)

You've read it that carefully and telling him the debt collector is the perfect candidate when it's not even a debt? Way to go you.

[Elansofar]

Hi - thank you all for your useful insights. The entire invoice remains outstanding, the debt collectors were good but a few months later advised that they could not help with an IR35 issue. SAco seems to have been a victim of the 2017 blanket assessment issue, which is well covered in the NAO report that came out in Feb 22. Needless to say there seems to be no easy way to get SAco the gross payment, and so I will have to settle for the net. Other public sector clients on the books at that time, either contracted directly or via agencies did not act in this way, and were very sensible completing CEST assessments in consultation etc.

[pr1]

It does? How?. The debt he's going after is the difference between what he'd get outside to what he'd get inside so only a percentage of the actual invoice. It's also going to be very complex to work that out as gross in to the company vs net in pocket is going to be so how much is he after?

And, more importantly, it's not really a debt. The agency have paid him as per the legislation so not technically a debt until he can overturn the SDS so no chance the debt collection people will take that on. This is a legislation fight, not debt collection.

I just meant from the aspect of it was 5 years ago, mentally almost written off (presumably, otherwise why would you wait 5 years), so passing over to debt collection turns it into a no-win-no-fee low-stress way of potentially getting some money. I understood it that OP was rejecting the inside decision and chasing the full invoice (and had so far received £0)

But I've just seen:

I instructed debt collectors in 2020

Glad to know you've been reading as carefully as I have NLUK :-)

[northernladuk]

This sounds like a perfect candidate for handing over to a debt collection agency - if they can get it sorted you'll get some money, if they don't, you won't be in a worse position than you are right now

It does? How?. The debt he's going after is the difference between what he'd get outside to what he'd get inside so only a percentage of the actual invoice. It's also going to be very complex to work that out as gross in to the company vs net in pocket is going to be so how much is he after?

And, more importantly, it's not really a debt. The agency have paid him as per the legislation so not technically a debt until he can overturn the SDS so no chance the debt collection people will take that on. This is a legislation fight, not debt collection.