Reply to: Moving from outside to inside - same company/role

[PerfectStorm]

I don't think anything bad would happen, but I would leave. Why?

1) Basic respect - if it was OK to be outside when it was your neck on the line, why not now?
2) IR35 determinations are meant to be done properly - if nothing else was changed, was it truly Outside before or is it truly Inside now
3) It's not just about tax - going inside means that you end up with potentially crappier terms about how and when you do the work. If they're keeping your rights via contract - well then why isn't it Outside still?
4) Leverage - you might find that they suddenly reconsider or give you a massive pay bump to stay on. I've known of a few "no pay increases!" agencies/clients to do this privately to keep key bods on.
5) Depending on how long you've been there it may be a good time/excuse to try something else anyway and have an unblemished record, free of permietractor Inside work.

[fiisch]

I would walk.

To add to what's already been said, where I've seen a similar situation, the good contractors walked to find other Outside IR35 gigs, and the bad ones who were more concerned with clinging on to what they had remained, such that working conditions deteriorated accordingly.

Only you know the full situation, how much you want to stay, what the inside vs outside rate is, how long you've been there already and what your prospects are on the open market, but I'd inclined to cull it now, avoid any ambiguity, and remain outside/find another gig.

[Protagoras]

My take on this would be
- if the client has simply banned LtdCo contractors and will definately not issue any SDS, it's probably low risk to remain
- if the client is going to issue a SDS it's time to walk away, one doesn't even want to receive it!

[jamesbrown]

Given that this company has to be large enough that they are subject to Chapter 10 rules (where they are liable) I am at a complete loss as to why they are insane enough to be bringing people inside now

Possibly nudged on the understanding that what happens in future is more important, possibly because they consider the Fee Payers (agencies) to be at most risk, but most likely because they've become less confident about the historical position (a large, but fixed liability) or more averse to the future risk (an unbounded liability) or some combination of the last two.

[jamesbrown]

Blanket bans are illegal

In principle, an SDS should be generated w/r to the actual working practices of the individual supplier. However, if the client has N suppliers all with the same WPs imposed contractually and in reality, then a client would be perfectly compliant to come to the same determination, quickly, about all suppliers, aka "blanket" them. In practice, it isn't worth the hassle/risk for big clients if they make a policy decision to de-risk. Instead, it makes sense to mandate the use of an umbrella, which is almost certainly what has happened to the OP, no new IR35 determination, no payment of PSCs with a deemed payment. They are still asking for scrutiny from HMRC, though.

[ensignia]

If the rate is increased to accommodate then do it unless you're confident in your ability to get another contract somewhere else.

Thousands upon thousands of contractors will have done this since the legislation came in, you're not suddenly going to skip this queue and jump to the front for an investigation.

I'm increasingly thinking the threat of investigation and financial penalties is as far as HMRC are willing to go, and for them it does the job of forcing most firms into banning of PSCs. I don't think they're actually interested in enforcing their own rules or following up just as long as the vast majority are PAYE.

[eek]

Given that this company has to be large enough that they are subject to Chapter 10 rules (where they are liable) I am at a complete loss as to why they are insane enough to be bringing people inside now

[northernladuk]

There are two camps on this topic here.

First camp is the hardcore IR35 bods who spend ages discussing it, understanding it, trying to second guess using the theory. I tend to fall in to this one to be honest. This group will tell you it's a bad idea. Outside to inside has always been a problem and is a flag to HMRC that their legislation has prompted a re-think and the client has more or less decided the job you are doing was inside after all so worth a look. Didn't GSK do this and they all get letters. We did take a guess that the first raft of investigations would be a company doing this as it's low hanging fruit for HMRC. Client has admitted it and they've got a ton of contractors all in the same boat. Nice and efficient to investigate and chase. Win one then they've got the lot.
The mitigating factor here is why have they gone inside. Blanket bans are illegal as each role has to be assessed individually but it could be the client just doesn't want to deal with PSC's so you aren't technically inside, you can't be engaged as a contractor so there is no determination to be made. Employed or nothing. So your role could still meet the criteria as outside and you are safe, it's just the engagement that has changed. Problem is you don't want an investigation, ever. It's not the winning or losing, its the nightmare that is a long expensive investigation.
Personally I'd be looking elsewhere. There are enough gigs out there to not put yourself through this. To hang on to a gig through this kinda looks like you aren't a real contractor so more likely HMRC are right. That said there doesn't seem to be many gigs out there and everyone there will be going for them so pickings could be slim.

The other camp will say just do it. PSC ban doesn't mean your old working practices were inside and no one has been investigated. Millions of contractors have worked through the same and not a peep. HMRC is all bluff and bluster and the people in the camp above are just talking bollocks. To be fair, everything we said might happen to outside/inside contractors never materialised so this camp 'might' be right.

So really it's up to you and how much you care about IR35. If you think it's all bluff and bluster then carry on. If you are super careful, risk averse and are good enough to get another gig then leave and don't worry.

BTW.. Tell us what happens. Last time I saw a big group go inside everyone said they'd leave and next to no one did.

[jamesbrown]

If we're talking hundreds of contractors here working for the same company, all transitioning from PSC to brolly at the same time, then that might pique HMRC's interest.

However, they'd need to investigate every single contractor individually, and that definitely wouldn't appeal to them. They like situations like CK/Boox where they can nail everyone in one fell swoop.

And, besides, this company is falling into line with what HMRC wants everyone to do ie. go PAYE. Why penalise them for that?

Could it even be possible that the company has been "nudged" into doing this by HMRC themselves?

No, they wouldn’t need to do that, realistically, they would need some test cases to establish sufficiently common WPs and the entire group would be screwed, in practice, although the liability would notionally fall on the Fee Payer to begin with. The whole point of Chapter 10 was to reverse the policing from individual suppliers to large clients. It is quite analogous to Chapter 9 in that regard (where the focus is on an MSCP), although the liability/debt collection is quite different. All that said, I think you’re right that HMRC’s main concern, for now, will be to get more contractors on payroll.

[cojak]

Oh Dear. Not good, not good at all.

[woody1]

If we're talking hundreds of contractors here working for the same company, all transitioning from PSC to brolly at the same time, then that might pique HMRC's interest.

However, they'd need to investigate every single contractor individually, and that definitely wouldn't appeal to them. They like situations like CK/Boox where they can nail everyone in one fell swoop.

And, besides, this company is falling into line with what HMRC wants everyone to do ie. go PAYE. Why penalise them for that?

Could it even be possible that the company has been "nudged" into doing this by HMRC themselves?

[jamesbrown]

Obviously, if they are instead documenting your future WPs as being “inside IR35” via correspondence etc. and your WPs haven’t changed, then they are morons. Chances are they are not taking a revised/different view on your historical WPs, at least until they are touched by HMRC , but merely mandating a change in contractual terms.

[jamesbrown]

No reason has been provided, but I believe they are just moving away from PSC’s and trying to reduce their risk.

It may be a technicality, but it matters somewhat, because they aren’t moving everyone “inside IR35” by mandating the use of an umbrella, they are merely rendering IR35 moot, as you will become an employee of the umbrella. They will not be issuing any IR35 determinations in that scenario. This is a completely legitimate way to manage risk and fully compliant because IR35 polices the use of an intermediary and there is no longer an intermediary. Regarding legacy risk, it’s hard to say. HMRC may smell a rat. OTOH, it ultimately comes down to your working practices and evidence for them. Perhaps the biggest risk would be that the client immediately accepts liability, regardless of the reality, but then tries to pursue you or your company for that liability, depending on what the contract says, but there’s little you can do about that now. The legacy risk is what it is.

[jmercer]

In theory, the client shouldn't make a blanket determination. However, there is some nuance: are they issuing you with an SDS which says that you're now inside, or are they imposing a ban on PSCs (personal service companies) and saying that you need to use an umbrella instead?

No reason has been provided, but I believe they are just moving away from PSC’s and trying to reduce their risk.

[hobnob]

i don’t think it’s my specific role, it’s a blanket change for all contractors so I’m thinking this will be huge in terms of contractors leaving.

In theory, the client shouldn't make a blanket determination. However, there is some nuance: are they issuing you with an SDS which says that you're now inside, or are they imposing a ban on PSCs (personal service companies) and saying that you need to use an umbrella instead?