Reply to: Day 1 Rights - IR35

[jamesbrown]

***UPDATE***

Pleased to announce that I've received the SDS from the agency declaring that I am outside of IR35 so I'm off the hook!

Very glad I didn't have to learn this lesson the hard way.

You're a little bit too credulous. Try re-reading some of the earlier posts in this thread.

That said, whether you're "off the hook" or not is largely out of your control now; it's better to understand these things before you sign a contract.

[northernladuk]

***UPDATE***

Pleased to announce that I've received the SDS from the agency declaring that I am outside of IR35 so I'm off the hook!

Very glad I didn't have to learn this lesson the hard way.

Certainly didn't learn it the easiest way by understanding what you should be doing though.

[Paralytic]

***UPDATE***

Pleased to announce that I've received the SDS from the agency declaring that I am outside of IR35 so I'm off the hook!

Very glad I didn't have to learn this lesson the hard way.

Good news, but not necessarily off the hook (yet). Has your agency received its first payment from the client? It might be a small risk, but it's still there.

[Roll Out The Farrell]

***UPDATE***

Pleased to announce that I've received the SDS from the agency declaring that I am outside of IR35 so I'm off the hook!

Very glad I didn't have to learn this lesson the hard way.

[Roll Out The Farrell]

Ok thanks for the responses. I think it's pretty clear where I potentially stand now so let's draw a line under that.

Assuming the worst, what should I do?

I'm probably going to walk - I've already paid myself a divi up to the higher rate to keep me going until the start of the new tax year so ever £1 from this gig going through PAYE will be taxed at the higher rate.

I guess there are 3 options;

1) Do nothing and hope they don't come knocking though I'm worried that the inside SDS determination will leave a papertrail all the way back to me. The chances of HMRC following up on it is another matter altogether.
2) Put everything I've earned in this role (I haven't spent any of it yet) into my pension.
3) Undeclare the divi to take me to the end of the year (is this possible?), pay back a certain amount to my ltd and continue through a brolly taking a low wage and contributing the rest of the income to my pension. This sounds complicated but a decent accountant could sort it out which reiterates my need to ditch NW! (see my other posts).

Anyway, fingers crossed none of this will be necessary but I will keep you updated as I'm sure these kinds of experiences can serve as a warning to others.

[eek]

I have always in the past got my contracts checked by QDOS and I still have insurance in place.

This is my first "outside" role since the changes and I was under the impression that the end client made the determination and carried the can in the event of HMRC later deeming that the role was, in fact, inside. Consequently, on this occasion, I didn't get it checked as I didn't think it would even be possible to carry on working via my ltd had the client deemed me inside and I didn't realise the determination could be made some time down the line after I'd started.

Oops....

I will check whether or not the SDS has been issued and act accordingly.

You should know this and you really do need to know this.

At least now I know....

That said, when the schedule specifically details "Off-Payroll Applicable - Outside IR35" I'd expect that to be the case.

Furthermore, why would they mislead? Presumably in most instances the SDS is issued in a much shorter time frame and the agent is just going to end up with egg on his face when the contractor walks after a couple of weeks in the role.

You said it was in the contract, the schedule is not part of the contract, its just an attachment to it.

As for your last point - it's remarkable how many people stay and remarkable how many agents don't care - if the agent lies and gets a contractor in they've done they job.

If the contract then walks the client and agency will just blame the contractor.

[eek]

Ermm...

Mostly, the contract is between you and the agency so cannot in all fairness define the working relationship with the client. The one between the agency and the client may well say something totally different anyway. Given there is precedent for a client flatly denying that substitution was permissible, in the early days of IR35 cases, the contract has been seriously devalued as a defence.

Given the focus that HMRC are currently making on substitution within their investigations that would be the bit I would be very careful of.

Replacing yourself with someone the end client already knows (see the recent Sky Sports case) is an area they are paying particular attention to as well as looking at whether a substitution is actual practical. From what I gather HMRC have leant a lot by watching the agile teams within the HMRC IT projects and now have a very detailed set of questions.

[Roll Out The Farrell]

Nope. An outside contract has not even been the best defence since IR35 started. Working practices trump the contract in all cases for a start. Now with the arrival of SDS it's even less so. The contract is a legally binding document between you and the client agreeing what and how the work is done along with associated terms. It doesn't 'directly' have anything to do with IR35. It's just the clauses that point to an outside determination which is your tax status. Nothing (previously) to do with the client or contract.

Example 1 You can have a contract that says outside IR35 but then has no or unreasonably fettered substitution clause which more or less immediately fails the IR35 test.
Example 2 You can have a contract that says outside IR35 but the client tells you what to do when and moves you on to different work when they fancy. You've failed the D&C test so you are inside.
This is why there is so much money to be made around IR35 contract checks and insurance.

You do get your contract checked by a specialist and have IR35 insurance don't you? Don't you????
(ok ok, this is aimed at the OP, not the guys in the know. We know the situation here nowadays )

I have always in the past got my contracts checked by QDOS and I still have insurance in place.

This is my first "outside" role since the changes and I was under the impression that the end client made the determination and carried the can in the event of HMRC later deeming that the role was, in fact, inside. Consequently, on this occasion, I didn't get it checked as I didn't think it would even be possible to carry on working via my ltd had the client deemed me inside and I didn't realise the determination could be made some time down the line after I'd started.

I will check whether or not the SDS has been issued and act accordingly.

At least now I know....

That said, when the schedule specifically details "Off-Payroll Applicable - Outside IR35" I'd expect that to be the case.

Furthermore, why would they mislead? Presumably in most instances the SDS is issued in a much shorter time frame and the agent is just going to end up with egg on his face when the contractor walks after a couple of weeks in the role.

[malvolio]

Nope. An outside contract has not even been the best defence since IR35 started. Working practices trump the contract in all cases for a start. Now with the arrival of SDS it's even less so. The contract is a legally binding document between you and the client agreeing what and how the work is done along with associated terms. It doesn't 'directly' have anything to do with IR35. It's just the clauses that point to an outside determination which is your tax status. Nothing (previously) to do with the client or contract.

Example 1 You can have a contract that says outside IR35 but then has no or unreasonably fettered substitution clause which more or less immediately fails the IR35 test.
Example 2 You can have a contract that says outside IR35 but the client tells you what to do when and moves you on to different work when they fancy. You've failed the D&C test so you are inside.
This is why there is so much money to be made around IR35 contract checks and insurance.

You do get your contract checked by a specialist and have IR35 insurance don't you? Don't you????
(ok ok, this is aimed at the OP, not the guys in the know. We know the situation here nowadays )

Ermm...

Mostly, the contract is between you and the agency so cannot in all fairness define the working relationship with the client. The one between the agency and the client may well say something totally different anyway. Given there is precedent for a client flatly denying that substitution was permissible, in the early days of IR35 cases, the contract has been seriously devalued as a defence.

[northernladuk]

Sorry, surely when my contract explicitly states the role is outside IR35 then that's a good defence? Is a contract not a legally binding document?

Nope. An outside contract has not even been the best defence since IR35 started. Working practices trump the contract in all cases for a start. Now with the arrival of SDS it's even less so. The contract is a legally binding document between you and the client agreeing what and how the work is done along with associated terms. It doesn't 'directly' have anything to do with IR35. It's just the clauses that point to an outside determination which is your tax status. Nothing (previously) to do with the client or contract.

Example 1 You can have a contract that says outside IR35 but then has no or unreasonably fettered substitution clause which more or less immediately fails the IR35 test.
Example 2 You can have a contract that says outside IR35 but the client tells you what to do when and moves you on to different work when they fancy. You've failed the D&C test so you are inside.
This is why there is so much money to be made around IR35 contract checks and insurance.

You do get your contract checked by a specialist and have IR35 insurance don't you? Don't you????
(ok ok, this is aimed at the OP, not the guys in the know. We know the situation here nowadays )

[eek]

Sorry, surely when my contract explicitly states the role is outside IR35 then that's a good defence? Is a contract not a legally binding document?

Scenario 1

The behaviour / actions of the contractor rendered the work as inside IR35. If the end client issues a determination with that statement in it how do you think it would work out and how could you prove the statement was false?

[Roll Out The Farrell]

If you've no SDS then the bullet is still on it's way. Ignorance is not a defence. Get an SDS or walk.

This is your livelihood and direct affects your pocket. Do better.

Sorry, surely when my contract explicitly states the role is outside IR35 then that's a good defence? Is a contract not a legally binding document?

[northernladuk]

they don't come here for good news do they ???

They don't come here to learn a bit about what they do for a job either it seems

[northernladuk]

I wonder what terms the end client has with the agency. On 90 days terms the end client has 4 months from the day the contractor arrives before the SDS is actually required (it must be presented before the end client pays the first bill).

That's what my money is on if he's been there three months and no SDS has appeared

[eek]

If you've no SDS then the bullet is still on it's way. Ignorance is not a defence. Get an SDS or walk.

This is your livelihood and direct affects your pocket. Do better.

I wonder what terms the end client has with the agency. On 90 days terms the end client has 4 months from the day the contractor arrives before the SDS is actually required (it must be presented before the end client pays the first bill).

Jan 1 - contractor arrives
Feb 2st invoice sent
March 30th project finishes last time sheet submitted
May 1st send SDS determination of inside
May 2nd invoice paid

That isn't fair but it's perfectly legal - HMRC's suggest solution is to ask the contract to repay the money owed - going to court if necessary.