Contractor to perm?

[sreed]

I'd say there is almost no risk in doing this.

1000s of people have done this and HMRC doesn't care. I doubt they'll bother - I think their end game was to get everyone on PAYE and these rules acted as a deterrent rather than proper legislation they intended to follow through with. Most companies are blanket PAYE now so it's done what it's needed to do.

I suppose there is a risk of HMRC randomly investigating a few LTD co directors, but I just don't think it'll happen.

Many on here have been completely beaten into submission by HMRC (and their own minds), and think they are watching your every move but the truth is they are a lumbering, bureaucratic and outdated organisation.

Some of the things I've heard and seen from your average contractor would have the people on here having aneurysms, but the truth is most contractors (outside us oddballs here) are disguised employees and see themselves as no different to FTEs and see the two as completely interchangeable.

A bit off topic but here are a few examples I've experienced recently of contractors being dolts:

- A contractor liquidated his company via MVL in Dec '22, opened a new one doing the same thing in October '23 and then liquidated that in April '24 when his gig ended!

- A contractor had an OIR35 gig for 6 months, during month 4 they applied for the equivalent perm role directly with the company and got it. They are now an employee of this company they were engaged with through an agency only a few months prior, doing the exact same thing. They have also now liquidated their company and brought in their partner as a referral (for a perm BA role) who was a 50/50 shareholder in that company.

- All the contractors on my team at an IB are still at that IB (according to LinkedIn) doing the same roles but as FTE. They swapped over to perm in May 2020. 4 years ago, and I think it's fair to say HMRC haven't taken an interest.

- A contractor I work with (OIR35), goes to the client office 3 times a week (no one asks him to) to try and ingratiate himself with stakeholders in order to get a permanent position. They attend all company events, insist on 1-to-1s and OKR tracking and have their own dedicated desk in the building. They refer to themselves as an employee of the end-client.

These are all recent examples of your average contractor just in the last 6 months I've been at this gig, but the TLDR; summary is you tell your "colleague" to crack on if it's the job they want and not to worry about the mythical HMRC bogeyman - there are 1000s upon 1000s of these types of people in the queue ahead of him to be investigated.

This this and this. Couldn’t agree more! 👏

[wattaj]

I'd say there is almost no risk in doing this....
...TLDR; summary is you tell your "colleague" to crack on if it's the job they want and not to worry about the mythical HMRC bogeyman - there are 1000s upon 1000s of these types of people in the queue ahead of him to be investigated.

Thanks. Interesting perspective. I'll pass that on. Appreciated.

[ensignia]

I'd say there is almost no risk in doing this.

1000s of people have done this and HMRC doesn't care. I doubt they'll bother - I think their end game was to get everyone on PAYE and these rules acted as a deterrent rather than proper legislation they intended to follow through with. Most companies are blanket PAYE now so it's done what it's needed to do.

I suppose there is a risk of HMRC randomly investigating a few LTD co directors, but I just don't think it'll happen.

Many on here have been completely beaten into submission by HMRC (and their own minds), and think they are watching your every move but the truth is they are a lumbering, bureaucratic and outdated organisation.

Some of the things I've heard and seen from your average contractor would have the people on here having aneurysms, but the truth is most contractors (outside us oddballs here) are disguised employees and see themselves as no different to FTEs and see the two as completely interchangeable.

A bit off topic but here are a few examples I've experienced recently of contractors being dolts:

- A contractor liquidated his company via MVL in Dec '22, opened a new one doing the same thing in October '23 and then liquidated that in April '24 when his gig ended!

- A contractor had an OIR35 gig for 6 months, during month 4 they applied for the equivalent perm role directly with the company and got it. They are now an employee of this company they were engaged with through an agency only a few months prior, doing the exact same thing. They have also now liquidated their company and brought in their partner as a referral (for a perm BA role) who was a 50/50 shareholder in that company.

- All the contractors on my team at an IB are still at that IB (according to LinkedIn) doing the same roles but as FTE. They swapped over to perm in May 2020. 4 years ago, and I think it's fair to say HMRC haven't taken an interest.

- A contractor I work with (OIR35), goes to the client office 3 times a week (no one asks him to) to try and ingratiate himself with stakeholders in order to get a permanent position. They attend all company events, insist on 1-to-1s and OKR tracking and have their own dedicated desk in the building. They refer to themselves as an employee of the end-client.

These are all recent examples of your average contractor just in the last 6 months I've been at this gig, but the TLDR; summary is you tell your "colleague" to crack on if it's the job they want and not to worry about the mythical HMRC bogeyman - there are 1000s upon 1000s of these types of people in the queue ahead of him to be investigated.

[northernladuk]

I, personally, would worry way more about going the other way - ie perm to contract at the same place. It's not massively uncommon for folks to be working at one place as a supplier and then be onboarded to the client. Its so common that in some cases, the suppliers have non-compete clauses in their contracts with clients to stop it happening.

It's not but that's different to a contractor. The employees of a supplier are either TUPEE'd across or give permission to apply for and join the company. It's an employee of a supplier to employee of client so no change in their tax treatment. The issue is an outside IR35 person to employee is a different tax model and that's where HMRC don't like it. The number of contractors going perm is definitaly uncommon in the bigger picture. Your original statement is comparing apples and pears.

[b0redom]

I, personally, would worry way more about going the other way - ie perm to contract at the same place. It's not massively uncommon for folks to be working at one place as a supplier and then be onboarded to the client. Its so common that in some cases, the suppliers have non-compete clauses in their contracts with clients to stop it happening.

If you're inside IR35, then it's not a problem as has already been stated.
If you're outside IR35, then you're probably going to wrap up your company anyway, so it would probably be a non-issue.

YMMV IANAL etc.

Personally though, I couldn't stomach being a permie at a big corp.

[Peoplesoft bloke]

Averse

[wattaj]

It's all about what your approach to risk is.

This is the crux of the matter for me.

I'm generally quite risk averse as I CBA trawling through the various bits and bobs of legislation, guidance, and reporting for the wiggle room.

There's been masses switching from contracts to perm when the IR35 changes came around and I've not seen a single story here that anyone ever got investigated. Maybe HMRC knew this would happen and never cared? or maybe some got caught, but never thought to come here to talk about it? My opinion is that unless HMRC can squeeze out a fair chunk of money from you, they won't bother, they already struggle with resources for basic stuff, let alone investigation to get an extra few grand from some random bloke doing IT somewhere.

This second paragraph is pretty much aligned to my thinking. And I've said as much, but feel that my view is likely out of date... albeit, apparently not by much.

[wattaj]

This reply implies that your “friend” was outside IR35. Rather than evading answering simple questions like that, it would be helpful if you gave straight answers to them.

how long has your friend been at the client?
if they have a lucrative contract, why are they wanting to go perm?
of course, if we go down the rabbit warren of your reply above, what % of people on here have gone perm?
of that, how many have gone perm with their current client?
and of that, how many have been in an outside IR35 contract with the client at that time?
and of that, how many have been caught by hector?
and of that list, how many would have openly declared on here that they were outside IR35, running their own company, and want to know who to blame for being caught?

I'll assume good faith, so yes, this is for someone else.

I don't know anyone who has taken an inside role.

I wasn't paying sufficient attention to answer NL's though I'd intended to when I started my reply.

Perhaps those answers are straight enough for you.

Now, off you pop and don't be treating me like some wet behind the ears, Johnny come lately.

[northernladuk]

Maybe those horror stories are still licking their wounds in some dark corner.

To be fair ensignia was (is) very vocal when we start quoting legislation and saying rather you than me etc because of the lack of evidence of investigations, particularly around the time the changes were announced and implemented.. and to give him credit he wasn't wrong BUT it doesn't mean he's right. I'm sure someone said don't go with offshore umbrellas but nothing happened for a few years and they ended up being right. Who really knows and it's an attitude to risk. Despite giving ensignia a nod that he wasn't wrong I do think it's right to quote chapter and verse and tell people to be very wary as one opinion. Once that person understands the gravity of a possible outcome then they can go away and apply their own level of risk to it. I think it's totally wrong to go in and say F*** it no one cares just do it. Both ensignia and the rest of the theory crowd actually make a balanced thread IMO.

So is it still to come? Is lack of evidence mean it's open seaon? Dunno, possibly yes but balance that with three thoughts. One is that we don't know how many are settled early. We don't see evidence of tax investigations but they do happen. Two could the lack of evidence be because a vast majority are following the rules so HMRC got what they wanted and it's not worth the effort. If we all said screw it and didn't care about the legislation then HMRC would have a golden goose and it's worth them coming looking and thirdly as a bonus we've got a change of gov coming in. Who knows what will happen.

[dsc]

It's all about what your approach to risk is. Yes it can cause issues if HRMC looks at it, the question is, will they ever? also depends how long the contract was before switching, you can calculate how much you'd owe if you got caught and then reserve the money for it, or just not care, depends on how much savings you have. As usual, it all depends.

There's been masses switching from contracts to perm when the IR35 changes came around and I've not seen a single story here that anyone ever got investigated. Maybe HMRC knew this would happen and never cared? or maybe some got caught, but never thought to come here to talk about it? My opinion is that unless HMRC can squeeze out a fair chunk of money from you, they won't bother, they already struggle with resources for basic stuff, let alone investigation to get an extra few grand from some random bloke doing IT somewhere.

[WTFH]

To be fair: I did, but I stopped paying attention a good few years ago. I don't know what, if anything, has changed, so thought to ask.

It seems that not much has and that the old considerations still hold.

It would be good to get a few different perspectives, but it's striking, as far as I can see from the threads above, that no one has switched AND then been caught up in an investigation, let alone found liable for tax due on past fees.

Maybe those horror stories are still licking their wounds in some dark corner.

This reply implies that your “friend” was outside IR35. Rather than evading answering simple questions like that, it would be helpful if you gave straight answers to them.

how long has your friend been at the client?
if they have a lucrative contract, why are they wanting to go perm?
of course, if we go down the rabbit warren of your reply above, what % of people on here have gone perm?
of that, how many have gone perm with their current client?
and of that, how many have been in an outside IR35 contract with the client at that time?
and of that, how many have been caught by hector?
and of that list, how many would have openly declared on here that they were outside IR35, running their own company, and want to know who to blame for being caught?

[wattaj]

To be fair you should know about it....

...At the very least you should know the first thing to ask is what the IR35 of their contract is.

To be fair: I did, but I stopped paying attention a good few years ago. I don't know what, if anything, has changed, so thought to ask.

It seems that not much has and that the old considerations still hold.

It would be good to get a few different perspectives, but it's striking, as far as I can see from the threads above, that no one has switched AND then been caught up in an investigation, let alone found liable for tax due on past fees.

Maybe those horror stories are still licking their wounds in some dark corner.

[northernladuk]

To be fair you should know about it. If you know enough about IR35 then you should know quite a bit about it.

At the very least you should know the first thing to ask is what the IR35 of their contract is.

[hobnob]

Here are a couple of previous threads:
contract to permanent - Contractor UK Bulletin Board
Client requests me to go permie - Contractor UK Bulletin Board

The main issue is whether the current contract is inside or outside IR35. If it's inside and you go permanent, no problem. If it's outside and then you go perm, it raises the question of whether it was really outside or just a tax dodge. I.e. this might attract extra scrutiny from HMRC, which you might prefer to avoid.

[wattaj]

A former colleague's been in touch asking about switching from contract to perm with the same client... good money from what he's told me (circa £100k for a senior BA role), not too bad a client, and remote first.

It's not something that I know much about to be honest, but I know that there are a few threads around here on that very subject... though I'll be damned if I can find them.

So, what's the current thinking about switching to the dark side, and do you have any links to earlier discussions?

Thanks.