Reply to: Return to Previous Employer for Contract Opportunity

[northernladuk]

Depends on the policy. I think the PCG offering covers the cost of representing you during the investigation but the tax and penalties are on your own head.

Other policies like TLC35 from QDOS appear to cover the tax liability so might be worth a look.

QDOS said the following in this thread...

http://forums.contractoruk.com/accou...insurance.html

Actually, the policy does cover the back tax. It covers all tax, NI, interest and penalties in respect of IR35 enquriries - i.e. everything (up to the indemnity limit, of course).

The policy is not insuring any kind of criminal fine or penalty. As you will see in Lisa's link, whilst criminal fines/penalties are uninsurable, civil fines or penalties are generally viewed as insurable provided they have not arisen as a result of fraud, dishonesty or a deliberate act.

Our policy specifically excludes any claim which arises as a result of fraud or dishonesty, and contains a further exclusion in respect of circumstances where public policy would prevent the application of insurance.

The TLC35 insurance was constructed by ex-HMRC inspectors and was reviewed and approved by insurers prior to being released to the market a number of years ago.

Am sure we had a big thread about exactly what it covered before as well.

[Wanderer]

I thought IR35 insurance covered the additional tax you would have to pay if deemed inside IR35 when the insurer (i.e. PCG) was happy you were outside IR35. In fact I thought that was the whole point of IR35 insurance.

Depends on the policy. I think the PCG offering covers the cost of representing you during the investigation but the tax and penalties are on your own head.

Other policies like TLC35 from QDOS appear to cover the tax liability so might be worth a look.

[rootsnall]

Thanks for the clarification.

Maybe double check that with PCG, but pretty sure it's correct.

[d000hg]

Thanks for the clarification.

[rootsnall]

@rootsnall, I thought IR35 insurance covered the additional tax you would have to pay if deemed inside IR35 when the insurer (i.e. PCG) was happy you were outside IR35. In fact I thought that was the whole point of IR35 insurance.

There may be products out there that promise that but I'd be very sceptical it would ever pay out if it did.

The PCG offering most certainly didn't cover additional tax when I last had it 2 years ago, it paid for specialist firms to fight your case thats all, and for what you pay I wouldn't expect anything more than that.

[d000hg]

I don't think taking insurance is enough to warrant claiming outside IR35 on an inside IR35 gig is it?

THat's what I meant about checking you're covered, i.e. having the contract reviewed and checking the broker knows the situation. It sounds unlikely to me too.

@rootsnall, I thought IR35 insurance covered the additional tax you would have to pay if deemed inside IR35 when the insurer (i.e. PCG) was happy you were outside IR35. In fact I thought that was the whole point of IR35 insurance.

[rootsnall]

You can just take the work and be inside IR35 if the rate is good enough (or you've nothing better to do) and you are worried you would fail an investigation. Or you could take the work and get IR35 insurance, making 100% sure the policy will cover your circumstances.

WHS, but without the insurance bit, unless things have changed then the insurance is just to cover your representation in an inquiry, so that won't get you out of jail. I assume it'll be direct with your ex employer so just make sure you are getting the 20%(ish) an agent would normally get and that covers your potential NI liability of the worst comes to the worst. I think if you just stay for 6 months then its very unlikely you'll come to any grief.

[pmeswani]

Some of you may remember that I joined these forums when trying to decide how best to move from permie to contracting whilst still working for the company I would have liked to contract for. Now I fully understand why 6 months ago this would have been a bad idea but there is a possibility that some work will come my way in the next month for said company and I wondered if my position had now changed since then.

My guess is the answer is "yes" as I've separated myself from the company as an employee and will be returning to them to fulfill a specific piece of work, on a contract basis, for which I have pretty niche skills which they have found (and to be fair I told them) they can't get elsewhere.

Would you folks concur? Any pitfalls/gotchas I haven't thought of?

My first question I would ask, other than the IR35 one that is currently being discussed, is that of your rights to claim redundancy. How long have you been working at your current client? If you have been working for them long enough to claim redundancy, if you left tomorrow and worked for the same client on Monday, and then terminated at the end of the week, would you cry foul? And would you lose your redundnacy rights?

Just asking like.

[northernladuk]

You can just take the work and be inside IR35 if the rate is good enough (or you've nothing better to do) and you are worried you would fail an investigation. Or you could take the work and get IR35 insurance, making 100% sure the policy will cover your circumstances.

I don't think taking insurance is enough to warrant claiming outside IR35 on an inside IR35 gig is it?

[d000hg]

You can just take the work and be inside IR35 if the rate is good enough (or you've nothing better to do) and you are worried you would fail an investigation. Or you could take the work and get IR35 insurance, making 100% sure the policy will cover your circumstances.

[Wanderer]

Some of you may remember that I joined these forums when trying to decide how best to move from permie to contracting whilst still working for the company I would have liked to contract for. Now I fully understand why 6 months ago this would have been a bad idea but there is a possibility that some work will come my way in the next month for said company and I wondered if my position had now changed since then.

I know it's not what you want to hear but returning to a previous PAYE employer within 12 months is a big no no when it comes to IR35. Sorry.

Take a look at HMRC's Business Entity Tests and tell us what you score. A quick calculation shows that you would probably be somewhere between -4 and 6 points which puts you firmly into the "high risk" category for an IR35 fail.

[northernladuk]

The statement above is not true.
OP - You need to speak to a specialist like Bauer & Cottrell. I recommend them because I have used their services several times last year.

My argument against NLUK's statement is this - You could return to an ex-employer as a contractor after 5+ years but if your contract and (equally important), your working practices fail the 3 tests of disguised employment, you will fall foul of IR35. As you may know, those tests are "Direct and Control","Mutuality of obligation" and "Right of Substitution". Google more if you need to.

Apart from the obvious, there are 2 main risks to bear in mind for someone in your position. The risk of being investigated and (if you're picked) the risk of failing an investigation. Regardless of your exposure to the former, the critical specialist counsel that you need is to ensure that your expsoure to the latter is minimised or if possible, eliminated.

Yes but after 5 years there is a reasonable break. The rule I believe he will fall straight in to here is a Friday to Monday contractor which is the whole reason for IR35. He will be returning to the same management, same project using the knowledge he had as a permie directly, not generic skills. If his contract says he cannot work for the company for 12 months and the comes back straight after that he has only demonstrated the absolute minimum he can to be away. That duration can be directly applied to Friday to Monday. That has Sat/Sun inbetween which can't be worked so it is the first working day back they can offer. That is exactly the same situation if you come back the first Monday after a x month break as directed by his contract. It is the first possible day he can come back therefore will be judged the same.

The 5 year example is not really valid in this case it he hasn't had a 5 year break. In that example I would agree.

[muser]

Should you? - No. You are a contractor now and shouldn't be seeking the haven of ex employers. No. You are in my opinion perfectly inside IR35 returning to a past client so soon.

The statement above is not true.
OP - You need to speak to a specialist like Bauer & Cottrell. I recommend them because I have used their services several times last year.

My argument against NLUK's statement is this - You could return to an ex-employer as a contractor after 5+ years but if your contract and (equally important), your working practices fail the 3 tests of disguised employment, you will fall foul of IR35. As you may know, those tests are "Direct and Control","Mutuality of obligation" and "Right of Substitution". Google more if you need to.

Apart from the obvious, there are 2 main risks to bear in mind for someone in your position. The risk of being investigated and (if you're picked) the risk of failing an investigation. Regardless of your exposure to the former, the critical specialist counsel that you need is to ensure that your expsoure to the latter is minimised or if possible, eliminated.

[northernladuk]

@NLUK - my contract of employment with the company as a permie would not allow me to return within 12 months as a permie - but nothing to be said for returning as a contractor. Also same response to bobspud below - it comes down to the question of should I vs. can I.

This doesn't sound right. I would check again. Most handcuffs will also include via suppliers or working for customers of the client. If that is all your handcuff says it is pretty poor. I would also be very surprised if it stipulated permie.

Ok...

Should you? - No. You are a contractor now and shouldn't be seeking the haven of ex employers. No. You are in my opinion perfectly inside IR35 returning to a past client so soon.

Can you? - As a contractor inside IR35 then sure, fill your boots. As an outside IR35 contractor then no. Also check your handcuff clause again.

[ThomserveBAS]

They are used to dealing with contractors so this could be contracted out in such a way that it is fixed term/fixed cost for me to offer almost a consultancy for them to take ownership of the system and manage it in-house rather than me specifically manage it.

@NLUK - my contract of employment with the company as a permie would not allow me to return within 12 months as a permie - but nothing to be said for returning as a contractor. Also same response to bobspud below - it comes down to the question of should I vs. can I.

@bobspud - received loud and clear, I know there is always a difference between "is it safe to do x" as opposed to "can I get away with x".

Just something to think of as extension date looms...