Reply to: Any point to IR35 Insurance if deemed Outside by end-client

[WordIsBond]

I'm in! Take my money!!

I was talking about insurance, not ladies of the night.

[northernladuk]

Stupid of me. I shouldn't have said anything, just started my own insurance company that offered that. Free money from the paranoid!

I'm in! Take my money!!

[WordIsBond]

That's a great idea!!!!! They get money for old rope, the most wary of us get cover, even if the opinion is it's not needed. Everyone is happy.

Stupid of me. I shouldn't have said anything, just started my own insurance company that offered that. Free money from the paranoid!

[northernladuk]

QDOS should offer about a 90% discount on TLC35 for those deemed outside by their PSB engager. Then, maybe it would make some sense.

That's a great idea!!!!! They get money for old rope, the most wary of us get cover, even if the opinion is it's not needed. Everyone is happy.

[WordIsBond]

I think that is unduly optimistic...

I think you are unduly pessimistic.

For there to be a risk here, HMRC would have to decide to challenge a PSB's outside determination which was based on the ESS, when they said they wouldn't. That's going to be a fun one for them to try and win.

And if they win, the legislation says the PSB is on the hook, and they have deep pockets compared to the average contractor. So who will HMRC target? The PSB, of course.

So they'll recover from the PSB. Not you. And who is going to be liable for employer NI? The PSB. Can they possibly challenge that you should have paid employee NI and income tax? Maybe, possibly, but why would they go after you when it will be so much easier to go after the PSB? But if they do go after you, the employee NI and income tax will be close to a wash compared to corporation tax and dividend tax. The only thing they are really out is employer NI, and the PSB is going to be on the hook for that, if anyone is.

There are going to be so many targets so much softer than you if the PSB has used the tool and got an outside determination. This is not who they will chase.

QDOS should offer about a 90% discount on TLC35 for those deemed outside by their PSB engager. Then, maybe it would make some sense.

[malvolio]

Yes but at least the client has been involved from the start in that determination and you have it in writing (ESS output) so everything seems to me to be more transparent and if there is any change in circumstances (change to expected working practices) you can terminate the contract prior. My assumption here is that only at the point where the client issues a revised ESS determination of inside would HMRC look at anything. i.e. no retrospective on the time period covered by the original outside determination.

I think that is unduly optimistic...

[NomDePlum]

I think it is a different risk in one way: you can insure against an incorrect determination by your contract reviewers, which is all TLC35 and Survive35 (among others) offer to do. You can't AFAIK insure against someone else's incorrect determination. That is what worries me slightly, that the PSB getting it wrong rolls down the chain to a big bill for the contractor.

I haven't seen anything that makes that unlikely, since making the client responsible still means you have received income that hasn't been taxed (precisely the same issue as the EBT victims) but I'm happy to be proved wrong

Yes but at least the client has been involved from the start in that determination and you have it in writing (ESS output) so everything seems to me to be more transparent and if there is any change in circumstances (change to expected working practices) you can terminate the contract prior. My assumption here is that only at the point where the client issues a revised ESS determination of inside would HMRC look at anything. i.e. no retrospective on the time period covered by the original outside determination.

[malvolio]

Is that a new risk though? The point of discretion has just moved from working practices + contract review to working practices + ESS determination (for Public Sector). It is still the working practices that put you in or out. And working practices are your responsibility to police. Pretending to be outside is surely the worst of all worlds.

If you have a copy of the ESS client answers then that is actually quite a good thing to support any argument about working practices with the client.

I think it is a different risk in one way: you can insure against an incorrect determination by your contract reviewers, which is all TLC35 and Survive35 (among others) offer to do. You can't AFAIK insure against someone else's incorrect determination. That is what worries me slightly, that the PSB getting it wrong rolls down the chain to a big bill for the contractor.

I haven't seen anything that makes that unlikely, since making the client responsible still means you have received income that hasn't been taxed (precisely the same issue as the EBT victims) but I'm happy to be proved wrong

[NomDePlum]

It is, agreed. In this brave new world I don't think you need tax liability cover, if you only work in the public sector, although I await with interest the first case where the contractor has been paid as outside, the gig is then found to be inside (easy enough if the PSB has bent the rules slightly and that is by no means an impossibility) and someone has to hand back the tax income they have been paid as gross contract income.

This is all new to everyone; there are going to be cock ups and corrections. As usual it's the poor bugger at the end of the chain that will have the headaches.

Is that a new risk though? The point of discretion has just moved from working practices + contract review to working practices + ESS determination (for Public Sector). It is still the working practices that put you in or out. And working practices are your responsibility to police. Pretending to be outside is surely the worst of all worlds.

If you have a copy of the ESS client answers then that is actually quite a good thing to support any argument about working practices with the client.

[northernladuk]

I wonder if QDos, Bauer & Cottrell and others who are in the supply side of this equation are wondering about the effect this might have on their business models going forwards? They've built a good reputation on a good service but this could well affect them at some level.

I know Seb from QDOS has been all over this and Kate Cottrell sits on the R35 Forum which is advising on and monitoring HMRC’s improvements to IR35 amongst other accolades I am sure they are. I'd be a bit staggered if anyone thought for one minute they've not considered all this.

Assume that the only people that aren't aware off the effect of this on their business models are PS contractors who are still asking questions 2 weeks before it his.

[malvolio]

Yeah, but tax liability cover is for IR35. Tax investigation cover, which you can get from multiple sources, is a completely different thing.

It is, agreed. In this brave new world I don't think you need tax liability cover, if you only work in the public sector, although I await with interest the first case where the contractor has been paid as outside, the gig is then found to be inside (easy enough if the PSB has bent the rules slightly and that is by no means an impossibility) and someone has to hand back the tax income they have been paid as gross contract income.

This is all new to everyone; there are going to be cock ups and corrections. As usual it's the poor bugger at the end of the chain that will have the headaches.

[NomDePlum]

... and always remembering there are a lot more threats to cover than IR35.

Agreed but paying for an IR35 review doesn't make sense here. And to be honest that is what I have always thought of the review as being for and how it was advertised.

In the draft contract I am looking at now there are some strange commercial terms which probably merit negotiation (removal) so its not to say that having an expert review a contract is not something to consider just not for IR35 in the circumstances above. Although having the correct contractual clauses in still make sense regardless - just will be less material.

I wonder if QDos, Bauer & Cottrell and others who are in the supply side of this equation are wondering about the effect this might have on their business models going forwards? They've built a good reputation on a good service but this could well affect them at some level.

[WordIsBond]

... and always remembering there are a lot more threats to cover than IR35.

Yeah, but tax liability cover is for IR35. Tax investigation cover, which you can get from multiple sources, is a completely different thing.

[malvolio]

There's other value in a contract review by a legal expert. But if you are just doing it for IR35, that review had no legal force other than to prove you'd taken precautions (which would limit or exclude penalties). An outside determination by an end user in this Brave New World actually has legal force in exempting you from future liability.

So there would be no reason to get the review for IR35 purposes.

And the same applies to tax liability cover -- for that contract. Obviously, you may well need such cover for other contracts, but that's been discussed at length above.

... and always remembering there are a lot more threats to cover than IR35.

[WordIsBond]

There's other value in a contract review by a legal expert. But if you are just doing it for IR35, that review had no legal force other than to prove you'd taken precautions (which would limit or exclude penalties). An outside determination by an end user in this Brave New World actually has legal force in exempting you from future liability.

So there would be no reason to get the review for IR35 purposes.

And the same applies to tax liability cover -- for that contract. Obviously, you may well need such cover for other contracts, but that's been discussed at length above.