Reply to: Working through the regulations

[Seahorse17]

Leaving is only a red flag if the client contacts HMRC and says "this contractor left because we tried to pay them as inside IR35". Which might happen, but it might not - who knows what the client will do, how they would even communicate that to HMRC, and what HMRC would do in response to that data.

Staying in the same role and being outside one day and inside the next could be a red flag if HMRC have enough data to link the two together. If the contractor continues to work through the same agency then they have that data; if the contractor works through their PSC but changes agency then they do not have that data (they know what you were outside, now inside, but they do not know who the client is or what the work entails); if the contractor changes from PSC to umbrella then they do not have that data (they know that you were outside via an agency, now they know that you are PAYE somewhere - they don't know where, they don't know if you are public or private sector). As I have said before, it is possible that a link could be made, but whether HMRC could make that link is another question.

Given the changes that the OP has made, I'm not convinced that (s)he is at any more risk of an investigation than any contractor.

I think it's unlikely. The PS has, for some time, been obliged to ensure that contractors are paying "the right amount of tax". They have accepted contract reviews and assessments from Abbey Tax, QDOS and the like as evidence. If they then say those contractors weren't paying the right amount of tax, they leave themselves open to fines for not having the correct assurance processes in place.

[FrontEnder]

Sorry, but this is completely wrong and misguided. For starters I never bottled it...they made it worth my while; Financially I'm considerably better off inside than I was outside.

Getting a "new" outside contract, and carrying on, if anything, is screaming...I knew my contract was inside before.

My head is certainly now in the sand, which is exactly why I drew a line under the previous contract. As for an appeal...what appeal? Who do you appeal to? I certainly have not seem any documented appeal process, and even if there was one it take time. What do you do during the months if not years of appeal? sit on the bench? or carry on knowing that they might refuse it? I think drawing a line under the contract and creating a new inside working relationship IS the safest way to go forward.

I didn't mean a new contract with new terms, was thinking extension. Basically I'd insist they deem me outside or walk. Agree a whole new contract would be suspicious, but i dont think clarification on a couple of points or getting the client to acknowledge they are valid would hurt.

There probably isn't a documented apeal process because the whole thing has been an ill conceived mess and has been rushed in too quickly. They didn't even know it affected them until recently did they? There is a right to appeal though, according to other threads on here.

[TheFaQQer]

As for an appeal...what appeal? Who do you appeal to? I certainly have not seem any documented appeal process, and even if there was one it take time. What do you do during the months if not years of appeal? sit on the bench? or carry on knowing that they might refuse it?

The most obvious route of appeal is to either appeal under the AWR or to take the client to an employment tribunal to fight for worker or employee rights. As you say, those will take time and effort, and at the end of it you might lose. Even if you win and prove that you should not have had any tax or NI deducted, it is far from certain that NI could ever be refunded to you (IMHO, it couldn't).

In an ideal world, departments should have a quick, easy, fair and accurate appeals process that allows you to make your perfectly valid case that you are outside IR35 and should be treated that way. I'm not holding my breath for that process to appear from anywhere though.

[TheFaQQer]

It might be a red flag to leave, but not nearly as much as staying in the same role and being outside one day and inside the next.

Leaving is only a red flag if the client contacts HMRC and says "this contractor left because we tried to pay them as inside IR35". Which might happen, but it might not - who knows what the client will do, how they would even communicate that to HMRC, and what HMRC would do in response to that data.

Staying in the same role and being outside one day and inside the next could be a red flag if HMRC have enough data to link the two together. If the contractor continues to work through the same agency then they have that data; if the contractor works through their PSC but changes agency then they do not have that data (they know what you were outside, now inside, but they do not know who the client is or what the work entails); if the contractor changes from PSC to umbrella then they do not have that data (they know that you were outside via an agency, now they know that you are PAYE somewhere - they don't know where, they don't know if you are public or private sector). As I have said before, it is possible that a link could be made, but whether HMRC could make that link is another question.

Given the changes that the OP has made, I'm not convinced that (s)he is at any more risk of an investigation than any contractor.

[NetContractor]

I'd tell them they need to offer me a new contract outside of IR35 or I'll leave before 5th april. Which is what you did do but then bottled it.

If they say your inside of appeal it as far as you can - the walk of they don't change it.

It might be a red flag to leave, but not nearly as much as staying in the same role and being outside one day and inside the next.

Yes, we don't know what HMRC will do, but it so d's like you're minimizing this risk when the consensus is that it's a big one. It sounds like you've got your head in the sand, tbh.

Sorry, but this is completely wrong and misguided. For starters I never bottled it...they made it worth my while; Financially I'm considerably better off inside than I was outside.

Getting a "new" outside contract, and carrying on, if anything, is screaming...I knew my contract was inside before.

My head is certainly now in the sand, which is exactly why I drew a line under the previous contract. As for an appeal...what appeal? Who do you appeal to? I certainly have not seem any documented appeal process, and even if there was one it take time. What do you do during the months if not years of appeal? sit on the bench? or carry on knowing that they might refuse it? I think drawing a line under the contract and creating a new inside working relationship IS the safest way to go forward.

[FrontEnder]

Alright then...What would YOU do in the situation where, under the new regulations, the client is making the decision, which I suspect is a blanket policy decision, but have no proof of that, to force the contract inside IR35. What would YOU do? - Because leaving doesn't make any difference. HMRC could see THAT as a "red rag". Carrying on under the same contract isnt an option, because if anything flags you up in the system its that you suddenly went from outside to inside under the same terms. Realistic Options?

I'd tell them they need to offer me a new contract outside of IR35 or I'll leave before 5th april. Which is what you did do but then bottled it.

If they say your inside of appeal it as far as you can - the walk of they don't change it.

It might be a red flag to leave, but not nearly as much as staying in the same role and being outside one day and inside the next.

Yes, we don't know what HMRC will do, but it so d's like you're minimising this risk when the consensus is that it's a big one. It sounds like you've got your head in the sand, tbh.

[Semtex]

If you are confident in your current working arrangements being outside, then you have little to worry about apart from any angst that might come from an investigation in the future (and nobody knows how likely that may be or not).

Your best bet from here is to make sure that you have excellent professional advice available to you if there is a future investigation - whoever that may be from. The majority of IR35 cases that lose do so because the contractor or someone on their behalf tried to deal with HMRC without knowing exactly what they were doing and how to respond correctly. As long as you have that professional representation to cover you for your prior work then I don't think there is much more that you can do.

Good luck

Agreed, you may well and probably are ok, but the flag to HMRC and their investigations would cause stress.

If it wasnt because HMRC are lacking any kind of moral compass I would go ahead and provide your services like a freelancer does. My concern and because of historical HMRC abuse in many instances on this forum I would be wary and cover myself as best I could ie insurance.

Good luck!

[NetContractor]

If you are confident in your current working arrangements being outside, then you have little to worry about apart from any angst that might come from an investigation in the future (and nobody knows how likely that may be or not).

Your best bet from here is to make sure that you have excellent professional advice available to you if there is a future investigation - whoever that may be from. The majority of IR35 cases that lose do so because the contractor or someone on their behalf tried to deal with HMRC without knowing exactly what they were doing and how to respond correctly. As long as you have that professional representation to cover you for your prior work then I don't think there is much more that you can do.

Good luck

True, however this advice isnt limited to my situation. It can be applied globally to ANY contract.

My point was that I am not more at risk for accepting new terms (and a new contract) than I was for not accepting them. In fact it could be argued that anyone outside Ir35 is more prone to an investigation going forward as HMRC start their clamp down.

For me, the inside argument was really about pride; for 15 years I have worked, as a contractor, and on day 1 I registered my own limited company. Suddenly accepting that, even though I still have the limited company, I am really going to be an employee of my client going forward, is a bit depressing. Being remunerated for being an employee, however, is not so depressing.

[TheFaQQer]

Alright then...What would YOU do in the situation where, under the new regulations, the client is making the decision, which I suspect is a blanket policy decision, but have no proof of that, to force the contract inside IR35. What would YOU do? - Because leaving doesn't make any difference. HMRC could see THAT as a "red rag". Carrying on under the same contract isnt an option, because if anything flags you up in the system its that you suddenly went from outside to inside under the same terms. Realistic Options?

If you are confident in your current working arrangements being outside, then you have little to worry about apart from any angst that might come from an investigation in the future (and nobody knows how likely that may be or not).

Your best bet from here is to make sure that you have excellent professional advice available to you if there is a future investigation - whoever that may be from. The majority of IR35 cases that lose do so because the contractor or someone on their behalf tried to deal with HMRC without knowing exactly what they were doing and how to respond correctly. As long as you have that professional representation to cover you for your prior work then I don't think there is much more that you can do.

Good luck

[WordIsBond]

Sounds as though you are carrying ALL the risk

Absolutely. Hopefully insurance is in place.

Of course, quantifying the risk is difficult. No one knows how much risk there is. OP has judged the risk of retrospective investigation is low, and who can say he is wrong?

The fact that there are substantive changes in the contract terms, as well as the rate increase, does work in his favour. If he'd KEPT a substitution clause in the new one and they were saying it was a fiction, that would be much more problematic. The fact that he terminated the contract as soon as they told him they wouldn't accept substitution, came back and proposed a completely different contract, and then accepted a still different contract which doesn't have substitution, would certainly bolster his defence. He can argue that he terminated because they were breaching the contract. None of this looks like an employer-employee relationship, it looks very much like a B2B relationship being terminated and a new employee-like relationship being formed, with new terms and rate.

I wouldn't feel very safe if I were OP, but neither do I think this gives HMRC an open and shut case. I would definitely run the online tool under the old contract claiming the substitution clause, print it, and keep it. And then I would run it again answering "no" to the substitution clause. If it shows either outside or can't determine, I'd print that and keep it, too. Then, if they come calling, you can say, "Look, I had a substitution clause. When the client said they were revoking it, I terminated. Here's the results of your own online tool. But even if you could successfully challenge it, you still don't have much of a case."

And I'd definitely maintain any IR35 insurance you have, and if you don't have any, I'd join IPSE yesterday.

[NetContractor]

I think this is all tragically naive, but particularly the part in bold.

That isn't an argument at all. HMRCs argument will be that those clauses are a sham (in particular substitution) and if the client agrees - which they do and are telling you they do in black and white, - you are totally ****ed.

Alright then...What would YOU do in the situation where, under the new regulations, the client is making the decision, which I suspect is a blanket policy decision, but have no proof of that, to force the contract inside IR35. What would YOU do? - Because leaving doesn't make any difference. HMRC could see THAT as a "red rag". Carrying on under the same contract isnt an option, because if anything flags you up in the system its that you suddenly went from outside to inside under the same terms. Realistic Options?

[FrontEnder]

...and here I thought I was just updating people with the (good) outcome.

I have taken financial advice and tax advice on the matter, and the professionals in the field generally seem to feel the retrospective investigation risk is low. Just because someone leaves a contract, it would not stop HMRC looking at the previous contract if they felt an investigation was due. My clients HR department, disagreed with my contract terms which put me outside of IR35. I think they are wrong, especially since they signed a contract 2 years ago stating that they accepted these as the business terms. IF I was to be investigated I would argue that the client signed the document to accept the terms, ie. substitution. Because they now disagree, we mutually agreed to immediately terminate the contract. We then agreed a NEW contract, starting from next week, which meets the needs of the client, puts me inside IR35 and with which I am happy with, going forward.

If I terminated the old contract and left, if would have no bearing on if HMRC would investigate it or not. And if they DO investigate my contract, I will argue regarding the previous one, but the new one is untouchable.

All is good.

I think this is all tragically naive, but particularly the part in bold.

That isn't an argument at all. HMRCs argument will be that those clauses are a sham (in particular substitution) and if the client agrees - which they do and are telling you they do in black and white, - you are totally ****ed.

[NetContractor]

pop along to the HMRC Scheme Enquiries thread.

Sounds as though you are carrying ALL the risk .... We/you are a business and to me this sounds like bad business. Remember HMRC can come after long after this contract has finished...

As a PM myself this has Red RAG all over it. I agree (cant believe I am saying this) with NLUK

...and here I thought I was just updating people with the (good) outcome.

I have taken financial advice and tax advice on the matter, and the professionals in the field generally seem to feel the retrospective investigation risk is low. Just because someone leaves a contract, it would not stop HMRC looking at the previous contract if they felt an investigation was due. My clients HR department, disagreed with my contract terms which put me outside of IR35. I think they are wrong, especially since they signed a contract 2 years ago stating that they accepted these as the business terms. IF I was to be investigated I would argue that the client signed the document to accept the terms, ie. substitution. Because they now disagree, we mutually agreed to immediately terminate the contract. We then agreed a NEW contract, starting from next week, which meets the needs of the client, puts me inside IR35 and with which I am happy with, going forward.

If I terminated the old contract and left, if would have no bearing on if HMRC would investigate it or not. And if they DO investigate my contract, I will argue regarding the previous one, but the new one is untouchable.

All is good.

[Semtex]

Thought I'd leave one final comment...

...All Sorted. Staying put under a new (inside IR35) contract until the end of the project. I'm pleased with the result. HMRC should be too.

The chance of a retrospective investigation is always there, however given the number of cases the HMRC is going to have to look at, I think this is and has always been a low risk option. Time will tell.

pop along to the HMRC Scheme Enquiries thread.

Sounds as though you are carrying ALL the risk .... We/you are a business and to me this sounds like bad business. Remember HMRC can come after long after this contract has finished...

As a PM myself this has Red RAG all over it. I agree (cant believe I am saying this) with NLUK

[NetContractor]

Thought I'd leave one final comment...

...All Sorted. Staying put under a new (inside IR35) contract until the end of the project. I'm pleased with the result. HMRC should be too.

The chance of a retrospective investigation is always there, however given the number of cases the HMRC is going to have to look at, I think this is and has always been a low risk option. Time will tell.