Reply to: Outside to Inside IR35 - Same Client, Different Agent, Different Contract

[TheFaQQer]

Thanks. If I understand it, IR35 investigations are against the Ltd, not the individual, so HMRC would also have to go through the added effort of investigating a closed Ltd, which may be technically possible, but how often does it actually happen and in what circumstances?

I don't know of any cases where the company has been closed down. It's generally regarded as best practice to make sure that you keep insurance for a year after closing down just in case, but I don't know whether anyone has ever gone through an investigation once the company is closed.

[northernladyuk]

Looking at the information that HMRC would have from a pure data point of view:

- Currently, they know your NI number, the agency reporting the information, the amount paid. They do not know the client, the job, the title, how you work etc.
- You move from agency to an umbrella company - you disappear from the agency reporting requirements because the umbrella now deducts PAYE and NI for you. You appear on umbrella RTI as an employee. HMRC are unaware of the client, the job, the title, etc
- You close the current company down - HMRC are aware that the company is closed and any money you get from that closure, via your self assessment next year
- In the future, you create a new company, take a contract on via an agency outside IR35. You appear again on the agency reporting requirements with your NI number and amount. HMRC don't know anything about what you are doing (unless the reporting requirements change in the future)

Is it possible for someone / something to tie all those things together and trigger an investigation into the way you worked before you moved to the umbrella company? Yes. But I would consider the likelihood of something like that happening when there are plenty of other cases that will be much easier for HMRC to investigate.

Thanks. If I understand it, IR35 investigations are against the Ltd, not the individual, so HMRC would also have to go through the added effort of investigating a closed Ltd, which may be technically possible, but how often does it actually happen and in what circumstances?

[Moss]

Looking at the information that HMRC would have from a pure data point of view:

- Currently, they know your NI number, the agency reporting the information, the amount paid. They do not know the client, the job, the title, how you work etc.
- You move from agency to an umbrella company - you disappear from the agency reporting requirements because the umbrella now deducts PAYE and NI for you. You appear on umbrella RTI as an employee. HMRC are unaware of the client, the job, the title, etc
- You close the current company down - HMRC are aware that the company is closed and any money you get from that closure, via your self assessment next year
- In the future, you create a new company, take a contract on via an agency outside IR35. You appear again on the agency reporting requirements with your NI number and amount. HMRC don't know anything about what you are doing (unless the reporting requirements change in the future)

Is it possible for someone / something to tie all those things together and trigger an investigation into the way you worked before you moved to the umbrella company? Yes. But I would consider the likelihood of something like that happening when there are plenty of other cases that will be much easier for HMRC to investigate.

Thanks to everyone for the great feedback - useful stuff!

With regard to this scenario - do you gain a lot by actually closing the company down? Would it be much different to keeping the company going and then invoicing through it again on a future contract?

Would HMRC not have similar issues trying to piece it together in the same way (i.e. tying your stint with the brolly to the previous limited contract) as it all seems to be NI based anyway?

[Moss]

Moss,
It all depends on your view on risk - changing the agency would help, but is it still the same contract - maybe compare old and new 'LOT' numbers on the contract Description?

Thanks - I'm assuming the contract will be a completely new/different one from the new agency (I don't have sight of the underlying client-agency contract).

[Moss]

Why are so many people accepting inside contracts????

Well - in my particular circumstances the location and company suit my current needs perfectly. On top I've managed to secure a rate increase (although to be fair - this wasn't a deal breaker given the other benefits).

I never tried pushing back on the decision, but I've been aware of the difficulties they've had in (a) understanding and (b) adapting to the these new rules over the last few months, and don't believe they would change now they've come to their decision.

[TheFaQQer]

Thanks. I had assumed that MVL / ER/ capital gains relief would not be an option but was asking with regard to IR35 investigation risk, with the Ltd closed down, operating via a brolly with same client. A level of risk I would be comfortable with I think.

Looking at the information that HMRC would have from a pure data point of view:

- Currently, they know your NI number, the agency reporting the information, the amount paid. They do not know the client, the job, the title, how you work etc.
- You move from agency to an umbrella company - you disappear from the agency reporting requirements because the umbrella now deducts PAYE and NI for you. You appear on umbrella RTI as an employee. HMRC are unaware of the client, the job, the title, etc
- You close the current company down - HMRC are aware that the company is closed and any money you get from that closure, via your self assessment next year
- In the future, you create a new company, take a contract on via an agency outside IR35. You appear again on the agency reporting requirements with your NI number and amount. HMRC don't know anything about what you are doing (unless the reporting requirements change in the future)

Is it possible for someone / something to tie all those things together and trigger an investigation into the way you worked before you moved to the umbrella company? Yes. But I would consider the likelihood of something like that happening when there are plenty of other cases that will be much easier for HMRC to investigate.

[northernladyuk]

The problem with closing down the company is that pesky word "trade" in the legislation around tax avoidance by closing the company down - you are still in the same trade even though you are working as an employee. The employer being a brolly company makes this slightly more awkward as well since it might be harder to defend if HMRC ask questions.

You can always close the company, it's whether you can close it and retain any of the tax advantages of an MVL / ER/ capital gains relief. If you have enough retained capital then there are other ways that might be appealing to get access to that money without closing the business.

Thanks. I had assumed that MVL / ER/ capital gains relief would not be an option but was asking with regard to IR35 investigation risk, with the Ltd closed down, operating via a brolly with same client. A level of risk I would be comfortable with I think.

[SueEllen]

The problem with closing down the company is that pesky word "trade" in the legislation around tax avoidance by closing the company down - you are still in the same trade even though you are working as an employee. The employer being a brolly company makes this slightly more awkward as well since it might be harder to defend if HMRC ask questions.

You can always close the company, it's whether you can close it and retain any of the tax advantages of an MVL / ER/ capital gains relief. If you have enough retained capital then there are other ways that might be appealing to get access to that money without closing the business.

If you close the limited down and don't take the tax advantages then if you get an outside IR35 contract in 18 months time you can open a new one up.

You have then cut the link between yourself and you old PS outside contract, decreasing your risk.

[TheFaQQer]

And from a risk point of view, if I had a contract and working practices reviewed by QDOS or AN Other and assessed as outside IR35, and I could get paid before 6 April, I would be comfortable closing the Ltd down and operating going forward via a brolly. Thoughts?

The problem with closing down the company is that pesky word "trade" in the legislation around tax avoidance by closing the company down - you are still in the same trade even though you are working as an employee. The employer being a brolly company makes this slightly more awkward as well since it might be harder to defend if HMRC ask questions.

You can always close the company, it's whether you can close it and retain any of the tax advantages of an MVL / ER/ capital gains relief. If you have enough retained capital then there are other ways that might be appealing to get access to that money without closing the business.

[TonyR]

Why are so many people accepting inside contracts????

You've always seemed to suggest a majority of contractors should be "Inside" based on their working practises and attitudes though right?

At my NHS client, nearly every contractor (working with I.T) was willing to accept an inside contract until they considered the risk of retrospective taxation.

Of course once that was considered the opposite became true and now everyone is finishing up on Friday, with agency payments agreed for next Wednesday.

[Scotchpie]

But you aren't just looking for that - you are looking for them to make a potentially fraudulent declaration in the hope that it protects you from an investigation into all work you have done under this contract.

I don't think so. I do work without supervision as no one has the skills, I can choose within reason where I work on a daily basis and to some degree the hours I work, I set my own schedule with some input from the client (ie when they need the work completed by) and I provide my own specialist software on my company's laptop when ever its required. I'm not back-filling, or covering temporary absense where I take on the duties of an existing employee and so I'm comfortable that the role is outside.

The reason they are saying the role is now inside is because other contractors are working the usual 9 to 5 grind in a supervised environment and as such the client is taking a broad brush approach.

For the above reasons I'm fighting that my role is outside.

[northernladyuk]

A I said in in the FAQ:



As others have posted, if there is a break between contracts (particularly where the agency changes) then looking at the data that HMRC have available to them the chance of an investigation straight away into your previous working practices could be lower. However, that doesn't mean that HMRC won't come knocking to ask about the working practices, and you'll need to have a good defence if they do.

As you say - it's down to how easily you want to sleep at night, so good luck with whatever decision you make.

And from a risk point of view, if I had a contract and working practices reviewed by QDOS or AN Other and assessed as outside IR35, and I could get paid before 6 April, I would be comfortable closing the Ltd down and operating going forward via a brolly. Thoughts?

[TheFaQQer]

My strategy is to persuade them that I am only looking for outside status for this one week and then the contract ends.

But you aren't just looking for that - you are looking for them to make a potentially fraudulent declaration in the hope that it protects you from an investigation into all work you have done under this contract.

If I was the client I'd be incredibly wary of making that declaration and would be looking at what potential liability that might open up for the PSB in the future.

[TheFaQQer]

So I was just thinking I was maybe being too cautious trying to retro-fit my old contract accounts into being inside IR35 - and in this case I can just accept the old contract as being outside, and the new contract as being inside IR35 and carry on.

Appreciate no-one really knows how HMRC will deal with these situations - and it all comes down to ‘how well you want to sleep at night’, but I’m thinking this gives me a *fair* degree of confidence that the old contract is well enough covered to cause HMRC to pass over if it ever arose (and yes, I have IR35 insurance).

Thought it might be useful to throw this particular scenario into the mix and see if anyone had any (hopefully constructive) insights?…

A I said in in the FAQ:

Looking at the data that is provided by an agency to HMRC, they do not provide the job title, client, job role or any meaningful details about the work that your company is providing to the client. There have been a number of discussions here around whether HMRC will have a data set that clearly identifies who (and what) to ask - I will not speculate on whether this is likely or not. However, I would carefully consider what implications might be drawn by an agency continuing to pay the same contractor under different terms from one pay period to the next. It might be a different matter if the contractor changed agency, but I would be wary about continuing under these circumstances.

As others have posted, if there is a break between contracts (particularly where the agency changes) then looking at the data that HMRC have available to them the chance of an investigation straight away into your previous working practices could be lower. However, that doesn't mean that HMRC won't come knocking to ask about the working practices, and you'll need to have a good defence if they do.

As you say - it's down to how easily you want to sleep at night, so good luck with whatever decision you make.

[Scotchpie]

Carrying on via your Ltd? Sounds risky.

I'd have to move to an brolley if inside, but then they haven't seen my day rate yet. Still confident I will be outside. Plus its a mission critical role and I'm the only one with the skills (R programming and data science) on site.