Reply to: Wording of Contract to make it Outside

[malvolio]

Because it was mis-sold as being inside IR35 when in reality it was outside. The client would be happy for me to fix any mistakes in my own time at my own expense, happy for me to not go to their regular big bash meetings or crimbo dos, happy for me to WFH and just deliver results in line with their needs, and happy for me to not bill them when the project phase completes and they don't have a need for me for a few weeks until the next project piece starts.

If they're going to treat me like a contractor and not a permie I want my tax back.

No it wasn't "mis-sold", it was offered as an inside IR35 deal. They make the determination, not you. IF they think that they would rather have their contractors paying taxes they probably don't owe, then tough, them's the apples on offer. It's up to you whether or not you accept the deal.

Perhaps, before accepting, you could have done the sums and asked for a <>50% uplift to cover your extra costs. End result would be the same, but at least it would have made them think.

[Hobosapien]

]I do so love an optimist...

You didn't have to take the contract, knowing it was inside IR35. So why should you get your tax back?

Because it was mis-sold as being inside IR35 when in reality it was outside. The client would be happy for me to fix any mistakes in my own time at my own expense, happy for me to not go to their regular big bash meetings or crimbo dos, happy for me to WFH and just deliver results in line with their needs, and happy for me to not bill them when the project phase completes and they don't have a need for me for a few weeks until the next project piece starts.

If they're going to treat me like a contractor and not a permie I want my tax back.

[malvolio]

If being deemed inside IR35 at renewal when previously 'proven' outside via contract/working practice review, and the ESS tool pointed to inside at the time due to no substitution allowed, if not too late (already accepted renewal and been inside for one or more payments so boat has sailed and sunk) then could try to get them to check the ESS tool again (it has been updated several times of late ) as despite me not being allowed substitution one or more of the other questions placed me outside when I ran through it myself.

Though in my case the PS client has blanket deemed everyone inside IR35 so I will wait for the class action lawsuit for mis-sold IR35 further down the line where we get all the unfair tax refunded.

]I do so love an optimist...

You didn't have to take the contract, knowing it was inside IR35. So why should you get your tax back?

[Hobosapien]

If being deemed inside IR35 at renewal when previously 'proven' outside via contract/working practice review, and the ESS tool pointed to inside at the time due to no substitution allowed, if not too late (already accepted renewal and been inside for one or more payments so boat has sailed and sunk) then could try to get them to check the ESS tool again (it has been updated several times of late ) as despite me not being allowed substitution one or more of the other questions placed me outside when I ran through it myself.

Though in my case the PS client has blanket deemed everyone inside IR35 so I will wait for the class action lawsuit for mis-sold IR35 further down the line where we get all the unfair tax refunded.

[eek]

They don't only tell HMRC about the people inside, they report all payments they make to intermediaries (ie any payment not made to the individual directly).

If you went and worked for an umbrella company (or even for the client directly as an employee or FTC) then you would disappear completely from the agency report since they wouldn't be making the payment to you (technically, the amount paid disappears since they are no longer paying you). You would then appear on the RTI report instead for whoever does the payroll for your new employer.

So if you stayed at the same agency, the report would show March £1000 gross payment to you, April £700 (or whatever the actual calculation is) net payment to you. I don't think it would be rocket science to put the two months together and then ask the individual "can you provide details of your clients covering this period" as a starter for ten (thousand).

Not quite true. If you moved to an umbrella company both transactions would appear on the Agency's report as in both cases the agency are still paying a known person gross rather than net. However it wouldn't be quite as obvious as the amount paid wouldn't have changed, just the intermediary it was paid to.... Whether a change in Intermediary between March and April was picked up and investigated would be anyone's guess...

[TheFaQQer]

So if agencies only tell HMRC about the people INSIDE (and this paying the extra tax) how are HMRC going to choose those to investigate, yes some may bounce inside/outside/inside again but I would imagine this to be few and far in between. Do HMRC know the difference between an agency not paying a contractor anything, or an agency stopping paying a contractor that was inside as they are now outside (which seems to be the point Eek made about going form inside to outside)

They don't only tell HMRC about the people inside, they report all payments they make to intermediaries (ie any payment not made to the individual directly).

If you went and worked for an umbrella company (or even for the client directly as an employee or FTC) then you would disappear completely from the agency report since they wouldn't be making the payment to you (technically, the amount paid disappears since they are no longer paying you). You would then appear on the RTI report instead for whoever does the payroll for your new employer.

So if you stayed at the same agency, the report would show March £1000 gross payment to you, April £700 (or whatever the actual calculation is) net payment to you. I don't think it would be rocket science to put the two months together and then ask the individual "can you provide details of your clients covering this period" as a starter for ten (thousand).

[eek]

So if agencies only tell HMRC about the people INSIDE (and this paying the extra tax) how are HMRC going to choose those to investigate, yes some may bounce inside/outside/inside again but I would imagine this to be few and far in between. Do HMRC know the difference between an agency not paying a contractor anything, or an agency stopping paying a contractor that was inside as they are now outside (which seems to be the point Eek made about going form inside to outside)

Agencies need to report all payments made for labour which are not paid directly to the individual (i.e. all payments made to a limited company or umbrella for services provided at an hourly / daily rate).

So if you worked on this contract in March HMRC will see that they paid £x gross for the labour provided by someone with the NI number xyz. A second report in April would show HMRC that the same agency paid you (with NI Number xyz) £y net of tax.

[InsertWittyNameHere555]

AFAIK, there is no direct mechanism for the client or agency to inform HMRC of anything that goes on in the process - they don't have to tell HMRC that they have made an assessment, they don't have to tell HMRC the result of that assessment, and they don't have to tell HMRC if they don't make any assessment. What they DO have to do is make sure that the "correct" level of tax and NI is deducted from the gross invoice value before your company is paid - if they assess the role as outside then that's £0, if it's inside then the fee payer needs to deduct PAYE and National Insurance. Additionally, as I've stated before, employers NI will be due, and the apprentice levy may become due if the payroll of the fee payer exceeds £3 million a year.

So if the PSB runs a test and it comes back as a no (I presume you mean inside IR35) then they are responsible for making the necessary tax deductions. If they fail to do that then the fee payer becomes liable for the payment.

But coming back to the question of whether there is any chance of being hit with the dart, you would need to think about the data sets available to HMRC and what they could do with the data. The agency reporting requirements will give HMRC a data set showing month by month who they have paid and what taxes have been deducted, using your NI number. It does not provide details of who the client is or what the role is. But if you were through an agency being paid in March as outside IR35 and then in April the same agency paid the same person an amount which equates to the same gross, then I don't think it's unreasonably to think that HMRC might ask questions about that engagement.

As I stated in the FAQ:

So if agencies only tell HMRC about the people INSIDE (and this paying the extra tax) how are HMRC going to choose those to investigate, yes some may bounce inside/outside/inside again but I would imagine this to be few and far in between. Do HMRC know the difference between an agency not paying a contractor anything, or an agency stopping paying a contractor that was inside as they are now outside (which seems to be the point Eek made about going form inside to outside)

[eek]

AFAIK, there is no direct mechanism for the client or agency to inform HMRC of anything that goes on in the process - they don't have to tell HMRC that they have made an assessment, they don't have to tell HMRC the result of that assessment, and they don't have to tell HMRC if they don't make any assessment. What they DO have to do is make sure that the "correct" level of tax and NI is deducted from the gross invoice value before your company is paid - if they assess the role as outside then that's £0, if it's inside then the fee payer needs to deduct PAYE and National Insurance. Additionally, as I've stated before, employers NI will be due, and the apprentice levy may become due if the payroll of the fee payer exceeds £3 million a year.

So if the PSB runs a test and it comes back as a no (I presume you mean inside IR35) then they are responsible for making the necessary tax deductions. If they fail to do that then the fee payer becomes liable for the payment.

But coming back to the question of whether there is any chance of being hit with the dart, you would need to think about the data sets available to HMRC and what they could do with the data. The agency reporting requirements will give HMRC a data set showing month by month who they have paid and what taxes have been deducted, using your NI number. It does not provide details of who the client is or what the role is. But if you were through an agency being paid in March as outside IR35 and then in April the same agency paid the same person an amount which equates to the same gross, then I don't think it's unreasonably to think that HMRC might ask questions about that engagement.

As I stated in the FAQ:

So its covered and the damage has already been done.... Hockey Cockey or not the only question the OP needs to ask himself is can he afford to continue working on this contract or can he find another one that is better paid. Only he can decide that...

[TheFaQQer]

Ok, here is one though, does the client/agency inform HMRC of the outcome from the decision tool? How does that then work for a role they advertise as outside, where they are not run against a specific person, does the PS organisation inform HMRC that they have run the test and it came back as a no.

In that respect doesn't HMRC still have the same chance of hitting something(one) with said dart

AFAIK, there is no direct mechanism for the client or agency to inform HMRC of anything that goes on in the process - they don't have to tell HMRC that they have made an assessment, they don't have to tell HMRC the result of that assessment, and they don't have to tell HMRC if they don't make any assessment. What they DO have to do is make sure that the "correct" level of tax and NI is deducted from the gross invoice value before your company is paid - if they assess the role as outside then that's £0, if it's inside then the fee payer needs to deduct PAYE and National Insurance. Additionally, as I've stated before, employers NI will be due, and the apprentice levy may become due if the payroll of the fee payer exceeds £3 million a year.

So if the PSB runs a test and it comes back as a no (I presume you mean inside IR35) then they are responsible for making the necessary tax deductions. If they fail to do that then the fee payer becomes liable for the payment.

But coming back to the question of whether there is any chance of being hit with the dart, you would need to think about the data sets available to HMRC and what they could do with the data. The agency reporting requirements will give HMRC a data set showing month by month who they have paid and what taxes have been deducted, using your NI number. It does not provide details of who the client is or what the role is. But if you were through an agency being paid in March as outside IR35 and then in April the same agency paid the same person an amount which equates to the same gross, then I don't think it's unreasonably to think that HMRC might ask questions about that engagement.

As I stated in the FAQ:

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.

[malvolio]

All a bit academic, actually. Apart from the PB having to report all payments made and to whom through RTI, you will only be getting your day rate net of taxes anyway. So even if you have a contract saying you're outside IR35, you won't be able to do a hell of a lot about it.

[eek]

Ok, here is one though, does the client/agency inform HMRC of the outcome from the decision tool? How does that then work for a role they advertise as outside, where they are not run against a specific person, does the PS organisation inform HMRC that they have run the test and it came back as a no.

In that respect doesn't HMRC still have the same chance of hitting something(one) with said dart

The report supposedly runs against the agency reporting requirements.

So it would show March 2017 £x paid gross, April 2017 £y paid net... Combine those 2 reports and you have a dataset of NI numbers ready to send letters to once the self assessments have been submitted.


And I suspect TF's FAQs don't cover that area in as much detail as my previous version.... I don't think TF believes the threat is as great as I do (mainly because I know said report was requested).

[northernladuk]

Make sure you read TFs stickies. Am sure much of this is covered.

[InsertWittyNameHere555]

The chance of IR35 investigations was low when all HMRC could do was through a dart into the dartboard and without any evidence start investigating someone. Now there is a large list of people previously outside IR35 who have been deemed by their employer (yes that is the word I'm using) to be inside IR35. Now I have reasons to believe that ready to be run reports exist within HMRC systems to identify such people - others around here believe that isn't the case. However, HMRC don't have to rush to kick off these investigations now so its going to be well into 2018 before anyone knows if my concerns were valid or just me being overly negative .

As for being inside - the decision is now made by the client and you have already been paid as if inside - so the damage has already in part been done (if the report mentioned above exists, you are probably already on it). And to be blunt arguing after the fact isn't going to get you anywhere they have made their decision - probably based as much on advice from NHS Improvement as the tool and nothing is going to change their viewpoint....

It's a Hokey Cokey contract. If HMRC were looking for someone to look at surely an outside, inside, outside determination for the same continuous role would be worth a sniff.

OP. Were you aware of everything at the time and keeping on top of it or just kept working and let it sort itself?

Ok, here is one though, does the client/agency inform HMRC of the outcome from the decision tool? How does that then work for a role they advertise as outside, where they are not run against a specific person, does the PS organisation inform HMRC that they have run the test and it came back as a no.

In that respect doesn't HMRC still have the same chance of hitting something(one) with said dart

[northernladuk]

It is.
I thought this the best time.
I understand your point thought about going outside, inside, outside throwing up some red flags.
I still think its worth a discussion. My trust was one of the 'lets put everyone inside straight away' trusts until they realized they cant do this and then it lets assess everyone but put as many inside as possible.

Sadly we had that discussion 2 or 3 months ago.