Reply to: IR35 Retrospective Tax Claims

[webberg]

In other words an HMRC fishing trip, looking to see who will pay up without a fight. Would they not have to open an investigation on each individual contractor and prove they were inside IR35 to force it? I strongly suspect HMRC doesn't have the manpower for this. It also doesn't have a deterrent effect, as the individuals are now inside IR35, so not worth incurring a lot of cost for little gain.

Yes - an enquiry on each individual in each year is usually required.

No - the onus of proof is upon the individual.

HMRC are likely to come along with a "you were contracting 16/17 and your end client said you were an employee 17/18. On the basis that your job description did not change and neither did your end client, we think you were likely inside IR35 for 16/17 (and perhaps 15/16). What evidence do you have for claiming otherwise?"

The public sector - esp Civil Service - has a group think that says if an individual is grade 4 say, then they can do ANY grade 4 job in the department. In HMRC that is a nonsense (a VAT specialist being reassigned to income tax fraud?). Perhaps in many other places also a nonsense. However, the starting assumption is there.

Consequently, in seeking to disprove HMRC's starting assumption, you have to fight this group think and point to differences between the two years or perhaps a change of circumstances or some other reason.

I guarantee you that relying upon a defence of "the end client was just being cautious" is almost certainly not enough.

[Acme Thunderer]

Not sure if you're going from the strict definition of retrospective but 6 public sector workers have been given tax bills for previous tax years after moving to an umbrella solution with the same end client / role post April 2017.

Their limited contract was terminated and a new one generated under PAYE following an inside decision from the public sector client. HMRC didn't open investigations, they just sent them a bill saying 'we believe you've been taxed incorrectly and should have been a deemed employee'.

In other words an HMRC fishing trip, looking to see who will pay up without a fight. Would they not have to open an investigation on each individual contractor and prove they were inside IR35 to force it? I strongly suspect HMRC doesn't have the manpower for this. It also doesn't have a deterrent effect, as the individuals are now inside IR35, so not worth incurring a lot of cost for little gain.

[cojak]

Not sure if you're going from the strict definition of retrospective but 6 public sector workers have been given tax bills for previous tax years after moving to an umbrella solution with the same end client / role post April 2017.

Their limited contract was terminated and a new one generated under PAYE following an inside decision from the public sector client. HMRC didn't open investigations, they just sent them a bill saying 'we believe you've been taxed incorrectly and should have been a deemed employee'.

I was told this a couple of weeks ago by the compliance director at the agency that supplies them so I trust that it's fairly accurate. Discussion from others in the same field and the consensus was that HMRC are keen to demonstrate the effectiveness of this change in raising tax revenues.

Quelle surprise.

Not.

https://www.contractoruk.com/forums/...ur-notice.html

I guess that we are going to need the same count down for the 24th February 2020 ( or should that be the 31st December this year...?)

[jk3838]

Not sure if you're going from the strict definition of retrospective but 6 public sector workers have been given tax bills for previous tax years after moving to an umbrella solution with the same end client / role post April 2017.

d.

For the previous tax year ? Or years ?

If years How many years ?

[ComplianceLady]

No one has been caught by retro taxation to date so I wouldn't be making it a decision point in whether you retire or not.

It's an interesting point that you talk about admitting your gig is inside yet not once have you mentioned leaving the client and getting a gig elsewhere. This smacks of permie-tractor to me for a number of reasons so maybe the inside determination isn't as far wrong as you think?

Not sure if you're going from the strict definition of retrospective but 6 public sector workers have been given tax bills for previous tax years after moving to an umbrella solution with the same end client / role post April 2017.

Their limited contract was terminated and a new one generated under PAYE following an inside decision from the public sector client. HMRC didn't open investigations, they just sent them a bill saying 'we believe you've been taxed incorrectly and should have been a deemed employee'.

I was told this a couple of weeks ago by the compliance director at the agency that supplies them so I trust that it's fairly accurate. Discussion from others in the same field and the consensus was that HMRC are keen to demonstrate the effectiveness of this change in raising tax revenues.

A tax accountancy advisor said closing the limited company will deter enforcement but not prevent it and so the advice from them (and us to our contractors) is not to switch from outside IR35 to inside IR35 or PAYE. If you're going to accept an inside IR35 engagement it's worth moving to an entirely new one.

Haven't read the entire thread so apologies if I've duplicated.

[jk3838]

So, just heard through the grapevine that agent has had a meeting with end client and proposed bringing an IR35 compliance company to review the contracts and working practices in order to assist the client in their determination of IR35 status for its contractors. (I know someone suggested that exact thing yesterday on here) and I presume some sort of insurance cover for the client

Then (the contracts may or may not need a tweek first but are qdos compliant now) the IR35 experts will then offer a contract review (paid for by the contractors that want it) to assure they are outside compliant

Good news in that they are looking at it rather than the blanket 'you're all inside' that I was expecting them to do, in a backside covering exercise

This has gained momentum here this week (I've nudged a few guys into sending the agent an email) and the penny is starting to drop with the client that they could lose the guys with hard to find skills who know the implications of what is coming, leaving the numpty 'if it happens it happens' too lazy/incompetent to move on types behind, if they don't cover it off

Always the chance the IR35 compliance company could advise the client to go 'all inside' for safety but there is some incentive for them to say 'outside' in that quite a bit of business for them to be had with individual reviews and compliance insurance for a few hundred contractors

Guess it comes down to 'are we really outside or not?', which is how it should be

Trouble is, if it comes back we're inside, then client determination might trump any evidence we have we are 'outside'

Either way I'll know what I'm doing based on the outcome

[jamesbrown]

But it has a bearing on if they'd bother pursuing you.

Actually, there isn't much evidence of that. The historical MO at HMRC seems to be: we open an investigation (probably triggered by something completely unrelated), and we pursue it much further than you might expect, possibly w/ long silent periods. There is anecdotal evidence of this everywhere. I expect you may be right for something on the order of days or weeks, but anything on the order of months, it seems not, anecdotally (based on anecdotes from those dealing w/ IR35 at the sharp end, because most of this stuff never sees the light of day, obviously). Operating a deterrent often means spending more than might be recovered.

[rootsnall]

length of contract has no bearing on your IR35 status.

But it has a bearing on if they'd bother pursuing you.

[NCOTBAC]

A signed 'outside' declaration from the client

Best way to do this is to use a Confirmation of Arrangements letter. Templates can be found here. It confirms the client is aware of and agrees the terms of the contract so there can be no accusations of sham clauses the client won't comply with.

Confirmation of Arrangements - IR35 Resources - Qdos Contractor

[jk3838]

So. Bit of a ramble but hope some of it is useful. I'm no expert and we have very little detail but these are the areas I'd be concerned about from just this thread. No particular order but trying to start of with tangible points and filter down to musings.

So your pillars are Ros, MoO and D&C. The problem you have is the length of time. Although not an indicator it is very difficult to keep these up as time progresses. You want to read up on the JLJ partial case where he was outside to start but through apathy he became part and parcel and forgot to keep his diligence up. Details here.
New IR35 ruling: Partial victory for JLJ Services v HMRC

So after a long time on the gig MoO has to be a problem. You just carry on doing the work you are given. Over time they'll just expect you to do the work you are given without saying no. That is assuming another key point. You are working to a well defined statement of work. It would be easy to imagine that for that length of time you are just doing a bum on seat enduring role that should have a permie doing it for a start. Even if you fudge the paperwork to make it look like a SoW over time it's likely you'll drop that and your contract will just look like a job description. As there is no defined work it's difficult to find a line where absence of MoO could be proved.

On to D&C. Again, if you are doing an enduring role and you've been there you have to be part and parcel. It's human nature just to fall in to it and very difficult after 10 years to think of it as anything but you permanent job and they treat you like a member of staff. That means you are highly likely to be treated like the perms and are directed and controlled in the same way. Going up to you client for 10 years reminding them you are a contractor and can't/shouldn't be doing that is going to grate on them for sure.

As mentioned there is the whole part and parcel thing. Although not directly a flag it brings all sorts of risks with it.

RoS. You've mentioned an employee which is terrific defence but it's not exactly Ros. If you are so specialised, been there so long and no one out there in the market they may be reticent to allow a substitute. I don't know if courts take in to account the fact that although they may allow it, it's next to impossible to do due to lack of equally skilled resources so the clause is a sham.

The length of time is also going to be of interest due to the amount of monies involved which is also likely to cloud their judgement on the facts (HMRC I mean, not the courts).

On the face of it 10 years, just doing the same can be nothing but a permie role but that doesn't really count for much. You have to go through all the elements in detail in court but you couldn't blame HMRC for thinking they've got a good case.

How many times have you had your contracts and working practices reviewed? Insurances in place?

I don't think any comments on minor evidence like having 'Contractor' on your pass and the like helps in this situation. They only thing you really need is cold hard examples of you meeting those pillars and working practices are outside every day for those 10 years. If you haven't been thinking and acting like a contractor with a very close eye on IR35 all these times then no retrospective defence is going to be much use at this point.

I don't want to be rude to the OP but schemes he's been thinking resulting in Cojaks comments would lead me to believe the previous paragraph is the real problem. We are going to see many many posts in the coming year from people that have suddenly gotten wind of the IR35 problem and are guessing at quick fixes rather than a balance and measured approach to something they've already been doing day in day out. The ideas and schemes show a gap in knowledge that is likely to have been there from day one. Sorry.

Can do nothing but agree with the above

But we are where we are

To shed a little extra like on my situation.

It's not ten years, but is more than five.
Have had periodic new contracts.
Have brought in a. n. other as well to help with work load
Do tell them I'm out of office (never ask them)
Do exclude myself from all team events, photos, training, forms, systems (yep, one contractor here was happy to use the clocking in and out system)
Have kept emails regarding delivering work as a package
A project they want is given to my company, I go away and create it then deliver it (no client intervention apart from do you want it in red or blue)
Have emails saying I'll rectify x,y,z that I did wrong at no additional cost to the client
Have emails saying I don't want that piece of work
Have emails from client asking 'we can't fix this, can you fix this?, 'yes I can fix that' 'here's a quote to fix that' 'let me know if you want that fixing and I'll see if I have capacity'
I have quotes for fixed price work and then invoice for same work at later date
Qdos review of current contract but not all contracts since day 1
Substitute clause in contract
Have a 'not an employee' and 'not to be treated as one' in the contract
Obviously don't get bonuses or any other 'employee benefits and discounts'
Constantly try to not become seen the same as the permies at every opportunity in all things
To everything I say 'no thanks, I don't work here' verbally and in writing

Things I will get next week after talking to client

A signed 'outside' declaration from the client
Signed CEST test on me by them

Not sure on cold hard examples of working practices apart from those above ?

If I'm caught, I'm caught but just trying to climb higher up the tree

Again any suggestions on how to do that appreciated

Learned a lot this week, no less scared, in fact more so, but better to be more aware and have done more to shore up the defences than most here who couldn't care less Ignorance is bliss and all that

[jk3838]

Of course jk3838.

I would not have deleted the thread, and now things have calmed down ( ) I'm sure that it will come back on track.

I may even decide to move the other posts to General.

Maybe.

great, and phew I was thinking I had to frantically copy and paste the useful bits (and that wasn't how high any mountains are)

[cojak]

Of course jk3838.

I would not have deleted the thread, and now things have calmed down ( ) I'm sure that it will come back on track.

I may even decide to move the other posts to General.

Maybe.

[jk3838]

Right, I've kept an eye on this thread but I'm now stepping in.

The OP has valiantly attempted to keep this thread on-topic by himself but with the last conspiracy theory post it's obvious that he needs help.

@jk3838 - do you have all the info you need? If you don't I will clear the dross off the thread from this point and keep it on topic.

If you have then I will close this thread.

Please can you keep the post, it is most useful, and I'm directing other contractors towards it so they might learn too

Delete the dross by all means if you have time to go through

Also, I feel others in the private sector will eventually start waking up and find this post, which I'm sure will answer a lot of identical questions for them (and save anyone having to ask/answer them all over again)

It would be a shame for the time put in to help me (and it time, to help others) were to be wasted by deleting the whole post simply because it was hijacked for a point scoring spat

Please can I ask that if the post is kept running, can the 'point scoring spat' please stop Call it a draw This forum is a great help to people like me

Again, thank you to those who kept to the point Your post have been / still are great help to those with lesser understanding of a very complicated but very important subject

[mudskipper]

OP - check out IPSE's guide to IR35, which covers the basics.

https://www.ipse.co.uk/uploads/asset...fae75f7d27.pdf

[JohntheBike]

So. Bit of a ramble but hope some of it is useful. I'm no expert and we have very little detail but these are the areas I'd be concerned about from just this thread. No particular order but trying to start of with tangible points and filter down to musings.

So your pillars are Ros, MoO and D&C. The problem you have is the length of time. Although not an indicator it is very difficult to keep these up as time progresses. You want to read up on the JLJ partial case where he was outside to start but through apathy he became part and parcel and forgot to keep his diligence up. Details here.
New IR35 ruling: Partial victory for JLJ Services v HMRC

So after a long time on the gig MoO has to be a problem. You just carry on doing the work you are given. Over time they'll just expect you to do the work you are given without saying no. That is assuming another key point. You are working to a well defined statement of work. It would be easy to imagine that for that length of time you are just doing a bum on seat enduring role that should have a permie doing it for a start. Even if you fudge the paperwork to make it look like a SoW over time it's likely you'll drop that and your contract will just look like a job description. As there is no defined work it's difficult to find a line where absence of MoO could be proved.

On to D&C. Again, if you are doing an enduring role and you've been there you have to be part and parcel. It's human nature just to fall in to it and very difficult after 10 years to think of it as anything but you permanent job and they treat you like a member of staff. That means you are highly likely to be treated like the perms and are directed and controlled in the same way. Going up to you client for 10 years reminding them you are a contractor and can't/shouldn't be doing that is going to grate on them for sure.

As mentioned there is the whole part and parcel thing. Although not directly a flag it brings all sorts of risks with it.

RoS. You've mentioned an employee which is terrific defence but it's not exactly Ros. If you are so specialised, been there so long and no one out there in the market they may be reticent to allow a substitute. I don't know if courts take in to account the fact that although they may allow it, it's next to impossible to do due to lack of equally skilled resources so the clause is a sham.

The length of time is also going to be of interest due to the amount of monies involved which is also likely to cloud their judgement on the facts (HMRC I mean, not the courts).

On the face of it 10 years, just doing the same can be nothing but a permie role but that doesn't really count for much. You have to go through all the elements in detail in court but you couldn't blame HMRC for thinking they've got a good case.

How many times have you had your contracts and working practices reviewed? Insurances in place?

I don't think any comments on minor evidence like having 'Contractor' on your pass and the like helps in this situation. They only thing you really need is cold hard examples of you meeting those pillars and working practices are outside every day for those 10 years. If you haven't been thinking and acting like a contractor with a very close eye on IR35 all these times then no retrospective defence is going to be much use at this point.

I don't want to be rude to the OP but schemes he's been thinking resulting in Cojaks comments would lead me to believe the previous paragraph is the real problem. We are going to see many many posts in the coming year from people that have suddenly gotten wind of the IR35 problem and are guessing at quick fixes rather than a balance and measured approach to something they've already been doing day in day out. The ideas and schemes show a gap in knowledge that is likely to have been there from day one. Sorry.

in any case, all aspects of the reality of the engagement and the contractual provisions as presented by both sides will be taken into account. The court will determine the weighting factor, so your advice isn't necessarily correct. As you say, you are no expert. Such things as the intentions of the parties and the remuneration levels can be and are taken into account and weighted appropriately. Only a court can decide these factors, what you say is only an opinion.