Reply to: Updated government factsheet (can't spot the change though)

[JohntheBike]

You're right, although it has nothing to do with HMRC, who have no jurisdiction in employment status.

But since the tests for employment are being used in the status determination and the client is the one making that determination, they're explicitly confirming that the working practices and company-worker relationship passes those employment tests.

If the worker then chooses to take that status determination to an employment tribunal, there are two possible outcomes:

1. The tribunal judges them to be an employee, in which case no IR35 tax is due to HMRC (all PAYE payments must be net of tax) - so, for an existing long engagement, the worker can demand all taxes paid on their gross contractor income back, with interest - and the worker can then also claim backdated employee rights and benefits from the company
   
2. The tribunal judges them not to be an employee, in which case the worker can approach the client, then HMRC if necessary, to agree their outside IR35 status, and claim back the difference between the taxes paid and what should have been due; the implicit threat to HMRC is that the worker will take them to the tax tribunal armed with a ET judgement saying that their relationship with the client is clearly not one of employment

Either way, the worker wins as far as I can see. With the first option, the client stands to take a big hit and I'm surprised more clients haven't woken up to this yet. The clever ones are those who've just said they won't use ltd company contractors after April and so they don't need to do a status determination, hence no magic piece of paper the contractor can use at an ET. But that still doesn't insulate them completely, it just makes things a little harder for the contractor who's p*ssed off that he's been given the elbow.

However, all it takes is a few disgruntled contractors to go down this route with major clients and I reckon the fireworks will start to go off in HMRC and the Treasury.

But since the tests for employment are being used in the status determination and the client is the one making that determination, they're explicitly confirming that the working practices and company-worker relationship passes those employment tests.

exactly

Either way, the worker wins as far as I can see.

exactly again, which is all I've said for the last 20 years. But some representative organisations chose to hide their heads in the send regarding this.

and your analysis about the recovery of tax is also correct and if this scenario were to transpire, then HMRC would go after the client for the reclaimed tax. So again, as you say, it's interesting to note that some clients don't seem to have woken up to this threat.

However, all it takes is a few disgruntled contractors to go down this route with major clients and I reckon the fireworks will start to go off in HMRC and the Treasury

let's hope so.

I'm glad that others are thinking the same way as I am. However, those that might be contemplating such actions should keep their powder dry for the moment and see what transpires.

[CompoundOverload]

https://assets.publishing.service.go..._factsheet.pdf

I don't think anyone has quoted this sheet in this thread, it seems to further clarify the not retrospective approach. You could read this as by leaving your current client you are giving up a get out of jail free card by not staying for a while post April and going inside IR35. I'd be happy with that if I trusted it.

Depending on your own personal circumstances the terms of your contract may change. It is also possible that you will pay additional income tax and NICs if you had not previously been applying the off-payroll rules (IR35) correctly. However, HMRC will not use information resulting from these changes to open a new enquiry into earlier years unless there is reason to suspect fraud or criminal behaviour.

If only you could wholeheartedly rely on that.

This part is worrying unless there is reason to suspect fraud or criminal behavior

What constitutes this, have they given examples?

[Snooky]

However, just because you're deemed inside as a contractor this does not automatically give you right to employment benefits. If I recall there was some wording in the HMRC guidance regarding this.

You're right, although it has nothing to do with HMRC, who have no jurisdiction in employment status.

But since the tests for employment are being used in the status determination and the client is the one making that determination, they're explicitly confirming that the working practices and company-worker relationship passes those employment tests.

If the worker then chooses to take that status determination to an employment tribunal, there are two possible outcomes:

1. The tribunal judges them to be an employee, in which case no IR35 tax is due to HMRC (all PAYE payments must be net of tax) - so, for an existing long engagement, the worker can demand all taxes paid on their gross contractor income back, with interest - and the worker can then also claim backdated employee rights and benefits from the company. The company is then also liable for unpaid PAYE taxes, plus interest plus possibly penalties, if HMRC decides to pursue that.
   
2. The tribunal judges them not to be an employee, in which case the worker can approach the client, then HMRC if necessary, to agree their outside IR35 status, and claim back the difference between the taxes paid and what should have been due; the implicit threat to HMRC is that the worker will take them to the tax tribunal armed with a ET judgement saying that their relationship with the client is clearly not one of employment

Either way, the worker wins as far as I can see. With the first option, the client stands to take a big hit and I'm surprised more clients haven't woken up to this yet. The clever ones are those who've just said they won't use ltd company contractors after April and so they don't need to do a status determination, hence no magic piece of paper the contractor can use at an ET. But that still doesn't insulate them completely, it just makes things a little harder for the contractor who's p*ssed off that he's been given the elbow.

However, all it takes is a few disgruntled contractors to go down this route with major clients and I reckon the fireworks will start to go off in HMRC and the Treasury.

[rootsnall]

https://assets.publishing.service.go..._factsheet.pdf

I don't think anyone has quoted this sheet in this thread, it seems to further clarify the not retrospective approach. You could read this as by leaving your current client you are giving up a get out of jail free card by not staying for a while post April and going inside IR35. I'd be happy with that if I trusted it.

Depending on your own personal circumstances the terms of your contract may change. It is also possible that you will pay additional income tax and NICs if you had not previously been applying the off-payroll rules (IR35) correctly. However, HMRC will not use information resulting from these changes to open a new enquiry into earlier years unless there is reason to suspect fraud or criminal behaviour.

I've only just grasped this. So if you are deemed IR35 caught then there is absolutely no point sending that money to your Ltd. So if you are doing a series a contracts and some are caught and some not, you will need a Ltd Co open, but for some contracts it's no use ( same for umbrellas ). Or have I lost the plot !?

How the changes may affect you
These changes may affect how you pay the tax and National Insurance contributions that are due.
If you are affected, the organisation you are providing your services to will determine your employment status for tax purposes from 6 April 2020. Your hirer will give you a ‘Status Determination Statement’, which will set out the determination your hirer has made and the reasons behind this. You may be asked to provide the hirer with some information to help them make their determination.
If they determine that you are employed for tax purposes, they (or the agency they have hired you through) will pay the necessary tax and National Insurance before they pay you.
If they determine that you are self-employed for tax purposes, you will remain responsible for meeting your tax obligations.

[CompoundOverload]

yes, but so is the client. They would expose themselves to a claim for employment benefits in the ET. I guess anyone exposed to an HMRC investigation as a result of this scenario, might want to take this approach.

Yes, but in order to do so, you'll need deep pockets.

I'm surprised there isn't a bolt on to the IR35 insurance offered in that if you lose the case, you go after the client for employment benefits.

However, just because you're deemed inside as a contractor this does not automatically give you right to employment benefits. If I recall there was some wording in the HMRC guidance regarding this.

[JohntheBike]

You could go one further and rank them in terms of risk but who has time for that!

Like others have said, you're more at risk if you have gone from outside to inside with the same client. UNLESS you can rationally provide evidence as to why this change was made, perhaps with a change in contract wording or different job responsibilities from the previous project / engagement, but that would look very suspicious.

you're more at risk if you have gone from outside to inside with the same client

yes, but so is the client. They would expose themselves to a claim for employment benefits in the ET. I guess anyone exposed to an HMRC investigation as a result of this scenario, might want to take this approach.

[JohntheBike]

I would add 3.d. as above

yes, but unlikely I suspect.

[ChimpMaster]

agreed. But then it would be sensible to identify all the possible scenarios and determine what action is needed for each. As I see it, here are the scenarios -

1. the client doesn't renew your contract at all after Feb/Mar 2020
2. the client undertakes an SDS and
a. declares the contract outside
b. declares the contract inside
3. the client doesn't undertake an SDS and
a. employs you on PAYE
b. employs you on an FTC
c. insists you join an umbrella
d. and you carry on as normal, outside IR35 - so long as you are confident of your status

Each person's financial situation will clearly be unique and their approach to any of these scenarios will be driven by that situation.

I would add 3.d. as above

[CompoundOverload]

agreed. But then it would be sensible to identify all the possible scenarios and determine what action is needed for each. As I see it, here are the scenarios -

1. the client doesn't renew your contract at all after Feb/Mar 2020
2. the client undertakes an SDS and
a. declares the contract outside
b. declares the contract inside
3. the client doesn't undertake an SDS and
a. employs you on PAYE
b. employs you on an FTC
c. insists you join an umbrella

Each person's financial situation will clearly be unique and their approach to any of these scenarios will be driven by that situation.






5.

You could go one further and rank them in terms of risk but who has time for that!

Like others have said, you're more at risk if you have gone from outside to inside with the same client. UNLESS you can rationally provide evidence as to why this change was made, perhaps with a change in contract wording or different job responsibilities from the previous project / engagement, but that would look very suspicious.

[Paralytic]

You've seen those machines that come along grab a tree trunk and rattle the fruit off a tree. They get 95% of the fruit then move on. They are still much more efficient than employing lots of people hand-picking 100% of the fruit.

Lesson, don't get rattled..stick around. Even if they think you are juicy, do they really want to climb that tree for a piece of cheap fruit, when you still might not be ripe for the taking

And to that that analogy further, the tree-shaker does not care if some fruit gets damaged in the fall. They just squeeze it and extract what they can.

[JohntheBike]

That could be the case for most contractors though. Operating outside as normally, you leave start a new engagement elsewhere. You're previous client then panics and deems your previous role with them as inside and the filth open an investigation based on the client's sweeping assessment and a letter is sent out asking more details.

No-one is safe and no-one knows exactly what they plan on doing. Unless you have a bullet proof contract review and working practices in place (even then the client could disagree later on down the line if management change etc). Closing the company does seem to be the most sensible option and starting again after two years once the dust has settled.

No-one is safe and no-one knows exactly what they plan on doing.

agreed. But then it would be sensible to identify all the possible scenarios and determine what action is needed for each. As I see it, here are the scenarios -

1. the client doesn't renew your contract at all after Feb/Mar 2020
2. the client undertakes an SDS and
a. declares the contract outside
b. declares the contract inside
3. the client doesn't undertake an SDS and
a. employs you on PAYE
b. employs you on an FTC
c. insists you join an umbrella

Each person's financial situation will clearly be unique and their approach to any of these scenarios will be driven by that situation.

[BABABlackSheep]

You've seen those machines that come along grab a tree trunk and rattle the fruit off a tree. They get 95% of the fruit then move on. They are still much more efficient than employing lots of people hand-picking 100% of the fruit.

Lesson, don't get rattled..stick around. Even if they think you are juicy, do they really want to climb that tree for a piece of cheap fruit, when you still might not be ripe for the taking

[eek]

Why were GSK contractors all in a tizz when the blanket letters went out? There were contractors that had left the firm but got caught up in the investigation because of the specific year the filth went snooping? I understand if the existing contractors were caught up in it if GSK had said all contractors are now inside and people stayed on, when they were outside previously.

Do you have tax investigation cover?
If you do you pass the information to them to deal with.

If you don't you panic and pay up.

Also I'm sorry but GSK was full of permietractors who had been there years. The reason people panicked is because they were caught unprepared and knew they were guilty.

[CompoundOverload]

But you are not there so what your previous end client decides is completely irrelevant. They can pretend it was inside but the person responsible for actually making the decision was the contractor and they will have paperwork that shows that when they were there the contract was outside.

The only thing people need to worry about is shifting from an outside IR35 contract to one inside IR35 at the same client using the same agency. HMRC won't have time to handle anything else.

Why were GSK contractors all in a tizz when the blanket letters went out? There were contractors that had left the firm but got caught up in the investigation because of the specific year the filth went snooping? I understand if the existing contractors were caught up in it if GSK had said all contractors are now inside and people stayed on, when they were outside previously.

[eek]

That could be the case for most contractors though. Operating outside as normally, you leave start a new engagement elsewhere. You're previous client then panics and deems your previous role with them as inside and the filth open an investigation based on the client's sweeping assessment and a letter is sent out asking more details.

No-one is safe and no-one knows exactly what they plan on doing. Unless you have a bullet proof contract review and working practices in place (even then the client could disagree later on down the line if management change etc). Closing the company does seem to be the most sensible option and starting again after two years once the dust has settled.

But you are not there so what your previous end client decides is completely irrelevant. They can pretend it was inside but the person responsible for actually making the decision was the contractor and they will have paperwork that shows that when they were there the contract was outside.

The only thing people need to worry about is shifting from an outside IR35 contract to one inside IR35 at the same client using the same agency. HMRC won't have time to handle anything else.