Reply to: From Outside IR35 to umbrella

[Martin Bank Holiday]

Hypothetically speaking...

What about if you've only been at a client say 4 months (operating as outside) but want to continue with them because you have the potential for extended work for the foreseeable, BUT they will only accept you past April if you go PAYE or umbrella (and the day rate is good) what do you do then?

Take the risk hoping you won't be investigated, or
If the former does happen, cough up for the 4 months tax you've already done in the outside arrangement and continue as umbrella?

Do you then run the risk that any other engagements you've worked on in prior years with other clients will be looked at?

That's the kicker and the thing that I'm currently grappling with.

[eek]

On this note, I have been contracting outside IR35 with the same company for the last 6 months and am coming up to a situation where I may have two options :-

1. Take an FTC with them - package probably roughly comparable to my current rate
2. Take an Inside IR35 job with another company at the same rate (Umbrella or still through PSC my choice), but INSIDE. Worse choice financially.

On one hand, the FTC bypasses any IR35 decision but it's Outside to short-term perm at the same Company. On the other, I'd be swapping companies and roles but would deemed Inside.

I can't quite work out if one is more risky Darth HMRC-wise than the other or they are both dreadful?

Taking an inside IR35 contract elsewhere is a career choice that has nothing to do with tax.

Continuing with the same contract opens up the risk of HMRC asking were your really outside.

The amount of risk involved there is up to you.

[nico]

Yep agreed. Which is why you really shouldn't ever go from outside to something else at the same client (unless you continue outside). Doing so increases HMRC of asking for back taxes at the same client when you declared yourself as outside.

On this note, I have been contracting outside IR35 with the same company for the last 6 months and am coming up to a situation where I may have two options :-

1. Take an FTC with them - package probably roughly comparable to my current rate
2. Take an Inside IR35 job with another company at the same rate (Umbrella or still through PSC my choice), but INSIDE. Worse choice financially.

On one hand, the FTC bypasses any IR35 decision but it's Outside to short-term perm at the same Company. On the other, I'd be swapping companies and roles but would deemed Inside.

I can't quite work out if one is more risky Darth HMRC-wise than the other or they are both dreadful?

[Anubis]

Read this

No one knows what HMRC will do. It's your appetite to risk

[CompoundOverload]

Yep agreed. Which is why you really shouldn't ever go from outside to something else at the same client (unless you continue outside). Doing so increases HMRC of asking for back taxes at the same client when you declared yourself as outside.

Hypothetically speaking...

What about if you've only been at a client say 4 months (operating as outside) but want to continue with them because you have the potential for extended work for the foreseeable, BUT they will only accept you past April if you go PAYE or umbrella (and the day rate is good) what do you do then?

Take the risk hoping you won't be investigated, or
If the former does happen, cough up for the 4 months tax you've already done in the outside arrangement and continue as umbrella?

Do you then run the risk that any other engagements you've worked on in prior years with other clients will be looked at?

[JohntheBike]

Yep agreed. Which is why you really shouldn't ever go from outside to something else at the same client (unless you continue outside). Doing so increases HMRC of asking for back taxes at the same client when you declared yourself as outside.

I would add that if the current contract had been professionally assessed as outside and tax investigation insurance had been taken out and is still in place, then going from outside to something else with the same client might be a necessarily pragmatic approach. We all have to put food on the table!

But as we all know, each person's circumstances are unique and they have to decide the best course of action for themselves.

[Kanaiya]

Yep agreed. Which is why you really shouldn't ever go from outside to something else at the same client (unless you continue outside). Doing so increases HMRC of asking for back taxes at the same client when you declared yourself as outside.

Completely agree.

[Anubis]

True , under an umbrella company, IR35 status is not a factor that needs to be considered. But I am sure HMRC tax system is smart enough to trigger whats changed and to trigger the backdated tax.

Yep agreed. Which is why you really shouldn't ever go from outside to something else at the same client (unless you continue outside). Doing so increases HMRC of asking for back taxes at the same client when you declared yourself as outside.

[Kanaiya]

For those who work under an umbrella company, IR35 status is not a factor that needs to be considered. Compliant umbrella companies effectively become the employer for contractors and operate Pay as You Earn (PAYE) income tax and National Insurance contributions.

You are no longer a limited company. You are an individual being paid by another company (the umbrella)

True , under an umbrella company, IR35 status is not a factor that needs to be considered. But I am sure HMRC tax system is smart enough to trigger whats changed and to trigger the backdated tax.

[Anubis]

Also agree with the person above.

By continuing as before but now declaring yourself as an employee basically negates any argument you did have as being a service provider before.

[GhostofTarbera]

Why not phone HMRC and turn yourself in as allways within IR35 at this client

Not sure you could have played this much worse to be fair


Sent from my iPhone using Contractor UK Forum

[Anubis]

For those who work under an umbrella company, IR35 status is not a factor that needs to be considered. Compliant umbrella companies effectively become the employer for contractors and operate Pay as You Earn (PAYE) income tax and National Insurance contributions.

You are no longer a limited company. You are an individual being paid by another company (the umbrella)

[Wary]

I recently changed from outside-IR35 to brolly at renewal, something that I was OK about as I believe my role has significantly changed from when I first commenced - hence my status is now more questionable. This was partly in the hope that it would negate the need for the end-client to make a determination.

Appreciate that my action could be deemed as self-determination of inside-IR35, although I thought that would be better than a client-determination especially as I could argue that it was simply a change of operating method. But my agency is insistent that they need to obtain a formal determination from the client, in accordance with the amended legislation, despite the fact that I don’t operate through a PSC.

Is that correct? I thought the reason why some companies have banned PSCs is to avoid having to make IR35-determinations, and because they’re not allowed to make a blanket decision then they’re effectively coming up with a way of making a blanket no-decision? That suggests that the agency aren't compelled to get an end-client determination for non-PSC contractors.

Appreciate that I'm putting myself at risk either way. I'm just trying to minimise the risk whilst staying with the same client as I'd likely struggle to find work elsewhere anytime soon.

[ftccp2020]

Thank you. I did try to search actually, but did not find the post that cojac shared just now

As a result, I decided to ask, hoping that somebody will point me in the right direction.

Thank you for the advice.

[Paralytic]

I am sorry, if this has already been answered before.

No you're not - you didn't even try to search, did you