Reply to: 1 month extension for March 2020 is it worth it.

[WordIsBond]

Although there is still that worry which you have highlighted as 1A) that they would be targeting my client- what in addition to a client SDS / Qdos contract review would help support the case in the event of an investigation?

If they target your client, the liability isn't yours anyway. The risk is that the client changes its determination in response to HMRC investigation / pressure. If that happens, you'll have to choose whether to continue inside IR35, or leave. But you won't have historical risk, that's entirely the client's/fee-payer's risk. So the change to inside in your case, if it ever comes, would be safe. If you work 6 months outside and then they flip to inside, your 6 months outside was safe.

The other risk is that they decide this is all a pain and just terminate your project or entirely staff it with permies.

But the things that would help support the case are the same as they always have been. Emails that reveal a lack of SDC. Anything that shows distinctions between how you are treated and how permies are treated. Communications with their clients that clearly show you are not passing yourself off as an employee. Etc, etc, all the things you should have been keeping in your IR35 dossier for each contract previously.

You don't keep these for your own protection anymore. You keep them now so that if an investigation ever comes, you give copies of it to your main client contact and say, 'You might want to pass this to Legal, it might help them.' It's the professional thing to do, and could make you very popular.

[dsc]

I have an unofficial chat with the hire manager on Monday, will say I am looking to have my current contract terminated and am looking to secure an inside contract to continue, on the proviso that the SDS determination on my current position is rescinded, they have 2 weeks. If logic of the incorrect determination is lost on them, then I'll take a different track and offer them what appears a reasonable offer. My only interest is refuting the inside determination, I'm off at the end of March in any case.

But if the contract ends before the 6th of April then an SDS is not required, I reckon they can't grasp this?

Btw I reckon SDSs get submitted to HMRC at some stage, is there some deadline by which they need to be submitted?

[LetterBox]

I'm kind of going through this now, still waiting for a decision re in / out, but as my contract expires end of next week, I've just told them to give me an extension till end of March and said that this can be in place regardless of their ridiculously long IR35 assessment process (which is now to finish with some info early March). They are desperate to keep me on as it's the end of a massive project I've been heavily involved in (same story as everywhere I reckon), but of course I've already told them I'll be going end of March if the decision is anything different than outside. I kind of have a feeling that they think they can just stick me via umbrella and pay me more to match my rate, so I'll be having a conversation with them on Monday and telling them why this will not work. The only thing I'm not sure about is whether the determination which is to be done early March is going to be just an early indicator or an official SDS. If it's the latter than I'd have to do the same as you, issue a dispute / appeal / a written statement that I don't agree just as proof for the future and then go end of March.

I have an unofficial chat with the hire manager on Monday, will say I am looking to have my current contract terminated and am looking to secure an inside contract to continue, on the proviso that the SDS determination on my current position is rescinded, they have 2 weeks. If logic of the incorrect determination is lost on them, then I'll take a different track and offer them what appears a reasonable offer. My only interest is refuting the inside determination, I'm off at the end of March in any case.

[dsc]

I tried to explain this to my client, advised them to get an opinion on inside / outside, then take a policy decision. They instead decided to act on their opinion and issue an SDS, which I previously advised them would automatically trigger me issuing a dispute and no longer providing services beyond April 5th. I explained to them this was not a matter of immediate financial loss, but a risk assessment my PSC had carried out, in the same way my client has essentially carried out a risk assessment and just deemed everyone inside. Apparently they are unhappy risk assessments can be 2-way.

I'm kind of going through this now, still waiting for a decision re in / out, but as my contract expires end of next week, I've just told them to give me an extension till end of March and said that this can be in place regardless of their ridiculously long IR35 assessment process (which is now to finish with some info early March). They are desperate to keep me on as it's the end of a massive project I've been heavily involved in (same story as everywhere I reckon), but of course I've already told them I'll be going end of March if the decision is anything different than outside. I kind of have a feeling that they think they can just stick me via umbrella and pay me more to match my rate, so I'll be having a conversation with them on Monday and telling them why this will not work. The only thing I'm not sure about is whether the determination which is to be done early March is going to be just an early indicator or an official SDS. If it's the latter than I'd have to do the same as you, issue a dispute / appeal / a written statement that I don't agree just as proof for the future and then go end of March.

[LetterBox]

If they are planning to simply ban PSC from April onwards and not doing any assessments ie. not creating any SDSs, then I can't see how this would ever increase your risk. It's actually probably the best position to be in if you plan to go end of March anyway as there's no talk about inside / outside, just a company policy change to not engage PSCs.

I tried to explain this to my client, advised them to get an opinion on inside / outside, then take a policy decision. They instead decided to act on their opinion and issue an SDS, which I previously advised them would automatically trigger me issuing a dispute and no longer providing services beyond April 5th. I explained to them this was not a matter of immediate financial loss, but a risk assessment my PSC had carried out, in the same way my client has essentially carried out a risk assessment and just deemed everyone inside. Apparently they are unhappy risk assessments can be 2-way.

[dsc]

The client has asked me to extend for 1 more month to complete the project im working on (the same role that QDOS has reviewed as outside IR35).

My understanding is that the client will not make an SDS statement but simply declare that they wlll not use PSC companies from April 6th.

I have no plans to continue with the client after March 31st.

If they are planning to simply ban PSC from April onwards and not doing any assessments ie. not creating any SDSs, then I can't see how this would ever increase your risk. It's actually probably the best position to be in if you plan to go end of March anyway as there's no talk about inside / outside, just a company policy change to not engage PSCs.

[CompoundOverload]

And, question 2. If the client weren't going to give an SDS, why would you not extend, however long you've been there? Not sure I understand the question.

The risk of staying comes from the negative impact of an inside SDS. The impact of the risk is quantified in part by how long you've been there.

I personally do not think that the inside SDS, if you are leaving before April, pushes the risk level high. Others might disagree. But three years of history puts the impact of the risk quite high. The reward of one extra month on the contract is, in most cases, not that high.

In balancing risk/reward, you look at the reward, the level of risk, and the impact of the risk. In the scenario of 3 years at risk, the impact is high, the risk IMO is low but not nothing, and the reward is not significant. I probably would not take the extra month. If I did, I would probably mitigate by operating it inside IR35.

If someone had no reserves, and had another contract lined up to start in May, but no way to feed their family until then, then the reward of the extra month becomes high, doesn't it? So the risk/reward consideration might vary considerably from person to person.

I was at previous client for three years working on a project, having had several extensions (intra project as took longer to complete than expected) - I got a contract review by Qdos - passed as outside. However, I never did the WP aspect as just relied upon the contract review and my own self declaration that I was also performing outside.

They started to send emails around re: SDS. I got a bit nervous regarding this as (and rightly so as they said they wouldn't keep on any contractors after March 31st unless they did a CEST check - even then it appears they are still not taking on PSCs post April 6th as all the outsiders are not being kept on but those umbrella ones are). I left before they gave me an SDS as didn't want my name on an insider SDS list.

Two weeks after I left they deemed them all inside - most are still there. I found another gig elsewhere outside and contract review by Qdos agreed. They are also going to provide a written SDS confirming me as outside post April. Although there is still that worry which you have highlighted as 1A) that they would be targeting my client- what in addition to a client SDS / Qdos contract review would help support the case in the event of an investigation?

NB It's worth noting that I have only been at this client four months so if they did a retro look back, I'd only be liable for the four months prior to the client SDS affirmation and not anything past this coming April 6th.

[WordIsBond]

What about those clients (large and small) that have both contractors inside (umbrella, FTCs et al and outside) - would they still be seen as a target given they have a hybrid of both on their books?

If HMRC were run on sane principles, they would say, 'This would be a tough target because they are obviously thinking through these decisions.' But when we look at the IR35 cases that have gone to Tribunal and lost, we see that these decisions are not being made based on sanity.

They have chosen high-profile cases because if they get wins on high-profile cases, they get publicity, with the resulting deterrent effect. I do not think they are so stupid as to want to lose cases, they are taking high risk (for them) cases simply because they want the publicity to scare people into going inside.

That would suggest that if a client has any substantive number of outside contractors, even if they have a hybrid, they may be a target. A client with 30 inside and 10 outside contractors is still a lot more lucrative, if they win the case, than a single contractor, even if he has 3-4 years of history, and the individual historical case has little deterrent effect any longer.

The agenda is simply not justice. It just isn't. It's to get as many people on payroll as possible because it means more money (allegedly, though probably not in reality) and because it is easier to enforce and to claim they've closed the tax gap.

So the responsible client may not be the first target they'll go after but I suspect they will be targeted more aggressively than historical individual cases. Those historical individual cases are going to be having diminishing returns because so many PSCs are going to be closing down rapidly.

[northernladuk]

What about those clients (large and small) that have both contractors inside (umbrella, FTCs et al and outside) - would they still be seen as a target given they have a hybrid of both on their books?

My current client would be regarded a a medium sized house but doesn't have many contractors - not sure how they would be viewed as on your risk barometer?

I'm not sure HMRC have enough data to make that call but IMO a client with a mix is showing some diligence and could be argued is assessing and actioning by role. If be more worried if a client has everyone inside or everyone outside. Neither of those is what HMRC expects or makes sense.. If you see what I mean.

[CompoundOverload]

Other targets (IMO only):
1. Large clients who are offering lots of outside determinations. Because the proceeds will be hefty and the deterrent factor will be significant.
1. A. Large clients who offer a few outside determinations. Because the proceeds, while not large, will be more than chasing individuals, and the deterrent factor will be significant.

2. Contractors who go from outside in March to inside in April. Where HMRC can match these up easily, at the very least these people will probably receive letters like the ones sent to GSK peeps. Some will be ready and have a professional response ready, some will just pay up, others will respond stupidly and then end up in an investigation.

3. Contractors who go from outside in March to payroll via umbrella but through the same agency in April. HMRC will probably be easily able to match these up. Again, I don't think they'll necessarily chase all these but they might go on a fishing expedition like the GSK letters.

4. Contractors who go from outside in March to permie employment at their former client in April. I do not know if HMRC will be able to easily match these up, but if they can, they might chase this one.

I think all of those are likely to be targeted before someone who leaves before April. I do not know how HMRC would ever know about the inside determination in such a case, unless they previously opened an investigation, and I don't think the inside determination would make for a slam dunk case for HMRC anyway. I'm sure once they opened the investigation, they'd ask if a determination had been made, and use it against the contractor, so an inside determination is certainly detrimental, but I think it very unlikely that it increases the risks of an investigation starting.

I suppose if I were given an inside determination but was leaving before April, I'd try to use GDPR rules to get it expunged, so that if HMRC comes asking the client for ALL determinations mine wouldn't turn up. I'm no expert on GDPR but I'd try anyway, because the client might not consider it worth fighting even if GDPR doesn't really help. But I doubt it's really a risk.

HMRC's biggest target is client behaviour, current and future, not individual contracts in the past. Much more money to be gained by using their investigative resources insuring that clients keep everyone on payroll, then by chasing dribs and drabs from contractors over past contracts. As above, they might send some letters to shake the tree and see what falls out, but strictly from a tax-take perspective, that's not the big target.

What about those clients (large and small) that have both contractors inside (umbrella, FTCs et al and outside) - would they still be seen as a target given they have a hybrid of both on their books?

My current client would be regarded a a medium sized house but doesn't have many contractors - not sure how they would be viewed as on your risk barometer?

[WordIsBond]

Q2) had the OP been there for three years (and client hadn't been given an SDS but was still willing to extend by an additional month) would you still take it?

And, question 2. If the client weren't going to give an SDS, why would you not extend, however long you've been there? Not sure I understand the question.

The risk of staying comes from the negative impact of an inside SDS. The impact of the risk is quantified in part by how long you've been there.

I personally do not think that the inside SDS, if you are leaving before April, pushes the risk level high. Others might disagree. But three years of history puts the impact of the risk quite high. The reward of one extra month on the contract is, in most cases, not that high.

In balancing risk/reward, you look at the reward, the level of risk, and the impact of the risk. In the scenario of 3 years at risk, the impact is high, the risk IMO is low but not nothing, and the reward is not significant. I probably would not take the extra month. If I did, I would probably mitigate by operating it inside IR35.

If someone had no reserves, and had another contract lined up to start in May, but no way to feed their family until then, then the reward of the extra month becomes high, doesn't it? So the risk/reward consideration might vary considerably from person to person.

[WordIsBond]

Q1) What do you think the other targets will be?

Q2) had the OP been there for three years (and client hadn't been given an SDS but was still willing to extend by an additional month) would you still take it?

Other targets (IMO only):
1. Large clients who are offering lots of outside determinations. Because the proceeds will be hefty and the deterrent factor will be significant.
1. A. Large clients who offer a few outside determinations. Because the proceeds, while not large, will be more than chasing individuals, and the deterrent factor will be significant.

2. Contractors who go from outside in March to inside in April. Where HMRC can match these up easily, at the very least these people will probably receive letters like the ones sent to GSK peeps. Some will be ready and have a professional response ready, some will just pay up, others will respond stupidly and then end up in an investigation.

3. Contractors who go from outside in March to payroll via umbrella but through the same agency in April. HMRC will probably be easily able to match these up. Again, I don't think they'll necessarily chase all these but they might go on a fishing expedition like the GSK letters.

4. Contractors who go from outside in March to permie employment at their former client in April. I do not know if HMRC will be able to easily match these up, but if they can, they might chase this one.

I think all of those are likely to be targeted before someone who leaves before April. I do not know how HMRC would ever know about the inside determination in such a case, unless they previously opened an investigation, and I don't think the inside determination would make for a slam dunk case for HMRC anyway. I'm sure once they opened the investigation, they'd ask if a determination had been made, and use it against the contractor, so an inside determination is certainly detrimental, but I think it very unlikely that it increases the risks of an investigation starting.

I suppose if I were given an inside determination but was leaving before April, I'd try to use GDPR rules to get it expunged, so that if HMRC comes asking the client for ALL determinations mine wouldn't turn up. I'm no expert on GDPR but I'd try anyway, because the client might not consider it worth fighting even if GDPR doesn't really help. But I doubt it's really a risk.

HMRC's biggest target is client behaviour, current and future, not individual contracts in the past. Much more money to be gained by using their investigative resources insuring that clients keep everyone on payroll, then by chasing dribs and drabs from contractors over past contracts. As above, they might send some letters to shake the tree and see what falls out, but strictly from a tax-take perspective, that's not the big target.

[redman123]

Testing

[CompoundOverload]

No one knows. I think it probably doesn't increase your risk. The one argument to the contrary is that if you accept an extension, even for one month, after they've issued an SDS, HMRC could then use that to argue that you've accepted the role should be inside. So that MIGHT increase your risk, but who knows?

Of course, you could operate that one month as an inside contract. If you did that, your counter-argument would be, "I had a contract review that showed I was outside, and I believed it to be outside because of A, B, C, and D. But when the client said that going forward they were going to view this as an employment relationship, that was obviously a change of circumstances, so I operated it as inside from that point forward."

I think it is unlikely you will ever be investigated, if you actually leave before April. I think they'll have other targets. But there is a slight chance that the extra month does increase your risk, and there's a chance that operating that month as inside would mitigate that increased risk.

If it were me, I'd just extend and not worry about it, personally, unless I had been there for like 3 years and had loads of exposure.

Q1) What do you think the other targets will be?

Q2) had the OP been there for three years (and client hadn't been given an SDS but was still willing to extend by an additional month) would you still take it?

[WordIsBond]

I have the same question with a slight difference
-current contract until end of feb
-extension expected for 1 month only
-sds "committed to be shared" not issued yet (expected to come within few days)
-rumours are everyone is going to be inside

Assuming its just an extension, I accept only until the end of March and not sign a new contract

If the SDS is issued (inside) and I leave before 6th April. Will the risk be higher accepting the 1 month extension?

No one knows. I think it probably doesn't increase your risk. The one argument to the contrary is that if you accept an extension, even for one month, after they've issued an SDS, HMRC could then use that to argue that you've accepted the role should be inside. So that MIGHT increase your risk, but who knows?

Of course, you could operate that one month as an inside contract. If you did that, your counter-argument would be, "I had a contract review that showed I was outside, and I believed it to be outside because of A, B, C, and D. But when the client said that going forward they were going to view this as an employment relationship, that was obviously a change of circumstances, so I operated it as inside from that point forward."

I think it is unlikely you will ever be investigated, if you actually leave before April. I think they'll have other targets. But there is a slight chance that the extra month does increase your risk, and there's a chance that operating that month as inside would mitigate that increased risk.

If it were me, I'd just extend and not worry about it, personally, unless I had been there for like 3 years and had loads of exposure.