Reply to: The Review and "Retro" IR35 Investigations

[webberg]

Our view is that the delay in the introduction of the reforms will mean that when HMRC do come back to normality and start to consider the way in which they police the situation, they will have a better view of the weaknesses and sharper tools to attack them.

If I were in HMRC, I'd be asking end clients to supply details of those individuals for whom an SDS has been prepared (in or out) and what payments have been made. Whist some of this may be strictly outside what such end clients are required to supply legally, I just don't see them ignoring the request.

Some end clients will have "reversed" their decision not to use PSC linked contractors. These would be top on my in box if I were an HMRC investigator. I would however be gong to the end client and not the individual.

(For the record, I'm not an HMRC investigator).

[Adam at 34square]

Is the risk really material?

HMRC are making changes to the responsible party so that they can more effectively govern and enforce the legislation. I suspect that means they'll move away from targeting individuals. Really how much revenue have they generated in the last 20 years by chasing contractors? I don't knlw the answer, but maybe they haven't even broken even?

[northernladuk]

So can it be argued that transitioning with the same client from a limited co. contract (pre april 5) to a fixed term employment contract is similar in terms of risk with regards to retrospective HMRC action as transitioning from contract to permanent employment?

As it says in the links FTC IS a contract of employment.

Given point made above that if you were going permanent it would be safer and less risky than continuing with the same client via an agency or brolly then the question I had was whether HMRC would regard an FTC as being the same thing as permanent employment.

You know the answer to that now.

As discussed https://www.contractoruk.com/forums/...-day-rate.html there are some large organisations using FTC's as a way to lure and retain contractors. What's the view on the risk of retrospective action if you start working for the same client under an FTC after they've blanket assessed all their contractors as inside IR35 ?

You know the answer to this now?

[rambaugh]

So can it be argued that transitioning with the same client from a limited co. contract (pre april 5) to a fixed term employment contract is similar in terms of risk with regards to retrospective HMRC action as transitioning from contract to permanent employment?

Given point made above that if you were going permanent it would be safer and less risky than continuing with the same client via an agency or brolly then the question I had was whether HMRC would regard an FTC as being the same thing as permanent employment.

As discussed https://www.contractoruk.com/forums/...-day-rate.html there are some large organisations using FTC's as a way to lure and retain contractors. What's the view on the risk of retrospective action if you start working for the same client under an FTC after they've blanket assessed all their contractors as inside IR35 ?

[ladymuck]

An FTC is a contract of employment. Check the Gov pages on what an FTC is.

Fixed-term employment contracts - GOV.UK

Employment status - GOV.UK

[northernladuk]

If you're offered an FTC post April 5th and accept will this be the same thing as permanent employment ?

An FTC is a contract of employment. Check the Gov pages on what an FTC is.

[rambaugh]

Employment is safer than brolly, IMO. There's then no third party (agency) in between, it's clearly a different relationship even if the role is similar. Contractors have been offered employment, and taken it, forever. Guy comes in, does a job, client says, "Hey, we could use someone with your skills permanently, here's an offer," and he accepts. I hired two contractors as perms back in my perm mgmt days.

If you stay brolly at least change agency if you can, that lessens the risk that they'll match up before and after. IMO.

If you stay inside in any of these ways I would definitely close the company, it also helps mitigate the risk. IMO.

If you're offered an FTC post April 5th and accept will this be the same thing as permanent employment ?

[LondonManc]

It won't just be IT, nursing will be taking a hammering too. Which will make HMRC about as popular as a colonoscopy with a cactus.

[WordIsBond]

interesting this ... so do you think a statement from the client stating (in bold) that would be of benefit and is worth pushing for ... certainly be something to file away with the insurance in my closed company file !

I agree that if the client will make such a statement it is helpful. And I can't see any reason the client should be unwilling.

It may not help all that much if you keep your company open but it at least counters the argument that "they did this because you should have been inside all along". And I think it would definitely make it harder for them to hold you personally liable in the event of your company being closed.

[LondonManc]

My personal view is that it's worth getting. I would say that clients should only issue an SDS for outside. If they think a role is inside post April then they should terminate giving reason as 'Change to working practices' and offer a new umbrella/PAYE contract. It's not cast iron but I think it leaves contractors in a better position.

"Should" is great. Blanket bans are a reality.

If you go down the route of fair assessment, a client could reasonably argue for role-based assessments rather than contract-by-contract. Then a split between senior and non-senior people and they'll be able to get a reasonable grid of who's inside and who is outside. Working practices and contracts can then be aligned accordingly, in an ideal world.

[WordIsBond]

So far I think it was believed that no determination=ban PSCs was better that inside determination.
With this new POV what is the silver bullet for a contractor when they are offered PAYE - umbrella or employment? Change agency? Other?

The only silver bullet is to have iron-clad evidence that your pre-April role was outside.

No determination/PSC ban is possibly better than inside determination but I've argued in the OP that HMRC may well end up pursuing them on the same basis. If I were staying I'd certainly rather stay via brolly than inside.

Employment is safer than brolly, IMO. There's then no third party (agency) in between, it's clearly a different relationship even if the role is similar. Contractors have been offered employment, and taken it, forever. Guy comes in, does a job, client says, "Hey, we could use someone with your skills permanently, here's an offer," and he accepts. I hired two contractors as perms back in my perm mgmt days.

If you stay brolly at least change agency if you can, that lessens the risk that they'll match up before and after. IMO.

If you stay inside in any of these ways I would definitely close the company, it also helps mitigate the risk. IMO.

[ComplianceLady]

interesting this ... so do you think a statement from the client stating (in bold) that would be of benefit and is worth pushing for ... certainly be something to file away with the insurance in my closed company file !

My personal view is that it's worth getting. I would say that clients should only issue an SDS for outside. If they think a role is inside post April then they should terminate giving reason as 'Change to working practices' and offer a new umbrella/PAYE contract. It's not cast iron but I think it leaves contractors in a better position.

[CanPayButWouldRatherNot]

I've spoken to clients about this - how you can say from April we want to offer you contract X but this has no bearing on your current contract. Those that value contractors and are more on the medium sized end of the spectrum are happy to manage this in a way that doesn't expose contractors to more risk. Some don't care.

interesting this ... so do you think a statement from the client stating (in bold) that would be of benefit and is worth pushing for ... certainly be something to file away with the insurance in my closed company file !

[eek]

The risk here I think is more what the client would say. HMRC can say it's an inside determination on the pre April contract but if the client puts in writing that it's actually to avoid the IR35 process (which some have) then HMRC's argument is moot.

I've spoken to clients about this - how you can say from April we want to offer you contract X but this has no bearing on your current contract. Those that value contractors and are more on the medium sized end of the spectrum are happy to manage this in a way that doesn't expose contractors to more risk. Some don't care.

I've also spoken to HMRC recently about the retro action approach and they do seem focussed on going forward and tackling clients who are deliberately dodging the rules - they want to ensure this doesn't slip into a change for 6 - 12 months then back to normal. Right now it seems it would be counter-intuitive to upset contractors at clients who are being more 'compliant'.

In my experience though that picture changes very quickly and I would put absolutely no faith in policy statements or similar.

HMRC have 4 years to query tax payments. The next 6-12 months is irrelevant when there are another 3 years to play with especially as HMRC will over time start chasing people who no longer have the appropriate original paperwork due to time.

[ComplianceLady]

The risk here I think is more what the client would say. HMRC can say it's an inside determination on the pre April contract but if the client puts in writing that it's actually to avoid the IR35 process (which some have) then HMRC's argument is moot.

I've spoken to clients about this - how you can say from April we want to offer you contract X but this has no bearing on your current contract. Those that value contractors and are more on the medium sized end of the spectrum are happy to manage this in a way that doesn't expose contractors to more risk. Some don't care.

I've also spoken to HMRC recently about the retro action approach and they do seem focussed on going forward and tackling clients who are deliberately dodging the rules - they want to ensure this doesn't slip into a change for 6 - 12 months then back to normal. Right now it seems it would be counter-intuitive to upset contractors at clients who are being more 'compliant'.

In my experience though that picture changes very quickly and I would put absolutely no faith in policy statements or similar.