Reply to: IR35 deferral risk

[simes]

I don't see that at all. It was the official document that 1. HMRC would honour so I don't think it can be ignored as easily as that. We rely on confirmation of arrangements which isn't even an official document so any evidence, particularly 2. and SDS will hold great weight. 3. To think the court will believe it's a knee jerk reaction is naive beyond belief.

If 4. and 5. SDS gets disregarded as a sham then HMRC's entire policy will be in question. As far as 6. [-] court will see it 7. it was 8. proper diligence applied by the client resulting in a determination. No way can that be called a sham. 9. Arguments about knee jerk reactions just will not stand up in court.

Grief, where to start on This?

1. What is the basis for this one? In fact, who's writing this? Is this son-of-Northern? The words 'HMRC' and 'Honour' only exist in the same sentence when exemplifying irony to greatest effect. You-really-must-know-this-by-now!

2. Typo - 'an'

3. For the last 20 years, the courts have been having a f--king field day with anything to do with IR35 based on the HMRC's lack of understanding of what they themselves authored. Bearing in mind the clients Only currently have what the HMRC have instructed, and bearing in mind the penalties for getting it wrong, does anyone in their right mind really think at this juncture that any of the clients are truly on top of this in the same way the courts are?

4. Typo - 'an'

5. I can't believe this even needs to be responded to. Aside from the HMRC who think all this Is a good idea, bearing in mind the Accountants, the Lords, Small Businesses, Us, IPSE, and other contractor bodies, and all that they have had to say by way of response to this roll-out, the only response is one of it is Being in Question.

6. Needs an 'a'

7. Unnecessary 'it'

8. By way of example, if I were to ask you to add 2 + 2 and you characteristically answered 5, the fact that you said you applied diligence to the mathematical conundrum would not provide you with a Get Out of Jail Free card. Equally, an HR clown saying that diligence was applied to understanding MoO while at the same time instructing a furlough, the court's first and foremost response will be, 'You got it wrong'. They won't say, 'Ah bless. Fancy another shot at that to defeat our client?'

9. Arguments about knee jerk reactions Will stand up in court if a) the clients are shown not to understand IR35 or the SDS questions and b) if they were only concerned about the back taxes and penalties. This in exactly the same way that arguing with the police officer that you didn't know it was a 30mph limit while caught driving at 40mph will not stand up in court.

[youngguy]

But as Jolie quite rightly points out CEST was ignored in the Elbourn case so good luck using it as a defense. We can't really point out it's flawed to prove clients are wrong on one hand and that it's correct for us on the other. Doesn't quite work like that.

Again, I agree. Bizarrely that's what HMRC do though of course.

As Jolie said, CEST doesn't hold much water in court, yet it is almost the defacto tool orgs had been using until a few days ago. Bit of a catch 22.

I think anyone in the situation needs to look at the facts and evidence and only if everything (contract, WP, cest,all QDOS'd etc) says outside should they consider it.

How many fall in that category....not many I'd guess - but l'd bet there are a few given how many blanket assessments etc we've heard about on these boards.

[Jolie]

Under the circumstances you've outlined, it wouldn't work!

It is however possible to get an outside determination without substitution via CEST.

It's possible, but for the majority, highly unlikely. There seems to be two questions that change the determination from "unable" to "outside", which are: do you provide materials before the client will pay you, and do you incur expenses (not including laptops, mobiles etc) before the client will pay you. These two would be hard to meet for most contractors.

But ...

I think many are assuming the SDS was always a true reflection of actually working practices. If blanket assessments were done and / or completed by a risk averse client, it is possible that their answers were not truthful or correct. If a PSC had evidence (actual evidence) of working practices which aligned to the contract rather than the client SDS, I think one could argue the SDS is invalid.

The court cases are proving that CEST is pretty much useless in determining working practices. What the court wants to see is evidence of what's actually going on in your situation.

The problem is that unless you go to the ET, you aren't going to be able to test this. Most won't go this route anyway, because if you are ruled an employee, then you are screwed. However, this is probably the best route if you have a watertight case. Edit: This is on the basis you continued inside and were forced to use a brolly. If you continued outside with the client's blessing, then the only route is below.

That leaves you with the risk that HMRC investigate you and likely find you inside, then your only course of action is a lengthy and costly court battle and depending on what judge you get, there's no guarantee you will win.

[northernladuk]

Under the circumstances you've outlined, it wouldn't work!

It is however possible to get an outside determination without substitution via CEST.

I think many are assuming the SDS was always a true reflection of actually working practices. If blanket assessments were done and / or completed by a risk averse client, it is possible that their answers were not truthful or correct. If a PSC had evidence (actual evidence) of working practices which aligned to the contract rather than the client SDS, I think one could argue the SDS is invalid.

But as Jolie quite rightly points out CEST was ignored in the Elbourn case so good luck using it as a defense. We can't really point out it's flawed to prove clients are wrong on one hand and that it's correct for us on the other. Doesn't quite work like that.

[youngguy]

If an SDS says no substitution how could you stand up in a tax tribunal and argue that you could use a substitute.
If an SDS says we give you whatever work needs to be done to keep you busy how does that work out for MoO and SDC.

While it may not be accurate you really would be fighting an uphill battle to justify being outside.

Under the circumstances you've outlined, it wouldn't work!

It is however possible to get an outside determination without substitution via CEST.

I think many are assuming the SDS was always a true reflection of actually working practices. If blanket assessments were done and / or completed by a risk averse client, it is possible that their answers were not truthful or correct. If a PSC had evidence (actual evidence) of working practices which aligned to the contract rather than the client SDS, I think one could argue the SDS is invalid.

[Jolie]

Maybe but HMRC will always ask the client and there are clauses you rely on that aren't proven like RoS. Your only defense is you were able but didn't invoke. If the client says no Ros, we said it in the SDS then you are screwed.

Remember, as it has always been, your contract is between you and the agency and often has little bearing on the upper contract between agency and client, which often doesn't reflect the reality of the WP. If the client doesn't want a true B2B engagement as dictated by the rules then dressing up the contract between agency and contractor isn't going to change that.

Again, I agree with you to a point. Most contractors will be working within SDC and MoO, but many aren't and the client can say what they want to HMRC or the courts, but if a contractor can prove otherwise, then that will trump the SDS.

RoS is one of the four points, SDC and MoO. In recent court cases, the RoS was proven to be an irrelevant part of a case, and Direction, Control and MoO clearly showed the contractor was a running a business.

Take the Elbourn case, the contractor was given an inside determination, took the client and agent to court to reclaim ErNI and proved the inside determination was wrong, albeit in forcing the client to admit he wasn't an employee and thus losing the case.

[eek]

I don't think you have got it wrong. I think it would be madness to completely ignore a determination as it clearly shows what the client thinks (we previously were able to assume WP aligned to the contract). But I don't think a determination is necessarily accurate in all cases, likely as a result of the HMRC approach and how some orgs might have reached that determination.

If an SDS says no substitution how could you stand up in a tax tribunal and argue that you could use a substitute.
If an SDS says we give you whatever work needs to be done to keep you busy how does that work out for MoO and SDC.

While it may not be accurate you really would be fighting an uphill battle to justify being outside.

[youngguy]

That said I'm a little worried I'm the only one banging on about this outside/inside/outside situation. Got a nagging feeling I've got it wrong or the only one that thinks this

I don't think you have got it wrong. I think it would be madness to completely ignore a determination as it clearly shows what the client thinks (we previously were able to assume WP aligned to the contract). But I don't think a determination is necessarily accurate in all cases, likely as a result of the HMRC approach and how some orgs might have reached that determination.

[Mr.Whippy]

Is that what they put in the email verbaitim or you summarising it for us? That's just disgraceful. The client who controls the engagement has the opinion of a bystander? Wow. It's never been like that and even more now you have to listen to what they say. I'd like to see this email.

That said I'm a little worried I'm the only one banging on about this outside/inside/outside situation. Got a nagging feeling I've got it wrong or the only one that thinks this

It’s here Private sector IR35 delay – what you need to know | IPSE

No I’m with you. If you’ve been told they wouldn’t accept a sub for whatever reason. Then that reason is still there regardless of the contact terms and you as a director have to take that into consideration when you make your own decision. Surely?

[northernladuk]

Nope - you haven't got it wrong, I just think it's slightly more nuanced.

But as I have no idea what that last word means or how to say it I'll keep going at the topic with my sledgehammer.

[eek]

Is that what they put in the email verbaitim or you summarising it for us? That's just disgraceful. The client who controls the engagement has the opinion of a bystander? Wow. It's never been like that and even more now you have to listen to what they say. I'd like to see this email.

That said I'm a little worried I'm the only one banging on about this outside/inside/outside situation. Got a nagging feeling I've got it wrong or the only one that thinks this

Nope - you haven't got it wrong, I just think it's slightly more nuanced.

In our previous conversation we hadn't seen the SDS determination and the OP was getting a check - if the check said outside I think you can argue the point as you haven't seen the end clients desires.

In this case the OP has seen the SDS determination and if you know the client is expecting to give you work to do and won't accept a substitute I think you have to accept that any future work is inside.

[northernladuk]

So I just got an IR35 update email from IPSE and their full guide says this :

What happens if your client has already issued a Status Determination Statement (SDS)?

Any SDS which has been issued is now worthless. It is of no consequence. It should be ignored. It has no bearing on your employment or tax status and HMRC has said it will not seek to find out if an SDS has been issued or what it said. Effectively, if your private sector client decided IR35 applied to your engagement, that is now no more than an opinion of a bystander. The only opinion that matters is yours (and HMRC’s of course).

So, I had an SDS that stated I would be inside because they would not accept a substitute, at all. Also they had an expectation that I would take on all work they asked me to. So to me, if I had stayed there is no way you can just say the SDS was worthless is there? And say it’s worth no more than a bystander. That reason from the clients perspective still exists regardless of the delay.

Is it just me that thinks IPSE are talking absolute garbage and could lead people into putting themselves in a very awkward position should HMRC ever come knocking?

Is that what they put in the email verbaitim or you summarising it for us? That's just disgraceful. The client who controls the engagement has the opinion of a bystander? Wow. It's never been like that and even more now you have to listen to what they say. I'd like to see this email.

That said I'm a little worried I'm the only one banging on about this outside/inside/outside situation. Got a nagging feeling I've got it wrong or the only one that thinks this

[Mr.Whippy]

You realise an SDS will state why they have come to the conclusion based on whatever method they used to asses (CEST, EY, QDOS or whatever). Three or four bullet points directly addressing individual elements of IR35 defense is in no way complicated.

So I just got an IR35 update email from IPSE and their full guide says this :

What happens if your client has already issued a Status Determination Statement (SDS)?

Any SDS which has been issued is now worthless. It is of no consequence. It should be ignored. It has no bearing on your employment or tax status and HMRC has said it will not seek to find out if an SDS has been issued or what it said. Effectively, if your private sector client decided IR35 applied to your engagement, that is now no more than an opinion of a bystander. The only opinion that matters is yours (and HMRC’s of course).

So, I had an SDS that stated I would be inside because they would not accept a substitute, at all. Also they had an expectation that I would take on all work they asked me to. So to me, if I had stayed there is no way you can just say the SDS was worthless is there? And say it’s worth no more than a bystander. That reason from the clients perspective still exists regardless of the delay.

Is it just me that thinks IPSE are talking absolute garbage and could lead people into putting themselves in a very awkward position should HMRC ever come knocking?

[northernladuk]

On the contrary, I am not saying the SDS should be ignored. I am saying, in the large part, it should be held up on high to be presented as a document too complicated for an HR department to correctly read, much less to correctly complete.

We have seen EY's take on MoO within the Samsung and Sky thread whereby they get it completely wrong. "A contract is in place, so the client is obliged to offer work." ...completely missing the inference from the imposing of furloughs.

But even then, the whole thing is flawed because in the past when fighting contractors in court, HMRC relied on;

1. A badly worded contract to suggest being Inside
2. And/or, if the contract was correctly worded to suggest Outside, working practices to Be Reviewed to see if in fact they did not marry up to the Outside contract.

An SDS ignores the need to review anything. Working practices will not by then be a known factor. So how on God's green earth can this SDS Ever be completed?

Hence why I would like to see it held up and mocked.

You realise an SDS will state why they have come to the conclusion based on whatever method they used to asses (CEST, EY, QDOS or whatever). Three or four bullet points directly addressing individual elements of IR35 defense is in no way complicated.

[simes]

The SDS certainly can't be ignored but being able to properly question how a company arrived at its SDS determinations is now on the table whereas it wasn't before. If it can be established that the method of determination didn't take into account genuine working practices then it could easily be argued due diligence wasn't applied.

On the contrary, I am not saying the SDS should be ignored. I am saying, in the large part, it should be held up on high to be presented as a document too complicated for an HR department to correctly read, much less to correctly complete.

We have seen EY's take on MoO within the Samsung and Sky thread whereby they get it completely wrong. "A contract is in place, so the client is obliged to offer work." ...completely missing the inference from the imposing of furloughs.

But even then, the whole thing is flawed because in the past when fighting contractors in court, HMRC relied on;

1. A badly worded contract to suggest being Inside
2. And/or, if the contract was correctly worded to suggest Outside, working practices to Be Reviewed to see if in fact they did not marry up to the Outside contract.

An SDS ignores the need to review anything. Working practices will not by then be a known factor. So how on God's green earth can this SDS Ever be completed?

Hence why I would like to see it held up and mocked.