Retrospective application of ‘inside IR35’ by client after contract ended

[Protagoras]

My next concern is if they submit - even without my approval - my previously filled tax return is invalided, the years income increased and presumably I’ll be landed with an income tax bill as it will push me in to the next bracket!

It would be interesting to understand what information would be submitted on a P60 in such a case.
For example, would the 'in this employment' pay box have the gross fees paid for the period, and then the tax and NI boxes completed with the corresponding payments?

If the Ch10 'deemed employer' is now paying the employee taxes, does that mean that OP could get a tax refund on PAYE income from OP's LtdCo on the basis that this money would have been taxed at source?

[Guy Incognito]

My understanding is that if the client does not provide an SDS then they do not take reasonable care and therefore the client pays the tax.

[sbzcontracts]

Unfortuantely then, this is all partly your fault for not making sure they did an SDS. Why did you not chase them pointing out it's the law and they should have done it. With no SDS there is a strong likelyhood they'll put you inside which causes problems like this.

Your get out is..

https://www.gov.uk/hmrc-internal-man...anual/esm10014



So I guess you are in the clear.

Very late response here….

I did chase, multiple times. In fact, I was one of the key people telling them the reform was coming. They just didn’t understand it, so verbally said “outside” and updated the contract with extra clauses. In hindsight I should have pushed for the SDS, but I was busy planning my escape!

QDOS response helpful, but basically stated they can approach HMRC and pay, as HMRC would never know. Agree I would not be liable!

I’m in the process of challenging the SDS as it’s inaccurate and has clearly been blanketed (I’ve compared with others). It’s just ALOT of back and forth with little agreement.

My next concern is if they submit - even without my approval - my previously filled tax return is invalided, the years income increased and presumably I’ll be landed with an income tax bill as it will push me in to the next bracket!

The battle continues

Thanks for your thoughts and extracts!

[eek]

I'm trying not to, but P60 is surely only an employment document ?

No it’s a PAYE/tax document. This year we paid £x on your behalf.

[Protagoras]

Don't mix employment and contracting (even inside IR35) they are not the same thing.

I'm trying not to, but P60 is surely only an employment document ?

[northernladuk]

So, can someone explain, please?

Can a company arbitrarily file a P60 and somehow associate this with someone who was not an employee?

If a firm does want to invent the notion that someone was an employee, does this not then expose them to the notional employee seeking further payments (e.g. holiday pay, pension)?

Don't mix employment and contracting (even inside IR35) they are not the same thing.

[Protagoras]

So, can someone explain, please?

Can a company arbitrarily file a P60 and somehow associate this with someone who was not an employee?

If a firm does want to invent the notion that someone was an employee, does this not then expose them to the notional employee seeking further payments (e.g. holiday pay, pension)?

[northernladuk]

northernladuk Thanks for your response

Good shout reaching out to QDOS. No active products at the moment with them, as not currently operating through company, but I will speak to them as products held in past.

Regarding your point on SDS, I should have been clearer… so, they never issued an SDS at the point they became responsible for the determination - only verbal communication. They themselves didn’t think it applied to them.

The SDS was done 5 months after my company stopped delivering for the client. I only received this in my inbox this week - 1 year and 5 months after the agreement ended - hence my labelling of the knowledge and process poor.

I was under the same understanding of the ‘before the first payment’ part too, but am struggling to find reference of this on any of the HMRC pages. I’ll look again

thanks

Unfortuantely then, this is all partly your fault for not making sure they did an SDS. Why did you not chase them pointing out it's the law and they should have done it. With no SDS there is a strong likelyhood they'll put you inside which causes problems like this.

Your get out is..

https://www.gov.uk/hmrc-internal-man...anual/esm10014

EXAMPLE OF A CLIENT NOT TAKING REASONABLE CARE


A large-sized company engages an agency to supply workers. The workers supplied by the agency operate through their own PSCs. The client decides to subcontract the status determination and production of the SDS to a third party. The client does not introduce any checks or processes to ensure the determinations have been carried out properly. The client also does not ensure the third party is suitably qualified to make determinations on employment status for tax.

As the client has taken no steps to ensure determinations have been carried out properly, they have not taken reasonable care. The responsibility for the deduction of tax and NICs, and the payment of the apprenticeship levy and paying these to HMRC if due rests with the client.

So I guess you are in the clear.

[sbzcontracts]

northernladuk Thanks for your response

Good shout reaching out to QDOS. No active products at the moment with them, as not currently operating through company, but I will speak to them as products held in past.

Regarding your point on SDS, I should have been clearer… so, they never issued an SDS at the point they became responsible for the determination - only verbal communication. They themselves didn’t think it applied to them.

The SDS was done 5 months after my company stopped delivering for the client. I only received this in my inbox this week - 1 year and 5 months after the agreement ended - hence my labelling of the knowledge and process poor.

I was under the same understanding of the ‘before the first payment’ part too, but am struggling to find reference of this on any of the HMRC pages. I’ll look again

thanks

[northernladuk]

Have you got IPSE+ or any QDOS tax products like TLC35? If so I'd be going to them first. Even if you haven't I'd be speaking to them first to see if they can help or provide guidance.

I assume you got an SDS when the legislation landed? Did that have the questions or reasoning as to why it was Outside? If you say the clients assessment is poor and doesn't understand UK law wouldn't that also apply to the SDS they've given? Should be the same process. No idea what's going to happen but I strikes me some care is needed if you are going to blame them for a poor understanding of the law now when you've been quite happily working on the original SDS if you get me. If that's your argument it could stand that the original SDS wasn't right either.

All that said, the determination statement must be made before first payment. So they can't issue another one after that point let alone after the contract has completed. I think they are on a wish and prayer here so a bit of a too'ing and fro'ing might be needed until the realise it's too late and leave you alone.

[sbzcontracts]

Looking for peoples thoughts.

Contracted via LTD for 11 months with overseas client, who have UK legal entity. Contract was outside IR35 truly. The contract spanned the change in legislation where client had to determine status. For the first 6 months it was down to contractor (pre April 21) then second half by client (5months). During the time with client they classed the engagement as outside.

Engagement structure was my company - UK agent - overseas agent - client. My Company invoiced and was paid by UK agent.

Full contract worked at my company registered business address.

This month, contacted by end client who thinks they’ve made mistake in past and want to rectify. Has classed every one who was on this payment model at time as “inside IR35”. Has filled out P60 and is approaching HMRC to pay tax on behalf.

Keen to hear some thoughts on this, the original contract was a deliverable based one, was QDOS outside it35 approved, worked not on client premises, had all the right clauses etc.

My interpretation of the guidance on HMRC website in regards to CREST (see below) is that there must be a contract in place, I.e. active - but contract was terminated back in Q4 2021.

There must be a contract in place to see whether the engagement is classed as employment or self-employment. The tool assumes there is, or will be, a contract in place.

Am in the process of fighting this as the assessment has been conducted very poorly, and is full of inaccurate answers to the questions / understanding of the UK law.

Thoughts most welcome
regards