IR35: Planning for April 2020 – should I stay or should I go? IR35: Planning for April 2020 – should I stay or should I go?
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    Default IR35: Planning for April 2020 – should I stay or should I go?

    So, it’s (nearly!) October 2019 and if you haven’t already, now is the time to start planning for the IR35 changes in April 2020.


    Just to be clear – IR35 itself isn’t changing; the change is who decides whether your role is inside or outside of IR35. It is the client who decides that, not you (or your contract reviewer).

    First, here are the new rules from the Horse’s Mouth. Read them:
    Understanding off-payroll working (IR35) - GOV.UK
    April 2020 changes to off-payroll working for clients - GOV.UK


    Awareness, not guidance

    In this thread I am NOT going to tell you what to do. Your decision comes down to your attitude to risk. If you think it’s unlikely that HMRC are going to start looking closely at your tax position in the future, then you don’t really need to do anything.

    But if you feel uneasy about this, maybe it’s time to take stock and decide what you are going to do.


    What is the problem?

    There is no problem if your outside IR35 contract ends before April 2020. It was reviewed and your working practices show that the outside review was a valid one.


    The problem as I see it is if you are currently in an outside IR35 contract but your client decides that your role will be inside IR35 at your next extension or after 6th April 2020. HMRC may look at the months before the switch: “if you are inside IR35 now, you should have been inside IR35 then”.

    There is evidence that this happened in the public sector when things changed for them
    IR35 inspectors to probe public PSCs retrospectively


    What can I do?

    Basically, if you think that your client is going to decide that you are inside IR35, you need to consider whether to leave that client:

    • BEFORE 31st December 2019 (or you client's assessment date)
    • or 24th February 2020 (monthly payment), if your client hasn't said anything to you about assessments
    • or 24th March (weekly payment), if your client hasn't said anything to you about assessments
    • or not bothering at all and sailing through 6th April 2020.

    It’s all about your appetite for risk.


    If you do decide to leave, there must be enough time for your last invoice payment date to fall before 6th April 2020. - Update: this no longer applies

    Because as HMRC says:
    If you [the client] use the simplified test to determine your size, you must apply the rules from the start of the tax year following the end of the calendar year when you met the conditions.
    (The 'simplified test' defines the size of the companies affected by the changes - annual turnover of more than £10.2 million, see the website for details).


    But there’s more to consider…

    December 31st comes from some people thinking that you will have been assessed between Jan and March, but my date would have been around the middle/end of Feb (or middle of March if weekly), depending on timesheet submission.

    Update 07/02/20: the above no longer applies. Read this for more info. https://www.contractoruk.com/forums/...ing-rules.html


    We need to remember that none of this is definite, but I’ve been around long enough to have a fair idea where this is all going, hence this thread.

    I don't know that this is actually going to happen, or when it might happen. I make my own determination of the situation based on previous observation of HMRC's ethics, methods and tactics, and the risk that they will be applied in the future with regard to the new world of IR35.

    If people ARE in business on their own account, they should be familiar with calculating risk versus reward and determine their own manner of mitigation in light of being informed of the possibilities.

    Basically - contractors are big and ugly enough to decide for themselves once they have the information.

    It's called making an informed decision.
    Last edited by cojak; 25th September 2019 at 20:35. Reason: Amended following JB’s & Alchemy’s correction.
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  2. #2

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    Nice, thanks.

    Minor quibble

    It is the feepayer who decides that, not you (or your contract reviewer).
    I would update that to client. The end client always determines status and issues the SDS, and the fee payer always deals with a fee payment based on status. The end client and fee payer may be the same in some cases.

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    Some things in Moderation

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    Quote Originally Posted by jamesbrown View Post
    Nice, thanks.

    Minor quibble



    I would update that to client. The end client always determines status and issues the SDS, and the fee payer always deals with a fee payment based on status. The end client and fee payer may be the same in some cases.
    I’ll change it.
    "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
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    Cool. Thanks for creating this - will be great to have somewhere to point folks in the first instance.

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    Still gathering requirements...


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    Quote Originally Posted by cojak View Post
    Basically, if you think that your employer is going to decide that you are inside IR35, you need to consider whether to leave that client
    Do you mean client, rather than employer?

  6. #6

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    Quote Originally Posted by Alchemy Accountancy View Post
    Do you mean client, rather than employer?
    Employer for tax deeming purposes

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    Quote Originally Posted by Alchemy Accountancy View Post
    Do you mean client, rather than employer?
    Dammit you’re right. I’ll change...

    (Thanks Alchemy.)
    "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
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    Thanks cojak for raising this thread.

    I've also thought about the risk you've highlighted and discussed it with other contractor colleagues. Some have said the way to reduce the risk is to agree a role change at client co. I'd imagine this would need to involve terminating existing contract and signing up to a new one with client but do you think it is a legitimate way to reduce the risk of HMRC arguing that you had retrospectively been inside IR35 when you had assessed yourself to be outside with client ?

    Others have said that the length of time with client also contributes to the risk. Is length of time at client also a factor with the risk you've highlighted?

  9. #9

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    Quote Originally Posted by rambaugh View Post
    Thanks cojak for raising this thread.

    I've also thought about the risk you've highlighted and discussed it with other contractor colleagues. Some have said the way to reduce the risk is to agree a role change at client co. I'd imagine this would need to involve terminating existing contract and signing up to a new one with client but do you think it is a legitimate way to reduce the risk of HMRC arguing that you had retrospectively been inside IR35 when you had assessed yourself to be outside with client ?

    Others have said that the length of time with client also contributes to the risk. Is length of time at client also a factor with the risk you've highlighted?
    Think about it in reverse. If your IR35 status changes from outside (self-declared) to inside (client-declared) and there is no change in working practices, does that increase the risk that you would be found inside all along? Surely, yes, assuming the client took reasonable care in making their assessment, as they are required to do by (draft) law. On the other hand, if there was a change in working practices, then their more recent assessment can surely be argued (by you) to depart from the earlier status, which you declared.

    So, yes, I would say that helps.

    In terms of duration of a contract, this is not directly a factor, but it can become a factor, indirectly, if you become part & parcel of the client's operation (the risk of that increases with time, unless you are careful).

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    Default IR35: Planning for April 2020 – should I stay or should I go?

    An IR35 investigation is painful even if you win, so unless the client confirms your outside status (thus leaving the existing contract in place) I would avoid the conversation with HMRC altogether and leave the client.

    Your view of risk will probably be different to mine.
    "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
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