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IR35: Backdated complications if new offer is inside IR35

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    IR35: Backdated complications if new offer is inside IR35

    have been working 5 years within same client/company via an agency. So the explicit assumption is all contractors will be inside IR35 from next year as per the client. The agency is planning to replicate the same as they are not bothered to take any risk. We are happy with client & agency and is offered an extra £25 per day rate to help us. So most of us are preparing ourselves to move inside IR35 from next year.

    But the key query is,
    1. If there is a change in IR35 determination from next year, will HMRC have an assertion to tag us as inside IR35 for previous 5 years? i.e. will this have backdated implications?
    2. Would HMRC have enough data to pick and isolate "directors" who have shifted from limited company to umbrella company?
    3. Is there any purpose of retaining existing limited company or can we close down after moving to umbrella company?

    #2
    Originally posted by sojan View Post
    have been working 5 years within same client/company via an agency.
    Ouch!!
    So the explicit assumption is all contractors will be inside IR35 from next year as per the client.
    You'd think so if they have a habit of keeping contractors 5+ years.
    The agency is planning to replicate the same as they are not bothered to take any risk.
    What has it got to do with the agency?
    We are happy with client & agency and is offered an extra £25 per day rate to help us.
    What, they are offering you 5% extra to make up for a 20%+ loss in income? Not such a good deal for you that really.
    So most of us are preparing ourselves to move inside IR35 from next year.
    Oh dear....
    But the key query is,
    1. If there is a change in IR35 determination from next year, will HMRC have an assertion to tag us as inside IR35 for previous 5 years? i.e. will this have backdated implications?
    Absolutely yes. IR35 investigation and pay back the taxes for the 5 years as if you'd been inside all along... Yikes!!!!
    2. Would HMRC have enough data to pick and isolate "directors" who have shifted from limited company to umbrella company?
    Yep. Especially when you intend shutting your company down. Only reason to do this is because you are now inside so it's gonna be like a red rag to a bull. Your tax situation will change so another very easy touch point for them.
    3. Is there any purpose of retaining existing limited company or can we close down after moving to umbrella company?
    Yes because you are a contractor and you take other gigs that are outside and.. and... Erm.. 5 years and happy to go inside? Maybe you aren't. Yes, shut it down and stay as a perma tractor.

    You can see why, with 5 years under your belt and no other consideration for options except to stay, HMRC is gonna look at you like a starving dog. This is exactly the situation they are after and is what they've been after for all these years.

    I would certainly not want to be in your shoes in an inside gig with that time behind me.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #3
      It’s all about your attitude to risk - will they catch you or won’t they?

      https://www.contractoruk.com/forums/...ould-i-go.html

      My guess is that they will, your guess might be different.
      "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."
      - Voltaire/Benjamin Franklin/Anne Frank...

      Comment


        #4
        Originally posted by cojak View Post
        It’s all about your attitude to risk - will they catch you or won’t they?

        https://www.contractoruk.com/forums/...ould-i-go.html

        My guess is that they will, your guess might be different.
        Getting your guess wrong doesn't come with a £100k price tag.

        Bearing in mind this looks like a slam dunk for HMRC they'd be stupid not to so I'd guess the same as my bestie Cojak.
        'CUK forum personality of 2011 - Winner - Yes really!!!!

        Comment


          #5
          Time with client on it's own is not a determining factor wrt IR35 though, it's about the contract and the working practices of the contractor surely and we don't know that. IF working practices change and IF the contract is changed significantly e.g. removal of sub clause, addition of scope of work then I admit there could still be a red flag there but there could be an element of justification for the change in IR35 status?

          Comment


            #6
            Originally posted by Liberator View Post
            Time with client on it's own is not a determining factor wrt IR35 though, it's about the contract and the working practices of the contractor surely and we don't know that. IF working practices change and IF the contract is changed significantly e.g. removal of sub clause, addition of scope of work then I admit there could still be a red flag there but there could be an element of justification for the change in IR35 status?
            Yep, there could be.

            Through an IR35 investigation. With the OP now working inside, and their old contract outside they will have to prove every step of the way that working practices are different inside.
            "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."
            - Voltaire/Benjamin Franklin/Anne Frank...

            Comment


              #7
              This will be a really common question over the next few months as clients move to minimise risk by moving everyone inside IR35 even if contractors had every belief and evidence via contract and working practices reviews that they were outside IR35. This could be me too though I haven't clocked up 5 years.

              What would be the best thing to do to avoid that red flag appearing? Leave the client and take an inside IR35 gig somewhere else if that's all that's being offered by clients after April 2020 or sign the new contract with the current client with the new inside IR35 contract and working arrangement changes that have been agreed with the client?

              Comment


                #8
                Originally posted by Liberator View Post
                Time with client on it's own is not a determining factor wrt IR35 though, it's about the contract and the working practices of the contractor surely and we don't know that. IF working practices change and IF the contract is changed significantly e.g. removal of sub clause, addition of scope of work then I admit there could still be a red flag there but there could be an element of justification for the change in IR35 status?
                That theory might be true but there is a lot going against it.

                For a start, one of HMRCs only wins against an IT contractor was the JLJ case which fell apart due to time on site eroding his situation. I've done 4 years on site and it got to the point I had to leave for the same reasons. I struggle to think of any situation I've seen where people are on site 3 years and are not sitting ducks. Part and parcel, IMO, is enivitable however hard you try.

                A client happy with a contractor, and I'd guess there is more than this guy, on site for this long shows a distinct lack of understanding or care for their status. The fact the OP doesn't appear to have considered anything else and is willing to hold on to a gig for 15 quid a day more speaks volumes of his diligence to me as well.
                Even if you were, say a PM, getting a new Sow for every project over time this would just look like a sham exercise.

                And then there is the fact HMRC will be looking for exactly this situation means it's going to have to be absolutely watertight as the chance of an investigation are very high.

                And will his insurance cover him (if he had it). Chance could be there it won't if the case is going to lose.

                And yes, I guess there is a chance he might win but boy, that investigation. Yikes.

                I can't see any pros in t hi is argument but a hell of a lot of Cons.

                To say I'd be concerned if I was the OP is an understatement.
                Last edited by northernladuk; 1 October 2019, 07:58.
                'CUK forum personality of 2011 - Winner - Yes really!!!!

                Comment


                  #9
                  Originally posted by Liberator View Post
                  This will be a really common question over the next few months as clients move to minimise risk by moving everyone inside IR35 even if contractors had every belief and evidence via contract and working practices reviews that they were outside IR35. This could be me too though I haven't clocked up 5 years.

                  What would be the best thing to do to avoid that red flag appearing? Leave the client and take an inside IR35 gig somewhere else if that's all that's being offered by clients after April 2020 or sign the new contract with the current client with the new inside IR35 contract and working arrangement changes that have been agreed with the client?
                  https://www.contractoruk.com/forums/...ould-i-go.html

                  That's your decision to make.
                  "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."
                  - Voltaire/Benjamin Franklin/Anne Frank...

                  Comment


                    #10
                    Completely agree with those guys.

                    Which makes it more surprising that some public sector clients are reassessing contracts inside. After having declared them outside for the last 2.5 years.

                    I’d have thought this would be opening these clients up to massive liabilities but maybe they know something we don’t.

                    Comment

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