IR35 - what happens if my client deems the role inside half-way through the task?

[DazedConfused]

Hey guys. I'm new to the forum and have spent the past 30 mins digesting the plethora of information on IR35. It's really useful but very overwhelming.

I have a couple of questions, but before I go into it I'll provide a bit of background:

- I'm 4 months into a 10 month contract performing specialist commercial and sub-contract expertise to a global defence contractor
- The job description is suitably woolly and I'm contracted in via an agency
- I have my own limited company
- Whilst I've made every effort to carve my role out and differentiate it from their permanent employees, the reality is that they utilise my skills on a number of things and thus the role I perform is not as 'ringfenced' as it could be

Right, so the Company are dealing with each contractor on a case-by-case basis using CEST and their in-house legal counsel. I suspect that they will deem my role to be 'inside' from April next year. My questions are as follows:

1) If the role is deemed to be 'inside' does that mean the agency performs the umbrella actions for payroll or would I need to find someone that does?
2) Would I still be subject to VAT and Corporation Tax on the revenue my business earns (assuming a gross figure can be calculated)?


Thanks in advance.

[DolanContractorGroup]

Hi DazedConfused,

If post-April 2020, the end client decides you are inside-IR35, then the agency (if one exists in the supply chain) will take the role of the fee payer and deduct PAYE taxes and NI from any payments owed to you.

You will not have to pay corporation tax or other company liabilities on these amounts, as these amounts will be deemed to be paid to you rather than your company.

Remember, the end client needs to give that 'inside' determination statement, otherwise the agency cannot make deemed employment payments. The risk/liability will also shift to the end client where they fail to make a determination.


Thanks

Zeeshan

[craigy1874]

Hey guys. I'm new to the forum and have spent the past 30 mins digesting the plethora of information on IR35. It's really useful but very overwhelming.

I have a couple of questions, but before I go into it I'll provide a bit of background:

- I'm 4 months into a 10 month contract performing specialist commercial and sub-contract expertise to a global defence contractor
- The job description is suitably woolly and I'm contracted in via an agency
- I have my own limited company
- Whilst I've made every effort to carve my role out and differentiate it from their permanent employees, the reality is that they utilise my skills on a number of things and thus the role I perform is not as 'ringfenced' as it could be

Right, so the Company are dealing with each contractor on a case-by-case basis using CEST and their in-house legal counsel. I suspect that they will deem my role to be 'inside' from April next year. My questions are as follows:

1) If the role is deemed to be 'inside' does that mean the agency performs the umbrella actions for payroll or would I need to find someone that does?
2) Would I still be subject to VAT and Corporation Tax on the revenue my business earns (assuming a gross figure can be calculated)?


Thanks in advance.

1. If deemed inside, the agency will deduct PAYE/NICs and pay your limited company net of these
2. You would still charge VAT, but you won't have any profits to pay CT on, nor will you have any income to relieve your running costs.

[Si666]

I would have a read of the sticky that was added by Cojak under Accounting/Legal. It's very informative.

[JohntheBike]

1. If deemed inside, the agency will deduct PAYE/NICs and pay your limited company net of these
2. You would still charge VAT, but you won't have any profits to pay CT on, nor will you have any income to relieve your running costs.

an issue that doesn't seem to be very clear is who should the funds be paid to. If they are paid to the contractor company then clearly the company must be maintained and incur a loss in doing so. So all the debate about whether or not the company should be wound up is irrelevant, as it can't be.

So, could or should the monies be paid directly to the contractor as they are already nett of taxes, thus bypassing the company?

The problem as I see it there, is that the contract will be between the contractor's company and the agency/client assuming that the contractor doesn't take an FTC or uses an umbrella, and so the agency/client would not want to pay the monies direct to an individual. So what does the panel think?

[northernladuk]

It will go to the individual. There will be no company involvement and yes it will need new cotracts. Pretty basic stuff.

[JohntheBike]

It will go to the individual. There will be no company involvement and yes it will need new cotracts. Pretty basic stuff.

okay, but what has happened in the public sector, i.e. have those declared inside by the client been given a direct contract and are being paid directly by the client, less taxes? or those declared inside have had the contracts renewed with their companies and the company has been paid nett of taxes and are thus obliged to trade at a loss?

[northernladuk]

okay, but what has happened in the public sector, i.e. have those declared inside by the client been given a direct contract and are being paid directly by the client, less taxes? or those declared inside have had the contracts renewed with their companies and the company has been paid nett of taxes and are thus obliged to trade at a loss?

They went inside with the existing agency. Agency offered PAYE or worked with an umbrella. In most cases an approved list of umbrellas. Nothing was renewed with any company. They are no longer required.

[JohntheBike]

They went inside with the existing agency. Agency offered PAYE or worked with an umbrella. In most cases an approved list of umbrellas. Nothing was renewed with any company. They are no longer required.

OK, it will be interesting to see what happens in the private sector then. The reality is that any situation other than outside will make the contractor's company redundant.

[northernladuk]

OK, it will be interesting to see what happens in the private sector then. The reality is that any situation other than outside will make the contractor's company redundant.

By jove.. I think you've finally got it.

I do think it will be interesting though. The options are very well documented and there is nothing new here.