Contracting outside IR35 to same client via Independent Service Provider

[Deepcut]

Hi All,

Would appreciate your view on this situation.

Infrastructure PM Data Centre,Networks etc. I have been contracting with the same blue chip client for 5 years, I tend to get offered the high profile projects (the one's they can't afford the perms to tulip).

My agency informed me that my client has deemed me inside IR35. My contract expires end March, I've explained to the client I will not be staying on.

My client has come back to me and said their hands are tied by their legal department however, they do not want to lose me and would i consider contracting via an Independent Management Service provider that is on the preferred suppliers list.

The company they want me to contract under is one that I have worked alongside some of my previous projects. They are a good bunch, the company turnover is under 10m which I understand enables it to fall outside the IR35 legislation.

It has been explained to me that my limited company would be contracted to the independent service provider, and the independent service provider would invoice the client directly. I would therefore not have any contractual relationship with my client, the independent service provider could in theory provide any PM in my place and I could in theory work for any of their other clients but in reality I would continue working for my client whilst remaining outside of IR35.

Seems a bit too good to be true, what are your views, are any IR35/HRMC laws been broken ? I was told the Blue Chips lawyers had reviewed this and authorised the offer.

Thanks,
Deep

[Andy Hallett]

You are right, it is too good to be true. IR35 doesn’t go away for a smaller company, it just means that you will be liable for the determination and the risk.

Without knowing your details in full, from your summary you seem very much ‘part and parcel’ of the client.

[Deepcut]

You are right, it is too good to be true. IR35 doesn’t go away for a smaller company, it just means that you will be liable for the determination and the risk.

Without knowing your details in full, from your summary you seem very much ‘part and parcel’ of the client.

Surely the independent service provider is liable for any IR35 investigations as it is there responsibility to determine whether I am in or out of IR35.

As far as HRMC/my ltd is concerned, I am now invoicing a new client i.e the independent service provider.

[northernladuk]

If that description doesn't scream disguised permie I don't know what does.

[BR14]

Surely the independent service provider is liable for any IR35 investigations as it is there responsibility to determine whether I am in or out of IR35.

As far as HRMC/my ltd is concerned, I am now invoicing a new client i.e the independent service provider.

so what would you like the answer to your question to be?
all good, carry on? - there you go, then.

[northernladuk]

You are right, it is too good to be true. IR35 doesn’t go away for a smaller company, it just means that you will be liable for the determination and the risk.

Without knowing your details in full, from your summary you seem very much ‘part and parcel’ of the client.

But he's still doing work for the client so they will have to make a determination. Role is the same, all thst has changed is the way he's paid.

Nothing has changed. His role is inside.

And don't forget about the agency handcuff which in this case will stand.

[WordIsBond]

Assuming you proceed with this, I anticipate the following possible scenarios.

1. HMRC never checks up on it. Everything's cool, right?

2. HMRC comes along and says the big client is liable. You will no doubt be declared inside at that point, and they'll also say, "Now, by the way, how long has this guy been contracting for you?" Big client has to pay tax from April. You get to pay 5 years of IR35 tax, unless somehow you can win the IR35 cases that come out of it.

3. HMRC comes along and agrees that you are working for the small consultancy, not the big client. They may not like that, so they may just decide to look into all your historical contracts as well as the current one.

4. HMRC comes along and says, "Hey, what a cool setup. We never anticipated this in our rules. You guys are brilliant, we'll have to change the rules to prevent anyone else doing this. Congratulations, have a great day!"

Which of those do you think is the most likely? Least likely?

[jamesbrown]

The ISP is almost certainly body-shopping you into the end-client rather than providing a fully outsourced service, so the end client remains, well, the end client. That will be HMRC's view anyway (and I think they would be correct, based on what you've written). It could get messy, because the end client is presumably doing this to try and avoid their responsibilities under the new legislation, but they won't have done it successfully, which means they will be responsible and liable (but the supply chain will presumably try to argue that you are both).

[Scruff]

Do you know what happened to the recruits in Deepcut?

[Deepcut]

How would HRMC identify the relationship between my ltd and the end client ? The paper trail is between the client and the ISP only. There would have no reference to me or my ltd. All my contracts are reviewed by Bauer and Cottrell and deemed to be outside IR35 and I have legal insurance in place to cover any HRMC investigations.

I do not pretend there is no risk, just trying to quantify whether the risk can be managed to a sufficient level.