Who is liable for penalties under the new IR35 regime?

[softwaredever]

If my client decides that I am outside IR35 from April 2020, then say in a year HMRC decides they were wrong and I was actually inside, who is liable for the extra tax due? Would I have to pay anything?

* I know that there will be no penalties for the first year, but theoretically.

[northernladuk]

Really??

Isn't this covered in the first paragraph of most articles discussing the new legislation.

How have you got to four weeks before they hit and don't know this?

[jamesbrown]

If my client decides that I am outside IR35 from April 2020, then say in a year HMRC decides they were wrong and I was actually inside, who is liable for the extra tax due? Would I have to pay anything?

* I know that there will be no penalties for the first year, but theoretically.

The Fee Payer, in the first instance, which may be the client. Anyone in the supply chain above the PSC in the event that the debt cannot be recovered quickly from the Fee Payer. The PSC and, potentially, the contractor if there is evidence of fraud (by the contractor), which is highly unlikely.

[Chart Accountancy]

The end client will likely have an insurance in place in case that HMRC disagreed with their determination. The IR35 court cases history has a mixed outcome with cases won by HMRC and the Contractor, it is difficult to predict the outcome as it will depend also how the working practises will be assessed.

[Andy Hallett]

I am not sure what policies are available now, but when I ran SThree’s Public Sector implementation the policies only covered for the costs of the investigation, there wasn’t a policy that would cover the back tax.