Umbrella to PSC : Current views?

[skeeter1122]

Hi,

I have seen one thread from March around this scenario, and I assume it affects many current contractors. QDOS recent article suggests 2/3rds of contractors "blanket assessed" for April 2020 are now wanting to move back to a PSC basis. Am keen to hear recent thoughts now we are another 2+ months down the track.

My scenario is that I was under an Umbrella already, a year before April 2020, and arbitrarily given an Inside-by-CEST determination (regardless of it not actually applying to me as I was under umbrella, I appealed it and it was never dealt with).

Now the client is offering the option to go to LTD which i have calculated as being a much more tax effective proposition (by several thousand £££). The work is basically self directed and bespoke IT work, little or no supervision due to the isolated nature of the project as a proof of concept peice. It will only be for a 6month term at best on the LTD basis. The other option given is to use a PAYE basis, which automatically puts me into the "employee" pool.

I have had a LTD coy previously, so i know the ropes there. But with the current scenario what at the views of exposures from this? I do not believe I should be classed as inside IR35 regardless, however I do get the feeling that the general atmosphere of the market and contractors generally is to veer towards lumping it and accepting an inside status "just to avoid hassles". Ultimately as i understand it, the onus is on the contractor to decide status until April 2021.

ANy thoughts appreciated, I am sure its a similar scenario to a lot of people out there looking to move Umbrella/PAYE-> PSC.

[LondonManc]

Unknowns for us that you haven't mentioned:

Employee benefits - are you entitled to any, e.g. paid holidays, sick pay, pension, etc., employee discount schemes, whatever. There is a worth to these so you'd need to factor those in.

I'd also be keen to know who was going to do any future determination of the contracts that you operate there to see if you'd just get blanket "insided" in the future. If best for you long term is inside, better having a steady 18 months of inside at the moment than 6 months outside then shafted.

[skeeter1122]

Unknowns for us that you haven't mentioned:

Employee benefits - are you entitled to any, e.g. paid holidays, sick pay, pension, etc., employee discount schemes, whatever. There is a worth to these so you'd need to factor those in.

I'd also be keen to know who was going to do any future determination of the contracts that you operate there to see if you'd just get blanket "insided" in the future. If best for you long term is inside, better having a steady 18 months of inside at the moment than 6 months outside then shafted.

Thanks for the reply. The main issue is if LTD is viable or sustainable. The initial term is 3months, hard to say if that will expand.
The PAYE option included pension basic , holiday pay (you have to take it, not paid out) but little else that would differentiate it. My wife has employment discount schemes so not really reliant on that.

I am fairly certain the project wont go beyond 3-6months. Maybe less if things get ropey and they invoke notice. Arguably there could be the option to go permanent as with any gig, but I suspect its more likely redundancies will happen in the company.

Crazy days indeed.

[ladymuck]

If you're sure the gig won't last beyond six months, and you're not sure what outside-IR35 pipeline you've got beyond that, then there's no point standing up a LtdCo IMO.

The admin and compliance requirements for six months is not worth the hassle.

If the only true alternative is PAYE then make sure you get it as an FTC which entitles you to much the same benefits as a permie (some practical exclusions exist for very short term roles like yours).
Fixed-term employment contracts - GOV.UK

[skeeter1122]

If you're sure the gig won't last beyond six months, and you're not sure what outside-IR35 pipeline you've got beyond that, then there's no point standing up a LtdCo IMO.

The admin and compliance requirements for six months is not worth the hassle.

If the only true alternative is PAYE then make sure you get it as an FTC which entitles you to much the same benefits as a permie (some practical exclusions exist for very short term roles like yours).
Fixed-term employment contracts - GOV.UK

Hi , thanks for the comments.

I am happy with the PSC overheads, that is manageable. But less happy with IR35 fallout. The point being i "was with an umbrella" now im in a PSC. Not sure how that works out.

The FTC link was usefull. It is an interesting idea for employers, in that its just (as far as i can see) a rolling contract of employment. e.g. it keeps going after the end of term if both parties agree , and that can happen for up to 4yrs! This strikes me as a way for businesses to avoid redundancy and restructuring costs, as well as other obligations. You are on a constant 1-week's notice. Having worked in the USA previously short term, the atmosphere and stress this kind of thing creates is crazy. I guess its where UK is headed very quickly along with zero-hour.

[ladymuck]

Hi , thanks for the comments.

I am happy with the PSC overheads, that is manageable. But less happy with IR35 fallout. The point being i "was with an umbrella" now im in a PSC. Not sure how that works out.

The FTC link was usefull. It is an interesting idea for employers, in that its just (as far as i can see) a rolling contract of employment. e.g. it keeps going after the end of term if both parties agree , and that can happen for up to 4yrs! This strikes me as a way for businesses to avoid redundancy and restructuring costs, as well as other obligations. You are on a constant 1-week's notice. Having worked in the USA previously short term, the atmosphere and stress this kind of thing creates is crazy. I guess its where UK is headed very quickly along with zero-hour.

If the contract is clearly a different role to the one previously assessed as inside, then you (if you were a LtdCo owner) determine the treatment of that contract and should do the usual due diligence of getting a contract review, etc. Moving from inside to outside at the same client, on the same job, is a bad idea. Same as the moves from outside to inside that were happening earlier this year would have sent a big red flag up.

It's doable but make sure it's different work and there's a clear audit trail showing the change of scope and responsibilities to cover your back.

I still wouldn't open a LtdCo for six months though.

[wattaj]

I am happy with the PSC overheads, that is manageable. But less happy with IR35 fallout. The point being i "was with an umbrella" now im in a PSC. Not sure how that works out.

Do you currently have a LtdCo that you can use for this short-term gig? Why bother if you do not; you'd not be saving much in doing so.

Use an umbrella and channel extra cash into a pension for the tax saving. Job done. Sleep easy.

I'd also be keen to know who was going to do any future determination of the contracts that you operate there to see if you'd just get blanket "insided" in the future. If best for you long term is inside, better having a steady 18 months of inside at the moment than 6 months outside then shafted.

^^ This.

If you're sure the gig won't last beyond six months, and you're not sure what outside-IR35 pipeline you've got beyond that, then there's no point standing up a LtdCo IMO.

The admin and compliance requirements for six months is not worth the hassle.

^^ This.

[elsergiovolador]

If the work could have been done on a PAYE basis and you say this is an option, then HMRC will likely view move to PSC as tax avoidance (whether it is right or not, nobody has time to prove them wrong in court).

[skeeter1122]

If the work could have been done on a PAYE basis and you say this is an option, then HMRC will likely view move to PSC as tax avoidance (whether it is right or not, nobody has time to prove them wrong in court).

This is kind of an interesting point. The client is saying they will "do whatever it takes" to make it work out and Therefore, the multiple options arose.
They still have a PSL and such happening - and can push me towards a solution. I think ultimately they would rather I was under an umbrella.
There was also the theory about using a partnership setup.

However, i would say that the main gist of this thread is that for some reason because i have been on site previously, that precludes any other treatment here REGARDLESS of how anything is done? The reason i left the old Umbrella is because it no longer operates/went under. Not just a random choice. They were a UK company.

[skeeter1122]

Do you currently have a LtdCo that you can use for this short-term gig? Why bother if you do not; you'd not be saving much in doing so.

I do , but its winding up. Nothing much in Distributions to be obtained so not worried about that part of it. But structure isnt suitable for this without a lot of articles or memos updating.

For PSC - What about obtaining insurances? like IR35 coverage? Worth the effort?