Contracting for previous employer

[Scottish30]

I was made redundant last week as the company I worked for was bought over and my role ceased to exist in the new structure.

I've since been approached by my previous employer with a short term contracting opportunity for 6 months on a day rate performing a completely different role (utilising my product knowledge). This would be arranged via an external agency.

Obviously as I'm unemployed, I'm keen to take up an opportunity of some paid work however they have advised me to check where I stand with redundancy and tax before I sign up.

Legally, my termination agreement has no clause which prevents me from returning however I believe this could look unfavourable with HMRC and IR35. I also want to protect my £30k tax free redundancy payout.

HMRC advised that I would only fall under IR35 if I set myself up as a limited company therefore if I go via an umbrella company, will this put me at sufficient arms length to avoid being taxed on my lump sum and ensure I'm IR35 compliant?

Any advice would be much appreciated.

[TheCyclingProgrammer]

You can't be caught by IR35 if you work through an umbrella. It's as simple as that.

Do note that if you only intend to do a single contract through the brolly you won't be able to claim travel expenses.

No idea about how it could affect your redundancy however, sorry.

Contracting for a former employer does not make you automatically caught by IR35, but the risk of being caught is arguably a lot higher. That's not to say that working through a Ltd is a bad idea - it might still be beneficial even if you declare yourself as inside IR35 for that contract if you intend to contract long term. Get some advice from an accountant.

If it's just going to be a one off and you don't want to have to worry about IR35, brolly is probably the simplest option.

[Scottish30]

Thanks for clarification.

I don't intend to contract long term (however I may be tempted after thus one) so I think for now the umbrella route saves me the paperwork and keeps me at a distance.

The main thing I'm concerned about is keeping my redundancy settlement tax free. It's a risk if I end up stung at the end of it all.

[SueEllen]

Scottish30 it looks like the company has mucked up not you. They should have offered you the alternative then made you redundant once that role finished as in theory you could sue them for unfair dismissal.

As none of us on here has access to your contract of employment and redundancy agreement you need to go and speak to an employment lawyer with these documents and explain the issue with your payout.

[Scottish30]

My old job no longer exists so I don't think the dismissal has been unfair. This is a completely different role and if their project analyst hadn't left I would still be redundant.

This has been unexpected on both sides so just trying to work out if there are any repercussions of going back to work for previous employer so soon and if it would impact the tax free element of my redundancy sum.

[Scottish30]

Sorry, should have mentioned the redundancy process has been ongoing for months as you'd expect from a large corporate so I've known for some time I'd be leaving the business.

This has only come about since leaving and they've thought of me to fill the contract short term knowing I'm on the market looking for work.

[SueEllen]

My old job no longer exists so I don't think the dismissal has been unfair.

It isn't what you think is unfair it's about the technicalities in law.

This is a completely different role

By law if you are qualified to take on a completely different role and it was available in the company then they shouldn't have made you redundant but offered the role to you as a "suitable alternative" job within the company. The role does not have to be exactly the same or even similar to the one you were made redundant from in pay and/or duties and/or location, you just have to have the skills to be able to do it.

and if their project analyst hadn't left I would still be redundant.

That throws a different light on it but it depends on the timescales involved i.e. when that person handed in their notice.

There are companies who make staff "redundant" then take them on as contractors/freelancers to avoid paying benefits and NI this is why IR35 came about even though some of the culprits were government departments and agencies in the first place.

Anyway HMRC does not like this and you could also sue them which is why you have been told to seek advice.

I know of people who were in a similar situation and their ex-employers just flatly refused to take them on as a contractor/freelance without a years gap because they didn't want any tax and legal implications on their side. (Though their employers are known for having dodgy dealings.)

This has been unexpected on both sides so just trying to work out if there are any repercussions of going back to work for previous employer so soon and if it would impact the tax free element of my redundancy sum.

You need to take qualified legal advice which we can't give here as first we aren't qualified to give it to you, and even if we were we would need to see all documentation.

Considering you are going to be about 30K up then spending £100 or so talking to an employment lawyer who would give you a 30 minute free consultation before charging you isn't going to break the bank....

[ASB]

EIM13810 - Termination payments and benefits: redundancy: re- engagements: general

it sounds as though the redundancy was genuine. In which case going back is ok.

however is the redundancy was not genuine the consequences of that, generally tax on the redundancy payment fall on the employee ot employer generally.

[Jessica@WhiteFieldTax]

Concur with ASB.

So long as the facts given are genuine, you should be safe both WRT redundancy and, if you feel minded to make the effort with record keeping, IR35 wise.

However you need a level of advice which is beyond that of an anonymous forum.

[centurian]

Do note that if you only intend to do a single contract through the brolly you won't be able to claim travel expenses.

Would the OP be able to (legally) claim travelling expenses anyway - as they have been at the same physical locality for some time

Wouldn't the 24 month rule apply - as it's tied to the person and the locality, not the mechanism of employment (contract, permie etc.)