Returning to a past PAYE employer

[KC1]

Hi,

This is my first post so apologies if I'm posting in the wrong area or broken any forum rules.

I am currently a permie and have been offered a contracting role with a past PAYE employee. I'm very close to accepting the contract and setting up my own limited company until IR35 kept me awake!

Here is some information to set the scene.
- Previous a PAYE permie with Company A for 13 years.
- Left Company A 10 months ago to seek new opportunity and immediately joined Company B as PAYE permie. There is no relationship between companies A and B.
- Agency has just presented me with a fairly lucrative contracting opportunity, which coincidentally is with Company A in the role that I left.
- Due to Company B's notice period, the earliest I can start Company A's contract is 51 weeks after I left them as a PAYE permie.
- I could delay my start date by any period of time, as long as it's reasonable.

It never crossed my mind that IR35 could be an issue until I started to read up more and it is worry. I know the working practices is key to all this. If I can demonstrate I am not receiving any permie benefits, and that I operate by providing a service, is this sufficient?

Is this a contract I should avoid without even thinking? I've even thought about going umbrella just for this particular contract opportunity just to avoid IR35 - is this a correct approach?

Appreciate any advice and assistance.

Thanks.

[NotAllThere]

The fact that A was your employer in the past has no bearing on the IR35 status of your contract. If you were going to contract with company B, that would be a different matter.

[Ketto]

QDOS do ask if you were ever employed by the end client in their working practices review. It may be a fairly minor point, but you should have a contract review and disclose it to get expert opinion.

[SlipTheJab]

I would think that after almost a year you should be golden HTH BIANAL

[WordIsBond]

The thing that would concern me here is not merely that it is a former employer, but that it is in the same role. That is going to make it easier for HMRC to argue it's a permie role. It is also going to increase the risk of the client seeing you as part and parcel and treating you like a permie, which means if investigated later some of their answers to questions will be coloured by your prior time as an employee. Finally, it being in the same role makes me wonder if you are being brought back to accomplish a particular task, which upon finishing you will leave, or if you are being brought back to do whatever is needed for that role.

There's nothing about going back to a former employer that means you have an IR35 problem, but I'd guess the risk is high that you do end up with a problem (because of client perceptions and expectations) if you go back to the same role within a year.

I don't know if it matters or not, but perhaps if you start more than a year after you left it has an impact on perceptions, so you may want to take a two week holiday and go back 53 weeks after you left, rather than 51. HMRC may even use some kind of filter for investigations that looks at people who return within a year. Nobody knows exactly how they decide who to investigate. So if they are happy to have you delay a couple weeks, it might be worth doing.

I'd say it is important to have a clearly defined task, and if you stay there more than 6-9 months, your IR35 risk is likely to go up and up.

Of course, it is always an option to operate this contract inside IR35. A 6 month contract inside isn't a big problem. You pay your annual pension contribution out of this contract's proceeds, and the rest of the deemed payment in salary, it won't be that bad. Your next contract would then be entirely profit/dividend. If you do it right, you'll do pretty well if half the year is IR35 caught as long as the rest of the year isn't.

[SlipTheJab]

I would think that after almost a year you should be golden HTH BIANAL

[Contreras]

It never crossed my mind that IR35 could be an issue until I started to read up more and it is worry. I know the working practices is key to all this. If I can demonstrate I am not receiving any permie benefits, and that I operate by providing a service, is this sufficient?

No, it's not sufficient. 1) Make sure you have a mutually agreed schedule of project specific deliverables. 2) Get the contact reviewed and mention to the reviewer your history with the company.

Is this a contract I should avoid without even thinking? I've even thought about going umbrella just for this particular contract opportunity just to avoid IR35 - is this a correct approach?

I would say no, but see what the review brings. You are more likely to be inside IR35 for lack of appreciation of what it entails, and that can be fixed. It probably does increase the risk of HMRC wanting to take a pop though.

Fwiw, here is the relevant (but now defunct) Business Entity Test:

Have you been engaged on PAYE employment terms by your current client/end user within the last financial year with no significant changes to your working arrangements?
If you are doing the same work you should answer yes to this question. Current engager also includes working at a different location owned by your engager or working at a different company but which is connected e.g. part of the same group.

[KC1]

Thanks for the advice so far. Seems like it's not a no goer, I just need to seek some professional advice and be prepared for HMRC investigations one day. It is up to 6 or 8 years?