Contract to Perm: IR35 Investigation Trigger?

[Unai Emery]

A bit of a moot point as I know the contract I've been in for the past 3 years is outside of IR35 but if I accept an offer to go permanent with my current client, could it raise my head over the parapet, so to speak?

[northernladuk]

A bit of a moot point as I know the contract I've been in for the past 3 years is outside of IR35 but if I accept an offer to go permanent with my current client, could it raise my head over the parapet, so to speak?

If you are continuing to do the same work you were previously and all that has changed is your engagement with the client then you could very well argue you've got a bit of IR35 problem as you should have been inside from the start.

Will making the change expose you to an investigation? Probably not. I don't think we know the actual way they pick who to investigate but it's been mention it's off the back of something else that's got their interest (or you've been dobbed in it by someone). As long as you close everything properly there should be no reason for HMRC to take any further interest.

Best keep your IR35 insurances (or IPSE+ membership) going for complete year after you've gone perm and closed the company just to be on the safe side.

[vwdan]

As NLUK says, if you got investigated it's a bit of a bad marker if you're doing the same work. But I can't see how it could be a trigger, because we don't report anything that shows who you were working (do we?)

[Hobosapien]

See how your working practices are likely to change once a permie, presuming your outside IR35 was determined by reviewing them in the first place.

Then see how the three pillars of IR35 (MOO, substitution, SDC), where all three need to stand to be caught within IR35, are likely to change. i.e. MOO is certain as an employee as you'll get paid whether you're actually working or not or ill, which is unlikely to be the case while a contractor.

So should be relatively simple to prove your working practices have changed once a permie if HMRC somehow investigate. I expect a trigger may be if you've been contracting via an agency they report to HMRC these days and if that report includes the end client then HMRC will also receive your permie PAYE details for the same client and their super-duper database will join the two and raise a flag. Whether they see the flag and act on it is unknown but be prepared.

[dx4100]

I went from contract to perm and then perm back to contracting all at the same company.

The key is all down to the role you are doing. My situation was genuinely from freelance .Net dev working on my own greenfield projects to fully fledged lead dev with everything that goes with that and then back again. All fully reviewed and signed off by my legal advisers (obviously all subject to interpretations but its the best I can do) and all signed off because the roles where totally different both on paper and in reality.

If they are at all similar then you will be in a bad position.

[northernladuk]

See how your working practices are likely to change once a permie, presuming your outside IR35 was determined by reviewing them in the first place.

Not many people get their working practices reviewed. Very difficult to do until you get to site.

Then see how the three pillars of IR35 (MOO, substitution, SDC), where all three need to stand to be caught within IR35, are likely to change. i.e. MOO is certain as an employee as you'll get paid whether you're actually working or not or ill, which is unlikely to be the case while a contractor.

That's not what MoO is. What you are referring to is the T&M nature of the contract. MoO is around other work after the current agreed one is complete.

So should be relatively simple to prove your working practices have changed once a permie if HMRC somehow investigate.

I doubt that, particularly if they don't which I'd bet they won't.

IR35 was Brough in around the Friday to Monday contractor. All that has changed is the remuneration method. The same could easily be argued the other way.

[Unai Emery]

Not many people get their working practices reviewed. Very difficult to do until you get to site.

That's not what MoO is. What you are referring to is the T&M nature of the contract. MoO is around other work after the current agreed one is complete.

Told you it was a MoOt point

As it happens, I've passed them up on their kind offer. Given it a bit of thought & I don't think permiedom is for me,

[Hobosapien]

Aye, all hangs on how the OP was operating outside IR35, whether done properly with a contract review including working practices or by wishful thinking.

Yep, the working practices thing is difficult to review pre-contract start but the way I've handled it is to start the contract with IR35 in mind and assess everything expected or asked of me by the client how it would fit into a contract review. Can then try to position oneself where the working practices will pass the review once established. Not ideal as there's a risk the client won't allow an outside IR35 approach.

At least if the client is making the outside determination then there's less to worry about if it remains that the client is on the hook if they get the determination wrong in HMRC's eyes.

[northernladuk]

Told you it was a MoOt point

As it happens, I've passed them up on their kind offer. Given it a bit of thought & I don't think permiedom is for me,

But are you going to continue contracting for them? In that position you know is full time? If so it appears Disguised Employeedom is for you.

[Hobosapien]

Told you it was a MoOt point

As it happens, I've passed them up on their kind offer. Given it a bit of thought & I don't think permiedom is for me,

See what happens in the upcoming budget statement, and if IR35 as currently applied to public sector does get rolled out to private sector next April, you can safely go permie after a contract renewal beyond April where client deems you still outside IR35 as the risk is then on them if they get it wrong in HMRC's eyes.