Going permie.. temporarily? Keeping company open?

[MarkA]

I've been contracted to a large multi-national for a couple of years, outside of IR35. This contract ends in the next couple of months and due to rules many levels up from the department I'm working in, they can't offer another contract because it's already been two years. I have to either go permie (which they've offered), or leave. I've been in this position before and usually I'd just wish them well and move on. However in this case I'm a lot more technically and emotionally invested in the project and it's a small team, so I want to stay around and get it much further down the line.

My manager and I have discussed that if I took a permie, it would be in the understanding that I would be mentally treating it like a contract and I may well resign in 6 or 12 months. I'd be keeping my limited company open and so on. However, I can't work out or decide whether this is a terrible idea for a number of reasons. I worry how HMRC will look at the two years of outside-IR35 status, or how horribly complicated my self-assessment will get and whether it'll trigger higher tax payments because I can no longer control my personal income from the company. Also my company pays big pension contributions but if that income into the company dries up, I have a problem there (the permie would come with its own pension, though how much use that is for 12 months work, not sure).

I think the financial implications will be hugely negative, but I haven't a chance of working that all out! We've not discussed what the salary would be, but I wouldn't know what it would need to be in order to balance things out.


Anyone been in this position?
Thanks for any thoughts and advice.

[northernladuk]

I've been contracted to a large multi-national for a couple of years, outside of IR35.

Really?

they can't offer another contract because it's already been two years. I have to either go permie (which they've offered), or leave.

Ah, maybe you aren't..

I've been in this position before and usually I'd just wish them well and move on. However in this case I'm a lot more technically and emotionally invested in the project and it's a small team, so I want to stay around and get it much further down the line.

That's proper permietractor thinking. You stay because it makes financial sense or you go. Staying because you are invested which then causes you a ton of panic and problems is a bit daft IMO. I think most of us have been in this situation and in the first couple of instances we didn't want to leave all the hard work we did and would have done anything to carry one. Most of us, however, didn't and have matured enough to see it for what it is. Company can't keep you, you're done. No emotional attachement. In another year down the line is your satisfaction of completing the job really match the 60+k you've lost? Will you think the same in five years? Will you buggery. Your emotional attatchment is clouding your judgement and you won't thank yourself for it later IMO.
The only reason for staying is that the gig suits you. You've had enough contracting, too much risk, young family whatever and permie life is calling. Doing a half cocked job like this fixes nothing.
On top of this your manager can't treat you differently to the other perms or they will be logging grievances left right and center and you'll have a month or possibly three notice period making it very difficult to dovetail with another gig. You could easily be on the bench for three months and lose everything you've earned.

My manager and I have discussed that if I took a permie, it would be in the understanding that I would be mentally treating it like a contract and I may well resign in 6 or 12 months.

Ah.. you definitely aren't then. Boy have you got a problem.

I'd be keeping my limited company open and so on. However, I can't work out or decide whether this is a terrible idea for a number of reasons. I worry how HMRC will look at the two years of outside-IR35 status,

They will be rubbing their hands together with glee. There are empty coffers that need filling and you are the one.

or how horribly complicated my self-assessment will get and whether it'll trigger higher tax payments because I can no longer control my personal income from the company.

Your accountant sorts his out for you. It's not complex.

Also my company pays big pension contributions but if that income into the company dries up, I have a problem there (the permie would come with its own pension, though how much use that is for 12 months work, not sure).

Why do you have a problem? Nothing is complicated here. LTD just doesnt make contributions and you get a permie one that gets next to nothing in it. At some point in the future you merge them if you can be bothered. Very simple.

I think the financial implications will be hugely negative, but I haven't a chance of working that all out! We've not discussed what the salary would be, but I wouldn't know what it would need to be in order to balance things out.

Hugely negative? You aren't half making a mountain of a mole hill. You income will go down by a good chunk. That's it. You need to create a budget to balance things out. It's not hard.

Anyone been in this position?
Thanks for any thoughts and advice.

Many tens of thousands but they haven't paniced and thrown the baby out with the bathwater. They've approached it sensibly by investigating each area i.e. your accountant re tax, budget re drop income etc and come to a conclustion and moved forward.

It's not as complicated as you appear to be making out. That's probably because you're a perma tractor with a permie mentality so the nuances of being a contractor and running a LTD is escaping you. Your accountant is the person to ask here.

If you do take the job I seriously hope you've got IR35 insurance because that's the only thing keeping you safe in your situation I am afraid.

[jamesbrown]

If you do take the job I seriously hope you've got IR35 insurance because that's the only thing keeping you safe in your situation I am afraid.

No amount of IR35 insurance is going to help the OP with that one. The moment you accept a permie role without a fundamental change in working practices, there is no reasonable prospect of success (something that all insurers will demand). Inside all along.

[northernladuk]

No amount of IR35 insurance is going to help the OP with that one. The moment you accept a permie role without a fundamental change in working practices, there is no reasonable prospect of success (something that all insurers will demand). Inside all along.

Actually that's true.. the fact he's pretending the perm role is a contract, which he's been doing all along says it all. Yes... What Jamesbrown says.

There you go, your decision is made. Easy.

[Old Greg]

No amount of IR35 insurance is going to help the OP with that one. The moment you accept a permie role without a fundamental change in working practices, there is no reasonable prospect of success (something that all insurers will demand). Inside all along.

But if the OP then closes the Ltd, what are the real world probabilities of personally being on the hook for IR35 related taxes, interest and penalties?

[jamesbrown]

But if the OP then closes the Ltd, what are the real world probabilities of personally being on the hook for IR35 related taxes, interest and penalties?

Probably quite small, but you never know. Although a little old now, this is still my go-to reference on the topic:

IR35 and Personal Liability - can HMRC proceed against an individual? - Whitefield Tax Limited - Isle of Wight Accountants - IR35 specialists

But, you're right, it is a fairly high bar and it would probably be quite difficult to transfer the liability to the OP personally. Personally, I wouldn't want to take that risk as this would be a pretty solid case for "inside all along and should have known better", especially after this forum post...

[Old Greg]

Probably quite small, but you never know. Although a little old now, this is still my go-to reference on the topic:

IR35 and Personal Liability - can HMRC proceed against an individual? - Whitefield Tax Limited - Isle of Wight Accountants - IR35 specialists

But, you're right, it is a fairly high bar and it would probably be quite difficult to transfer the liability to the OP personally. Personally, I wouldn't want to take that risk as this would be a pretty solid case for "inside all along and should have known better", especially after this forum post...

How many people do you think have been personally on the hook in the last 10 years?

[ensignia]

I'm anti permietractor as anyone (well maybe not NLUK, who seems genuinely disturbed), but there is very little chance HMRC will come after you in this scenario.

A LOT of my ex-contractor colleagues at the big financial companies have made the switch from contractor to perm doing the exact same roles with the same titles, and many have closed their ltd companies down too.

With the IR35 reforms in the private sector there will be thousands of ex contractors in the same boat, what makes people think HMRC have the resources to go after everyone? If you've been there less than 2 years you'll be way down this imaginary "investigate" list, there were tons of these permietractors who had been at the same place for 5+ years and who gladly made the transition into permiedom because they had become an integral part of the operations who'd be in HMRCs cross-hairs first.

That being said, your situation is a bit messy. The risk is probably minimal, so you'd need to weigh it up.

[Lance]

I'm anti permietractor as anyone (well maybe not NLUK, who seems genuinely disturbed), but there is very little chance HMRC will come after you in this scenario.

A LOT of my ex-contractor colleagues at the big financial companies have made the switch from contractor to perm doing the exact same roles with the same titles, and many have closed their ltd companies down too.

With the IR35 reforms in the private sector there will be thousands of ex contractors in the same boat, what makes people think HMRC have the resources to go after everyone? If you've been there less than 2 years you'll be way down this imaginary "investigate" list, there were tons of these permietractors who had been at the same place for 5+ years and who gladly made the transition into permiedom because they had become an integral part of the operations who'd be in HMRCs cross-hairs first.

That being said, your situation is a bit messy. The risk is probably minimal, so you'd need to weigh it up.

I think you’re missing the point.

When large numbers of people switch and stay at the same client it becomes easy pickings for HMRC. They no longer need to painstakingly investigate every case.
They have, through mandatory reporting, lists of people who have made the transition.

Tell me, how has lack of resources impacted HMRCs ability to chase the loan scheme tax evoiders?

[BigDataPro]

...
When large numbers of people switch and stay at the same client it becomes easy pickings for HMRC. They no longer need to painstakingly investigate every case.
...

^^This^^