PSC with Sub contractor

[meeko]

Hi all,

I have been providing services via my own LTD company directly to my public sector client, who has deemed this engagement to be outside of IR35. I also have a self-employed sub contractor who provides services via my LTD company to the same client. There is a separate contract for the subcontractor and this too is deemed outside IR35.

The HR Director of the client has now decided that all contractors will inside IR35. I have been advised that any new contract and working practices would be very different and so it would be clear cut that the new engagement is inside IR35.

If I were to continue to provide the services of my sub contractor (who doesn't have an interest in my LTD company), would the client pay me gross and expect me to run his payroll, hence taking the deemed payment?

If were to accept the new contract offer, I suspect I would be better off working via an umbrella so I could benefit from a group pension.

Any advice greatly appreciated!

[northernladuk]

If both roles are inside I'd expect the client to insist they deal with you both as individuals seems they've deemed each of you as disguised employees.

Won't be much chance to cream of his rate any more

[malvolio]

Depends a little on how vital you are to them, but I suspect you should call their bluff. Ask to see the reasons for their determination and walk away if they persist in their view - or if it's based on CEST which is a crock of beans anyway. hey can't unilaterally change the terms of your contract anyway.

If you're providing services to an agreed set of deliverables and using additional resources though your own company, IR35 seems a distant probability.

[DeludedKitten]

The HR Director of the client has now decided that all contractors will inside IR35.

That would be illegal - if you get it in writing then they are stuffed.

Point him to recent tribunal cases, eg Susan Winchester v HMRC and others, where forcing genuine contractors unfairly inside IR35 has cost the client. Ask to see the determination and what tool they used (legally they have to) and what the appeals mechanism is.

And then ask them whether they really want you to be inside IR35 (different role, different rate etc) or whether they want to reconsider making a blanket determination.

[meeko]

Depends a little on how vital you are to them, but I suspect you should call their bluff. Ask to see the reasons for their determination and walk away if they persist in their view - or if it's based on CEST which is a crock of beans anyway. hey can't unilaterally change the terms of your contract anyway.

If you're providing services to an agreed set of deliverables and using additional resources though your own company, IR35 seems a distant probability.

The CEST tool have an outside verdict, as did a review of my contract and working practices. I work to provide service to agreed deliverables too. Even so I have been told that if they were able to recruit someone with my skills (which they can't as their salaries are too low), the work could be completed by an employee. That's the only reason they gave.

[meeko]

That would be illegal - if you get it in writing then they are stuffed.

Point him to recent tribunal cases, eg Susan Winchester v HMRC and others, where forcing genuine contractors unfairly inside IR35 has cost the client. Ask to see the determination and what tool they used (legally they have to) and what the appeals mechanism is.

And then ask them whether they really want you to be inside IR35 (different role, different rate etc) or whether they want to reconsider making a blanket determination.

Do they legally have to justify their decision and show the tool, even if my existing "outside" contract is coming to an end, and the new one would be completely different, and not an extension?

[northernladuk]

Do they legally have to justify their decision and show the tool, even if my existing "outside" contract is coming to an end, and the new one would be completely different, and not an extension?

I believe so but when I pressed my client when they didn't comply they got very unhappy and 'suggested' it's not the best course for me to stay on.

[malvolio]

The CEST tool have an outside verdict, as did a review of my contract and working practices. I work to provide service to agreed deliverables too. Even so I have been told that if they were able to recruit someone with my skills (which they can't as their salaries are too low), the work could be completed by an employee. That's the only reason they gave.

Well that's rubbish, I'm afraid: you could say that about any job you care to mention. They simply cannot do that, it's against the law. Bad as it is, if CEST says outside, then you're outside and HMRC won't argue. You cannot therefore be asked to pay taxes you (or YourCo) do not owe.

Are you an IPSE member? If so, give their legal helpline a call for chapter and verse, then explain it to your client.

[northernladuk]

Well that's rubbish, I'm afraid: you could say that about any job you care to mention. They simply cannot do that, it's against the law. Bad as it is, if CEST says outside, then you're outside and HMRC won't argue. You cannot therefore be asked to pay taxes you (or YourCo) do not owe.

Are you an IPSE member? If so, give their legal helpline a call for chapter and verse, then explain it to your client.

It is but that's exactly the reason I was told I was inside and the refusal to show me the CEST results. I spoke to IPSE and apart from take my client to court they weren't able to help.

[malvolio]

It is but that's exactly the reason I was told I was inside and the refusal to show me the CEST results. I spoke to IPSE and apart from take my client to court they weren't able to help.

Ok, but if you follow Susan's example and take your client to court they will support you . The more cases we have that show what a disaster the PSC roll out is the easier we can stop the private sector version.