Going Perm following Contract Role...

[sim2kuk]

Morning all,

With all the uncertainty around contracting from next April, I'm thinking of winding up my limited company in November, and taking on a permanent role at the company I am at.

I've read a few articles and posts outlining that if you went to PAYE after April at the same company, it is likely that you'll have to pay back taxes to HMRC, but is that likely to happen with a permanent role? I'm guessing because the role is a very different role within the company, that it shouldn't matter.

Just looking for confirmation really!

[Hobosapien]

The more you can differentiate the current contract role to the permie role you are interested in the easier it should be to convince HMRC that the two are not the same, should they ever show an interest in investigating for IR35 purposes.

That's presuming your current contract has been reviewed and deemed outside IR35 in the first place. If not so clear then better to have a decent gap from end of contract before going back permie and maybe even a short contract (or even non-related job activity such as volunteer work) elsewhere to further divide the two states at the same client.

Things to consider when trying to differentiate the contract to the permie role:

a. Job titles
b. Working practices (for permie role actively engage in client permie stuff that as a contractor you would usually look to avoid)
c. Key skills (if permie role is sufficiently different that you will need to upskill or get training on the job, all the better to show it's not the same role even if at a higher level it appears to be)
d. Permie team members (will the permie job be with a different team, team leader, or location in terms of building/office or site)
e. Clear differences in client expectations (covers the usual IR35 factors when determining status as well as how they view you as an employee and not a contract resource assigned to a specific project with no obligation to offer or accept any other type of work unless agreed and added to the existing contract deliverables).

Probably many other things I can't think of at the moment but have been covered elsewhere that you may have some success finding via a search.

[NCOTBAC]

I'm guessing because the role is a very different role within the company

If that is really true then you're golden.

[sim2kuk]

The more you can differentiate the current contract role to the permie role you are interested in the easier it should be to convince HMRC that the two are not the same, should they ever show an interest in investigating for IR35 purposes.

That's presuming your current contract has been reviewed and deemed outside IR35 in the first place. If not so clear then better to have a decent gap from end of contract before going back permie and maybe even a short contract (or even non-related job activity such as volunteer work) elsewhere to further divide the two states at the same client.

Things to consider when trying to differentiate the contract to the permie role:

a. Job titles
b. Working practices (for permie role actively engage in client permie stuff that as a contractor you would usually look to avoid)
c. Key skills (if permie role is sufficiently different that you will need to upskill or get training on the job, all the better to show it's not the same role even if at a higher level it appears to be)
d. Permie team members (will the permie job be with a different team, team leader, or location in terms of building/office or site)
e. Clear differences in client expectations (covers the usual IR35 factors when determining status as well as how they view you as an employee and not a contract resource assigned to a specific project with no obligation to offer or accept any other type of work unless agreed and added to the existing contract deliverables).

Probably many other things I can't think of at the moment but have been covered elsewhere that you may have some success finding via a search.

Excellent - cheers for that!!

[webberg]

Morning all,

With all the uncertainty around contracting from next April, I'm thinking of winding up my limited company in November, and taking on a permanent role at the company I am at.

I've read a few articles and posts outlining that if you went to PAYE after April at the same company, it is likely that you'll have to pay back taxes to HMRC, but is that likely to happen with a permanent role? I'm guessing because the role is a very different role within the company, that it shouldn't matter.

Just looking for confirmation really!

Confirmation from whom? We are a group of mainly anonymous people, some of whom have relevant experience, some not, but how do you know? What is the worth of the opinion?

HMRC will certainly not give you any advance confirmation of what they may or may not do, as this is contrary to their policy.

In my view, (no better or worse than many others), you need to take an objective look at what your role was whilst contracting. Was it really outside IR35?

By that I mean if you look at the job done and the manner it was done and the supervision, direction and control you were under, was it really outside IR35?

Forget contracts, PSCs, VAT registrations, advice from "experts", advice from end client or agencies. Stick to a cold examination of the facts and make an assessment. If you need help to do that, by all means seek out professional assistance but please make sure that they have little or no connection with the end client, the agencies, the accountants running your PSC. Find somebody to work for you and be objective.

I would say that your chance of an IR35 status enquiry is elevated simply because HMRC's computer will see the same name before and after the event, one contracting, one employed. However that risk is probably still very small if the end client is in the private sector as it may require a year or tow of data to get up to speed.

That would enable you to prepare for the transition.

[sim2kuk]

Confirmation from whom? We are a group of mainly anonymous people, some of whom have relevant experience, some not, but how do you know? What is the worth of the opinion?

HMRC will certainly not give you any advance confirmation of what they may or may not do, as this is contrary to their policy.

In my view, (no better or worse than many others), you need to take an objective look at what your role was whilst contracting. Was it really outside IR35?

By that I mean if you look at the job done and the manner it was done and the supervision, direction and control you were under, was it really outside IR35?

Forget contracts, PSCs, VAT registrations, advice from "experts", advice from end client or agencies. Stick to a cold examination of the facts and make an assessment. If you need help to do that, by all means seek out professional assistance but please make sure that they have little or no connection with the end client, the agencies, the accountants running your PSC. Find somebody to work for you and be objective.

I would say that your chance of an IR35 status enquiry is elevated simply because HMRC's computer will see the same name before and after the event, one contracting, one employed. However that risk is probably still very small if the end client is in the private sector as it may require a year or tow of data to get up to speed.

That would enable you to prepare for the transition.

It seems odd that if I make the decision to go into a permanent role (not an inside IR35 roll), then this could be an issue? I agree if I went from an outside to inside IR35 roll, but to take on a permanent position with the same firm due to a change in circumstances seems pretty silly TBH.

As an aside, how do HMRC know who I work for as a contractor? Genuine question.

[bstar1]

I would say that your chance of an IR35 status enquiry is elevated simply because HMRC's computer will see the same name before and after the event, one contracting, one employed. However that risk is probably still very small if the end client is in the private sector as it may require a year or tow of data to get up to speed.

That would enable you to prepare for the transition.[/QUOTE]


Where was the original poster talking about IR35?

[Maslins]

It seems odd that if I make the decision to go into a permanent role (not an inside IR35 roll), then this could be an issue? I agree if I went from an outside to inside IR35 roll, but to take on a permanent position with the same firm due to a change in circumstances seems pretty silly TBH.

As an aside, how do HMRC know who I work for as a contractor? Genuine question.

Re your final point, they don't, unless they enquire into something at which point they could of course ask for copy invoices etc.

I personally can't see HMRC going after many of these cases (those as webberg says this is just my opinion, no better than anyone elses). It would seem that they'd have "won" anyway by basically getting you to drift from outside IR35 contractor to PAYE employee. Yes some may think they'll be aggressive and try to push this a step further to win more, but I don't see it being worth the resources required for them.

As has been suggested, with it being an employed role as opposed to a contract role, as a minimum there will be differences in the contract. So there will be some clear distinction between the two, even if it is just superficial. Plus as you suggest HMRC won't readily be able to tell which contractors going permie were with the same end client/employer, so they couldn't easily target this. Of course plenty of contractors take up permie roles with entirely unrelated businesses, and unrelated to IR35, all the time. Add in to that the fact that HMRC are losing more IR35 enquiries than they're winning...so even if they can figure out you jumped ship with same company, and gloss over change in contract, there's still no guarantee they'd win, far from it. Plus one further thing, in most of these cases unless the contractor stalls significantly, the Ltd Co would be closed by the time HMRC might get around to enquiring anyway. Yes theoretically they could in some niche circumstances attempt to go after the director(s), but that would then be yet another high legal hurdle they'd have to overcome.

Even with those going to inside IR35 work for the same end client I don't see it being the no brainer/taking candy from a baby scenario for HMRC that some people seem to think. When it's permie, and company is closed, I think it's virtually a non starter for HMRC.

[bstar1]

Re your final point, they don't, unless they enquire into something at which point they could of course ask for copy invoices etc.

I personally can't see HMRC going after many of these cases (those as webberg says this is just my opinion, no better than anyone elses). It would seem that they'd have "won" anyway by basically getting you to drift from outside IR35 contractor to PAYE employee. Yes some may think they'll be aggressive and try to push this a step further to win more, but I don't see it being worth the resources required for them.

As has been suggested, with it being an employed role as opposed to a contract role, as a minimum there will be differences in the contract. So there will be some clear distinction between the two, even if it is just superficial. Plus as you suggest HMRC won't readily be able to tell which contractors going permie were with the same end client/employer, so they couldn't easily target this. Of course plenty of contractors take up permie roles with entirely unrelated businesses, and unrelated to IR35, all the time. Add in to that the fact that HMRC are losing more IR35 enquiries than they're winning...so even if they can figure out you jumped ship with same company, and gloss over change in contract, there's still no guarantee they'd win, far from it. Plus one further thing, in most of these cases unless the contractor stalls significantly, the Ltd Co would be closed by the time HMRC might get around to enquiring anyway. Yes theoretically they could in some niche circumstances attempt to go after the director(s), but that would then be yet another high legal hurdle they'd have to overcome.

Even with those going to inside IR35 work for the same end client I don't see it being the no brainer/taking candy from a baby scenario for HMRC that some people seem to think. When it's permie, and company is closed, I think it's virtually a non starter for HMRC.

agreed!

[sim2kuk]

Re your final point, they don't, unless they enquire into something at which point they could of course ask for copy invoices etc.

I personally can't see HMRC going after many of these cases (those as webberg says this is just my opinion, no better than anyone elses). It would seem that they'd have "won" anyway by basically getting you to drift from outside IR35 contractor to PAYE employee. Yes some may think they'll be aggressive and try to push this a step further to win more, but I don't see it being worth the resources required for them.

As has been suggested, with it being an employed role as opposed to a contract role, as a minimum there will be differences in the contract. So there will be some clear distinction between the two, even if it is just superficial. Plus as you suggest HMRC won't readily be able to tell which contractors going permie were with the same end client/employer, so they couldn't easily target this. Of course plenty of contractors take up permie roles with entirely unrelated businesses, and unrelated to IR35, all the time. Add in to that the fact that HMRC are losing more IR35 enquiries than they're winning...so even if they can figure out you jumped ship with same company, and gloss over change in contract, there's still no guarantee they'd win, far from it. Plus one further thing, in most of these cases unless the contractor stalls significantly, the Ltd Co would be closed by the time HMRC might get around to enquiring anyway. Yes theoretically they could in some niche circumstances attempt to go after the director(s), but that would then be yet another high legal hurdle they'd have to overcome.

Even with those going to inside IR35 work for the same end client I don't see it being the no brainer/taking candy from a baby scenario for HMRC that some people seem to think. When it's permie, and company is closed, I think it's virtually a non starter for HMRC.

Thanks for your reply.

I would wind up the company straight away, that's for sure.

As you say, the perm contract is very different - even down to hours (35 v 40 for the contractor), so I think in the unlikely event of investigation it would not be an issue.