Originally posted by jamesbrown
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I've been contracted to my current client since October 2005 through two different "agencies". There are too many variables in my situation to have a clear picture of what will happen, so let's look at the hypothetical possibilities.
1. I'm declared outside.
I can supply two independent professional assessments, apart from my EAT judgement, which confirm that the engagement has always been outside of IR35, and if I'm given the opportunity to put my case, before an assessment, or even after, this is the message I'll be sending.
The risks.
To me - none, other than what has previously existed, i.e. an investigation by HMRC, which given my past history of involvement with HMRC, is unlikely, but even if it were to come about, my IR35 investigation insurance would cover the cost of handling the investigation. HMRC are unlikely to win.
To the client - minimal, i.e. any shortfall in tax that the client would be liable for, i.e. the amount which is liable for the period between when the client deems me outside and when or if HMRC prove that I should have been inside. Given that it is extremely unlikely that I'll complete a full year next year, that amount will be quite small. I don't enjoy and never have enjoyed the rates that some on here seem to have enjoyed, so that sum will be minimal, even considering if a 100% penalty were imposed. The client's attitude to that sum is unknown of course. I have no idea what other implications there might be for the client.
To the wider contractual environment - none. It's just a personal issue between me, my client and HMRC.
2. I'm declared inside.
to me - significant. Because my wife and I are both employees and directors of my company, I enjoy a significant reduction in tax over what would be paid at source. However, given my limited time to work, this wouldn't bother me and may be offset with redundancy payments. Granted, this is an issue which would need clarification, and I acknowledge that there are some who claim redundancies cannot be claimed, but there are others who challenge this. What is a much larger risk is that, despite what HMRC say, it is likely they'd open an investigation into previous years, and although I'm confident that using my IR35 tax investigation insurance, HMRC are unlikely to succeed, the aggravation of such an investigation isn't an issue that I want to go through at my time of life.
To the client - significant. If I engage with the client's dispute resolution process and they maintain that they used CEST to assess my status, or fail to abide by any of the provisions of the regulations, and don't concede to my point of view, i.e. I'm outside, then I'll immediately launch a claim for employment benefits in the ET, which wouldn't be out of time. Given my past experiences with the ET, I'm confident that I could mount a strong challenge and maybe, just maybe, I'd win this time around, especially given the client's position and their written assessment that I'd use in such a case. The financial risk of my winning would be huge. Just calculate 14 years at 20 days a year for 14 years at an average day rate and even ignoring any pension issues, the figure becomes significant. The bad publicity would also be an issue the client might not want.
To the wider community - possibly significant if I win or lose. If I win, others will follow and maybe, just maybe, IR35 will be neutralised. Alternatively, contracting generally might suffer, but we will definitely suffer whatever from April 2020. If I lost, the downside to the community wouldn't be any less than it is now, i.e. the case would demonstrate the long held claim which is at the heart of IR35, that individuals can be taxed as employees with employee benefits. At least we would have clarity on this issue then.
So, what is your assessment of my hypothetical position?
The fact that IPSE has long engaged in activities which seem to be designed to distance themselves from the PCG ideology, I guess will come home to haunt those that now depend on that organisation for income. Time will tell.
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