Originally posted by jamesbrown
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Public Sector - Extention offered inside IR35
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Last edited by Contractor UK; 15 December 2019, 16:40. -
Originally posted by WordIsBond View PostI understood that to be an after-the-fact use of CEST, and by the contractor. They are going to blow this 'reform' out of the water if they oppose CEST when it was timely-used by a client, because it effectively means they are giving clients no mechanism to make this assessment.
I use CEST, because I think it cannot hurt, strategically, when completed truthfully by both parties, but I don’t only use that, and if I were a legal/compliance team at a large client, I would probably take the same view. Like they say in golf: drive for show, but putt for dough.Comment
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Originally posted by DoubleL View PostHi,
I have a contract with a Public Sector body deemed to be outside of IR35 (as determined by the client using CEST in 2018 when my contract started) which runs out in October 2019. I have been told that any extensions will be offered inside IR35 now. I have been told that this will be applicable to all contractors in the organisation - seems as though they are making 'blanket' determinations now (this seems in correct in it's own right, but that's another story).
If I did accept the extension inside IR35 on a higher negotiated day rate, would I be a target for a HMRC investigation due to changing status on the same contract or would any liability reside with the client?
Any guidance or advice would be greatly appreciated.
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Originally posted by GhostofTarbera View PostHow much a day extra are they offering ?
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Many thanks for all your replies. My initial thoughts were the same as WordIsBond, in that it is a Public Sector body that has been through 'reform' and therefore any liability would lie with them (esp. seeing that they used CEST to make the initial determination), but the more I read the more unsure I am.
In terms of the increase to my day rate - we haven't discussed numbers as I wanted to clarify my position in advance of sitting down with them. To be honest, I am confident that they will increase the day rate to a sufficient amount that will soften the move to 'inside', it's the risk of a future investigation / liability that concerns me.Comment
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Public Sector - Extention offered inside IR35
Originally posted by DoubleL View PostMany thanks for all your replies. My initial thoughts were the same as WordIsBond, in that it is a Public Sector body that has been through 'reform' and therefore any liability would lie with them (esp. seeing that they used CEST to make the initial determination), but the more I read the more unsure I am.
In terms of the increase to my day rate - we haven't discussed numbers as I wanted to clarify my position in advance of sitting down with them. To be honest, I am confident that they will increase the day rate to a sufficient amount that will soften the move to 'inside', it's the risk of a future investigation / liability that concerns me.
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Originally posted by DoubleL View PostMany thanks for all your replies. My initial thoughts were the same as WordIsBond, in that it is a Public Sector body that has been through 'reform' and therefore any liability would lie with them (esp. seeing that they used CEST to make the initial determination), but the more I read the more unsure I am.
In terms of the increase to my day rate - we haven't discussed numbers as I wanted to clarify my position in advance of sitting down with them. To be honest, I am confident that they will increase the day rate to a sufficient amount that will soften the move to 'inside', it's the risk of a future investigation / liability that concerns me.
Do you have the CEST 'outside IR35' determination in writing with maybe a print-out of the answers they gave to reach that determination? Do you want to rock the boat by pursuing a reason why they are now ignoring their own determination process that should still stand unless something has changed with the circumstances at the client?
If it was me I'd get as much evidence as you can to back up your original determination so even if the client changes to inside via blanket determination you have something to show how they have not implemented the process properly and any risk and financial penalty will reside with them as per the public sector rules. Even better if you can get someone at client to sign off a letter stating such.
Unless anyone has evidence or heard of a case where HMRC have taken an outside to inside determination to court or pursued back taxes (from the client one would presume until case law shows otherwise) then the actual risk and effect is a bit unknown, but going by HMRC's own rules the client should be the one getting all the hassle and potential financial hit.
If you want to remain at the client, one possible route to mitigate the risk is to not accept renewal as such but request a new contract with sufficient difference in terms to make it obviously inside IR35 at the higher negotiated rate, then there is a clear distinction between old and new contracts and even less risk to worry about.Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.Comment
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Originally posted by Hobosapien View PostIf you want to remain at the client, one possible route to mitigate the risk is to not accept renewal as such but request a new contract with sufficient difference in terms to make it obviously inside IR35 at the higher negotiated rate, then there is a clear distinction between old and new contracts and even less risk to worry about.
For instance, if the old contract had the right of substitution, you could have it removed in the new contract. Then if asked why the change from outside to inside, the response will be that the right of substitution was removed.
I would think they'd be glad to make adjustments. It's for their protection, more than for yours.Comment
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Agree with the above if it’s a real change in WP and not window dressing in the contract. Moving from outside to inside is logical if it reflects a real change in WP that has a real explanation (e.g., different project with different requirements). That said, we are all guessing about the real risk; there is a case that being inside or being a permie is ultimately where HMRC wants you to be, so it won’t be their first priority when enforcing the new rules, even if the change does point to you having being inside all along.Comment
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Originally posted by jamesbrown View Postthere is a case that being inside or being a permie is ultimately where HMRC wants you to be, so it won’t be their first priority when enforcing the new rules, even if the change does point to you having being inside all along.
Budget 2018: Off-payroll working in the private sector (IR35) policy paper
• the reform is not retrospective – as it has in the public sector HMRC will focus its efforts on ensuring businesses comply with the reform rather than focusing on historic cases
• HMRC will not carry out targeted campaigns into previous years when individuals start paying employment taxes under IR35 for the first time following the reform and businesses’ decisions about whether their workers are within the rules will not automatically trigger an enquiry into earlier yearsMaybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.Comment
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Originally posted by Hobosapien View Post• the reform is not retrospective – as it has in the public sector HMRC will focus its efforts on ensuring businesses comply with the reform rather than focusing on historic cases
• HMRC will not carry out targeted campaigns into previous years when individuals start paying employment taxes under IR35 for the first time following the reform and businesses’ decisions about whether their workers are within the rules will not automatically trigger an enquiry into earlier yearsComment
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