HMRC contract investigations

[Blert596]

Hi,

My end client is "working on" its determination status and should be issuing something out in the next "weeks or months". I currently have a contract since August that's been checked as outside by QDoS and have TLC35 but am looking at not renewing in December anyway. To be honest if (more a case of when I think) the client decides that everyone is inside then I really don't want the hassle involved in fighting them over it.

So the plan is to leave at Xmas at which point I'm (hopefully) sufficiently outside the firing line (initial at least) come April 2020. I do get paid on a weekly turnaround so thought about staying longer but a bit of risk aversion kicks in.

I was with the current client for almost 3 years until a project was finishing and we were told that the contractors wouldn't be needed for probably 3-6 months. I finished there and found another 3 month contract with a different client, away from home.

I was then asked if I was available to return to work on the newly released project with the initial client, so am back where I began. However, there are different job titles between the two, although the role is pretty much the same.

What I'd like some advice on, and as far as I'm aware it's all just speculation at the moment, is if I leave the contract at Xmas, close down my ltd etc, and come April HMRC do rock up, would it just be my current contract they investigate, or would they be likely to want to see ones from previous clients that had no self determination and would be classed as outside, certainly by me but don't have a QDoS safety net on these.

If I was to stay and HMRC were just goint to investigate the current client contract, going back 6 months then that's something I could live with. Going back 8 years presents a much greater risk.

I think that the client will probably be offering a few permy positions to make up the contractor shortfall, and as it's close to home I'd like to apply for one of them if I could. I'm pretty well thought of there as a contractor so that should stand in my favour. Would the 3 month gap help in not being flagged up to HMRC as a change of outside/not employed/inside permy. Or would they not have my name on the clients books anyway so wouldn't know where to look.

Any guidance appreciated

[northernladuk]

We've absolutely no idea I am afraid but IMO if HMRC is speaking to the client about you it's likely this will pop up in conversation and if many gigs are going inside it would be well worth the time to have a sniff at the first one as well?

They won't have a direct match from outside to inside as per the clients determination but there is a good assumption they'll think you got the determination wrong for that gig as well as the one you are in?

I wouldn't be banking a massive chunk of money on a three month gap being enough.. but.. No one knows.

[webberg]

I'm with Northern Lad in terms of having no hard knowledge of how HMRC will approach this, but I do have daily experience of HMRC and a lot of past experience.

My guess is something like the following. (And it's a guess).

HMRC will require the end client to provide a list of payments made to outside IR35 contractors paid in 2019/20.

HMRC will - if resources permit - check whether the named contractor was in 2020/21 still contracting, contracting at the same client, a permie at the same client, has closed their PSC.

Somebody who was contracting and is then permie at the same end client and who has closed a PSC will score high on the risk scale.

This will be mid 2021.

An enquiry made then may reveal the sort of fact pattern mentioned by the OP. If so, I would expect an enquiry about the circumstances for any years then in charge. In Autumn 2021, that would allow a look back to at least 2018/19.

Measuring against this is the fact that it is labour intensive for HMRC. It may be therefore that HMRC would prefer to go against a large client who has 200 "grade 6 contractors", and claim that all are in fact employees. This might be more "efficient" than going after contractors, one to one.

In turn how much resource they have may depend on whether our incompetent, arrogant, democracy denying political classes are still circling Brexit which diverts HMRC officers into that, leaving fewer elsewhere.

Like I said, I have no inside knowledge and I suspect HMRC does not yet have a strategy but rather a vague idea which will depend on resources.

[TheInvoicer]

Somebody who was contracting and is then permie at the same end client and who has closed a PSC will score high on the risk scale.

.

As we see many contractors are being “forced” down this route by end clients, go perm or leave etc I agree this must be an easy group to mail shot with a guilty verdict and give me the tax al la GSK.

I’ve not read anything about what measures anyone can take to mitigate this I.e. how to differentiate between the 2 roles, what would they look at to assess it’s the same role or not?


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[cojak]

As we see many contractors are being “forced” down this route by end clients, go perm or leave etc I agree this must be an easy group to mail shot with a guilty verdict and give me the tax al la GSK.

I’ve not read anything about what measures anyone can take to mitigate this I.e. how to differentiate between the 2 roles, what would they look at to assess it’s the same role or not?


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Which takes us aaaaaalllllllllllllllllllllllllllllllllllllllllll the way back to the thread IR35: Should I stay or should I go?

To all those people hoping for advice on how to stay in your current contract - you ain't going to get it here.

[TheInvoicer]

My question assumes you leave your contract now and end with client co. The end client makes no determination.

Then in January you take a permanent role at the same client. Are you saying that in effect you have gone outside to inside with the same client. So it’s the same in risk and mitigation as staying in the contract beyond April after client says your inside when you are previously outside.




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[webberg]

To all those people hoping for advice on how to stay in your current contract - you ain't going to get it here.

Agreed.

The situation for each individual is just that - individual.

You need to take your circumstances to somebody who knows something about IR35 and its myriad implications and throw your personal situation into the mix.

That costs. I have no idea exactly how much (how long is a piece of string) but a few hundred perhaps. See this as an investment in your future.

Judging whether the role/contract/gig in front of you right now is inside or outside IR35 is claimed to be possible with the help of an AI software application. I suspect that such beasts can be accurate in a good percentage of cases but:

1. None of them (including HMRC's CEST) gives a guarantee of the right answer
2. None of them (including HMRC's CEST) gives a guarantee that HMRC will stand by the answer
3. None of them consider the history of previous contracts and how to prepare for HMRC enquiry

Finally, as I said elsewhere, my view is that HMRC will be going after numbers of contractors who have done the same job. For example:

"You were at desk 16B of Megabank and the people at desks 16A, 16C and 43D have already agreed (been scared into) that they were disguised employees. Would you like to pay us now or would you like an intrusive and draining enquiry for the next 2 years?"

I would like to say that this dystopian view of the future is outrageously inaccurate, but I fear it's not.

[zerosum]

Hi,

My end client is "working on" its determination status and should be issuing something out in the next "weeks or months". I currently have a contract since August that's been checked as outside by QDoS and have TLC35 but am looking at not renewing in December anyway. To be honest if (more a case of when I think) the client decides that everyone is inside then I really don't want the hassle involved in fighting them over it....

What I'd like some advice on, and as far as I'm aware it's all just speculation at the moment, is if I leave the contract at Xmas, close down my ltd etc, and come April HMRC do rock up, would it just be my current contract they investigate, or would they be likely to want to see ones from previous clients that had no self determination and would be classed as outside, certainly by me but don't have a QDoS safety net on these.

Not sure I follow. TLC35 is not tied to a particular contract.

"This insurance is offered on a 'claims made' basis. This means that the policy will cover claims which arise and are notified to our claims department whilst cover is in place, regardless of the period of time into which HMRC are enquiring."