Risks involved in contracts running beyond April

[ComplianceLady]

Isn't that precisely what I said?

The reason people are spooked about payments after 6th April is that if the client determines a role inside from 6th April they / Agency can process PAYE on all payments after that date. I actually think this isn't really a risk as the fee payer can't deduct ERNIC from the contract rate so they'd have to pay this on top of the rate unless they negotiate a new rate. This means clients/agencies are wanting to be crystal clear about the status in advance.

[eek]

Isn't that precisely what I said?

You weren't sure and like everything else relating to IR35 nuances are very important.

[DevUK]

OK, so it's a hypothetical situation. We could debate for pages what might or might not happen if you choose x or y and if you get an interview and if... and if... and if...

Get a general understanding of what it means - and there's good info on here already about that.
Then IF something comes along, see how that contract or offer weighs up compared with the info that's on here.

Sorry, I'm asking really specifically here about if there are implications (specific legislation) that covers contracts that span that time and I think the question's being taken as subjective.

It's hypothetical in a sense, but there's nothing wrong with a hypothetical and the decision a lot of contractors have to make as to whether to even pursue it in the first place or go perm/inside hinges on it. Invitation to interview's far too late in the day to be considering the potential impact, is it at interview stage you decide what type of contract you wish to pursue?

[eek]

Sorry, I'm asking really specifically here about if there are implications (specific legislation) that covers contracts that span that time and I think the question's being taken as subjective.

It's hypothetical in a sense, but there's nothing wrong with a hypothetical and the decision a lot of contractors have to make as to whether to even pursue it in the first place or go perm/inside hinges on it. Invitation to interview's far too late in the day to be considering the potential impact, is it at interview stage you decide what type of contract you wish to pursue?

There are none - the rules were very carefully written so that contract law was avoided and the end client could declare you inside and pay you the amount less Employers NI and leave you with the mess.

[DevUK]

There are none - the rules were very carefully written so that contract law was avoided and the end client could declare you inside and pay you the amount less Employers NI and leave you with the mess.

Perfect, that answers my question.

Thanks a lot for the reply

[Anubis]

Thanks for the reply and link.
EDIT: For some context, this question comes from concerns I've seen people voice around contractors being exposed if payment is made after April (even if the contract ends in March), but I'm confused how a contractor could be exposed at all here if a contract can still stand despite the reform.

So...here's a few of the problems from a contractors perspective. We're all in the same boat:

1. Getting a contract from a client states "you have x amount of months to work on a project(s) that needs completing. Your company won the contract so crack on and deliver as agreed". So, from a contractors perspective you have only this many months worth of income from this particular client - nothing is stated about an on-going relationship with them (i.e. you are inside...aka: "off official payroll" staff or permanent staff, etc). So with all things considered you regard yourself as outside since it's only temporary and nothing is stopping your company from working with others, getting someone else to help you or substitute in for you, if the client has no work for you they are not obliged to pay you, etc. In a nutshell - "you asked for services from my company for 6 months, so I'll do my best for you for 6 months". You're outside...the end.

2. From 6th April 2020 it will be the clients who determine who inside or outside. This is because HMRC believe clients are using contractors as full time staff and they are missing a big fat wedge of tax that should be paid if this is the case. If the client pays a contractor (i.e. the contractor receives money from 6th April) the CLIENT will determine individuals that are inside or outside the tax rules. Doesn't sound too bad and it makes sense since really it's the client that knows the real intention for the future of said individual or company relationship (they pay you...so they call the shots).

3. Okay, it doesn't sound too bad (HMRC get what they want, client knows who really is a 'real' contractor or not even though your actual contract says nothing about this) until this happens....HMRC cannot garuantee...or at least there's nothing stopping them from saying to contractors post April "ahem...so, still at Mega Corp client right? oh well, you know before you, the contractor, said you're outside IR35 well...according to your client you are inside and are being treated as 'off the official' payroll with them. You now owe us back taxes running into thousands of pounds". Yet according to your paperwork signed by the client you are only there for 3 months on a day rate and if they have no work for you they won't pay you. At odds? Yep.

4. Why would clients make their contractors go inside? Your client, Mega Corp, will be liable to pay for any incorrect determinations from April. If they have lots of outside contractors then they are potentially exposed to paying huge sums of money if they are wrongly classified and are infact inside contractors - hence they are now getting rid of 'outside' contractors to be on the super safe side. To add to all this, HMRC may also ask you (who prior to April said were also outside) for back payments for missed tax the whole time you have provided services for Mega Corp prior to April.

A mess? You bet