IR35 insurance - worth buying at this stage in my situation? IR35 insurance - worth buying at this stage in my situation?
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  1. #1

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    Default IR35 insurance - worth buying at this stage in my situation?

    Hi all

    Appreciate there's a lot of people in a similar boat and a lot of questions around IR35 flying around at the moment, but not sure this specific question has been asked/answered.

    I'm contracting via a Ltd company with a large private sector client and my previous CEST assessment suggests I should be outside IR35, but everyone fears the client will determine that all contractors are inside IR35 to avoid any responsibility on their side (I believe this will be announced at the end of this month).

    My contract is due to expire at the end of Feb so I'm thinking of not renewing, wrapping up the company and then POSSIBLY going back 'later' (if a suitable gap helps reduce risks?) on PAYE/via an Umbrella, BUT, more likely, to further avoid the risk, taking a new contract elsewhere (via Umbrella) or taking a permanent posistion. Seems a lot of people are struggling to decide what to do here in terms of the risk of HMRC saying 'well surely if the client has said your inside now you have been all along' and coming after you for restrospective tax (which I believe happened in the public sector).

    My question though is around the IR35 insurance that is available.

    Currently I don't have any.

    Is it worth me purchasing any right now?

    I understand the basic cover provides you with legal advice/assistance should HMRC raise an IR35 investigation. I imagine purchasing now that it would still cover for me for future issues from that perspective, on my current contract. However, other options actually cover you financially for any tax you would have to pay back should HMRC deem you to have been inside IR35 and pay back years worth of tax. Although if I buy that now, surely they would only cover me for my current/future contracts going forward and not previous years? Or perhaps they would review my current contract (originally 3 months, extended several times and the last time by 6 months; will be 16 months in total by end of Feb) and if they agreed it looked ok they'd cover me for that period??

    Just trying to work out whether it's worth purchasing any IR35 insurance & what level at this late stage, regardless of whether I find alternative work or not - even closing the company could 'flag' it to HMRC I guess and with the imminent changes they're going to be 'on the watch' surely.

    Thanks

  2. #2

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    Quote Originally Posted by mrrossi View Post
    even closing the company could 'flag' it to HMRC I guess and with the imminent changes they're going to be 'on the watch' surely.
    I don't know if there is any evidence to back that up. When the IR35 2016 public sector reforms came in, there were large numbers of companies closing, to the point that they were excluded from some stats.

    For the private sector changes this April, we will probably see the same thing happen again.

    Company insolvency statistics gov.uk
    From April 2016, following changes to the IR35 rules and/or changes in VAT flat rate, some directors of personal service companies have cited these changes as the primary reason that their company’s activities have become
    unviable, therefore leading to liquidation of large numbers of these companies (or “bulk insolvencies”). Underlying numbers exclude these bulk insolvencies to enable comparison between quarters

  3. #3

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    Quote Originally Posted by mrrossi View Post
    Hi all

    Appreciate there's a lot of people in a similar boat and a lot of questions around IR35 flying around at the moment, but not sure this specific question has been asked/answered.

    I'm contracting via a Ltd company with a large private sector client and my previous CEST assessment suggests I should be outside IR35, but everyone fears the client will determine that all contractors are inside IR35 to avoid any responsibility on their side (I believe this will be announced at the end of this month).

    My contract is due to expire at the end of Feb so I'm thinking of not renewing, wrapping up the company and then POSSIBLY going back 'later' (if a suitable gap helps reduce risks?) on PAYE/via an Umbrella, BUT, more likely, to further avoid the risk, taking a new contract elsewhere (via Umbrella) or taking a permanent posistion. Seems a lot of people are struggling to decide what to do here in terms of the risk of HMRC saying 'well surely if the client has said your inside now you have been all along' and coming after you for restrospective tax (which I believe happened in the public sector).

    My question though is around the IR35 insurance that is available.

    Currently I don't have any.

    Is it worth me purchasing any right now?

    I understand the basic cover provides you with legal advice/assistance should HMRC raise an IR35 investigation. I imagine purchasing now that it would still cover for me for future issues from that perspective, on my current contract. However, other options actually cover you financially for any tax you would have to pay back should HMRC deem you to have been inside IR35 and pay back years worth of tax. Although if I buy that now, surely they would only cover me for my current/future contracts going forward and not previous years? Or perhaps they would review my current contract (originally 3 months, extended several times and the last time by 6 months; will be 16 months in total by end of Feb) and if they agreed it looked ok they'd cover me for that period??

    Just trying to work out whether it's worth purchasing any IR35 insurance & what level at this late stage, regardless of whether I find alternative work or not - even closing the company could 'flag' it to HMRC I guess and with the imminent changes they're going to be 'on the watch' surely.

    Thanks
    Your large client won’t say you are inside IR35 (have you been reading the forums ?)

    They will just stop using PSC’s

    And only engage you via umbrella on full PAYE basis




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  4. #4

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    Quote Originally Posted by GhostofTarbera View Post
    Your large client won’t say you are inside IR35 (have you been reading the forums ?)

    They will just stop using PSC’s

    And only engage you via umbrella on full PAYE basis
    Thanks both.

    I've read MANY of the forums but haven't come across anything that says "the client won't say you are inside IR35" and will just stop using PSCs and engage via PAYE. All the posts I've read are people worried about the client making a determination and that most clients will simply state 'outside' to avoid responsibility.

    Does a client NEED to make a determination? Or could they simply say: "we will no longer work with PSCs, all contractors much work via an Umbrella company". In which case they haven't said we're inside IR35 (and the risk is potentially reduced).

    I know the law change means it's up to them post Apr to decide whether we're in our out, but do they HAVE to actually make a determination, or is it only if someone (HMRC most likely) ASKS them to make one?

    I did see on one forum (post 106) that some banks have simply said they won't engage with PSCs:

    https://www.contractoruk.com/forums/...d-i-go-11.html

  5. #5

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    Quote Originally Posted by mrrossi View Post
    Thanks both.

    I've read MANY of the forums but haven't come across anything that says "the client won't say you are inside IR35" and will just stop using PSCs and engage via PAYE. All the posts I've read are people worried about the client making a determination and that most clients will simply state 'outside' to avoid responsibility.

    Does a client NEED to make a determination? Or could they simply say: "we will no longer work with PSCs, all contractors much work via an Umbrella company". In which case they haven't said we're inside IR35 (and the risk is potentially reduced).

    I know the law change means it's up to them post Apr to decide whether we're in our out, but do they HAVE to actually make a determination, or is it only if someone (HMRC most likely) ASKS them to make one?

    I did see on one forum (post 106) that some banks have simply said they won't engage with PSCs:

    https://www.contractoruk.com/forums/...d-i-go-11.html
    Every bank and telco is taking the no PSC route as far as I am aware - many have invited the current contractors back via umbrella/PAYE road

    People are assuming the big co’s are determining them inside IR35 - they are not


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  6. #6

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    Quote Originally Posted by mrrossi View Post
    Thanks both.

    I've read MANY of the forums but haven't come across anything that says "the client won't say you are inside IR35" and will just stop using PSCs and engage via PAYE. All the posts I've read are people worried about the client making a determination and that most clients will simply state 'outside' to avoid responsibility.

    Does a client NEED to make a determination? Or could they simply say: "we will no longer work with PSCs, all contractors much work via an Umbrella company". In which case they haven't said we're inside IR35 (and the risk is potentially reduced).

    I know the law change means it's up to them post Apr to decide whether we're in our out, but do they HAVE to actually make a determination, or is it only if someone (HMRC most likely) ASKS them to make one?

    I did see on one forum (post 106) that some banks have simply said they won't engage with PSCs:

    https://www.contractoruk.com/forums/...d-i-go-11.html
    Picking the brolly / PAYE route is as easy way out for companies as with a proper IR35 determination you have to go through each contract (no blanket assessments), most likely get an outside company to do it as most (all?) companies are clueless on IR35 and then even if you decide everyone is inside, you theoretically have to offer an appeal route. Why go through all the faff if you can just make a rule that from April onwards no PSCs are allowed, then wait for most companies to do the same and thus create a market full of contractors without contracts to pick and choose from.

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    Quote Originally Posted by dsc View Post
    Picking the brolly / PAYE route is as easy way out for companies as with a proper IR35 determination you have to go through each contract (no blanket assessments), most likely get an outside company to do it as most (all?) companies are clueless on IR35 and then even if you decide everyone is inside, you theoretically have to offer an appeal route. Why go through all the faff if you can just make a rule that from April onwards no PSCs are allowed, then wait for most companies to do the same and thus create a market full of contractors without contracts to pick and choose from.
    Very good point. Let's hope my client take that route... believe we're supposed to hear something at the end of Jan.

    Still... considering IR35 insurance 'just in case'.

    Does anyone have any thoughts on my original question around that?

  8. #8

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    Quote Originally Posted by mrrossi View Post
    Very good point. Let's hope my client take that route... believe we're supposed to hear something at the end of Jan.

    Still... considering IR35 insurance 'just in case'.

    Does anyone have any thoughts on my original question around that?
    Takes which route? The individual assessments or umbrella / PAYE? The latter means at least 30% less money via umbrella assuming they keep your rate the same or depending on your skillset and industry an even bigger cut when moving to PAYE. There's also the risk of moving from PSC to umbrella / PAYE with the same company, which can be seen by HMRC as admitting that you've always been an employee.

    As for owed-tax insurance I doubt you'll get cover for past years as then anyone could just roll up, pay for a year of insurance and be cover for the last 5 years.

  9. #9

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    Quote Originally Posted by dsc View Post
    Takes which route? The individual assessments or umbrella / PAYE? The latter means at least 30% less money via umbrella assuming they keep your rate the same or depending on your skillset and industry an even bigger cut when moving to PAYE. There's also the risk of moving from PSC to umbrella / PAYE with the same company, which can be seen by HMRC as admitting that you've always been an employee.

    As for owed-tax insurance I doubt you'll get cover for past years as then anyone could just roll up, pay for a year of insurance and be cover for the last 5 years.
    The umbrella / PAYE route.

    We've all accepted the pay cut (it's not as bad as 30% for me as I don't claim any expenses/live local etc anyway), it's the fear of being declared 'inside' and retrospective tax that's been worrying us all.

    Rate will be same I think for now and we'll have to see what happens in 6 months time; reckon the rate will have to increase the way it did in the public sector.

    There is still a risk but it's smaller than being declared 'inside' surely.

    I may take up the basic insurance just to cover me with an adviser if I do get investigated.

  10. #10

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    Brolly might be a different risk, but PAYE is still a big risk imho, especially if you stay in the same dept, doing the same thing. On the other hand no one really knows, but if all that changes is the way you are engaged, then I think HMRC might have an easy target.

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