IR35 - Outside to umbrella IR35 - Outside to umbrella
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  1. #1

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    Default IR35 - Outside to umbrella

    I'm 8 months into a contract with this client. They finally made their IR35 stance clear. Either PAYE or umbrella company. I am not interested in their PAYE for several reasons. Would moving to umbrella automatically mean I'm inviting HMRC to claim backdated tax for all of this contract? I am thinking of moving abroad, so i'll be closing my limited company anyway. If I can be with an umbrella without HMRC coming after me, I want to go next year.

    My current contract is definitely outside IR35. If the client wants more control and moves the role inside IR35 or if the client just decided to only hire contractors through umbrella, how is it my fault according to HMRC?

    Keen to hear your thoughts!

  2. #2

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    The short answer is nobody knows. There is a risk going from outside under your own Ltd Co to inside via a brolly but until things have been running for a few months it's impossible to know if HMRC are going to do some digging.

    There is a school of thought that they will be too happy collecting all that extra tax and NI to bother with your historic status and will instead target those who stubbornly remain on outside contracts. However that honeymoon period may not last long and they may go back to see if there's any new low hanging fruit.

  3. #3

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    Quote Originally Posted by Winterdiva View Post
    I'm 8 months into a contract with this client. They finally made their IR35 stance clear. Either PAYE or umbrella company. I am not interested in their PAYE for several reasons. Would moving to umbrella automatically mean I'm inviting HMRC to claim backdated tax for all of this contract? I am thinking of moving abroad, so i'll be closing my limited company anyway. If I can be with an umbrella without HMRC coming after me, I want to go next year.

    My current contract is definitely outside IR35. If the client wants more control and moves the role inside IR35 or if the client just decided to only hire contractors through umbrella, how is it my fault according to HMRC?

    Keen to hear your thoughts!
    I'm in exactly the same position as, I'm sure, are many others on here.

    In my own case, I'd have 6 months' exposure on this gig if HMRC came after me.

    But what if that investigation were to become a gateway to a more thorough investigation? It could be potentially ruinous.

    Just can't help feeling that suddenly going PAYE in April 2020 after years of paying yourself minimum salary and divis is tantamount to putting a huge target on one's back.

  4. #4

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    So I enquired about closing my company and was told I can't open another (doing similar work) for at least 2 years. So no quick return to contracting unless it's via an umbrella!

  5. #5

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    Quote Originally Posted by quantum77 View Post
    So I enquired about closing my company and was told I can't open another (doing similar work) for at least 2 years. So no quick return to contracting unless it's via an umbrella!
    Only if you claimed ER when closing the first company.
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  6. #6

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    Quote Originally Posted by wattaj View Post
    Only if you claimed ER when closing the first company.
    Nope. Not true.

    Only if you distributed funds as capital rather than dividends. All ER is capital, not all capital is covered by ER.
    See You Next Tuesday

  7. #7

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    Quote Originally Posted by quantum77 View Post
    So I enquired about closing my company and was told I can't open another (doing similar work) for at least 2 years. So no quick return to contracting unless it's via an umbrella!
    True, but sorry I didn’t get the point here.

  8. #8

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    Quote Originally Posted by Lance View Post
    Nope. Not true.

    Only if you distributed funds as capital rather than dividends. All ER is capital, not all capital is covered by ER.
    Interesting; thanks. I hadn't considered capital distribution outside of ER.
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  9. #9

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    Quote Originally Posted by Winterdiva View Post
    True, but sorry I didn’t get the point here.
    If I went outside IR35 to umbrella (like the OP) then I would close my company down, but was surprised to find I could not go back to a new company quickly.

  10. #10

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    Quote Originally Posted by quantum77 View Post
    If I went outside IR35 to umbrella (like the OP) then I would close my company down, but was surprised to find I could not go back to a new company quickly.
    You can go back to a limited company. The difficulty will be opening a limited company when HMRC ask you know that entrepreneur relief you got - are you sure you actually qualified for it.
    merely at clientco for the entertainment

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