Outside IR35. Who suffers if it's the wrong call?

[dsc]

I always believed that it’s the entity pays you or the source of where your payment originates from is liable which I always took that to mean the end client.

But my accountant Qdos, the one and only famous Qdos told me that is the agency would be liable as ‘those are the ones paying you’ (I receive the money from the agency bank accounts). So the end client would be completely risk free post April.

Don't forget you also have people going direct with no agencies involved.

I think there's still a risk of investigation regardless of in / out status. Being declared inside and carrying on is obviously super risky, but what if you get an outside determination but your client bails and says it's wrong and inside if pushed by HMRC? You are then automatically open to an investigation just like in the first scenario of outside -> inside. And it's not like it's going to be hard to find people being declared outside post April as there's going to be a handful of them.

The only safe position is to move imho.

[LondonManc]

On the CEST tool website the disclaimer is very clear:

Disclaimer

HMRC will stand by the result you get from this tool.
Warning:

This would not be the case if the information you have provided was checked and found to be inaccurate.

HMRC will also not stand by results achieved through contrived arrangements, designed to get a particular outcome from the service. This would be treated as evidence of deliberate non-compliance, which can attract higher associated penalties

If you've got an outside determination from the tool, take your evidence, together with the answers that you supplied to your hiring manager. HMRC have said that they will stand by the result. If the client will stand by the responses that you have entered into the tool, then all's good.

[CalmEddie]

There is some incorrect information above. The Fee Payer is liable once the client has completed an SDS with reasonable care and provided it to the supply chain. The Fee Payer is the closest UK entity to the PSC. However, the transfer of debt clauses allow for liability to be transferred to any entity in the supply chain above the PSC if HMRC cannot acquire the tax due within a reasonable timeframe. In the event of fraud, even the PSC and the individual contractor could become liable. In summary, the entire supply chain above the PSC is at risk, but primarily the Fee Payer.

Very interesting, thank you.

Though in terms of PSC - As futile as it may be, we refute the PSC label. We are a small consultancy with 4 employees.
Which actually brings up an interesting point, should 3 of us take the path of going "inside IR35", the situation actually influences the tax status of others in my company, by defaulting the 4th person into being a PSC. Possibly that indicates some additional level of unfairness?

[jamesbrown]

Very interesting, thank you.

Though in terms of PSC - As futile as it may be, we refute the PSC label. We are a small consultancy with 4 employees.
Which actually brings up an interesting point, should 3 of us take the path of going "inside IR35", the situation actually influences the tax status of others in my company, by defaulting the 4th person into being a PSC. Possibly that indicates some additional level of unfairness?

I agree that a PSC is a meaningless term, legally speaking, but it has become convenient. As such, there is no entry or exit from being one, because it doesn't legally exist.

[eazy]

Liability

James Brown
There is some incorrect information above. The Fee Payer is liable once the client has completed an SDS with reasonable care and provided it to the supply chain. The Fee Payer is the closest UK entity to the PSC. However, the transfer of debt clauses allow for liability to be transferred to any entity in the supply chain above the PSC if HMRC cannot acquire the tax due within a reasonable timeframe. In the event of fraud, even the PSC and the individual contractor could become liable. In summary, the entire supply chain above the PSC is at risk, but primarily the Fee Payer.

For the above reason few of the companies are outlawing the use of Ltd company contractors anywhere in the supply chain. For example, today I heard of this scenario
Contractor - Ltd Co - Agency - Client (Engineering Co) - End User (Oil Company) set-up, Client determines the status & issues the SDS outside determination for contractors based at their offices, the End user (oil company) is insisting no Ltd contractors to be used for their workscopes.

[BritishLad88]

Being declared inside and carrying on is obviously super risky..

i agree with you. however, a lot of my current colleagues moving inside have said they're super safe because their counter argument is that then it would be a complete brand new contract after moving inside. But hey, that's their view.

[BritishLad88]

No they wouldn’t. They have responsibilities and, potentially, liabilities. Why do you think many are banning PSCs altogether?

my statement regarding clients would be completely risk free is not mines. I was just relaying on what QDos are saying.

[jamesbrown]

my statement regarding clients would be completely risk free is not mines. I was just relaying on what QDos are saying.

I doubt it, what with them knowing about this stuff 'n all.

[dsc]

i agree with you. however, a lot of my current colleagues moving inside have said they're super safe because their counter argument is that then it would be a complete brand new contract after moving inside. But hey, that's their view.

If they start doing smth completely different then you can argue that indeed they are fairly safe, but if they just carry on like before but on a new contract they might be in for a nasty surprise (or might get away with, I'm sure HMRC won't have the resources to investigate everyone).

What I was trying to highlight is that walking away from your current client is probably the safest bet.

[BritishLad88]

If they start doing smth completely different then you can argue that indeed they are fairly safe, but if they just carry on like before but on a new contract they might be in for a nasty surprise (or might get away with, I'm sure HMRC won't have the resources to investigate everyone).

Yes, exactly, they probably banking on that. I think another reason for their views is that HMRC said they're not doing retro investigations and they somehow believe HMRC 100%. I won't & I know lot of us here won't either but that's what they believe. what else can I say then.

What I was trying to highlight is that walking away from your current client is probably the safest bet.

completely agree. i'm doing that as well. walking away.