Contractors: IR35 & general discussion

Contractors: IR35 & general discussion

Author
Discussion

Clockwork Cupcake

74,598 posts

273 months

Thursday 27th February 2020
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Well, I sent my email to my client just now. It was very diplomatically worded but boiled down to an ultimatum of "declare our engagement as being outside IR35 or I will terminate it". Obviously I wasn't quite so blunt.

It *ought* to be a fairly easy decision to them as I'm their only contractor, and only C++ resource, and they have effectively outsourced all C++ development and maintenance to my company, and I operate exclusively from my own premises as they shut their office local to me over a year ago and I've been remote working ever since.

Being their sole contractor, it means they have to consider me on an individual basis, so a blanket "inside" is less likely unless it is an edict handed down on them by Head Office.

Fingers crossed, otherwise I will have to walk and either become a 'Lady of Leisure' for a few months or else start looking for a new engagement - I simply can't run the risk of being declared inside IR35 and then HMRC deciding I've therefore always been inside IR35 for the past 2+ years.

I'm hopeful that sheer inertia will cause them to declare outside IR35. That and the issue of who pays the Employer's NI.


hyphen

26,262 posts

91 months

Thursday 27th February 2020
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Clockwork Cupcake said:
Well, I sent my email to my client just now.
Why show your hand so early?

Unless they gave you an ultimatum, should leave it till they ask for an answer/notice period start to 5th April.

The more notice they have, the more recruitment and handover time they have is how I see it.


markyb_lcy

9,904 posts

63 months

Thursday 27th February 2020
quotequote all
Clockwork Cupcake said:
It *ought* to be a fairly easy decision to them as I'm their only contractor, and only C++ resource, and they have effectively outsourced all C++ development and maintenance to my company, and I operate exclusively from my own premises as they shut their office local to me over a year ago and I've been remote working ever since.
Good luck. You sound to me like you should be outside. What does the CEST tool say for your circumstances?

My client contact ran the tool in lieu of a renewal i'm about to sign and it came back with an outside result. Printed and framed biggrin

hyphen

26,262 posts

91 months

Thursday 27th February 2020
quotequote all
Anubis said:
The contracting side will now pretty much only show inside roles.
Why? The public sector still have lots of outside roles, so why would the private sector not.

aeropilot

34,663 posts

228 months

Thursday 27th February 2020
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Anubis said:
probably at least an extra £200 on a day rate (so before 500 will have to be 700 minimum).
See, this is the problem when I see posts like this as in my industry we're dealing with contractors that are only getting 200-250 as a day rate......and facing losing 20-25% of that.......by being inside.

Our clients are pushing back even a 30 per day rate increase.

Its the 1000's of contractors in many industries on 20-25/hr rates that are being seriously screwed over by this joyful HMRC wheeze.


Clockwork Cupcake

74,598 posts

273 months

Thursday 27th February 2020
quotequote all
hyphen said:
Why show your hand so early?

Unless they gave you an ultimatum, should leave it till they ask for an answer/notice period start to 5th April.

The more notice they have, the more recruitment and handover time they have is how I see it.
Oh. Fair point.

I made the mistake of being professional and transparent. smile

Too late now - the bolt has been shot.

To clarify though, the agency involved had already sent a simple "just fill in this questionnaire" email (with a link to https://www.tax.service.gov.uk/check-employment-st... and no briefing or background info) to the client representative earlier in the month, but fortunately due to a change of personnel it wasn't read or actioned by the client, and I told the agent to leave it to me. I was livid, as you can imagine.

Also there is an open-ended perpetual contract in force at moment, until one of us gives notice of termination, so I wanted to be a little more proactive otherwise nothing would get done.

Maybe I should have just left it. Too late now.



Clockwork Cupcake

74,598 posts

273 months

Thursday 27th February 2020
quotequote all
hyphen said:
Why? The public sector still have lots of outside roles, so why would the private sector not.
They've had time to adjust and learn that in order to get people they need to advertise as outside IR35.

The private sector will need similar time to adjust.

Gazzab

21,108 posts

283 months

Thursday 27th February 2020
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The revenue are in for a slow car crash with their tax receipts.
I haven’t worked much this tax year due to IR35 (etc!?) but had a healthy co bank balance to lessen the impact. I have done my books early and, ignoring VAT, will pay over 40% less tax this year.
Assuming I now work for lower rates and less frequently I am expecting my tax bills to be around 50 % lower at least for now. So even accounting for employers NI they will see my paye (!) tax as a much lower total than my PSC tax.
With a constantly increasing number of people between contracts, off shoring, big consultancies, perm roles, lower rates, less frequent work etc then surely the revenue will see a massive tax reduction. What a fab outcome.

Anubis

1,029 posts

180 months

Thursday 27th February 2020
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aeropilot said:
See, this is the problem when I see posts like this as in my industry we're dealing with contractors that are only getting 200-250 as a day rate......and facing losing 20-25% of that.......by being inside.

Our clients are pushing back even a 30 per day rate increase.

Its the 1000's of contractors in many industries on 20-25/hr rates that are being seriously screwed over by this joyful HMRC wheeze.
Unfortunately I agree with you aeropilot.

Those not earning “big” wages will suffer the most; you are correct...plus some employers will now be thinking “wow...all these people wanting jobs, let’s have a race to the bottom for perm and contract rates” as HMRC have created a huge imbalance to the market.

It’s going to be an interesting 12 months that’s for sure. Starting now, though more likely the last 2 weeks of March there is going to be huge movement and tons of projects being disrupted across every industry from construction, medical, IT, HGV and transportation, defence projects....you name it.

It’s never happened before on such a scale. Buckle in...it’s about to get tasty

Clockwork Cupcake

74,598 posts

273 months

Thursday 27th February 2020
quotequote all
Anubis said:
It’s never happened before on such a scale. Buckle in...it’s about to get tasty
And all happening at a time of economic uncertainty, what with Brexit and Corona-virus.

Clockwork Cupcake

74,598 posts

273 months

Thursday 27th February 2020
quotequote all
Well, blimey.

Just had an enlightening phone call with my client. Apparently my email was very timely as they do have another contractor elsewhere in the organisation and had just gone through CEST only yesterday and it was fresh in their mind.

To cut a long story short, this other guy's situation is such that most would agree he was inside IR35 (been with them for years, quite a lot of direction & control, no other clients), yet CEST gave an "outside" ruling much to everyone's astonishment. My client can't see any reason why it should not to do the same for me, given that I'm clearly more outside than this other guy, and assuming it does are happy for this engagement to be outside IR35. And, indeed, have a strong desire for it to be outside IR35 (mainly because of Employer's NI).

So, yay.

Edit: The major difference I can see is that the other guy has fixed price work and I deliver "Time and Materials". Hopefully that isn't the clincher, as in all other respects my answers to CEST would be the same or even more outside.



Edited by Clockwork Cupcake on Thursday 27th February 14:51

i prefer a flan

89 posts

51 months

Thursday 27th February 2020
quotequote all
Anubis said:
It’s never happened before on such a scale. Buckle in...it’s about to get tasty
Clockwork Cupcake said:
And all happening at a time of economic uncertainty, what with Brexit and Corona-virus.
+1.

Throw this lot into the mix - gridlocked roads, population boom, creaking public services, artificial intelligence, mass surveillance / police state.

Is it melodramatic to say 'the system's' teetering on a knife edge? Feels like it.

anonymous-user

55 months

Thursday 27th February 2020
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I'm debating about going inside at my current place.

To set the scene - I initially worked at company A for around 18 months on a specific software system that has now been decommissioned/replaced. I left early part of last year and worked three months on another contract at company B. Returned to company A last summer and worked on another project up until Christmas. New Year I've started a new contract on completely different projects in a different department and different team at company A.

I'm currently thinking that if I do get investigated I would only be on the hook for my current contract this year. Any thoughts on this?

Gazzab

21,108 posts

283 months

Thursday 27th February 2020
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Liggle said:
ruprechtmonkeyboy said:
I'm debating about going inside at my current place.

...

I'm currently thinking that if I do get investigated I would only be on the hook for my current contract this year. Any thoughts on this?
That's a pragmatic approach to the risk. Chances are it'll never happen, they'll go after the big clients first if they bother - GSK, Lloyds etc.
How do you know that they might only go after the most recent outside for a retro? How do you know which clients they will go after? You might be right but you might be wrong. Guesswork doesn’t really provide good advice.
My advice would be to walk unless you are willing to accept the risk. Hmrc will have the data and readily generate letters at very low cost and at very high volumes so as to gain your old ‘disguised’ tax (their words not mine).
One thing is clear - off payroll will reduce the hmrc tax income. So the woolly faux promises not to do retros will be harder and harder for hmrc to resist.


vindaloo79

962 posts

81 months

Thursday 27th February 2020
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Has anyone got any awareness on companies that will come crashing down when the exodus occurs, when inside CEST outcomes drive the contractors away.

If armed with info, it would be rude not to make some cash shorting the less reactive companies.

Out of 20 + developers I know most are in small consultancies and outside.

2 of us are folding and going perm. 3 are going inside after many years at same place. 2 moving to new inside roles elsewhere. Rest seem outside and lucky. Numbers are approximate.

Gazzab

21,108 posts

283 months

Thursday 27th February 2020
quotequote all
The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing.

markyb_lcy

9,904 posts

63 months

Thursday 27th February 2020
quotequote all
Liggle said:
That's a pragmatic approach to the risk. Chances are it'll never happen, they'll go after the big clients first if they bother - GSK, Lloyds etc.
What, you mean the ones that get a personal contact at HMRC and actively haggle over their annual tax bills? I doubt it.

cheeky_chops

1,589 posts

252 months

Thursday 27th February 2020
quotequote all
I was putting a fair bit in my pension with my last permie role, it saved a huge amount on tax and NI for me and the employer. That led me to the following idea to minimise NI and tax increase. Ive googled and not found any blindingly obvious reasons it wont work -

- Take dividends from my LTD co until cash exhausted april 2021
- Find umbrella company that offers salary sacrifice to maximise pension AND allows "carry forward" pension allowance
- plan to salary sacrifice to pension down to minimum wage to save personal tax, employer and employee NI

Obv this isnt for everyone, but if i can get down to minimum wage for a year i will be paying a fraction of the inside NI rates

Ive just got a list of "approved umbrellas" from agency. Ive also got a meeting with accountant to run it past her. If this is a go-er, there is still the risk of being inside/outside same contract bla bla

CaptainSlow

13,179 posts

213 months

Thursday 27th February 2020
quotequote all
Let me know how you get on, specifically which umbrellas allow which pensions...ssips.

Seems I'm the only person moving permie to contractor lol.

I do big pension contributions so want to take advantage of any day rate increases whilst dodging the employer's ni as much as possible.

Tim330

1,130 posts

213 months

Thursday 27th February 2020
quotequote all
cheeky_chops said:
I was putting a fair bit in my pension with my last permie role, it saved a huge amount on tax and NI for me and the employer. That led me to the following idea to minimise NI and tax increase. Ive googled and not found any blindingly obvious reasons it wont work -

- Take dividends from my LTD co until cash exhausted april 2021
- Find umbrella company that offers salary sacrifice to maximise pension AND allows "carry forward" pension allowance
- plan to salary sacrifice to pension down to minimum wage to save personal tax, employer and employee NI

Obv this isnt for everyone, but if i can get down to minimum wage for a year i will be paying a fraction of the inside NI rates

Ive just got a list of "approved umbrellas" from agency. Ive also got a meeting with accountant to run it past her. If this is a go-er, there is still the risk of being inside/outside same contract bla bla
Only thing I can think of is the 40k pa limit on tax relief on pension contributions. Depends on your rate if this will have an impact on your plan.

Edit-I guess you still save the Employer NIC even if above 40k allowance, hopefully an expert knows the answer to this.