Living with IR35: Ask Andy Answers
As the 2021/22 tax year gets into its stride, the IR35 questions for Andy Vessey, Kingsbridge’s Head of Tax and resident IR35 expert, continue to roll in – now with a focus on living with the new legislation and how it applies in real terms. This week, for instance, Andy is answering questions on status appeals, blanket decisions, and expenses claims.
If you have a question for Andy, read on to find out how to submit it but, in the meantime, on with the questions.
I was working on a contract outside IR35 up to the end of March. The client’s Status Determination Statement (SDS) put me inside, which I have now appealed, and I am not working for them while the appeal goes through (which may take 45 business days apparently). My 2 questions are:
1. Can I work for them using an umbrella company while my appeal is being looked at, and would it harm my appeal?
2. What are my options if the appeal comes back and they haven’t changed their determination?
If you work through an umbrella while your appeal is pending, then you will suffer tax and employees NIC on your pay for a maximum of 45 days, i.e., the full length of time an engager is permitted to respond to a dispute. If the engager upholds your appeal, then you would have suffered these deductions unnecessarily, albeit that you may be able to claim a refund depending on your level of taxable income throughout 2021/22. If your end client rejects your appeal, then you can either request a repayment of overpaid PAYE tax via your Personal Tax Account or your Self-Assessment tax return. However, both courses of action are likely to trigger an IR35 enquiry and you will need to be able to present HMRC with compelling evidence to support your position as HMRC put great store in end client testimony.
I have been working for seven years for my limited company and, recently, the client has informed me that I can’t be paid as limited any longer. The only way they are willing to pay me is as PAYE, not even on a self-employed basis (UTR) What would you suggest? Is the client legally correct? Could you please help?
Unfortunately, a number of engagers have taken a very risk-averse approach and decided not to engage with the off-payroll working rules by only hiring workers via umbrella companies or agency PAYE. In my opinion, this is a short-sighted decision and one that they may well have to revisit at some point. This is a business decision that they are entitled to make, so you are left with the option of either accepting their terms or seeking a contract elsewhere with an engager who takes a much more balanced view and is prepared to consider using PSCs.
If the contractor has had an SDS saying outside IR35, and then they start to claim expenses and benefits which would be their right at the time, if they then are deemed inside by a HMRC review, would expenses still be covered under the policy?
It is perfectly legitimate for a PSC to recharge bona fide business expenses, e.g., business travel, via sales invoices. That will not affect their IR35 status provided the process by which they claim such expenses is not the same as it is for end client employees. Benefits-in-kind (BIK) are not claimed by workers, they are provided to them by employers. End clients should not be providing such benefits to self-employed workers as this could make them look like disguised employees and therefore ‘inside’ IR35.
If an engager were to provide BIKs to a worker at some point in the relationship, then it is incumbent on that engager to carry out a new status determination to ascertain if the change in circumstances affects the original SDS. Failure to do so would be a breach of the duty to take reasonable care, so if the worker should have been properly deemed ‘inside’ IR35 because of the change in circumstances, then the policy will not cover any subsequent enquiry because the hirer’s actions have compromised prospects of success. If it was understood from the outset that BIKs would be provided as part of the PSC’s fee, and the hirer considered that this did not affect the worker’s employment status, then the matter should be referred to the Kingsbridge IR35 team for a final decision.
How to Ask Andy…
We’re continuing to put your questions to Andy while everyone gets to grips with the IR35 reforms, so you can ask your own here. Andy will do his best to answer here on this blog.
If you’re looking for some clarity or reassurance on your IR35 status, remember that you can use the Kingsbridge IR35 Status Tool for just £50 plus VAT. This clever hybrid tool can give you an instant inside or outside IR35 determination and if your result is borderline, it will be referred to one of our in-house IR35 specialists for manual review, giving you confidence and peace of mind.