Employer wants to change inside IR35 role to outside

[goldar]

I'm in discussion with my employer about changing my inside IR35 role to an outside role, or rather they're offering me the opportunity to go ltd so we can both share in the saving - I currently lose around half my pay due to umbrella, NI, tax etc. It would mean my day rate stays the same and I take home more, and they wouldn't have to pay an agency on top of my day rate.

So they're up for doing this, but their HR department is clueless and doesn't know how to go about it.
What information can I give them to 'educate' them?

And more importantly, is there anything I need to do to cover my back?

[rustyuk]

You will need a new contract and obviously take on the risk of an investigation by HMRC.

[E63eeeeee...]

I'd talk to a specialist rather than looking for advice online. If you assume you're going to have to defend this to HMRC at some point, get yourself in a position to do that based on proper, professional advice.

[dibblecorse]

What's changing in the job or the way you do it or the manner in which you are managed to be able to defend an investigation if it happens, if its inside today why would it qualify as outside tomorrow? The umbrella is irrelevant in this determination, im amazed that they would put themselves at risk in this way

[worsy]

The risk remains with the engager. In effect they will need to create a determination for the role. You could look for advice from someone like QDOS or IR35Shield.

It could be legitimate if there was no determination made previously and thus it was in effect a blanket ban on outside contracts, however with you referring to your client as Employer, I'd be raising serious questions as to whether the determination would really be outside.

Also check new tax rates for Corporation Tax, Shares which will narrow the gain. You will also need to learn how to run a company, so you will need a limited set up, VAT registration, insurance for liability, an accountant to submit your accounts and ensure your digital tax is submitted monthly etc etc. You will also lose Holiday Pay, although in effect that comes out of your headline rate so ensure any calculations for comparison include/exclude where appropriate.

Finally for 12-24 months you will be a basket case for mortgage applications in the main, so don't go limited if you plan on moving house or remortgaging soon.

[Countdown]

dibblecorse said:

What's changing in the job or the way you do it or the manner in which you are managed to be able to defend an investigation if it happens, if its inside today why would it qualify as outside tomorrow? The umbrella is irrelevant in this determination, im amazed that they would put themselves at risk in this way

It looks like the only reason is to save both the OP and the Employer money.

As the risk sits wholly with the Employer I can't see what the downside is for the OP.

[Big_Dan]

Don't forget the agency might have first dibs too - in that they may have a covenant in your contract

[zippy3x]

There's been several discussions on the contractor thread about the risk of going from inside to outside for the same client.
It's generally regarded to be a bit of a slam dunk win for HMRC (and a big bill for you) should they choose to launch an investigation.

If you do go ahead, I suggest you put any tax "savings" into an account so you have the money to pay should you be investigated and lose.
After six years (or whatever the statute of limitations is on investigations) go and buy a new car

All of the above is moot anyway. I guarantee the agency will have a covenant in the contract between the agency and your client.
You would need to leave for 6-12 months before you could return without having to give the agency a cut.

[Eric Mc]

goldar said:

I'm in discussion with my employer about changing my inside IR35 role to an outside role, or rather they're offering me the opportunity to go ltd so we can both share in the saving - I currently lose around half my pay due to umbrella, NI, tax etc. It would mean my day rate stays the same and I take home more, and they wouldn't have to pay an agency on top of my day rate.

So they're up for doing this, but their HR department is clueless and doesn't know how to go about it.
What information can I give them to 'educate' them?

And more importantly, is there anything I need to do to cover my back?

HMRC always says that whether you are inside or outside PAYE rules (IR35 if a limited company) is not a matter of choice.

How would your role be different regarding the the nature of the actual work you do if you did change?

[jesusbuiltmycar]

zippy3x said:

There's been several discussions on the contractor thread about the risk of going from inside to outside for the same client.
It's generally regarded to be a bit of a slam dunk win for HMRC (and a big bill for you) should they choose to launch an investigation.

If you do go ahead, I suggest you put any tax "savings" into an account so you have the money to pay should you be investigated and lose.
After six years (or whatever the statute of limitations is on investigations) go and buy a new car

All of the above is moot anyway. I guarantee the agency will have a covenant in the contract between the agency and your client.
You would need to leave for 6-12 months before you could return without having to give the agency a cut.

Whilst it is not something I would do, I thought that under the current rules the tax liability falls on the company not on the contractor, as it is the companies responsibility to asses the roll.

The agency covenant thing is always something to be wary of; I have known of cases where the covenant between Agency & Contractor was 6 months ut between Agency and client was 12.

The only loophole to covenants I have seen exercised is where a client was taken over by a larger company; the larger company had a preferred agency which they decided all contractors had to use and as far as they were concerned they had no contracts in place with the existing agencies. All contractors switched which resulted in a lot of unhappy agents.

[Blown2CV]

as long as you both fully understand what changes you would need to make to the contract and working arrangements, and this is agreed to be viable, and you both stick to it, then this is fine. You run the risk of an investigation though as HMRC would assume you don't and/or won't.

[duffy78]

jesusbuiltmycar said:

Whilst it is not something I would do, I thought that under the current rules the tax liability falls on the company not on the contractor, as it is the companies responsibility to asses the roll.

If the company in question is an SME then the onus is on the contractor to assess the roll (sic)