HMRC Inside ir35 - tax evasion
Discussion
My current role is outside IR35 and contracted through a consultancy. I am currently working on a project, but I’ve recently been informed that my role has now been deemed to be inside IR35.
The consultancy claims they’ve found a solution to address the inside IR35 determination.
I’ve been told I’ll be issued two contracts: one inside IR35 and one outside. The inside IR35 contract will cover 39 hours per week and will pay a total of £108.20 for the month — supposedly to meet the minimum London living wage requirements.
The second, outside IR35 contract will cover the remaining payment, which will be the bulk of my contract. However, only 30 minutes to 1 hour per month will be allocated to delivering work for the consultancy.
To me, this arrangement feels ethically questionable and potentially constitutes tax evasion. While the consultancy has stated they’ve taken legal advice to support this approach, I have serious doubts about its legitimacy.
Any thoughts? If this were a valid solution, I suspect we’d see this kind of setup far more widely used.
The consultancy claims they’ve found a solution to address the inside IR35 determination.
I’ve been told I’ll be issued two contracts: one inside IR35 and one outside. The inside IR35 contract will cover 39 hours per week and will pay a total of £108.20 for the month — supposedly to meet the minimum London living wage requirements.
The second, outside IR35 contract will cover the remaining payment, which will be the bulk of my contract. However, only 30 minutes to 1 hour per month will be allocated to delivering work for the consultancy.
To me, this arrangement feels ethically questionable and potentially constitutes tax evasion. While the consultancy has stated they’ve taken legal advice to support this approach, I have serious doubts about its legitimacy.
Any thoughts? If this were a valid solution, I suspect we’d see this kind of setup far more widely used.
There are quite a few umbrella companies who offer this - while it's "legal" HMRC strongly discourage against this. They can retrospectively recover unpaid taxes when they change the law/rules in future, see the 'loan charge' structure.
https://www.gov.uk/guidance/working-through-an-umb...
https://www.gov.uk/guidance/working-through-an-umb...
Back in 2009 ish I was in a "scheme". Biggest professional regret ever.
The thing with these schemes is that they tell you they're declared to HMRC and it's all above board.
But when it all goes tits up, they disappear, usually to the caman islands.
I was also involved in our company when the IR35 rules changed and had a bunch of contractors working for me.
I'm a bit out of this arena now, but my no.1 piece of advice is that if it seems too good to be true, it almost certainly is. Keep your nose clean, it'll cost more than you save now to fix it later.
The thing with these schemes is that they tell you they're declared to HMRC and it's all above board.
But when it all goes tits up, they disappear, usually to the caman islands.
I was also involved in our company when the IR35 rules changed and had a bunch of contractors working for me.
I'm a bit out of this arena now, but my no.1 piece of advice is that if it seems too good to be true, it almost certainly is. Keep your nose clean, it'll cost more than you save now to fix it later.
Your instinct is correct - this is highly problematic as HMRC examines "the actual nature of the work relationship, not only the contract," which means they look beyond paperwork to determine your true working arrangement.
The fact that it isn't commonly seen is telling. While the consultancy claims they've taken legal advice, I would be very skeptical about this approach.
The fact that it isn't commonly seen is telling. While the consultancy claims they've taken legal advice, I would be very skeptical about this approach.
ks. And how can 39 hours per week at the living wage only amount to £108.20 for the month?Too Late said:
My current role is outside IR35 and contracted through a consultancy. I am currently working on a project, but I’ve recently been informed that my role has now been deemed to be inside IR35.
The consultancy claims they’ve found a solution to address the inside IR35 determination.
I’ve been told I’ll be issued two contracts: one inside IR35 and one outside. The inside IR35 contract will cover 39 hours per week and will pay a total of £108.20 for the month — supposedly to meet the minimum London living wage requirements.
The second, outside IR35 contract will cover the remaining payment, which will be the bulk of my contract. However, only 30 minutes to 1 hour per month will be allocated to delivering work for the consultancy.
To me, this arrangement feels ethically questionable and potentially constitutes tax evasion. While the consultancy has stated they’ve taken legal advice to support this approach, I have serious doubts about its legitimacy.
Any thoughts? If this were a valid solution, I suspect we’d see this kind of setup far more widely used.
The onus is on the Employer to ensure that the correct tax treatment is applied so i wouldn't worry about it too much. The consultancy claims they’ve found a solution to address the inside IR35 determination.
I’ve been told I’ll be issued two contracts: one inside IR35 and one outside. The inside IR35 contract will cover 39 hours per week and will pay a total of £108.20 for the month — supposedly to meet the minimum London living wage requirements.
The second, outside IR35 contract will cover the remaining payment, which will be the bulk of my contract. However, only 30 minutes to 1 hour per month will be allocated to delivering work for the consultancy.
To me, this arrangement feels ethically questionable and potentially constitutes tax evasion. While the consultancy has stated they’ve taken legal advice to support this approach, I have serious doubts about its legitimacy.
Any thoughts? If this were a valid solution, I suspect we’d see this kind of setup far more widely used.
"If a promoter says their scheme is legal or that they have legal opinion, it does not mean it works. A lawyer may have given an opinion on a scheme, but often it’s heavily dependent on a list of circumstances that may not be relevant to you. You cannot rely on an opinion given to somebody else. It’s also only one opinion and may not be correct.
"If you sign up to a scheme that does not work, you may end up with a higher tax bill than expected."
On this somewhat dated link there's a specific section about contractors and agency workers,
https://www.gov.uk/guidance/tax-avoidance-schemes-...
"If you sign up to a scheme that does not work, you may end up with a higher tax bill than expected."
On this somewhat dated link there's a specific section about contractors and agency workers,
https://www.gov.uk/guidance/tax-avoidance-schemes-...
Too Late said:
My current role is outside IR35 and contracted through a consultancy. I am currently working on a project, but I’ve recently been informed that my role has now been deemed to be inside IR35.
The consultancy claims they’ve found a solution to address the inside IR35 determination.
I’ve been told I’ll be issued two contracts: one inside IR35 and one outside. The inside IR35 contract will cover 39 hours per week and will pay a total of £108.20 for the month — supposedly to meet the minimum London living wage requirements.
The second, outside IR35 contract will cover the remaining payment, which will be the bulk of my contract. However, only 30 minutes to 1 hour per month will be allocated to delivering work for the consultancy.
To me, this arrangement feels ethically questionable and potentially constitutes tax evasion. While the consultancy has stated they’ve taken legal advice to support this approach, I have serious doubts about its legitimacy.
Any thoughts? If this were a valid solution, I suspect we’d see this kind of setup far more widely used.
First question, the 'inside' contract would be at minimum wage, or thereabouts, your post did not make sense on that point.The consultancy claims they’ve found a solution to address the inside IR35 determination.
I’ve been told I’ll be issued two contracts: one inside IR35 and one outside. The inside IR35 contract will cover 39 hours per week and will pay a total of £108.20 for the month — supposedly to meet the minimum London living wage requirements.
The second, outside IR35 contract will cover the remaining payment, which will be the bulk of my contract. However, only 30 minutes to 1 hour per month will be allocated to delivering work for the consultancy.
To me, this arrangement feels ethically questionable and potentially constitutes tax evasion. While the consultancy has stated they’ve taken legal advice to support this approach, I have serious doubts about its legitimacy.
Any thoughts? If this were a valid solution, I suspect we’d see this kind of setup far more widely used.
Secondly, the 'outside' contract would be for what exactly? If the inside contract covers your time, what could possibly be included in the outside contract?
Who determined the status of the original contract, the hiring org or you / your PSC?
Putting the new arrangement to one side, the big risk of an ongoing engagement switching from outside to inside is that HMRC come along and determine that it should have always been inside, and demand the backdated deductions plus penalties.
At risk of stating the obvious, if the new arrangement is also blatantly contrived to evade tax, the chance of that investigation happening go up exponentially, what you have described would be a red rag to a bull.
Putting the new arrangement to one side, the big risk of an ongoing engagement switching from outside to inside is that HMRC come along and determine that it should have always been inside, and demand the backdated deductions plus penalties.
At risk of stating the obvious, if the new arrangement is also blatantly contrived to evade tax, the chance of that investigation happening go up exponentially, what you have described would be a red rag to a bull.
Edited by theboss on Tuesday 27th May 16:36
There has been a lot of outside roles now being determined as inside over the past couple of years
If you are providing a service outside and you are now expected to deliver the role (note not a service) as inside then you have two options
1) Exit immediately - HMRC can go back a number of years and if the now inside can be applied to the previous outside - guess who gets the bill
2) Take the new inside role but request that the terms, nature and desc are very different to the previous outside service and just pay the paye - maybe you can get a rate hike to cover the Employers NI that you'll now be paying - all a bit of a risk if retro application takes place.
Personally I had to do (1) a couple of years ago as I'm public sector and the status reviews were just being applied blanked inside
If you are providing a service outside and you are now expected to deliver the role (note not a service) as inside then you have two options
1) Exit immediately - HMRC can go back a number of years and if the now inside can be applied to the previous outside - guess who gets the bill
2) Take the new inside role but request that the terms, nature and desc are very different to the previous outside service and just pay the paye - maybe you can get a rate hike to cover the Employers NI that you'll now be paying - all a bit of a risk if retro application takes place.
Personally I had to do (1) a couple of years ago as I'm public sector and the status reviews were just being applied blanked inside
arfur said:
There has been a lot of outside roles now being determined as inside over the past couple of years
If you are providing a service outside and you are now expected to deliver the role (note not a service) as inside then you have two options
1) Exit immediately - HMRC can go back a number of years and if the now inside can be applied to the previous outside - guess who gets the bill
2) Take the new inside role but request that the terms, nature and desc are very different to the previous outside service and just pay the paye - maybe you can get a rate hike to cover the Employers NI that you'll now be paying - all a bit of a risk if retro application takes place.
Personally I had to do (1) a couple of years ago as I'm public sector and the status reviews were just being applied blanked inside
Agreed.If you are providing a service outside and you are now expected to deliver the role (note not a service) as inside then you have two options
1) Exit immediately - HMRC can go back a number of years and if the now inside can be applied to the previous outside - guess who gets the bill
2) Take the new inside role but request that the terms, nature and desc are very different to the previous outside service and just pay the paye - maybe you can get a rate hike to cover the Employers NI that you'll now be paying - all a bit of a risk if retro application takes place.
Personally I had to do (1) a couple of years ago as I'm public sector and the status reviews were just being applied blanked inside
The problem as I see it, is a lot of 'inside' work now issued in the form of PAYE employment contracts are still outside in nature, just determined to be inside due to risk aversion and policy.
I've even had prospective clients approach me about doing 5/10 days of T&M professional services, totally autonomous working in keeping with B2B service provision, yet wants to issue a PAYE contract to cover it.
It's like me insisting that the bloke cutting my trees signs a PAYE contract for the job.
theboss said:
arfur said:
There has been a lot of outside roles now being determined as inside over the past couple of years
If you are providing a service outside and you are now expected to deliver the role (note not a service) as inside then you have two options
1) Exit immediately - HMRC can go back a number of years and if the now inside can be applied to the previous outside - guess who gets the bill
2) Take the new inside role but request that the terms, nature and desc are very different to the previous outside service and just pay the paye - maybe you can get a rate hike to cover the Employers NI that you'll now be paying - all a bit of a risk if retro application takes place.
Personally I had to do (1) a couple of years ago as I'm public sector and the status reviews were just being applied blanked inside
Agreed.If you are providing a service outside and you are now expected to deliver the role (note not a service) as inside then you have two options
1) Exit immediately - HMRC can go back a number of years and if the now inside can be applied to the previous outside - guess who gets the bill
2) Take the new inside role but request that the terms, nature and desc are very different to the previous outside service and just pay the paye - maybe you can get a rate hike to cover the Employers NI that you'll now be paying - all a bit of a risk if retro application takes place.
Personally I had to do (1) a couple of years ago as I'm public sector and the status reviews were just being applied blanked inside
The problem as I see it, is a lot of 'inside' work now issued in the form of PAYE employment contracts are still outside in nature, just determined to be inside due to risk aversion and policy.
I've even had prospective clients approach me about doing 5/10 days of T&M professional services, totally autonomous working in keeping with B2B service provision, yet wants to issue a PAYE contract to cover it.
It's like me insisting that the bloke cutting my trees signs a PAYE contract for the job.
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