Self assessment and delays to IR35: Ask Andy Answers
With less than a month to go before the date of the IR35 private sector reforms, Andy Vessey, Kingsbridge’s Head of Tax and one of the UK’s leading experts on IR35, has been busy answering contractors’ questions on the new legislation. Find out how to ask your own question at the end of this blog.
Of course, the question on everyone’s lips is whether or not the reforms are actually going ahead, after they were dramatically delayed last year as part of the government’s pandemic support package. Andy answers that question here, along with information on how to contest an SDS using your Self-Assessment.
Do you know if IR35 will be implemented in the coming tax year from 6th April 2021?
The IR35 reforms for the private sector are going ahead as of 6th April 2021. Finance Bill 2021 will make a few minor changes to the legislation and there will be a Targeted Anti-Avoidance Rule, all to be implemented from 6th April as well. These changes will not affect the main body or thrust of the legislation.
I have a client that will not engage in discussions over IR35 and have assessed the role they wish me to do as inside IR35, without asking for any input regarding my own limited company set-up.
Having seen how they have operated thus far, I fear that any appeal will not drive them to engage in any deliberation. In fact, last year before the deferral they engaged a “specialist” company who produced determinations with pre-answered questions and wouldn’t share the answers they used. This year they have refused to have any round the table discussions with PSCs.
While I understand that, following the appeal process, they can still refuse to change the determination, I believe I can then use self-assessment to somehow claim the overpayments back. My first question really is how, as even HMRC couldn’t tell me.
My second question is, if I make my own determination using a tool such as yours and get an outside determination back, and buy the insurance policy, where would I stand with HMRC? It would seem I took due diligence and the end client didn’t if the two differ and the appeal is somewhat dismissed.
From 6th April 2021, your end client is duty-bound to consider your representations and respond to them within 45 days. However, if you feel that is a fait accompli and you still disagree with the SDS, then you can effectively appeal via your Self-Assessment tax return (SATR), as you have alluded to. On the employment page of your SATR you will have to show ‘nil’ income but still enter the PAYE tax suffered. On the white space information box, you will have to inform HMRC of the reason for showing ‘nil’ gross pay and that you are in disagreement with the end client’s status determination. This will then create an overpayment of tax. There is also a knock-on effect on the preparation of your company accounts and Company Tax return.
Regarding the NIC, you will have to write to HMRC and claim a refund soon after the tax year you’re claiming for.
Both these actions will trigger an IR35 enquiry and this is where the difficulties will arise. HMRC will set great store on the end client evidence, and your end client is likely to stick to their guns, so effectively you are taking on both these parties. While this is not an impossible task, your evidence for arguing an ‘outside’ IR35 determination is going to have to be strong and compelling. It could be that some of your evidence is personal but persuasive, e.g., business on own account factors, that the end client refused to listen to, in which case they could be guilty of failing to take reasonable care.
With regard to how the insurance policy would react in the circumstances you describe, you will have to talk to Kingsbridge for absolute verification as I can only confine my comments to taxation matters.
How to Ask Andy…
With so little time left before the reforms come into effect, we’re sure you’ll have your own questions for Andy. You can ask them right here using our online form and Andy will endeavour to answer right here on the blog, using his 20-plus years of experience.
In the meantime, as your clients draw up your Status Determination Statements, it’s an ideal time to do your research into your status. The Kingsbridge IR35 Status Tool is an award-winning hybrid tool developed by Andy. Based on your answers to carefully crafted questions, it will issue you with an immediate inside or outside IR35 status. If your case is borderline, it will be reviewed by one of our in-house IR35 specialists in order to ascertain your status, giving you confidence that your SDS is correct, or giving you grounds to appeal it.