Your IR35 clients

Dropping like flies

Didn't find your answer?

We're getting a constant stream of emails from clients who are now being caught, although predictable it is still a concern and it will only get worse over the next couple of months. We don't have a huge number of contractors which is good but the ones we have are great clients and are probably our most profitable clients. 

It was predictable but I'm concerned we'll get an avalanche of notifications in March...

How are others finding it?

Replies (20)

Please login or register to join the discussion.

By Moonbeam
21st Jan 2020 16:31

My Mr Bloggs was let go by a bank a few months ago, and has since got himself involved in an arrangement whereby he substitutes for another contractor on a regular basis. I worry about the regularity, but there you go.

Thanks (0)
By Roland195
21st Jan 2020 16:31

Much the same as you but with a reluctance to proactively seek advice.

Thanks (0)
By JCresswellTax
21st Jan 2020 16:32

Also dropping like flies. Contracting is over for the foreseeable.

Thanks (0)
By Matrix
21st Jan 2020 16:42

Do you mean their status has been challenged by HMRC or that their private sector engagers don’t want to bear the risk now that the rules have changed?

Thanks (0)
Replying to Matrix:
By Payroll Pete
22nd Jan 2020 11:59

I've had clients from two very large companies this week, one investment bank, one consultancy, where the client has imposed a blanket ban on contracting via their own ltd company - either go PAYE or leave, no review of status.

It's also been reported that both Lloyds and HSBC have banned consultancies from hiring limited company contractors, so it's spreading down the chain.

Thanks (0)
paddle steamer
21st Jan 2020 16:45

Even my son is dropping his Limited Company come March, apparently he is carrying on with his HMG contract (well strictly a new 2 year contract come March) via some umbrella beastie. Not that I understand all this, I never acted for any contractors and sent him to A N Other Edinburgh firm who actually seemed to know what they were doing.

Thanks (0)
By Maslins
21st Jan 2020 17:14

As a firm we are what might be considered "contractor accountants"...though not all exactly fit this mould, many are freelancers with multiple small clients etc.

Up to and including December 2019, we were still (just) taking on more clients than we lost month on month. Going into this month, we had our first negative month (lost more clients than gained) in years. I expect that to continue, probably for the next ~6 months.

However, we knew it was coming, we're confident we'll survive it as a temporary blip, and consider it just one of those things. We are however extremely busy at the moment, as inevitably helping someone close a company is lots more work in the short term than leaving it ticking over. I do wonder whether those "contractor accountants" who cut it fine with staffing levels will cope.

I also am heavily involved in MVL Online though, which is having an exremely busy time (though equally that's likely to be short lived, a few months of boom followed by a bust!).

Thanks (0)
By ireallyshouldknowthisbut
21st Jan 2020 18:43

We are certainly having a lot more out than in.

It seem the more junior ones are off, where quite frankly they were blatantly employees, so no surprises there.

The more senior ones which were probably more likely to be outside of IR35 are stating put in most cases, or at least debating the matter with their end client / moving contracts.

There seems to be a lot of end clients who do not yet have a firm policy one way or the other, which suggests they will be putting them all inside, but not letting on yet so they don't jump ship.......quite a number of clients seem to be oblivious to this until I mentioned it to them. [I have been speaking to everyone with their VAT returns this past 3-4 months]

I expect a big drop in March/April time, and have been busy taking new company work on this Jan to cover that is not affected.

Then in time the market will recover as companies still need contractors in 12 months time and the realise that the actual underlying rules have not changed, and it will still be a pain for HMRC to enforce on a contract by contract basis.

Thanks (1)
By atleastisoundknowledgable...
22nd Jan 2020 10:16

We don’t have many - about 50% of that I’ll we have are more genuine freelancers with a few clients.

What we do have however is quickly getting eroded away. Shame. It’s enough to concern but not worry me. I think.

Thanks (0)
By RedFive
22nd Jan 2020 11:01

Interesting to read the responses to my question back in 2018 regarding this:

As I said in that this type of client was about 7% of GRF, and is now 9% as have still taken some on while growing the rest of my client base.

A couple have gone having been transferred to full time employee contracts (as Maslins says a fair bit of work to do to close down that clients are reluctant to pay for).

The rest are head in the sand - I've got three guys who work at Caterpillar and have been told they will find out by end of January. Find out what we don't know - being let go / going full time or staying as they are, they are in the dark.

Also depneds how you look at it, one of my 'IR35' types was subject to a lengthy written 'we think you are IR35' enquiry that we dealt with in full until they dropped it. Took over a year, the guy had 'worked' for the same client for 2 years so was looking ropey but we batted back on 'tools / supervison etc' and in the end they sent a letter saying case closed and they don't think he is IR35. That was after 3 different case workers looked at it due to HMRC sickness etc.

So I don't think it is clear cut and interesting times to come.

Stupid question, but what is stopping people switching to self employed rather than via a LTD PSC to which IR35 doesn't apply?

End client companies insisted contractors used their own LTD (to protect the end client) but can they now stop the contractor switching to self employed? Of course the onus then falls on the end client to ensure correct status (as the new IR35 rules do) otherwise they take the hit with penalties etc. but they might not realise that.

Thanks (0)
By meadowsaw227
22nd Jan 2020 12:06

Made a decision years ago not to take on IR35 clients.

Thanks (2)
Replying to meadowsaw227:
By RedFive
22nd Jan 2020 12:14

Interesting. But what is an IR35 client?

If you mean someone definitely caught by IR35 then we are in the same boat - we don't take on. Never had one though.

But it is a massively grey area and the client might not think they are IR35, I might not though have some reservations in some cases / with some contracts, but HMRC might argue they are.

Do you have none of those? A PSC working a contract at a time, maybe just 3 months each, using own tools, setting own times to work, not under supervison? These will likely be falling under new rules with large Corps now refusing to take the risk on them.

Thanks (1)
Replying to RedFive:
By meadowsaw227
24th Jan 2020 11:48

I just decided to not take on ANY "contractors" at all.
Saves me having to decide their "status".

Thanks (1)
By Manchester_man
23rd Jan 2020 00:15

Don’t have many contractor clients but the first one to go has reared his head. He received an email from his contractor last month stating that the contract wording will now be changed from “outside IR35” to “inside IR35” and that he must make a decision as to whether to go via an umbrella company (they recommended one offering reduced fees) or continue but under the IR35 rules.

We had a meeting last week to discuss.

My calculations suggest that he will be worse off whichever route he takes, but between IR35 ltd company / deemed salary and umbrella company I don’t see a lot of difference. Considering accountancy fees, he is slightly better off with the umbrella company (based on their advertised fees).

As another poster stated, there are very profitable clients and I’m really miffed about this.

Thanks (1)
By Matrix
23rd Jan 2020 13:55

I have a few per above who have gone permanent with HSBC who obviously don’t want to bear the risk now it is theirs.....

Any thoughts on whether entrepreneurs relief will be changed in the budget since it could have a huge impact on all these MVLs? Should we be advising clients there is a risk it may not apply?


Thanks (0)
24th Jan 2020 10:14

"...clients who are now being caught..."

You make it sound like these people have actually done something wrong.

They are not criminals or tax-dodgers, they simply arranged their affairs - often at the behest of the engaging party - because of the flexibility afforded to both parties with that type of arrangement.

I don't think many people who will now deemed to be inside actually have a problem with paying additional tax, but why can't they have the sick pay and pension rights that go with it (let's leave the job security bit out of this discussion for now)?

You are either employed or not employed, so please refrain from inferring that contractors are tax-dodgers, as in the majority of cases invoicing via a personal services company was the simplest arrangement for the engager.

Thanks (2)
24th Jan 2020 11:15

I had several very profitable clients working in the IT sector for NHS et al ... but they all disappeared back in years 2003 to 2006 as the IT contractor boom ended ... as one of my clients said at the time, the problem with the contracting biz is that it's contracting...

Thanks (0)
By David Gordon FCCA
24th Jan 2020 12:03

First the rules are still not yet clear.
Second, all my possible IR35 discussion clients set up the companies because the Contractors wanted it this way, and not because we advised the client to go Ltd.
My at risk clients are specialist engineers, not in the Construction or IT industries.
What has happened is that major contractors and or agencies in this sector have relocated outside of the UK. For example Dublin and Romania.

None of them receive any employee type benefits at all, nor holiday, sickness, or pension.

So, in the industry I am concerned about, HMG will simply lose a great deal of tax revenue.

Meanwhile I have not received any calls from anguished clients. -Thank Heaven-

Thanks (0)
By North East Accountant
24th Jan 2020 13:31

A huge tax risk with huge potential liabilities lands on your lap. What do you do?

PAYE old boy and pretty pronto.

Thanks (0)
blue sheep
25th Jan 2020 09:08

yep, this parrot is dead

Thanks (0)