Going back to work as an external consultant for my employer after retirement

Stimmer61

I wonder if anyone can help with this please?

I am due to retire from my post in higher education at the end of August, and had been asked to come in and do some work post-retirement as an external contractor. I'd assumed this would be straight-forward (my colleague did the same thing without problems last year), but I've now been told this by my employer's tax/legal team.

"They have identified that there is not a sufficient gap between his being employed to having a contractor’s agreement, and the work that he is being asked to undertake is not sufficiently different from the employed work he had with us.

Had he not been retiring we could have offered him a fixed term contract to undertake this work. However, he is retiring and under the pension scheme rules, staff can’t have any known employment prior to them retiring."

I've asked for clarity about what would be a 'sufficient gap', but still not received an answer, so I wondered if anyone could give me some guidance please. My pension is with USS, if that helps.

Thank you.

leosayer

Instead of "retiring" and taking your pension, what happens if you simply resign and then commence your pension at a later date, after your fixed-term contract ends?

Lowtrawler

Stimmer61 said:

I wonder if anyone can help with this please?

I am due to retire from my post in higher education at the end of August, and had been asked to come in and do some work post-retirement as an external contractor. I'd assumed this would be straight-forward (my colleague did the same thing without problems last year), but I've now been told this by my employer's tax/legal team.

"They have identified that there is not a sufficient gap between his being employed to having a contractor’s agreement, and the work that he is being asked to undertake is not sufficiently different from the employed work he had with us.

Had he not been retiring we could have offered him a fixed term contract to undertake this work. However, he is retiring and under the pension scheme rules, staff can’t have any known employment prior to them retiring."

I've asked for clarity about what would be a 'sufficient gap', but still not received an answer, so I wondered if anyone could give me some guidance please. My pension is with USS, if that helps.

The problem is related to IR35 and whether you are deemed to be an employee or a genuine contractor in the new role. There are lots of grey areas relating to this but your employers tax / legal team have clearly reviewed the intended contract and concluded you would be considered an employee.

The "sufficient gap" is something of a red-herring because whether you had been absent 2 weeks or 5 years, the test they should be performing to determine if you are an employee or a contractor would be the same. Company tax teams are aware HMRC will set a red flag for any individual leaving employment and returning to the same employer as a contractor and that period is generally considered to be around 1 year. It means breaches of the IR35 rules are more likely to be picked up in that period.

You are falling foul of the following in the USS scheme:
"Under the Scheme Rules, you won't be deemed to have retired if you start another role in which you can build a USS pension (with either your current or a new employer). However, if you are already retired and then offered another role, your employer may need to automatically enrol you into a pension scheme. You’ll need to speak to your employer about whether you can re-join USS."

What this means is, because you are not yet retired and they want to offer you what would be deemed an employed role prior to your retirement, you would have your retirement cancelled if you accepted. However, if you retire at the end of August and then get offered the role in September, you can accept and come back as an employee (but not contractor).

Your employer will need to consider what pension offering they may be able to provide you for the new role and you may want to consider the tax position.