IR35 - Media Scaremongering?

[sloverid]

It would appear that with each weekly newsletter sent round by CUK, there is a new article regarding IR35 reminding us contractors how flaky (not to mention confusing) the guidelines are along with how ruthless the HMRC pursue them.

However, I increasingly feel that we are only get one side of the story. Let's take a quote from a recent article from Kate Cottrell:

"gives HMRC a total of 4 out of 4 wins for IR35 cases at the highest courts that IR35 cases have been heard"

This sounds pretty scary to me. But let's not forget this article was written by Kate Cottrell, whose company make money by analysing freelancer’s contractors to determine if they fall within IR35. Her vested interest immediately starts the 'hang on a minute' alarm in my head. The articles are also typically written in lawyer speak which is makes it mostly impenetrable to thickies like me, as what we don't understand we typically fear. A couple of metaphors, analogies and examples in plain English wouldn't go amiss.

What I’d like to see is some facts and stats from the other side, which aren't so often visible. Answers to such questions as:

1. How many IT contractors operate as 'one man bands' currently in the UK?
2. Of those, how many are annually investigated by HMRC?
3. How many of these investigations are quashed before court proceedings?
4. What sort of losses do contractors experience when they lose to HMRC?

Until I know the answers to questions like these, only then will I take IR35 more seriously as I can't help but feel we're being controlled by fear to purchase goods or services (a la all other types of media in western society).

I don't want to say I'm ordering a big bucket of sand to burying my head into regarding IR35, nor am I saying the threat isn’t out there, but until we have more balanced views and articles, why should I think otherwise?

It's clear that the bottom line is that IR35 is mockery of a sham and an invention of a crooked, not a fair, government. But to quote a line from the Office Pest comic strip where he rides a polar bear into work that chews the heads of his fellow employees, "It's here now, and we've got to deal with it"

Does anyone have any answers or thoughts on this?

[cojak]

I'm sure Mal will..

[northernladuk]

Bit of a heavy question this one. It is hardly going to be answered by us I don't think. One thing I will add is that this has been discussed on a massive scale on here with posts ranging from have you been investigated to why would you ever admit you are inside IR35 which give a lot of great insights that may further answer your fears. I dont think a couple of lines from each of us in this thread will really answer the in depth question you have leveled.

HTH

[malvolio]

1. About 1.4 million. Or 4.5 million if you count non-freelance workers like small businesses and traders.

2. 50-60 at most.

3. 95% plus of those with representation. Closer to zero if you DIY

4. The contractual earnings are recalculated to get the IR35 total due, then PAYE, NICs and CT already paid is deducted to get a net payment, and interestest added. Penalties rarely apply.

Now join the PCG. Where do you think I got the data from?

[MaryPoppins]

I'm not sure I completely agree that IR35 is a terrible thing. Some elements of it probably aren't right, but in general I think that contractors should act like contractors as much as possible.

A Ltd Co is the best (legal) way to maximise income, but to me, it doesn't quite fit our one man band type requirement.

Disguised permies sitting in the same role for years, earning more than the actual permies around them, should be challenged.

[cojak]

Penalties rarely apply.

Up until now, that is.

Since penalities seem to be earned for almost anything these days, that might well change.

cojak - PCG Member...

[malvolio]

cojak - PCG Member...

And one who really ought to be up for a CC place. Go on, you know you want to....

[Wanderer]

An excellent first post, sloverid.

However, I don't think it's the MEDIA who are scaremongering about IR35, it's the Inland Revenue. The more fear they can spread, the more money they take. They must have made billions out of this with no change in the law and at little cost to them. Just take on a few high profile cases and hopefully win a few and then everyone will roll over and pay up the extra IR35 taxes.

I think there are a lot of contractors who preach the "fire and brimstone" line on IR35 while quietly working outside it themselves. As long as the IR35 bluff is working and a fair portion of contractors accept that they are caught by it then the IR will leave the others along. Once the cat is out of the bag that IR35 is a complete sham and you can trade outside it with impunity then the IR will come up with some enforcement or change the law (retrospectively if they could).

It's like the EBTs. Dodgy as hell but legal. Everyone says don't do it but there are loads of people taking the chance. No doubt they will change the law one day and stop it but until then they want to put the fear of god into people. When too many people start exploiting loopholes then they have to close them down - especially when people make a business out of helping tax payers exploit loopholes.

The tax system seems to be like a massive leaky bucket. There is water pissing out of leaks everywhere and when one gets big enough they try to plug it with a bit of cloth.

[malvolio]

Have you considered how many companies there are whose business is built on the existence of IR35....?

Incidentally, HMRC don't set the laws, Parliament does.

[smalldog]

An excellent first post, sloverid.

However, I don't think it's the MEDIA who are scaremongering about IR35, it's the Inland Revenue. The more fear they can spread, the more money they take. They must have made billions out of this with no change in the law and at little cost to them. Just take on a few high profile cases and hopefully win a few and then everyone will roll over and pay up the extra IR35 taxes.

I think there are a lot of contractors who preach the "fire and brimstone" line on IR35 while quietly working outside it themselves. As long as the IR35 bluff is working and a fair portion of contractors accept that they are caught by it then the IR will leave the others along. Once the cat is out of the bag that IR35 is a complete sham and you can trade outside it with impunity then the IR will come up with some enforcement or change the law (retrospectively if they could).

It's like the EBTs. Dodgy as hell but legal. Everyone says don't do it but there are loads of people taking the chance. No doubt they will change the law one day and stop it but until then they want to put the fear of god into people. When too many people start exploiting loopholes then they have to close them down - especially when people make a business out of helping tax payers exploit loopholes.

The tax system seems to be like a massive leaky bucket. There is water pissing out of leaks everywhere and when one gets big enough they try to plug it with a bit of cloth.

they can and they do, look at BN66 or Section 58 of the finance act. Retrospective tax measure going back to 87 announced a few years back that some people are challenging through the courts, including the likes of PWC and KPMG