HMRC Investigation Protection

[malvolio]

In which case, joining the PCG and following their advice would surely have been "don't take the contract, or pay up".

Which is hardly the same as "ignoring IR35"

He was already in the contract and had been long before IR35. That was the whole problem. Those early start cases, which are the ones that hit the headlilnes, had to define the case law.

Since around 2006 we've had enough knowledge to mitigate the effects and are getting better at it all the time. The mantra of "Join the PCG, do what you're advised to do and ignore IR35" is based on today, not 2001, and means that if you have a full understanding of the contractual situation and proper legal support, you are clear if you are in or out and needn't be bothered about it. It doesn't mean you should ignore IR35 itself, merely being prosecuted for it. Which is where we all want to be, isn't it?

The current reality is as I said earlier - you should start from a position of being outside and look for reasons why you might not be. Too many people insist on doing it the other way round.

[Kate Cottrell]

Here is an IR35 case for today - 2011

This case may cause a rethink for some on how they should be dealing with IR35 now.

The Finance & Tax Tribunal

Kate Cottrell

[doomage]

This case may cause a rethink for some on how they should be dealing with IR35 now.

The Finance & Tax Tribunal

Kate Cottrell

Quite a story there. My summary:

Beardy Unix dude starts contracting in early 90's after a couple of years unemployed. Tough times. Usual contracting story, although seems he always had the same agency.

Starts contract with Allianz in 2000. Project based contracts, extensions of between 1 & 4 months at a time. Up until 2003.

Then more or less offered indefinite work from 2003 onwards until retirement in 2007. This is the point of contention, 12 month rolling contract not tied to any particular project. Otherwise fairly typical contractor situation; used Allianz equipment, could have substituted but not realistically, paid out of his own pocket for some benefits (food, xmas party).

Para 55 interesting:

55. The type of situation, where we consider the contract worker analysis to be
realistic is the one where:
 an individual has a particular area of expertise;
 that area of expertise is one that he has found has not enabled him to gain full
time employment;
 the explanation for not gaining full-time employment is that the area of
expertise is likely to be one that various companies might need, but not on an
indefinite basis, but rather simply to complete a particular project;
 the type of work for which the worker is engaged is likely to be work outside
the core work of the business.
 the individual has only been able to gain work through rendering his specialist
expertise available through placement agents;
 the past pattern of work has confirmed all the above points of short
engagements with different companies, and many unwanted gaps between
engagements;
 the area of expertise is likely to be one where the client would indicate the
project to be done, and the hoped-for time frame for completion of the project,
but would not expect to be able to supervise or “control” the worker in any
way, simply because the expert would be engaged to do something outside the
expertise or competence of the company; and
 the company engaging the individual, engaging him for a project, would
consider it quite inappropriate to provide holiday pay, pension benefit, and the
other normal incidents of employment because they would all be inappropriate
for such contract workers.

[LisaContractorUmbrella]

This case may cause a rethink for some on how they should be dealing with IR35 now.

The Finance & Tax Tribunal

Kate Cottrell

Blimey So now they are saying that a ROS cannot be anything other than a sham if the contractor has no employees! Control is a reality if a contractor is not working on projects. He failed the first of the 'own business test' because he was paid for hours worked. Commissioners expected 'financial risk' to come from diminished profits from e.g. a project being undertaken on an inefficient basis. The Commissioners commented that the MOO test is of diminished importance, indeed, nearly meaningless.

Seems as though long-term contracting outside IR35 is a gnats risky

[malvolio]

This case may cause a rethink for some on how they should be dealing with IR35 now.

The Finance & Tax Tribunal

Kate Cottrell

Hmmm... Interesting,

I would bow to Kate's far superior knowledge but it occurs to me that you cannot lightly dismiss both a genuine RoS, even if a conditional one, and the Mutuality clause, on the suppostiion that the worker did not really want to be running a business, and that being evidenced by the fact that Allianz wanted to retain his highly valuable (and convenient) services. Given the monies at stake I would certainly appeal that ruling. Also not convinced by ignoring the client giving verifiably incorrect evidence on the basis that the contractual clause of of no relevance.

However it does further confirm the importance of behaving as a genuine business as a key factor is establishing deemed employement status and the absolute necessity that the contract has to refelct reality.

[Chugnut]

Surely alarm bells should have been ringing when they offered automatic annual extensions at the end of 2003? Sort of shot himself in the foot with that.

"And fundamentally Allianz wants to engage him as a permanent member of the team."

Not sure how that's entirely relevant though. It's not unreasonable to think a client may "chance their arm" sooner rather than later to see if a contractor wants to make a move to permanent, especially if they've had rubbish people in the past.

[northernladuk]

This is the point of contention, 12 month rolling contract not tied to any particular project. Otherwise fairly typical contractor situation; used Allianz equipment, could have substituted but not realistically, paid out of his own pocket for some benefits (food, xmas party).:

I don't think you can include a 12 month rolling, not tied to any project and then go on to say otherwise fairly typical situation. The rolling contract is a pretty big no no and surely a very important detail and makes it a very untypical contractor situation with some other similarities.

Its like saying 'It has 153 seats and 12 litre engine but otherwise a typical commuter car'. Doesn't make sense.

[LisaContractorUmbrella]

Hmmm... Interesting,

I would bow to Kate's far superior knowledge but it occurs to me that you cannot lightly dismiss both a genuine RoS, even if a conditional one, and the Mutuality clause, on the suppostiion that the worker did not really want to be running a business, and that being evidenced by the fact that Allianz wanted to retain his highly valuable (and convenient) services. Given the monies at stake I would certainly appeal that ruling. Also not convinced by ignoring the client giving verifiably incorrect evidence on the basis that the contractual clause of of no relevance.

However it does further confirm the importance of behaving as a genuine business as a key factor is establishing deemed employement status and the absolute necessity that the contract has to refelct reality.

But it wasn't a genuine ROS as he had no employees to be able to send in as replacement, he didn't know if the two people 'he knew of' who may be able to replace him were available and any candidate he provided would have had to have passed interview with Allianz

[malvolio]

But it wasn't a genuine ROS as he had no employees to be able to send in as replacement, he didn't know if the two people 'he knew of' who may be able to replace him were available and any candidate he provided would have had to have passed interview with Allianz

Substitutes don't have to be employees, merely supplied through your own company. In this market I don't think you would be pushed to scare up a dozen or so Unix heroes with insurance knowledge. And "such permission not to be unreasonably withheld" in a RoS rather implies the client has to be able to assess the candidate(s) somehow.

[northernladuk]

Seems as though long-term contracting outside IR35 is a gnats risky

Playing devils advocate I can't see how it can't be. There are two parties that have to be acting in a b2b way with a contract and over the years both those parties have to keep this relationship up. I would argue however long you try one or the other of the parties will let that slip over time as they have in the last 3 years here.

On another note I think this section should be the be all and end all..

31. Either party could terminate the contract with four week’s notice. Obviously
the contract could also be terminated immediately for gross misconduct etc., and
somewhat oddly, although the contracts at both levels could not be terminated in the
event of short illness, they could be terminated for any illness for a period of more
than two weeks. In the seven years during which Mr. Spencer worked with
Allianz, he was in fact never ill.

That line alone proves he is a contractor and was never a hidden permie. I rest my case m'lud