Budget 2015: Chancellor announcement on Employment Intermediaries: Temporary workers

[Zero Liability]

I don't see how the client can disclaim any responsibility in the matter. They are saving on NI and don't have to worry about employment rights and other such accommodations. Yet should the contractor be found inside, they are then stuck with the NICs their presumed employer has no part in paying. If the client just rolls over and claims you're an employee, and can't be bothered doing the basic research and putting in the minimal effort required to avoid this scenario, I see no issue with them being stuck with the burden of it, irrespective of what documents they may sign. Sure, it benefits Hector for them to assume no liability and just give answers that may differ wildly from reality, but why should a company with its own legal department competent enough to research this topic be let off the hook? I can only assume because if that were to happen, IR35 would quickly become utterly unenforceable, which it may yet become with the new changes to T&S expenses.

Also, considering that temps can often evoke clauses like the substitution clause, or have contracts with no MOO between contracts, they would still meet the criteria for being outside IR35, were they to go limited. I appreciate what you're saying but the law is as it is, and IR35 has gone far beyond its original scope, having become the incredibly vague, arbitrary tool that it is now that is so reliant on deception on Hector's part, with a rather sketchy track record that is reliant on very dubious assumptions to demonstrate any benefit from it. Far better would be to take a grounds up approach where you get those contractors who are most "business-like" getting the associated tax treatment, those who are somewhere in between paying a reduced amount of tax due to surrendering their employment rights, and then permies. My guess is that this is how FLCs will be "sold", but in practice they're a tool to do what IR35 has failed to do, rather than a means of ensuring the flexible labour force sees some benefit in surrendering employee benefits/rights etc. Even better would be to scrap all this nonsense and just go with a flat tax on income or a VAT, above a minimum threshold, and do away with differential rates etc.

[jamesbrown]

I don't see how the client can disclaim any responsibility in the matter. They are saving on NI and don't have to worry about employment rights and other such accommodations. Yet should the contractor be found inside, they are then stuck with the NICs their presumed employer has no part in paying. If the client just rolls over and claims you're an employee, and can't be bothered doing the basic research and putting in the minimal effort required to avoid this scenario, I see no issue with them being stuck with the burden of it, irrespective of what documents they may sign. Sure, it benefits Hector for them to assume no liability and just give answers that may differ wildly from reality, but why should a company with its own legal department competent enough to research this topic be let off the hook? I can only assume because if that were to happen, IR35 would quickly become utterly unenforceable, which it may yet become with the new changes to T&S expenses.

Also, considering that temps can often evoke clauses like the substitution clause, or have contracts with no MOO between contracts, they would still meet the criteria for being outside IR35, were they to go limited. I appreciate what you're saying but the law is as it is, and IR35 has gone far beyond its original scope, having become the incredibly vague, arbitrary tool that it is now that is so reliant on deception on Hector's part, with a rather sketchy track record that is reliant on very dubious assumptions to demonstrate any benefit from it. Far better would be to take a grounds up approach where you get those contractors who are most "business-like" getting the associated tax treatment, those who are somewhere in between paying a reduced amount of tax due to surrendering their employment rights, and then permies. My guess is that this is how FLCs will be "sold", but in practice they're a tool to do what IR35 has failed to do, rather than a means of ensuring the flexible labour force sees some benefit in surrendering employee benefits/rights etc. Even better would be to scrap all this nonsense and just go with a flat tax on income or a VAT, above a minimum threshold, and do away with differential rates etc.

I am not speaking to the morality or desirability, but to the reality. Unless there is an obvious distinction between different workers on the ground (i.e. obvious to the client), there is no reason for a client to maintain, or feel the need to maintain, an artificial distinction (and frankly, a few contract clauses are not a reason). A client is only given a reason to distinguish if either: 1) the reality of the situation is unquestionably one of independent contractor and client (B2B) because the client does not have those skills in-house and the contractor cannot, therefore, be confused with in-house workers; or 2) the legislation dictates that they should care, because there are penalties (to the client) for not distinguishing between different shades of workers.

I would argue that (1) applies to only a small fraction of contractors, in practice, and that (2) creates a perverse incentive for contractors to argue that (1) applies when it does not. It's perverse because the situation is win-win for the client. The client can procure temp resources under the guise of those workers being independent contractors, responsible for their own tax affairs (and hence they save money with limited risk). It's also perverse because the number of workers operating in this grey area dictates that IR35 must be vague; it's addressing a perceived risk to the Exchequer. You should be under no illusion that IR35 was ever intended to be something other than vague. In contrast, in a true B2B scenario, the costs and benefits are distributed more evenly; the client saves money from avoiding the need to in-house expensive skills, and the contractor benefits from dictating terms (minimal D&C) and commanding an excellent rate (with any tax incentives being secondary).

Given this grey area, I think there is, in fact, a notional gap for something like an FLC, but it will not be used as intended by IPSE (or anyone else) in the current climate. It will be used as a vehicle for HMRC to police the Exchequer risk. This is where the rhetoric on a flexible economy meets the working assumption that contractors are disguised employees to be proven otherwise.

[Zero Liability]

Which is why I am quite concerned that anything that comes in to replace IR35 will not really address its flaws or unfairness but will instead be introduced to achieve what it failed to do. I quite agree with you on how the incentives are currently structured with regard to IR35 as far as the client is concerned; luckily the burden of proof on Hector is quite high. This recent move, to bar umbrella agency workers (and potentially those inside IR35) from claiming T&S expenses, does expose that this is another naked tax grab, though, rather than anything to do with supposed "concerns" for what they term vulnerable workers in the case of the former.

[jamesbrown]

I think the success of IR35 really depends on your perspective. It's been painful for many contractors and a minor irritation for clients. That said, many contractors (myself included) are perfectly happy operating IR35 appropriately. For HMRC, the costs and benefits are not distributed evenly; the burden of costs is really on contractors and, to a large degree, I think HMRC believes its own rhetoric on the Exchequer risk. Thus, for HMRC, IR35 has worked perfectly well (minimal costs, large notional savings), or at least it had until the political risk increased w/r to all areas of tax avoidance. The ongoing feigned horror among politicians of all political persuasions and hence all quarters of the press about any "greyness" remaining in the tax system (and hence the absurd merging of avoidance/evasion) is inevitably going to lead to "solutions" such as FLCs for all the wrong reasons.

So far, all of this has just been an aside from my POV - I don't lose any sleep over it; like I said, I worry more about the state of the market and contracts. However, we'll see if that remains the case. A ham-fisted implementation of FLCs could be materially fecking annoying.

[Zero Liability]

The FLC could be a very good development in filling that void, particularly if it were an interim measure as we transitioned to a less convoluted tax system, but like you I have little faith that it will be any of these things in actual fact, and almost certainly will end up not being "optional". Too many political agendas to fill, not enough focus on taking into account changing commercial realities that don't segue very well into permiedom and which warrant a rethink of the current system.

[SpontaneousOrder]

Week1 - no D&C
Scrum master: What u done/doing ?
Perm: coding
Contractor: coding
Client sales sitting in: <quiet>

Week2 - "Broadly" ?
Scrum master: What u done/doing ?
Perm: coding
Contractor: coding
Client sales sitting in: Lets see it. Good, works perfectly. Problem is the background is green. Following last week's email from the
MD it must be blue. Anything other than blue is unacceptable. We need it with a blue background for a presentation next week.

So building a product according to the customer's needs is D&C?

And if the ScrumMaster asks what you're doing/done, then you're probably not doing Scrum properly.

[BlasterBates]

The trouble with Agile/Scrum is you're not doing a specific development task for several months, you're picking up a new task probably once or twice a week, and it's whatever is top of the list. It could be a permie or it could be a contractor picking up the task. If there are special contractor tasks on the scrum board I would say that would be better. Even worse if he has to abide by strict coding and development guidelines. A contractor in an agile environment looks a bit like a supply teacher.

[SueEllen]

The trouble with Agile/Scrum is you're not doing a specific development task for several months, you're picking up a new task probably once or twice a week, and it's whatever is top of the list. It could be a permie or it could be a contractor picking up the task. If there are special contractor tasks on the scrum board I would say that would be better.

However you forgot to add it's up to the group to determine the tasks.

[BlasterBates]

However you forgot to add it's up to the group to determine the tasks.

The tasks in our agile group are defined by Product Managers, and it's clear which components are affected and then you pick the ticket that is highest priority. In fact the permies have a bit of a choice but the contractors are usually told what tickets they should work on, they can't pick and choose, which one could argue is something that differentiates permies and contractors.

[MrWebDev]

However you forgot to add it's up to the group to determine the tasks.

Exactly! Sprint planning etc

The tasks in our agile group are defined by Product Managers, and it's clear which components are affected and then you pick the ticket that is highest priority. In fact the permies have a bit of a choice but the contractors are usually told what tickets they should work on, they can't pick and choose, which one could argue is something that differentiates permies and contractors.

This is where I think the permie/contract difference lays. For example I specialise in a certain field of web development, so I'm only given/agree to work on cards/tasks specific to that area (note SueEllen's earlier comment). The permies will pickup the cards in the backlog set by priority order, so I'm almost on a different stream of work if you like. As I am the only one in the 'team' that specialises in that particular type of work I believe that sets me aside. I believe where this may fall down is if I'm on a project with a permie that also happens to do the same type of work as myself, and I share my cards/tasks with he/she.