Very worrying - the expenses thing

[webberg]

I'm putting my calculator together comparing 15/16 with 16/17.

The assumption I've made is that if you operate via a Limited Company, then in any given week, you charge say

5 x day rate (400), plus £100 of expenses = 2,100

Your company pays you £100 of expenses, tax free in 15/16, and potentially taxable in 16/17.

Ignoring PAYE/Div tax etc, your CASH position in the two years is;

2015/16

Salary/div £2,000 (I've ignored overheads for this purpose)
Tax on salary/div (guess) £500
Expenses £100
Net cash £1,600.

2016/17

Salary/div £2,000
Tax on salary/div (guess) £550
Expenses £100
Tax on expenses £40
net cash £1,510.

£90 a week for say 46 weeks? £4,140 pa on a gross turnover of £2100 x 46 = £96,600.

Give or take a 4% difference.

Is that correct please?

[jamesbrown]

For IR35 v2 however, the examples given seem to indicate even the Prime Minister would be caught under the new direction and control definition.

I'm genuinely not following all this concern on the specific point about how SD&C (or the right to apply them) is interpreted (or the "or" versus "and"), although I certainly share much of the concern about the general tone and direction. In terms of how SD&C is interpreted, this has been established through case law from RMC through to Talentcore and the component factors have always been looked at in the round, rather than purely mechanistically. For example, control involves several aspects (what, when, where and how) and there are degrees of circularity between S, D and C. It's important to remember that any examples from HMRC are important only insofar as they propagate FUD (and these examples are likely to change anyway). They cannot have it both ways. Either a distinct test is legislated and they lose the deterrent effect (via FUD) and open the possibility of well-defined mechanisms to counteract the risk or they don't and the same case law stands. Perhaps someone could explain the heightened fear w/r to SD&C specifically (and I'm not talking about the other aspects, such as policing via agents/clients)?

[PerfectStorm]

Not a big commute then. 45p a mile 16 miles a day?

They have trains and tubes in London

That figure includes lunch!

[TestMangler]

I'm genuinely not following all this concern on the specific point about how SD&C (or the right to apply them) is interpreted (or the "or" versus "and"), although I certainly share much of the concern about the general tone and direction. In terms of how SD&C is interpreted, this has been established through case law from RMC through to Talentcore and the component factors have always been looked at in the round, rather than purely mechanistically. For example, control involves several aspects (what, when, where and how) and there are degrees of circularity between S, D and C. It's important to remember that any examples from HMRC are important only insofar as they propagate FUD (and these examples are likely to change anyway). They cannot have it both ways. Either a distinct test is legislated and they lose the deterrent effect (via FUD) and open the possibility of well-defined mechanisms to counteract the risk or they don't and the same case law stands. Perhaps someone could explain the heightened fear w/r to SD&C specifically (and I'm not talking about the other aspects, such as policing via agents/clients)?

I think you're missing the point that IR35 did not change the legal definition of employment, i.e. existing case law would be used to determine the difference. Do you seriously put it past this lot to legislate a definition of personal service in the context of small companies? And by that I mean legislate, which would render your previous case law irrelevant.

[jamesbrown]

I think you're missing the point that IR35 did not change the legal definition of employment, i.e. existing case law would be used to determine the difference. Do you seriously put it past this lot to legislate a definition of personal service in the context of small companies? And by that I mean legislate, which would render your previous case law irrelevant.

I think you're missing the point that nothing has changed other than an increased political will to address a perceived problem. A workable solution (an improvement on IR35) is just as difficult now as it always was. If they legislate, it will need to be draconian, easy to police, and difficult to avoid (and it's questionable whether that combination is possible). What is your analogy for something workable? The Australian PSI rules are draconian but they're no less less complicated than IR35 and my understanding is that they've failed and are likely to be overhauled again:

Changes to Contractor Laws Likely - Professionals Australia

It's possible that HMRC could legislate afresh and then, obviously, new case law would be required. Anyway, I quite clearly directed my point towards SD&C and not to the wider concerns about what HMRC may or may not do following this discussion; there seems to be a lot of concern about the degree to which "and" vs. "or" matters in SD&C and I'm not following the perceived significance of this...

[TestMangler]

I think you're missing the point that nothing has changed other than an increased political will to address a perceived problem. A workable solution (an improvement on IR35) is just as difficult now as it always was. If they legislate, it will need to be draconian, easy to police, and difficult to avoid (and it's questionable whether that combination is possible). What is your analogy for something workable? The Australian PSI rules are draconian but they're no less less complicated than IR35 and my understanding is that they've failed and are likely to be overhauled again:

Changes to Contractor Laws Likely - Professionals Australia

It's possible that HMRC could legislate afresh and then, obviously, new case law would be required. Anyway, I quite clearly directed my point towards SD&C and not to the wider concerns about what HMRC may or may not do following this discussion; there seems to be a lot of concern about the degree to which "and" vs. "or" matters in SD&C and I'm not following the perceived significance of this...

Only had a quick skim of your link, but this:

“The fact that a contractor is engaged on a project which runs for longer than 12 months”, said Mr Walton, “should not mean that they are penalised and denied legitimate business tax deductions.” “The PSI rules do not always reflect the reality of commercial practice,” he said. “We are keen to see this area of the PSI rules reviewed while maintaining protections to ensure that unscrupulous employers do not use the changes to avoid their employment obligations or unfairly divert professional liability.”

Would suggest that they are worried about business availability and a flexible workforce being allowed to thrive and contribute I very much doubt that our government have the same aims in mind. If they were approaching this with anything other than a dogmatic view that we are 'cheating', we wouldn't be where we are now.

I fully expect a full dose of draconian with a sprinkling of 'extra draconian' on top.

For clarity, I'm not disagreeing with you. In my opinion a lot of people on this thread are looking at this from the point of view that the government will use an 'obvious common sense' approach because ******** this up could cost serious revenue in the future, but if they actually took account of the unintended consequences, then there would be no such thing as ICTs. For example, can anyone on a board of IT contractors covering hundreds of clients and thousands of colleagues, give us an example of an ICT that is doing a job so highly specialised that no one in this country could have filled the role ?

[jamesbrown]

Only had a quick skim of your link, but this:

“The fact that a contractor is engaged on a project which runs for longer than 12 months”, said Mr Walton, “should not mean that they are penalised and denied legitimate business tax deductions.” “The PSI rules do not always reflect the reality of commercial practice,” he said. “We are keen to see this area of the PSI rules reviewed while maintaining protections to ensure that unscrupulous employers do not use the changes to avoid their employment obligations or unfairly divert professional liability.”

Would suggest that they are worried about business availability and a flexible workforce being allowed to thrive and contribute I very much doubt that our government have the same aims in mind. If they were approaching this with anything other than a dogmatic view that we are 'cheating', we wouldn't be where we are now.

I fully expect a full dose of draconian with a sprinkling of 'extra draconian' on top.

For clarity, I'm not disagreeing with you. In my opinion a lot of people on this thread are looking at this from the point of view that the government will use an 'obvious common sense' approach because ******** this up could cost serious revenue in the future, but if they actually took account of the unintended consequences, then there would be no such thing as ICTs. For example, can anyone on a board of IT contractors covering hundreds of clients and thousands of colleagues, give us an example of an ICT that is doing a job so highly specialised that no one in this country could have filled the role ?

Sure, I can see some worst case scenarios, but I don't see much point in dwelling on them, and I get the sense (possibly misplaced) from the discussion document that they're likely to go for improved administration (via clients/agents) rather than wholesale revision. I think there's a consensus that HMRC and HMG are incompetent in equal measure, but there's little point in navel gazing at this stage. Any concerns about damaging the flexible workforce were presumably overruled in Australia when the PSI rules were introduced, and this appears to have backfired. It would be better to make these representations now, although I'm as cynical as anyone else about the extent to which the discussion is open.

[BolshieBastard]

I'm genuinely not following all this concern on the specific point about how SD&C (or the right to apply them) is interpreted (or the "or" versus "and"), although I certainly share much of the concern about the general tone and direction. In terms of how SD&C is interpreted, this has been established through case law from RMC through to Talentcore and the component factors have always been looked at in the round, rather than purely mechanistically. For example, control involves several aspects (what, when, where and how) and there are degrees of circularity between S, D and C. It's important to remember that any examples from HMRC are important only insofar as they propagate FUD (and these examples are likely to change anyway). They cannot have it both ways. Either a distinct test is legislated and they lose the deterrent effect (via FUD) and open the possibility of well-defined mechanisms to counteract the risk or they don't and the same case law stands. Perhaps someone could explain the heightened fear w/r to SD&C specifically (and I'm not talking about the other aspects, such as policing via agents/clients)?

Honestly, you dont half chat some tulip. "mechanistically," "degrees of circularity," "insofar as they propagate FUD,"!

[jamesbrown]

Honestly, you dont half chat some tulip. "mechanistically," "degrees of circularity," "insofar as they propagate FUD,"!

You remind me of Father Jack, minus the funny.

Drink!

Go back to sleep.

[LisaContractorUmbrella]

I'm genuinely not following all this concern on the specific point about how SD&C (or the right to apply them) is interpreted (or the "or" versus "and"), although I certainly share much of the concern about the general tone and direction. In terms of how SD&C is interpreted, this has been established through case law from RMC through to Talentcore and the component factors have always been looked at in the round, rather than purely mechanistically. For example, control involves several aspects (what, when, where and how) and there are degrees of circularity between S, D and C. It's important to remember that any examples from HMRC are important only insofar as they propagate FUD (and these examples are likely to change anyway). They cannot have it both ways. Either a distinct test is legislated and they lose the deterrent effect (via FUD) and open the possibility of well-defined mechanisms to counteract the risk or they don't and the same case law stands. Perhaps someone could explain the heightened fear w/r to SD&C specifically (and I'm not talking about the other aspects, such as policing via agents/clients)?

The concern is that SDC has not, historically, been the only determination for employment status - the cases you mention also consider MOO and ROS which have always been, from what I have read, primary considerations with SDC as secondary. Supervision OR Direction OR Control OR the right of any of these has enormous scope e.g. it could be successfully argued that a High Court Judge is subject to Direction as he will receive sentencing guidelines from the Government yet most people would view their role as being completely autonomous. You could argue that a tradesman coming to your home would most definitely be self-employed but, let's say, a man comes to build and fit a new staircase - if you tell him what timber you'd want used or when you want it completed by you have given direction. HMRC have Employment Status Manuals that cover SDC and we could assume that they would use the same criteria as they have previously BUT the way that the consultation and discussion documents have been written, they COULD use much wider ranging arguments and have a good chance of success in court.