Worst case scenario

[northernladuk]

I don't see a problem with the term true contractor, proper contractor, real contractor or whatever. There is a big difference between those that run their affairs properly and those that don't have a clue. It's because we don't differentiate we are going tonight a sledgehammer that's going to affect us all. If HMRC did a decent job in the last we might not be here. Discuss

[Contreras]

The only compromise I can see is that the contractor is required to operate a deemed payment and must provide proof of that deemed payment to the client, in order to mitigate their risk. That way, the client polices the arrangement, by judging status and seeking assurances from the contractor, but it remains off payroll. I can't envisage a halfway mechanism that doesn't encounter all sorts of problems (contractual arrangement, lack of limited liability, transfer of PAYE from business to contractor etc.). For those instances where an arrangement is deemed outside, the client may nevertheless require the contractor to indemnify them by way of an insurance policy (much like the current offerings, but for clients rather than contractors).

Yes it could be implemented like that, but it doesn't need to be so onerous for the client.

I think we need to separate out 'policing' and 'enforcement' :-

The 'policing' is in the pre-judging of status, that's all. Easily dealt with in standard contract wording.

The 'enforcement' is anything that gets the tax paid. Ignoring the contract, or lying to your accountant, in order to avoid tax, isn't avoidance - it's evasion and a criminal matter - that should be enough.

[jamesbrown]

Yes it could be implemented like that, but it doesn't need to be so onerous for the client.

I think we need to separate out 'policing' and 'enforcement' :-

The 'policing' is in the pre-judging of status, that's all. Easily dealt with in standard contract wording.

The 'enforcement' is anything that gets the tax paid. Ignoring the contract, or lying to your accountant, in order to avoid tax, isn't avoidance - it's evasion and a criminal matter - that should be enough.

I understand what you're saying, but I suspect that isn't enough because HMRC is not party to the contract. A joint and several liability can be pursued anywhere in the contract chain, regardless of whether one part of the chain becomes insolvent. Thus, I think a contract matters only in the sense that it can be enforced, in principle, by the contracted parties (in other words, once a debt is paid, the client could pursue the contractor's company). Of course, that isn't the commercial risk, and I think the client would want to satisfy themselves that the commercial risk is covered (i.e. I can't see how the client wouldn't be part of the enforcement). However, I'm just a contractor, not a lawyer, so I could be wrong.

[centurian]

There is another sledgehammer approach which hasn't been discussed.

If a ClientCo decides a contractor should be IR35-able, they could simply refuse to engage you as a LtdCo at all - and only offer you the contract on a PAYE umbrella basis.

Think this is bonkers - there'e nothing to stop them engaging with you as a sole trader, but 99.99% don't because it renders them liable. Likewise some agencies have a whitelist of umbrellas - sometime due to commission, but also to avoid the offshore guys.

[ShandyDrinker]

I don't see a problem with the term true contractor, proper contractor, real contractor or whatever. There is a big difference between those that run their affairs properly and those that don't have a clue. It's because we don't differentiate we are going tonight a sledgehammer that's going to affect us all. If HMRC did a decent job in the last we might not be here. Discuss

Yeah. Unfortunately there are far too many that don't have a clue hence ending up where we are.

It depends on your interpretation of "if HRMC did a decent job". From the HMRC perspective they probably felt they did a good job as they made the legislation so vague that people would be scared into paying. From the legal/insurance perspective it has also been very lucrative allowing the likes of QDOS do very nicely.

There is another sledgehammer approach which hasn't been discussed.

If a ClientCo decides a contractor should be IR35-able, they could simply refuse to engage you as a LtdCo at all - and only offer you the contract on a PAYE umbrella basis.

Think this is bonkers - there'e nothing to stop them engaging with you as a sole trader, but 99.99% don't because it renders them liable. Likewise some agencies have a whitelist of umbrellas - sometime due to commission, but also to avoid the offshore guys.

The problem is clients refuse to engage you as a LtdCo, they might not be able to attract contractors. As another post stated, everyone will then scream skills shortage and we know the rest.

[LondonManc]

It's not quite that simple though it is?

That's why I said it depends. That's without knowing the full state of IR35Mk2. People are bouncing ideas around based on worst case.

It's very much down to the individual, their circumstances and what motivates them. I'd personally keep contracting because my work is project-based. Delivering something then dying of boredom for 3 years as I "support" it is what turned me to contracting in the first place.

[expat]

That's why I said it depends. That's without knowing the full state of IR35Mk2. People are bouncing ideas around based on worst case.

It's very much down to the individual, their circumstances and what motivates them. I'd personally keep contracting because my work is project-based. Delivering something then dying of boredom for 3 years as I "support" it is what turned me to contracting in the first place.

+1M

Expat in "2 days from end of contract and not looking yet" mode.

[LisaContractorUmbrella]

In case you haven't seen it How HMRC is revoking tax relief on contractor expenses :: Contractor UK. We found out yesterday that HMRC will be applying the same criteria to establishing SDC as they do in the agency legislation contained within section 44(2) of ITEPA i.e. if you work through an agency there will be an automatic presumption of SDC.

[The Spartan]

I'm wondering how this will effect current contracts, for example my current role runs until July 2016. So I'm guessing from April 2016 I'll be screwed if everything goes through as it presently stands if HMRC are using the SDC criteria from section 44(2) ITEPA, is there a possibility it will be applied to the whole duration of the contract?

[Guesstimator]

Thanks for link Lisa... I think

Oddly, the agencies are the last element who are likely to wield SDC and easiest to prove they don't, but it doesn't seem like there's any way to demonstrate that as it's a case of 'we say they do'