Worst case scenario

[Zero Liability]

I wonder how all this will be implemented... will we be temporary individuals, self employed, still running LTD companies? I think IR35 1.0 was simple when it was HMRC vs LTD, this sounds like a potential clusterfudge...

I wonder how much they expect to recoup for it..:/

Another thing that gets me is when people say "As a contractor you earn so much more than a permie" - well yeah of course we do because we choose the insecurity and risk that all these "Oh I could never go contract I need my job security" people choose not to

Plus lack of all the other employment rights, and of course all the additional costs of employment to the client.

[Guesstimator]

Oh I'm complaining alright, you'll both find my witterings in your surveys..

I guess what I was clarifying was whether the tack of avoiding the presumption of SDC, by having the agency sign up to state so (and rendering themselves liable for back tax if the worker is subsequently found to be under SDC ) is widely used and it sounds like it hasn't.

ie this is the first real attempt to get another party to police SDC by making them co-liable, albeit on T&S.

[ShandyDrinker]

I see it more like the PSC argument. It's a thing that neither does nor should exist that we're accepting does and should exists, thus giving creedence to the suggestion that the regulations we're suffering from should exist. I think it weakens our position as a class and I'll attempt to further that point with my response to ShandyDrinker.

As a contractor that's never been anywhere more than a year, I still take less risks than the others of my kind because:-

a) I'm polyglot developer who does operations. If devops dries up, I go backend. If backend dries up, I'll do some JavaScript. My job security is my versatility.
b) I have a nice face.
c) I'm charismatic.
d) I'm super talented.
e) My fields are super popular.

Lets assume for a moment I'm not just full of myself and these things are actually true, should I be taxed more because I'm in the enviable position of being desirable thus assume much less risk than you ugly bad people? Statistically it's suggested that tall men do better in the careers, should they pay a tall tax?

I know it's a silly point, but I'm using it to draw parallels to the contractor who actually delivers well enough for their client to actually want to keep them for 10 years. He shouldn't be punished for his success, neither should I, nor should the guys who are taller than me and nor should you. Any argument to the contrary is falling for the governments rhetoric.

The reason we should be able to use it is because it exists. If your accountant, solicitor, big company owner or anyone else can incoperate and offset tax liability then I should be able to too. That's fairness. Without IR35 your everyman in the street can also incoperate to the mutual advantage of their employers when they also became desirable enough assets for this to become amenable. That's fairness. What's not fair is seperating our companies into a class for the plebs, but by accepting the argument against those so-called contractors, you're accepting that there should be an upper and lower class for companies, which is where we lost because as people who work for a living, we're never going to be on the right side of that line no matter how much more of a contractor you think you are than the others.

I can see what you're driving at and for the most part your points are completely valid.

Given the discussions that have been going on in this thread and elsewhere today (How HMRC is revoking your right to expenses), I think there are bigger issues afoot which will affect us all if we don't get involved.

[centurian]

Option 1. It will be the engager’s responsibility to confirm with the employment intermediary whether the contracted worker will be under the right of supervision, direction or control, to allow for the appropriate tax relief to be available. If HMRC identifies that the rules for travel and subsistence tax reliefs have not been applied compliantly, and that inappropriate or false claims have been made, the engager for whom the worker provides their personal services, will be jointly and severally liable to HMRC for any outstanding obligations.

This will allow HMRC to pursue the engager for any debt that arises for travel and subsistence tax relief misuse where the employment intermediary can show that they were misled by the engager with regards to the manner in which the worker’s employment would be carried out, or, if appropriate, where HMRC are unable to pursue the employment intermediary for any reason

So ClientCo has to effectively sign a blank cheque and be completely at the whim of whether the contractor submits expense claims.

Sorry guys, but this will scare the living tulip out of ClientCo's.

If I were in a resourcing & risk/compliance function in a ClientCo, I would be giving serious consideration to forming a strategy to wean the organisation off LtdCo contractors completely - and only hire "contractors" as PAYE temps.

[Zero Liability]

I can see what you're driving at and for the most part your points are completely valid.

Given the discussions that have been going on in this thread and elsewhere today (How HMRC is revoking your right to expenses), I think there are bigger issues afoot which will affect us all if we don't get involved.

It's all inter-related, and I think fool is quite right to put the focus where he has (i.e. lack of employment rights). They've been allowed to get away with highly arbitrary definitions and presumptuous assertions so much so that they've now redefined the language to suit their purposes, all to plug holes in the very opaque tax system, driven by excessive spending on part of the govt. The figures behind any "protected yields" are a house of cards waiting to collapse. The HoL review predicated any support for IR35 on the assumption that hector could justify said figures, which they have been utterly unable to do. With the dividend tax coming in, that protected yield will wither away further. Yet now here these measures come and it's assumed they must be introduced to protect the Treasury's interests, with little regard being given to the broader economic consequences, nevermind the fairness of it.

I just hope people like this will be making the case now that it matters most.

[JB3000]

So ClientCo has to effectively sign a blank cheque and be completely at the whim of whether the contractor submits expense claims.

Sorry guys, but this will scare the living tulip out of ClientCo's.

If I were in a resourcing & risk/compliance function in a ClientCo, I would be giving serious consideration to forming a strategy to wean the organisation off LtdCo contractors completely - and only hire "contractors" as PAYE temps.

The umbrella/PSC would need to demonstrate that the client had got their SDC decision incorrect in order for hector to go after the client for the tax.

For example, if the client says to the umbrella/psc you are not SDC and then the umbrella/psc got investigated for claiming t&s and HMRC found out the umbrella/psc was sdc it would be the client's fault and they would have to pay the tax. However if the client says to the umbrella/psc you are SDC and the umbrella/psc claims t&s then hector would not be able to go after client, he would have to go after umbrella/psc. Hector can only go after the client if the client provides false information (not if the umbrella/psc abuses the system).

Consequently I can see many clients saying everyone is under sdc. Come to think of it my client has "the right" to sdc me as well. Time for qdos ir35 tax liability insurance me thinks

[ShandyDrinker]

It's all inter-related, and I think fool is quite right to put the focus where he has (i.e. lack of employment rights). They've been allowed to get away with highly arbitrary definitions and presumptuous assertions so much so that they've now redefined the language to suit their purposes, all to plug holes in the very opaque tax system, driven by excessive spending on part of the govt. The figures behind any "protected yields" are a house of cards waiting to collapse. The HoL review predicated any support for IR35 on the assumption that hector could justify said figures, which they have been utterly unable to do. With the dividend tax coming in, that protected yield will wither away further. Yet now here these measures come and it's assumed they must be introduced to protect the Treasury's interests, with little regard being given to the broader economic consequences, nevermind the fairness of it.

I just hope people like this will be making the case now that it matters most.

What's a real shame here is that the dividend changes are going to have enough of an impact on their own but the combination of the expenses changes and IR35 changes means that our sector is arguably being hit the hardest of anyone since the election.

It's not just people like the person in the article you added a link to but everyone involved in the contracting ecosystem from the recruitment agencies through to the accountancy firms such as Nixon Williams, SJD and so on.

[fool]

I can see what you're driving at and for the most part your points are completely valid.

Given the discussions that have been going on in this thread and elsewhere today (How HMRC is revoking your right to expenses), I think there are bigger issues afoot which will affect us all if we don't get involved.

I agree that the real issues are what's coming next, but it's the success of the divide an conquer strategy that left us seperatly vulnerable from other business.

Remove the PSC definition and force the Government to apply the rules equally to all LTDs and my money is on them almost certainly folding.

Alternativly, we accept we're a different type of company and prepare for the shafting. It's just my 2p though, I'm going to drop the point now.

[mudskipper]

This was the question asked:

"Can you please clarify something for me – in the T&S proposal document it is stated that the SDC test will be applied ‘in a similar way to that currently used for agency workers in section 44(2) of ITEPA. That section makes a presumption of SDC if the worker is engaged through an employment agency – will that be the case now??"

The answer was: "Yes, we will be replicating the revised section 44."

"Where a worker is engaged by or through an agency, there will be a presumption that there is (or there is the right of) supervision, direction, or control over the worker". Towards the bottom of the page here: ESM2037 - Agency and temporary workers: agency legislation - provisions from 6 April 2014: supervision, direction or control (as to the manner in which the worker provides the services)

The whole of that section reads:

"Where a worker is engaged by or through an agency, there will be a presumption that there is (or there is the right of) supervision, direction, or control over the worker. This means it is the responsibility of the agency that contracts with the client to whom the worker provides their services to operate PAYE (see ESM2039) and act as the secondary contributor for NICs (see ESM2040). When the agency does not consider a worker is subject to (or to a right of) supervision, direction, or control by any person, then they will need to keep evidence of this (see ESM2042)."

So this must be in relation to who this applies to - guess the reporting stuff comes into it - i.e. if you're an agent not doing PAYE, you have to report the payments.

But without fully understanding how all this stuff fits together, it's difficult to see how that sentence would apply to me, given that I'm not PAYE through the agency.

So if they simply replicate it, then how are we included?

[jamesbrown]

The whole of that section reads:

"Where a worker is engaged by or through an agency, there will be a presumption that there is (or there is the right of) supervision, direction, or control over the worker. This means it is the responsibility of the agency that contracts with the client to whom the worker provides their services to operate PAYE (see ESM2039) and act as the secondary contributor for NICs (see ESM2040). When the agency does not consider a worker is subject to (or to a right of) supervision, direction, or control by any person, then they will need to keep evidence of this (see ESM2042)."

So this must be in relation to who this applies to - guess the reporting stuff comes into it - i.e. if you're an agent not doing PAYE, you have to report the payments.

But without fully understanding how all this stuff fits together, it's difficult to see how that sentence would apply to me, given that I'm not PAYE through the agency.

So if they simply replicate it, then how are we included?

It is rather confusing, but I think we're talking about separate vehicles here. There are three main sets of regulations: 1) The agency legislation; 2) MSC legislation; and 3) IR35. They are operated in that order of priority. There are several conditions that must be met for the agency legislation to apply (all conditions must be met) and one of these concerns the nature of the income. Since the PSC distributes any profit as employment income (salary) to which PAYE is already applied, or dividends, which do not arise from the provision of the worker's services, none of this income is within scope of the agency legislation. Of course, the PSC is potentially also an "agency" for the purposes of the agency legislation, and the rules might apply if they subcontract to a self-employed person (for example). Separately, the agency also has a reporting requirement and must report on payments made to PSCs.

I think what we're talking about now is beyond the scope of the agency legislation, although elements of that will be used as a template. We're talking about changes to the rules surrounding expenses and changes to the rules surrounding IR35, both of which are likely to revolve around SDC. I don't have a copy of the updated Section 44 (2) of ITEPA to hand, but I think Lisa is saying that a worker operating via an agency is presumed subject to SDC. Perhaps someone can post the relevant section. The point being that, if this is adopted for the purposes of IR35, it would apply in that context (not in the context of the agency legislation). Separately, if the client is responsible for determining status and is made financially liable for that determination (in terms of the tax or a penalty), they would be unlikely to state that the worker was not subject to SDC (i.e. to counter the presumption). In other words, something that isn't currently an issue for PSCs w/r to the agency legislation (because PAYE salary and dividends are not within scope) would immediately become an issue w/r to IR35. That's my take, but I could be off base...