IR35 Update following discussion group yesterday - survey request

[SueEllen]

That's the case today. And that's how it will be -- until someone challenges it in court as fundamentally unfair that an engager can tell HMRC to tax you like an employee but tell employment tribunals you aren't an employee.

And maybe some judge decides to be a hero by sticking it to big business.

If anyone in Big Corporation UK is thinking about this, they want to be as Far Away As They Can Be from deciding IR35 status.

It's unfair to be taxed as an employee if you don't get employment rights. But it is REALLY unfair to have the people who aren't giving you employment rights be the ones who decide that you should be taxed as an employee. If that becomes the way the law works, it won't last long. HMG and Corporate UK can argue all day that they are separate laws and unrelated, but the press will pick up on it, find some low-paid victim who is on the losing end of both of these "unrelated" laws, and make noise until it changes.

It would end up going to Europe. Some solicitors and barristers would do it pro-bono if the person was something like a carer.....

[jamesbrown]

Also, I will add that, while it doesn't "sit right" with me arguing for employment rights as an independent contractor, it is something that I could support as a fighting strategy (e.g. taken up by IPSE). We're not there yet, but it's worth bearing in mind.

[WordIsBond]

I agree, and it has been done before. It is a possibility. However, I don't think it's a straightforward one.

No, it's not straightforward.

But if engagers just declare everyone inside IR35 to avoid risk, they might have a nasty surprise down the road that will make the risk of IR35 look pretty small, whatever the law says right now.

And Sue, you are probably right that it would end up in Europe, and it is certain the victim will have lots of help.

[jamesbrown]

No, it's not straightforward.

But if engagers just declare everyone inside IR35 to avoid risk, they might have a nasty surprise down the road that will make the risk of IR35 look pretty small, whatever the law says right now.

And Sue, you are probably right that it would end up in Europe, and it is certain the victim will have lots of help.

This issue will come up in the discussion. One problem I foresee is that the stated aim of the discussion is to increase tax revenue. The problem with having a two-sided (proper) risk/reward evaluation of SDC is that, in many cases, engagers that aren't currently interested in IR35 would suddenly become much more careful in designing contracts with appropriate working practices that reflect a client-supplier relationship. Obviously, this would be a good thing for contractors. But it probably wouldn't increase tax revenue for HMRC. I think this will come up in the discussion. The point being that HMRC don't give a flying feck about what is fair, only about increasing tax revenue, so they would probably legislate to avoid this scenario or otherwise use strict deeming criteria, ensuring that almost everyone was on payroll (an actual employee). In other words, we can have a lot of good, principled, ideas, but none of them will stick unless HMRC sees a route to greatly increased revenue.

[Guesstimator]

And Sue, you are probably right that it would end up in Europe, and it is certain the victim will have lots of help.

Wouldn't it just be gosh darned upsetting if one Ltd co were to engage another small Ltd co telling hmrc they were inside ir35, only for there to be a fall out over things and it lead to this situation, forcing some precedents to be set

[Zero Liability]

This issue will come up in the discussion. One problem I foresee is that the stated aim of the discussion is to increase tax revenue. The problem with having a two-sided (proper) risk/reward evaluation of SDC is that, in many cases, engagers that aren't currently interested in IR35 would suddenly become much more careful in designing contracts with appropriate working practices that reflect a client-supplier relationship. Obviously, this would be a good thing for contractors. But it probably wouldn't increase tax revenue for HMRC. I think this will come up in the discussion. The point being that HMRC don't give a flying feck about what is fair, only about increasing tax revenue, so they would probably legislate to avoid this scenario or otherwise use strict deeming criteria, ensuring that almost everyone was on payroll (an actual employee). In other words, we can have a lot of good, principled, ideas, but none of them will stick unless HMRC sees a route to greatly increased revenue.

They really do need to provide some evidence for their assertions regarding the vaunted "protected yield" figure; ATM they've not even taken into account the dividend tax and are unable to provide figures surrounding the actual number of one-man bands out there, even though they claim to know it. This is without taking into account any losses accruing from higher rate contractors becoming lower paid permies (at least in terms of pure salary.) £430m is already a trifling amount, and it's not even accurate anymore. Just providing figures spewed out by so-called analysts shouldn't suffice. On the one hand, there are much bigger fish they could go after if they're that revenue starved (which I don't support, just pointing it out); on the other, if this is about Fri-Mon scenarios, as their examples imply, one would think those are fairly easy to resolve. A shame HMG doesn't see this for the monomaniacal, fruitless obsession that it is.

No, it's not straightforward.

But if engagers just declare everyone inside IR35 to avoid risk, they might have a nasty surprise down the road that will make the risk of IR35 look pretty small, whatever the law says right now.

Agreed, shouldn't be able to have their cake and eat it, too. If they want to make such a declaration, they can then take on all the consequences that should flow from it.

[sociopath]

I don't think you could actually do that via a contract - even if it was signed, if there was then an issue that went to a Tribunal, say, I don't think the disclaimer would have any weight in law

Most direct engineering consultancy contracts have a statement "Nothing in this agreement will create any relationship of employer/employee. The Consultant is not the servant or agent of the Client." based on model form MF/4. But stop short of mentioning employment rights etc.

[pr1]

Oh. Well, I never worked in HR.

Seems ridiculous to tell people that they can't mutually agree something, but I guess we have to protect the idiots.

There was a panorama a few months ago about one of the factories in China that make chips for iPads and iPhones etc, Apple had pressure from western press to ensure no one in their supply chain was forced to work unreasonable hours. So the factory, upon getting their new batch of recruits said 'OK and before you can start working for us you must sign this waiver form stating that you are willing to work all hours, otherwise you must go back home' - obviously they all signed it because they're desperate for work, and all ended up working 16+ hour days 6 days a week - so it's not just "idiots" that need protecting, there's plenty of big companies who would jump on the opportunity and vulnerable people open to abuse from being able to 'mutually opt out' of employment rights (we're seeing similar in the uk through forced incorporation for lots of low paid staff)

[SueEllen]

Most direct engineering consultancy contracts have a statement "Nothing in this agreement will create any relationship of employer/employee. The Consultant is not the servant or agent of the Client." based on model form MF/4. But stop short of mentioning employment rights etc.

You can put any words you like in a contract but it doesn't make it legally binding and enforceable until a judge rules on it, an example of this is handcuff clauses.

For example can put a clause in preventing you from working with clients and customers of the client for 12 months. Unfortunately as an agency the client you are providing services is HMRC. Now can you seriously contract for anyone in the UK who isn't a client or a customer of HMRC?

[SueEllen]

There was a panorama a few months ago about one of the factories in China that make chips for iPads and iPhones etc, Apple had pressure from western press to ensure no one in their supply chain was forced to work unreasonable hours. So the factory, upon getting their new batch of recruits said 'OK and before you can start working for us you must sign this waiver form stating that you are willing to work all hours, otherwise you must go back home' - obviously they all signed it because they're desperate for work, and all ended up working 16+ hour days 6 days a week - so it's not just "idiots" that need protecting, there's plenty of big companies who would jump on the opportunity and vulnerable people open to abuse from being able to 'mutually opt out' of employment rights (we're seeing similar in the uk through forced incorporation for lots of low paid staff)

This is what HMRC want to target but they are going about it the wrong way.

We have had a discussion on here where it was floated that people should invoice x to be able to incorporate. However it was pointed out that some people incorporate for entirely different reasons.

Also this probably helps explain why HMRC cannot provide the figures for the number of one man bands.

They would have to define their criteria and cross match records with Companies House.

Otherwise they would say that a company with multiple directors and one fee earner who takes a salary is a one-man band, while ignoring someone who set up a company for limited liability protection and is not taking any money out of it.