Another high profile IR35 loss for HMRC

[WordIsBond]

*HMRC want to move the onus onto the client so it makes sense the client takes out the investigation insurance to ensure everyone in the chain is protected.

With risk averse but smart clients, that's the way it will go. Keeps contracting costs down because contractors will want the outside IR35 contracts.

With risk averse but dumber clients, they won't take out the insurance, they'll just put people inside. In the long run, they'll be competing for contractors with the smart clients, so they'll either pay more or get worse contractors and pay for it in other ways.

With risk-friendly smart clients, they'll go case by case and be willing to take calculated risks to get better contractors cheaper -- and skip the insurance.

Risk-friendly dumb clients will say, 'Who cares? Everyone outside, it's cheaper that way.'

Look for the smart clients.

[WordIsBond]

Do remember that from April 2020 the end client will care a lot more whether both the contract and working practices suggest outside IR35 or not. Increasingly I'm thinking Apr 2020 changes will be a damp squib, and only a positive thing for contractors (please don't quote me on this if in 12 months I'm proved horribly wrong!).

Prior to April 2020:
- contractor wants it to be outside IR35,
- HMRC wants it to be inside IR35,
- end client doesn't care (so isn't always particularly helpful in an HMRC challenge).
1 vs 1, where it's big HMRC vs little contractor.

Post April 2020:
- contractor wants it to be outside IR35,
- HMRC wants it to be inside IR35,
- end client wants it to be outside IR35.
2 vs 1, where it's contractor plus well insured big client with clever lawyers vs HMRC.

The end client will be much more proactive in helping ensure both contracts and working practices are IR35 friendly.

The contractor then gets the tax benefits of being considered outside IR35, with no risk of IR35 investigation (for the contractor). That nasty thing that stops some contractors sleeping at night, where even though they're fairly confident they're outside IR35, they know that if HMRC argue otherwise they've got a massive fight on their hands. All that fear can go away, as it's on the end client's shoulders now.

Sorry, deviation from the subject/OP...but the more high profile cases HMRC lose in the run up to Apr 2020, the more confident end clients are likely to be that leaning towards outside is only a small risk.

Logical, and certainly will apply in many cases. But unfortunately there will also be many risk-averse clients who use blanket or almost blanket determinations that everyone is inside. So a lot of people will be thrown inside that probably shouldn't be.

But to your point, for those who are deemed outside by a client, HMRC will probably almost never win a case again. They don't care, though. Revenue will go up from those thrown inside (properly or improperly) by their clients, and HMRC simply do not care that it will be unjust in some cases.

[WordIsBond]

Anyway, back to the judgment.

They've just given CEST the death penalty, and in the process may have forced a delay on IR35 reform. You now have a judgment that is directly opposite to what CEST would have said, because CEST simply doesn't deal with all the factors. How could it? You have to look at the case 'in the round' and an online tool, to cover every base, would take three days to go through.

I suppose you could have CEST check the three pillars, and if any aren't there, use it to prove IR35 doesn't apply. Even with SDC, though, it's often somewhat subjective in the real world which side that comes down on. But there's no way you can make an online tool reflect all the things that might apply and would call IR35 into question, so there's no way you can honestly make an online tool that properly gives an inside determination. It's a crock, it has been all along. But now there's a court judgment proving it's a crock.

HMRC proved once again they don't understand IR35. Now, they've proved CEST doesn't understand it, either. I anticipate someone in similar circumstances being ruled inside on the basis of CEST and not just appealing their own case but launching a legal challenge against HMRC. They KNOW CEST is a crock, they've been told so, now they have a case they've just lost proving it, and they keep rolling with it. Someone is going to drag them into court and rightfully so.

[Maslins]

But to your point, for those who are deemed outside by a client, HMRC will probably almost never win a case again. They don't care, though. Revenue will go up from those thrown inside (properly or improperly) by their clients, and HMRC simply do not care that it will be unjust in some cases.

Agreed. Some contractors will (rightly or wrongly) be declared inside IR35 by the end client and drift towards umbrellas/PAYE. This will be deemed a "win" by HMRC, much publicised no doubt "nasty tax avoiding contractors now paying proper tax". Many other contractors will continue contracting via a Ltd Co, outside IR35, and as you suggest they'd be a much tougher nut for HMRC to crack.

There may be one or two IR35 investigations against big corporates where HMRC fancy their chances. Given the alignment of motives by contractor and end client it will be a tough nut for HMRC to crack.

[DaveB]

Agreed. Some contractors will (rightly or wrongly) be declared inside IR35 by the end client and drift towards umbrellas/PAYE. This will be deemed a "win" by HMRC, much publicised no doubt "nasty tax avoiding contractors now paying proper tax". Many other contractors will continue contracting via a Ltd Co, outside IR35, and as you suggest they'd be a much tougher nut for HMRC to crack.

There may be one or two IR35 investigations against big corporates where HMRC fancy their chances. Given the alignment of motives by contractor and end client it will be a tough nut for HMRC to crack.

It will be interesting to see how many, if any, cases HMRC bring against PS bodies declaring their contractors outside. There are a good few gigs out there that are explicitly stating they are outside in the job descriptions.

[northernladuk]

It will be interesting to see how many, if any, cases HMRC bring against PS bodies declaring their contractors outside. There are a good few gigs out there that are explicitly stating they are outside in the job descriptions.

And also if anything is going to happen to those still declaring blanket inside statuses and not allowing contractors to see the determination. But I think that's a different area to the above so maybe off topic.

[simes]

Not really. He says SINCE THEN. He probably knows more about investigations than most experts because he's been through it so he is perfectly placed to know exactly what he needs to put in and what needs checking. We don't so need the experts to do it.

Would he recommend going in to his situation with no check of the contract? Would he suggest that if you aren't an IR35 expert you get your contract checked? I don't think so.

I'd like to see a comment from someone like Seb or other tax specialist outlining how many investigations get shut early because the right documentation was submitted and how many of them had the potential to go further with out it.

But you rest happy you've got a misquoted statement from one person.....

You're an utter clown. You referenced the chap in your usual sweeping statement, unverified, unclarified, know-it-all fashion and, once I had actually Spoken to him, with his permission, I quoted his response. A response that came today, via PM. Did you miss this bit in your omnipresent rush to stick something else down on the boards.

I figured, since you referenced Batcher, that perhaps he could be correctly referenced, with comments and quotes.

Responding to the bit I have now emboldened in your last random chucking of words, this is Exactly what he said. "He'd check it himself, he would not bother with a paid review" per all the commentary above. And, even though his contract Was professionally reviewed, it Made No Difference to the HMRC desire to pursue an investigation.

I am not sure how many times and in how many ways the same thing can be said before it percolates through to what you call a presence.

Moving to other things, I am assuming that a civil response in the Professional forums extends to what happens via Reputation Comments on ones User Profile. In your case, you manifest a sad life by exploiting, presumably, loopholes to ensure you can call all my posts as 'utter bollox' and 'the usual drivel' Please grow up. I had thought you had improved somewhat since I last popped you on my Ignore list.

Clearly you haven't and so, back you go.

Mods, not sure what Reputation Comments are, nor how they are used, and nor how they are cleaned up - but if you could be so kind...

[northernladuk]

I figured, since you referenced Batcher, that perhaps he could be correctly referenced, with comments and quotes.

He could, but you didn't.

But you aren't reading this so Meh.

[DeludedKitten]

Anyone got the stats on high profile HMRC wins this year? Would be useful for when I talk to my MP about it. By my reckoning they are either 2 wins from 6 cases or 2 from 7 in 2019 but I may have miscounted.

[northernladuk]

Anyone got the stats on high profile HMRC wins this year? Would be useful for when I talk to my MP about it. By my reckoning they are either 2 wins from 6 cases or 2 from 7 in 2019 but I may have miscounted.

You could try dropping Dave Chaplin at Contractor Calculator. He's been all over these cases on LinkedIn for a long time now so sure he's got a good idea.