Private settlement over IR35 claim

[malvolio]

No, no, no... you are missing the whole point. I am not an employuee of anyone, I get no employee benefits, paid holidays, employment protection, I have to fund my own SSP, all the NICs, expenses, training, accomodation. Why the hell should I pay the same tax as someone who has a full time job for someone else and gets all that provided FOC?

The whole point of IR35 is that it is a tax wrongly applied to the wrong group pf people. The idea was to stop employers sacking people, rehiring them as temps and saving themselves all the employment costs. It's failed to do that and because of Gorgon's ignorance and Dim Prawn's ineptness has been applied to all freelances, regardless.

There are very few (if any) situations where a contractor is genuinely liable for the tax. People who just lie down and pay it are wasting significnat amounts of their own money for the sake of an easy life. Fine, but I'm not joining.

[rootsnall]

Yes they do, in general. Don't know if this applies to IR35-caught contractors, as I would imagine you need a savvy accountant to negotiate on your behalf.

I was suspicious of the PCG success figures because I assumed that everyone who didn't have an ironclad case settled before a hearing, and that these "failures" wouldn't appear in the statistics, however when I enquired I was assured that the success rate included all disputes, not just ones that e.g. went to commissioners.

With personal taxation you can negotiate on the penalties but I think the tax/NI avoided ( + interest ) is non negotiable. I think (!?) its legally the same for IR35. If they say you owe 10K, then in theory they can charge you an extra 10K in penalties, there are various criteria to haggle this down, a 40% reduction for full co-operation, 20% for owning up in advance, and 40% depending on how serious your offence is. Not sure how this has panned out in real cases or if they have been waiving the penalties !?

I still don't know anybody who has paid up !?

[IR35 Avoider]

With personal taxation you can negotiate on the penalties but I think the tax/NI avoided ( + interest ) is non negotiable. I think (!?) its legally the same for IR35. If they say you owe 10K, then in theory they can charge you an extra 10K in penalties, there are various criteria to haggle this down, a 40% reduction for full co-operation, 20% for owning up in advance, and 40% depending on how serious your offence is. Not sure how this has panned out in real cases or if they have been waiving the penalties !?

I still don't know anybody who has paid up !?

First, let's assume the contractor has made a "reasonable" effort to assess his status before concluding he wasn't caught. In that case, even if his assessment is subsequently agreed to be wrong, there should be no penalties, as he's been neither fraudulent nor negligent. On top of the tax owed he will have to pay interest, a fair but fairly negligible extra expense.

In general terms (not specifically related to IR35) a settlement is negotiated where taxpayer disagrees with HMRC about tax due. e.g. (1.) Inland Revenue tell plumber they think he has done more cash work than his disorganised records show (2.) HMRC tells tax avoidance scheme member that they disagree with him (and his lawyer) that his scheme works, (3) HMRC tells contractor they think he is IR35-caught, though he and his advisers do not agree.

In all these scenarios, assuming agreement cannot be reached, it is not known for certain what tax must be paid without going to commisioner's hearings and possibly (if loser appeals) to courts.

So it is open to both parties to agree the taxpayer will pay a certain amount, and HMRC will drop the dispute.

In short, I think a settlement is an option whenever there is genuine disgreement between the tax-payer and HMRC about tax due, and neither side is 100% confident of winning if it goes to court. (A settlement is also an attractive option if the "loss" from compromising is less than the cost in legal fees of continuing the argument.)

In the case of IR35 it is very easy to sincerely disagree whether a contract is caught, so I would have thought this was a very suitable area for settlements. If they don't happen a lot, I suspect it will be because contractors almost always fall into one of two groups: (1) stand-alone contractors who don't know how to negotiate and cave in and (2) contractors with heavy-duty advisors (from PCG or insurance) who are tough enough to nearly always force HMRC to back down completely.

[tim123]

No, no, no... you are missing the whole point. I am not an employuee of anyone, I get no employee benefits, paid holidays, employment protection, I have to fund my own SSP, all the NICs, expenses, training, accomodation. Why the hell should I pay the same tax as someone who has a full time job for someone else and gets all that provided FOC?

Yes you are, you are the employee of you own limited company. It is that limited company's responsibility to give you employment benefits. Your client company have divested itself of the need to provide this, by paying your company twice as much per hour as they pay their perms.

tim

[malvolio]

Yes you are, you are the employee of you own limited company. It is that limited company's responsibility to give you employment benefits. Your client company have divested itself of the need to provide this, by paying your company twice as much per hour as they pay their perms.

tim

One point, I'm not an employee, I am a director: I do not have a contract of employment with MyCo. I do pay myself an annual salary as director.

Nevertheless, why should I now be expected to pay taxes because some Gorgon-inspired drone believes me to be sort-of-but-not-quite-employed by my current client? And by extracting the taxation from my bottom line, how am I suppsed to pay for the supposed employee benefits I theoretically enjoy from MyCo? If I am an pseudo employee, then where's my holiday pay and training costs and please can I reclaim the tens of thousands of pounds of VAT I have paid out on what turns out to be salaried income rather than invoiced charges for work done, and can I also reclaim the thousands of pounds of employer's NICs I have been paying on my clients' behalf.

It's a crap tax, badly thought out, badly implemented. It is not justifiable on any realistic basis.

[maxima]

No, no, no... you are missing the whole point.

Sorry I might have asked indistinctly.. I understand your point. But I asked - why people would go for PAYE schemas? And pay all the taxes not having holidays sick pay etc...

[maxima]

I suspect it will be because contractors almost always fall into one of two groups: (1) stand-alone contractors who don't know how to negotiate and cave in and (2) contractors with heavy-duty advisors (from PCG or insurance) who are tough enough to nearly always force HMRC to back down completely.

That is the point of this topic - is there anyone who can advise on what statistics for #1 contractors who negotiated to pay without going to a court.

As I understand - for #2 stats are 1400:3 so far.

What is it for #1 ??

[malvolio]

Not sure anyone knows the answer.

HMG won't say (in fact HMG refuses to answer any questions about IR35 in isolation) but we can assume a fair few people tick the box on the P35. After April, the question is even more loaded, so no doubt there will be a few more. Note that IR35 is still being levied so perhaps it still brings in net revenues.

PCG don't know the answer because they've never actually asked the membership. Given that the vast majority (but not all...) PCG members put themselves outside IR35, you could argue that the question has no value. The 1400:3 win ratio is a good pointer though, especially when the 3 losses were actually winnable as well.

What I have never seen is any count of the people who get investigated for not ticking the box - every case to date has been as part of a wider review process - so it is possible that your question #1 has never actually arisen.

[rootsnall]

not ticking the box

Which box ?

[malvolio]

Which box ?

Ah. The one on the P35 that asks "Do you consider yourself subject to the requirements of the intermediaries legisation?" - aka the hands-up-I'm-caught box - and that is being extended from this year to cover the changes to the taxation rules aimed at killing off Managed Service companies.

You mean, you've never seen it...?