Quick IR35 2.0 question

[northernladuk]

Why not? Surely having this clause helps with IR35?

And get insurance to avoid the cost of being sued...

Not really. Having clauses in that open you up to such liability is poor business sense and definately not worth having just to wave the IR35 flag. You don't have to take on unacceptable risk just to prove you are outside IR35.

[JohnDoe]

What do people make of this from the PCG;

IR35 Forum Minutes

If IR35 is going to be around how a business works rather than what your contract says, would this make QDOS IR35 insurance (or any IR35 insurance) hard to get/invalid?

[northernladuk]

What do people make of this from the PCG;

IR35 Forum Minutes

If IR35 is going to be around how a business works rather than what your contract says, would this make QDOS IR35 insurance (or any IR35 insurance) hard to get/invalid?

I love this bit...

Some areas of progress

Putting the all important scoring aside for a moment, HMRC have made some significant strides forwards. In adopting the principle of ‘Business entity tests’, HMRC have signalled a radical shift in approach. Instead of looking solely at a contract, HMRC are now considering the business entity as a whole. This gives businesses the opportunity to prove that they are businesses and not disguised employees. PCG have lobbied hard for this change and we acknowledge HMRC’s agreement to this more business friendly approach.
HMRC will also be publishing 6 hypothetical scenarios designed to provide contractors with greater clarity of their status. PCG have always maintained that lack of clarity is the greatest of all the flaws of IR35 and we accept this attempt to address the problem.

I do hope this bit means what I think it does. If HMRC investigate peoples knowledge of how their business runs, their relation to their clients/agents and finances then a lot of contractors are going to be screwed... maybe quite rightly so.

[JohnDoe]

I love this bit...



I do hope this bit means what I think it does. If HMRC investigate peoples knowledge of how their business runs, their relation to their clients/agents and finances then a lot of contractors are going to be screwed... maybe quite rightly so.

What about people, for example, many IT contractors, who work through Ltd Companies because the industry in general prefers to hire on a temporary basis and does not generally like to hire people as self employed. Not everyone is trying to avoid tax. Some people are just trying to work which is what the government supposedly wants people to do. How can making it harder for people to work in a profession in which they are experienced encourage more people to work. Penalising people will just encourage more people to jack it in and go on the dole.

[malvolio]

This is a bigger step forward than you may think. Getting HMRC to recognise that there a lot of people out there who have a history of engagements, selling their expertise to a number of end clients, and therefore are operating as a business is a major win for the guys on the IR35 Forum. It is the first time that HMRC (and indeed HMG) recognise what we've been saying for 12 years; we aren't doing this to avoid tax, we're doing it to get work.

And don't get too wrpapped up in what the tests mean; they are an attempt (albeit a piss-poor one) by HMRC to identify companies that should not be treated as IR35 fodder. In other words, if you score highly on the in business tests, you should never get investigated for IR35 in the first place. That's why PCG and others are bitching about the scoring - if everyone passes or everyone fails, the tests have no value whatosever.

And behind all that, IR35 remains unchanged: all previous case law is still applicable.

[gingerjedi]

If (after comparing hypothetical scenarios and scoring badly) a contractor decides they are caught after all do you think there will be a moratorium so contractors can arrange their status to be compliant or will HMRC instantly bankrupt thousands?

If it's the later surely this will just lead to many burying their heads in the sand as they do now.

[northernladuk]

What about people, for example, many IT contractors, who work through Ltd Companies because the industry in general prefers to hire on a temporary basis and does not generally like to hire people as self employed. Not everyone is trying to avoid tax. Some people are just trying to work which is what the government supposedly wants people to do. How can making it harder for people to work in a profession in which they are experienced encourage more people to work. Penalising people will just encourage more people to jack it in and go on the dole.

But you have just defined a hidden permie, not a business. All it means at these people are taxed differently. They do the same job, just hired in a different way. That is not a business and should not therefor be taxed as one. This isn't making it hard to get roles or jacking it in, just being taxed differently that is all. It is this push to take people on via contract to do permie work which is the root of all this.

Too early to tell but from this and what Mal says it is looking good for people that operate as a business.

[gingerjedi]

But you have just defined a hidden permie, not a business. All it means at these people are taxed differently. They do the same job, just hired in a different way. That is not a business and should not therefor be taxed as one. This isn't making it hard to get roles or jacking it in, just being taxed differently that is all. It is this push to take people on via contract to do permie work which is the root of all this.

Too early to tell but from this and what Mal says it is looking good for people that operate as a business.

Surely a company could employ anyone with the right skills to do whatever they require, why do they need to engage a business instead of employing someone?

All of my contracts could have been done by an employee, give me a scenario where this isn't the case.

[northernladuk]

Surely a company could employ anyone with the right skills to do whatever they require, why do they need to engage a business instead of employing someone?

All of my contracts could have been done by an employee, give me a scenario where this isn't the case.

Because the company may not have the skill set to complete the task and if it isn't their main business they may not have the stomach to take them on, particularly if it is going to be a short term piece of work. Outsourcing work that isn't their main focus is an acceptable business model. Companies often have oursourced canteens, plant cleaners etc for the same reason.

The idea of taking contractors on is because they are specialists in the area of work required and can be finished once the work is done. You cannot do that with an employee.

Now I do not have an argument for these clients that have 10 PM's then contract in another 20 and have been doing for years. You would think they could up that to 15, maybe 20 and contract 10 in. That is another story.

I am not trying to write policy here, just banding ideas around.

[malvolio]

Main reason is budgetary. Permies go on the bottom line, contractors are paid out of revenue and so don't affect BigCo's profit margins and dividends. Avoiding the associated on costs of a permie and the ability to bin them when you want are useful adjuncts, but not the main driver.