New PCG IR35 Questionnaire

[malvolio]

Hello again Runes
By case law I mean actual cases that have gone before the tribunals (previously the Commissioners) and the Courts and you will know that HMRC has won more cases than taxpayers. For me the scoring and the tests need to relate to how the tribunals and courts view the issues e.g. minor or major pointers to disguised employment or self-employment. You cannot deal with any of this by having some kind of % objective. The only objective, when the law has NOT changed, can only be one that fits with the law. The measuring comes later in the test and learn phase.
Kate Cottrell

While I totally agree with your point about case law and the number of HMRC wins at appeal, the fact remains that of several thousand IR35 cases started, only 10 have been found in favour of HMRC. The vast majority have been dropped, effectively in favour of the taxpayer (or, to be precise, the taxpayer's company).

That is why we have problems with using Case Law to define the in-business tests. Engineering the tests to match a 60:40 win ratio when the empirical evidence is that the ratio is actually vanishingly small does not seem like a fair way forward, but that is what HMRC are obviously trying to do. The objective was to take out of scope of expensive, time-wasting and ultimately destructive investigations those contractors working as genuine businesses, not determine who is or who may be a disguised employee.

[LisaContractorUmbrella]

While I totally agree with your point about case law and the number of HMRC wins at appeal, the fact remains that of several thousand IR35 cases started, only 10 have been found in favour of HMRC. The vast majority have been dropped, effectively in favour of the taxpayer (or, to be precise, the taxpayer's company).

That is why we have problems with using Case Law to define the in-business tests. Engineering the tests to match a 60:40 win ratio when the empirical evidence is that the ratio is actually vanishingly small does not seem like a fair way forward, but that is what HMRC are obviously trying to do. The objective was to take out of scope of expensive, time-wasting and ultimately destructive investigations those contractors working as genuine businesses, not determine who is or who may be a disguised employee.

How many have been dropped by HMR&C because they had no case and how many have been settled before the case came to tribunal?

[malvolio]

How many have been dropped by HMR&C because they had no case and how many have been settled before the case came to tribunal?

No idea on the split, since such matters are (quite rightly) confidential. However, talking to one of the firms who deal with such things recently, they have had no IR35 losses in over 1600 defended cases. So I'm guessing the distinction is moot.

[Kate Cottrell]

No idea on the split, since such matters are (quite rightly) confidential. However, talking to one of the firms who deal with such things recently, they have had no IR35 losses in over 1600 defended cases. So I'm guessing the distinction is moot.

My experience is that the numbers were fed into PCG's statistics without verification and they included cases that were not PCG members. Many of the so called wins were HMRC simply walking away and we all saw the letters issued by HMRC e.g. "we think you are inside IR35 but we will not pursue your case". Another issue concerns, do you count a case that was settled i.e. you paid up an amount as having not been "lost", which is vastly different to a win? The figures make good headlines but we are where we are now and it is all about how we are going to deal with this from April not about the mistakes and problems of the past. For the record of the IR35 tribunal cases, since 2001 we have 10 wins for the taxpayer and HMRC has 13 wins at the Specials and of most importance is their 3 wins at the High Court versus none for the taxpayer. These are the important ones and all have been decided independently. The new administration of IR35 can only be measured after it has been introduced and the business entity tests have to be linked to the case law and not to some ratio based upon past unvalidated statistics. As before these tests are a very minor issue that some are blowing out of all proportion.

Kate Cottrell

[Sockpuppet]

While I totally agree with your point about case law and the number of HMRC wins at appeal, the fact remains that of several thousand IR35 cases started, only 10 have been found in favour of HMRC. The vast majority have been dropped, effectively in favour of the taxpayer (or, to be precise, the taxpayer's company).

That is why we have problems with using Case Law to define the in-business tests. Engineering the tests to match a 60:40 win ratio when the empirical evidence is that the ratio is actually vanishingly small does not seem like a fair way forward, but that is what HMRC are obviously trying to do. The objective was to take out of scope of expensive, time-wasting and ultimately destructive investigations those contractors working as genuine businesses, not determine who is or who may be a disguised employee.

I think this is a "safety" in numbers that maybe these business tests are trying to address. With a lot of contractors rocking a PCG or QDOS type insurance product for investigation HMRC probably drop a lot of cases as the tax collected would be less than the costs of fighting the case.

If many businesses get excluded by being judged as Low risk maybe the takers of these will drop meaning its easier to fight against the insurance backed companies.

[malvolio]

My experience is that the numbers were fed into PCG's statistics without verification and they included cases that were not PCG members. Many of the so called wins were HMRC simply walking away and we all saw the letters issued by HMRC e.g. "we think you are inside IR35 but we will not pursue your case". Another issue concerns, do you count a case that was settled i.e. you paid up an amount as having not been "lost", which is vastly different to a win? The figures make good headlines but we are where we are now and it is all about how we are going to deal with this from April not about the mistakes and problems of the past. For the record of the IR35 tribunal cases, since 2001 we have 10 wins for the taxpayer and HMRC has 13 wins at the Specials and of most importance is their 3 wins at the High Court versus none for the taxpayer. These are the important ones and all have been decided independently. The new administration of IR35 can only be measured after it has been introduced and the business entity tests have to be linked to the case law and not to some ratio based upon past unvalidated statistics. As before these tests are a very minor issue that some are blowing out of all proportion.

Kate Cottrell

The 1600-ish are the cases defended under the provisions of PCG membership, so all were PCG members. I have no visiility of the cases managed by QDOS since they stoppe working with PCG some years ago, but I doubt their results are significantly different.

Yes, many cases are simply dropped, presumably as not being worth fighting. Equally, every case I've seen that was lost started off with the taxpayer defending themselves; I don't know of any losses that had representation from Day One (although I'm happy to be proved wrong on that).

I stand by my point that the end result of the scoping exercise should align to the likelihood of a successful prosecution under IR35 if the tests are to have any meaning at all. Clearly we will have to agree to differ on what represents that likelihood!

[northernladuk]

Maybe slightly off topic but what happens if someone appears on HMRC's radar, goes to the PCG and the applicants position is indefensible due to them not attempting to get contracts reviewed etc. Do the PCG just advise it can't be won or with they fight it to the death? Would PCG advise they pay up at all?

[Kate Cottrell]

The 1600-ish are the cases defended under the provisions of PCG membership, so all were PCG members. I have no visiility of the cases managed by QDOS since they stoppe working with PCG some years ago, but I doubt their results are significantly different.

Yes, many cases are simply dropped, presumably as not being worth fighting. Equally, every case I've seen that was lost started off with the taxpayer defending themselves; I don't know of any losses that had representation from Day One (although I'm happy to be proved wrong on that).

I stand by my point that the end result of the scoping exercise should align to the likelihood of a successful prosecution under IR35 if the tests are to have any meaning at all. Clearly we will have to agree to differ on what represents that likelihood!

I think you need to check the 1600 and whether or not they were members Mal. B&C used to feed into these figures too you know!

I note your stance based on old unvalidated statistics and wonder if that is the reason for the claims that you are "locked in disagreement" with the IR35 Forum? It would also be interesting to know who the "vast majority" of the IR35 Forum that you/PCG claim are in agreement with you. I can think of many that are not. I will say again that this is being blown out of all proportion especially as 1.7million freelancers cannot even take the imaginary test PCG have created ahead of official release of the real test.

Kate Cottrell

[malvolio]

I think you need to check the 1600 and whether or not they were members Mal. B&C used to feed into these figures too you know!

I note your stance based on old unvalidated statistics and wonder if that is the reason for the claims that you are "locked in disagreement" with the IR35 Forum? It would also be interesting to know who the "vast majority" of the IR35 Forum that you/PCG claim are in agreement with you. I can think of many that are not. I will say again that this is being blown out of all proportion especially as 1.7million freelancers cannot even take the imaginary test PCG have created ahead of official release of the real test.

Kate Cottrell

Dunno about unvalidated. I was talking with Paul Mason, I assume he knows what he's talking about in respect of the cases they have taken on. As I say, I think we will have to agree to disagree on the numbers of contractors who should be caught under IR35.

I'm not "locked in disagreement" with anyone, I'm only trying to put the case of the jobbing contractor, but the IR35 Forum minutes and subsequent commentrary seem to indicate that the scoring of the tests is a matter of some contention to several parties. Again, I'm happy to be proved wrong on that conclusion,

And the PCG test is not imaginary; as they make clear, it is using (and surveying, hence the six supplementary ones that aren't part of the real HMRC set) the 12 questions that HMRC have formulated and that will appear on their website soon after Easter, when anyone can have a go.

[Kate Cottrell]

Dunno about unvalidated. I was talking with Paul Mason, I assume he knows what he's talking about in respect of the cases they have taken on. As I say, I think we will have to agree to disagree on the numbers of contractors who should be caught under IR35.

I'm not "locked in disagreement" with anyone, I'm only trying to put the case of the jobbing contractor, but the IR35 Forum minutes and subsequent commentrary seem to indicate that the scoring of the tests is a matter of some contention to several parties. Again, I'm happy to be proved wrong on that conclusion,

And the PCG test is not imaginary; as they make clear, it is using (and surveying, hence the six supplementary ones that aren't part of the real HMRC set) the 12 questions that HMRC have formulated and that will appear on their website soon after Easter, when anyone can have a go.

I agree Mal. Lets wait and see so everyone can make up their own minds about all of this and when the real tests are published they will see too that the tests are only about HMRC risk profiling and will no doubt wonder what all this fuss/scaremongering is about. Happy Easter.

Kate Cottrell