MPs slam ‘flawed’ IR35 and call for clamp down on ‘wild west’

[GigiBronz]

https://www.contractorweekly.com/tax...m-flawed-ir35/

Greater transparency and regulation needed


The report also highlighted a “general lack of transparency” over fees and deductions, with some umbrella companies “unlawfully deducting employer’s taxes from contractors’ pay” and others withholding holiday pay from contractors who did not know they could claim it.

Some recruitment agencies were also said to be “ignoring the legal requirement” to provide a Key Information Document to all workers. The report concluded that the “unregulated umbrella market is out-of-control” and is one of the “key reasons for tax avoidance schemes operating”.

It stated: “It is clear the current system of voluntary regulation and accreditation does not stop the facilitation of tax avoidance schemes and does not stop malpractice in the supply chain (by both umbrella companies/payroll intermediaries and also recruitment agencies)”.
‘Exploitative practices’ result in ‘wild west’ supply chain


The report calls on the government to intervene and address these issues as part of its promised review into supporting self-employment and examine the best way of “organising, remunerating and taxing” this way of working.

It outlines a number of policy recommendations, which include making it unlawful for agencies to receive financial incentives, withhold holiday pay and force or coerce contractors to opt out of the Conduct of Employment Regulations.

The APPG also suggested making it mandatory for agencies to disclose all fees and costs and explain deductions in documents and on payslips. It also takes the view that contractors working inside IR35 should be granted employment rights and benefits.

Ruth Cadbury, Labour MP and Co-Chair of the Loan Charge APPG said: “It is clear from our inquiry that there is significant non-compliance in the worryingly opaque supply chain, which has been dubbed ‘the wild west’ as a result and the lack of regulation enables exploitative practices, as well as enabling promoters of tax avoidance schemes to operate.

https://www.contractorweekly.com/tax...m-flawed-ir35/


Who would have thought? Not as if or leaders are on top of it to decimate every sense of freedom that still exists in this society and create a more favourable place for their contributors to thrive. Big corp is running the country.

We should have more transparency in financial transactions as well to know which politician is in the pocket of what lobby group. But I guess as any other subject touching on "the city" or 'trust " legislation is a no go.

[OwlHoot]

I very much doubt these MPs are in favour of a return to the status quo ante, with contractors working through limited companies

They would almost certainly prefer every contractor and self-employed person to work and be taxed as employees of a few large skill-specific "holding companies"

[GigiBronz]

I very much doubt these MPs are in favour of a return to the status quo ante, with contractors working through limited companies

They would almost certainly prefer every contractor and self-employed person to work and be taxed as employees of a few large skill-specific "holding companies"

so taxation without representation, rights or any other tangible benefit for the employee.

What price can you put on flexible workforce. is it 20-30-50% more than a normal resource? Or is it 300% more expensive.

You want someone to come in and deliver and leave afterwards. if you give him 1.5k more per month that person would not even consider.
Really doubt that companies would start paying 1.5k pd for contractors.

So the real goal is to decimate the industry and water down legislation so that "employment at will" will become standard.
There are already no rights before 2 years and 55k is poverty line in 1-4 London zones. So why even bother?

[TwoWolves]

The HoC has a long history of destroying industries simply because they felt they couldn't extract enough punitive taxation from it. They damn near killed the Industrial Revolution before it even got started.

[eek]

You are aware that by transparency the request is:-

1) Make sure contractors know what they are being paid
2) Make sure end clients can confirm that pay parity (after 12 weeks) occurs when it's legally required between people doing equivalent work (i.e. drivers)
3) the removal (or at least the clear signposting) of excess umbrella fees being charged with money ending up back at the agency
4) using the opt out (campaigned for originally as a quid pro quo for people outside IR35) isn't abused by agencies who can't use it for agency workers but can use it if said workers go via an umbrella

I'm at a loss as to why people see a problem with any of those items.

BTW - I suspect there will be delivery issues next week due to a lack of HGV drivers - a lot of whom are going to get a very nasty surprise when they see their first umbrella pay packet tomorrow.

As I've pointed out before we are rarely the target of these government campaigns, merely the people impacted by them.

[LondonManc]

Rishi will do f**k all to jeopardise his wife's inheritance, don't worry about that.

No conflict/confluence of interests though.

[Whorty]

I'm relatively new to contracting, only started in 2007, but can someone explain why we can't be 'self employed' and not have to go through a LTD or umbrella? What was the reason for forcing all contractors through a LTD rather than invoicing direct (assuming you cover yourself with insurance etc)?

As for umbrellas, if I go back contracting this year or next, I'll go this route again for ease and I'm not planning to work that many years to warrant a LTD, but umbrellas are an extra layer that should just not be needed. To me, it's another solution to fix a problem caused by the government (of whichever flavour).

The whole flexible working economy needs to be looked at from scratch.

[northernladuk]

I'm relatively new to contracting, only started in 2007, but can someone explain why we can't be 'self employed' and not have to go through a LTD or umbrella? What was the reason for forcing all contractors through a LTD rather than invoicing direct (assuming you cover yourself with insurance etc)?

As for umbrellas, if I go back contracting this year or next, I'll go this route again for ease and I'm not planning to work that many years to warrant a LTD, but umbrellas are an extra layer that should just not be needed. To me, it's another solution to fix a problem caused by the government (of whichever flavour).

The whole flexible working economy needs to be looked at from scratch.

So, why can’t contractors be sole traders? Well, clients and agencies won’t do business with sole traders for many reasons. These include the fear clients have that a sole trader might be seen in law as an employee with all the employment rights that go with that; whilst for agencies, they are wary of debt transfer and employment agency legislation that requires workers to be paid under PAYE schemes.

In addition to all of this, contracting as a sole trader, even if it could be done, would have downsides for contractors themselves. For example, sole traders face virtually unlimited liability, which means that as sole traders their homes and other personal assets would be at risk of litigious clients.

There is also something around the agent being responsible of the sole trader doesn't pay their taxes properly which is covered under the debt transfer bit but isn't clear.

[jamesbrown]

The problem arises because the ITEPA and related legislation puts an agency or end-client on the hook if a self-employed person fails to pay the appropriate taxes. You may find a willing client with whom you can work directly. But the main reason to not work in this way is unlimited personal liability.

[Whorty]

There is also something around the agent being responsible of the sole trader doesn't pay their taxes properly which is covered under the debt transfer bit but isn't clear.

The problem arises because the ITEPA and related legislation puts an agency or end-client on the hook if a self-employed person fails to pay the appropriate taxes. You may find a willing client with whom you can work directly. But the main reason to not work in this way is unlimited personal liability.

So, if there was an appetite to resolve the unlimited liability of a sole trader, and remove the risk of the agency being liable for the sole trader not paying the correct tax, then many contractors could go this route and bypass the umbrella - thus removing the totally unnecessary and pointless umbrella and it's non-value add costs?