Outside IR35 now even harder to prove PGMOL ruling

[jamesbrown]

jamesbrown I apreciate your responses on this and other threads, you always seem to bring clarity. So if you will, an example scenario for you?

Suppose you have just been offered a 6 month outside contract in IT, as a software developer, nicely paid. The contract is on your desk awaiting signature. In order to satisfy yourself that the contract is genuinely outside of IR35 and there is no risk HMRC coming after you... What things would you absolutely insist that it must contain? What things would you absolutely insist that is must not contain? And what actions would you absolutely insist on the client carrying out (such as letting you substitute someone to prove RoS is genuine)?

The contract that matters is the hypothetical one between you personally and the end client, the one that doesn't exist but is constructed to establish the nature of your actual working practices. The written contract matters only insofar as it clarifies and represents that relationship. It's a piece of the puzzle.

In our common law system, the intermediaries legislation (and other legislation) will always be a moving target, but it's especially potent for the question of what constitutes employment because it's an inherently difficult question to answer from the bottom up (based on factors present in employment relationships as seen in real workplaces, rather than using a statutory test) and expectations will also change over time and with context. In short, the upper tribunal and courts have enormous latitude to (re)define it. For example, control is an important test, but it's also a rather tricky test for a highly skilled individual operating in an environment without employees of the client who are similarly skilled individuals. In that case, the autonomy the contractor enjoys may not be very reflective of the contractual relationship they have.

Putting a contract in place that has strong elements of D&C, RoS and MoO is important, but what comes after that is far more important, namely documenting the relationship as reflective of the contract. If you don't have a folder of evidence for each client you've worked with, you are taking a risk, especially because these investigations typically take place years after the engagement has finished. Put anything and everything in that folder, it can be sifted by the professionals later on. Documenting the relationship is the best you can do. Beyond that, hope for the best because, even if you have a very solid and evidenced case, no one wants to go through the stress/hassle of an investigation. They remain relatively rare.

Let's see what Labour does. There are a couple of ways they can knock this on the head or at least narrow the scope dramatically (e.g., leaving moneyboxing as the last "problem"), if they are so inclined. The first is to completely eliminate any tax advantage of self-employment, at least via an intermediary. The October budget and subsequent budgets are the hooks for this. Obviously, any tax advantage has been eroded aggressively in recent years. The second is to introduce a positive statutory test for self-employment, aka strict deeming, which is what many other jurisdictions have. IPSE now seems to favour this, but they should be very careful what they wish for. It will certainly remove flexibility, especially if they focus on the risk of the definition being gamed, because it will then become a very penal test. The hook for this is Labour's employment law reforms, potentially.

[TwoWolves]

I don't think some of you are paying attention.

This government enjoys such wide-spectrum civil service capture that it can write the implementation of any law exactly as they please. What we imagine is law, case law etc has become irrelevant. In the end they will come for us, whatever our relationship with the client is and take the shirts from our backs. They are Communists and they hate everything that the self-employed stand for.

Britain as we have known it is on its last legs.

[woody1]

I confess I've been out of the game for a very long time. Is inside -vs outside just about minimising tax/nics?

Are their ways of mitigation, inside, that can narrow the gap enough to make dicing with outside not worth the risk? Pension contributions is an obvious one but what about anything else? EIS/SEIS/VCT perhaps?

[eek]

I confess I've been out of the game for a very long time. Is inside -vs outside just about minimising tax/nics?

Are their ways of mitigation, inside, that can narrow the gap enough to make dicing with outside not worth the risk? Pension contributions is an obvious one but what about anything else? EIS/SEIS/VCT perhaps?

Nope - it's to do with travel and expenses. A £150 train fare is acceptable once in a while if it's outside, that same train fare is £400 if it's inside..

[woody1]

Nope - it's to do with travel and expenses. A £150 train fare is acceptable once in a while if it's outside, that same train fare is £400 if it's inside..

Yes but £400 once in a while is no big shakes either.

You mean traveling to and from the place of work every day, or staying in digs during the week?

[willendure]

Putting a contract in place that has strong elements of D&C, RoS and MoO is important, but what comes after that is far more important, namely documenting the relationship as reflective of the contract. If you don't have a folder of evidence for each client you've worked with, you are taking a risk, especially because these investigations typically take place years after the engagement has finished. Put anything and everything in that folder, it can be sifted by the professionals later on. Documenting the relationship is the best you can do.

Sounds reasonable - although documentation itself might be a risk? I mean if you accused of something then the accuser must produce evidence. If there is no evidence on the other hand.

[malvolio]

Sounds reasonable - although documentation itself might be a risk? I mean if you accused of something then the accuser must produce evidence. If there is no evidence on the other hand.

Erm...

You will be the one defending your status, not the client. You are the one to provide the evidence. If you can't, you lose immediately.

We have been facing this for over 20 years. You would hope people had at least a grasp of the realities by now.

[eek]

Erm...

You will be the one defending your status, not the client. You are the one to provide the evidence. If you can't, you lose immediately.

We have been facing this for over 20 years. You would hope people had at least a grasp of the realities by now.

Really? Under Chapter 10 rules it's the agency / client who will be defending the status - hence the reason so many contracts are now inside..

[vetran]

Really? Under Chapter 10 rules it's the agency / client who will be defending the status - hence the reason so many contracts are now inside..

who pays the tax?

[willendure]

Erm...

You will be the one defending your status, not the client. You are the one to provide the evidence. If you can't, you lose immediately.

We have been facing this for over 20 years. You would hope people had at least a grasp of the realities by now.

Is that how it works? I mean if I end up in court accused of some crime, I don't have to produce any evidence to defend myself, I could simply say its up to the prosecution to prove it. And if they have no evidence at all, they cannot prove it.

But of course and HMRC investigation is not a court case. Are you telling me it works the other way around, "guilty" until you prove your innocence?