IR35 win for HMRC

[ChimpMaster]

ASB - just so I understand this correctly - are you saying that if HMRC finds you within IR35, and hence assigns you "Employee" status, does that mean you can claim employee rights from the agency/end-client?

Perish the thought - but I know that if HMRC screwed me on the taxation, I would want to get something back by any means possible. Holiday pay, pensions, sick pay etc would all add up.

Of course, this would present a contractual nightmare for all involved.

[The Lone Gunman]

ASB - just so I understand this correctly - are you saying that if HMRC finds you within IR35, and hence assigns you "Employee" status, does that mean you can claim employee rights from the agency/end-client?

Perish the thought - but I know that if HMRC screwed me on the taxation, I would want to get something back by any means possible. Holiday pay, pensions, sick pay etc would all add up.

Of course, this would present a contractual nightmare for all involved.

Currently HMG say there is a difference between employment status and tax status.
Just because you are IR35 caught for tax does not make you an employee.
An employment trinbunal may say you are not an employee.


HTH.

[ASB]

ASB - just so I understand this correctly - are you saying that if HMRC finds you within IR35, and hence assigns you "Employee" status, does that mean you can claim employee rights from the agency/end-client?

Perish the thought - but I know that if HMRC screwed me on the taxation, I would want to get something back by any means possible. Holiday pay, pensions, sick pay etc would all add up.

Of course, this would present a contractual nightmare for all involved.

No.

In order to claim employment rights from the client you would have to prove you were an actual employee of them. HMRC finding you inside IR35 has no bearing on that whatsoever - IR35 judges a notional contract. Employment status only deals with reality.

[ASB]

The intention is not to prove loss, it is to prove that a crime has been commited. The intention is to get the agent and the client thrown in jail (or at least threatened with it). Too may agents and clients are colluding to avoid employment status problems by entering into fraudulent contracts.

Obtaining goods or money by deception is against the law. Our supplied services constitute the "goods" in question. The deception is in the unmatched contract clauses which the agent knew about and the client might have.

Ok, I submit. I hadn't thought of it from the potentially criminal angle.

I am proposing this to bring this absurd disparity between employment status and tax status to a head. If there is no nexus then there can be no employment status and therefore no tax status either, but untill someone goes to the Lords with a tax ruling saying they are an employee and an employment ruling saying they are not then we will remain in limbo.

But on what basis can somebody take those rulings to the Lords? They are not contradictory. It is perfectly plausible as the law stands. Whether it is right or not is a different thing and would surely be a matter for further judicial review.

[richard-af]

Contract

There seems to be an obvious point for contractors to consider:

You must get some sort of meaningful assurance from one of the contract vetting services that your contract is as safe as can be from this sort of thing.

I expect that, in light of this strange judgement, such service providers will now get weaving and find a way around it, and advise that it be put into all future contracts.

It'd be helpful if we knew whether the poor victim had ever had his contract vetted.

[The Lone Gunman]

Ok, I submit. I hadn't thought of it from the potentially criminal angle.

Wasn't looking for a win here, just healthy debate, but thanks for not making me argue it further.

But on what basis can somebody take those rulings to the Lords? They are not contradictory. It is perfectly plausible as the law stands. Whether it is right or not is a different thing and would surely be a matter for further judicial review.

I think this would be a long and arduous road, but would eventualy force a ruling, possibly from a judicial review. They may not be contradictory, but it is absurd if not perverse that you can be both an employee and not an employee depending in which court you are standing and with enough apeals it must eventualy get high enough.

[BoredBloke]

I can't understand why this is allowed. How can it be legal to be bound by clauses which you have no access to and have not signed up to. Does anybody have any other examples where this happens? So in this situation, as I understand it, the contractor had a RoS in his contractor agency contract, but the agency clinet one did not. How the hell was he supposed to know, or any of us for that matter?

[malvolio]

Late to this conversation, but two points spring to mind...


Doing the end client for employment rights is the so-called nuclear option. I've long resisted this idea, as have many others, because the most likely end result would be loss of the current contractor model, to be replaced with a series of short-term employments. Slightly more hassle for the end client, but a lot more comfortable, and a lot more controllable, than being threatened by random claims from IR35-assessed contractors.

Similarly, the solution to the mismatch between the two contracts is simply to put the higher level contractual terms in the lower one, which would probably move the majority of contracts back inside IR35. Do we really want that to happen?

There is a school of thought that says the current uncertainties actually work in our favour, so we shouldn't mess around trying for more clarity. You can be sure that any "corrective" action would damage our interests significantly.

The real solution is to be able to declare yourself legally a self-employed person and take the tax benefits as compensation for the loss of rights and protections of an employee. That's where the PCG is going on behalf of the one-in seven workers in the country who are self-employed. Needless to say, HMG are ignoring that approach (and the 1 in 7 voters...) and seem to prefer levelling the taxation between us and employees, which is why we are seeing a scaling up of CT for small businesses.

[The Lone Gunman]

Hi Mal:

There are a number of issues here.

I have been against hitting the clients with the Nuke up to now (see shout99 for a number of points) not least because I feel they have already paid and I want repeat business, but more and more I see client colluding with agents and HMRC to hng us out to dry, at the same time as admitting that they think we are employees. If a few get stung then others will shift to more IR35 friendly contracts.

Agents are deliberately issuing non matching contracts. It is fraud and needs dealing with.
I can not quote for a job based on half the info. My rate is dependant on my expected take home. If I knew I was IR35 caught then I would chare accordingly.

Both client and agent want to have cake and eat it.

Then we have one of the reasons I do not like the PCG.

I do not care if the uncertainty often works in our favour. That is all well and good untill you are the bloke who loses.
I don't care if the contract falls under IR35. At least I will be able to asses the situation and charge accordingly.
I don't care if the contractor model changes. At least I will be able to asses the situation and charge accordingly.

I want certainty. If I am IR35 caught then I want to know now. I will gladly pay the extra tax and NI, I do not have a problem with that. I will know before hand and will be able to charge a sensible rate.
What I don't need is a large tax bill 6 years down the line because some numpty in HR says the wrong thing to HMRC.

It is farcical that the body which proclaims itself to be the representative body of contractors simply chooses the path of least resistance. Sometimes the right way is the hard way and the right result is not the result you want.

IR35 in its present form is wrong and we and the PCG should challenge it at every oportunity with all the evidence we can muster.
If that means that the Ltd comany route is taken away then so be it, but at least we will know.

[Chugnut]

Hi Mal:

There are a number of issues here....

Well said TLG.