IR35 caught contactor wins holiday pay from HMRC

[DeludedKitten]

It's quite possible that HMRC settled because they were in a lose/lose situation. As an agency worker she is entitled to transparent holiday pay. If the court had found AWR did not apply, that would have been another blow for CEST and their inside determination.

The potential win for HMRC would have been if they could show that the new contract had holiday pay rolled into it already (I don't know if it did or didn't). If it did, then they would surely win on that point. From there, you could appeal the point of law about whether it is legal to roll in that holiday pay or not, but then you're taking on HMRC plus the entire umbrella industry as well which is going to be very, very expensive to do.

FTAOD, I see the case as a lose/lose though - either she was an agency worker entitled to holiday pay, or she wasn't a worker and therefore should never have been inside IR35. I'm just positing a potential win that HMRC might have been able to take.

[malvolio]

The potential win for HMRC would have been if they could show that the new contract had holiday pay rolled into it already (I don't know if it did or didn't). If it did, then they would surely win on that point. From there, you could appeal the point of law about whether it is legal to roll in that holiday pay or not, but then you're taking on HMRC plus the entire umbrella industry as well which is going to be very, very expensive to do.

FTAOD, I see the case as a lose/lose though - either she was an agency worker entitled to holiday pay, or she wasn't a worker and therefore should never have been inside IR35. I'm just positing a potential win that HMRC might have been able to take.

The point was that she was already an independent worker that HMRC moved into IR35 under the new PS ruling, under an inappropriate blanket assessment, therefore making her a worker by default, without awarding her the benefits that a worker is entitled to.

IF a client wants an agency worker, they have to meet their obligations to that worker. HMRC didn't, hence the case being brought. Now all we need is a few tens of thousands of other blanket-assessed workers to do the same thing to their nominal employers, such as the NHS, the BBC and various other PS bodies.

By any measure this was a successful result for the whole contractor workforce.

[mudskipper]

The point was that she was already an independent worker that HMRC moved into IR35 under the new PS ruling, under an inappropriate blanket assessment, therefore making her a worker by default, without awarding her the benefits that a worker is entitled to.

IF a client wants an agency worker, they have to meet their obligations to that worker. HMRC didn't, hence the case being brought. Now all we need is a few tens of thousands of other blanket-assessed workers to do the same thing to their nominal employers, such as the NHS, the BBC and various other PS bodies.

By any measure this was a successful result for the whole contractor workforce.

HMRC used CEST, as is explained in Susan's story.

Agree with the rest

[WordIsBond]

The point was that she was already an independent worker that HMRC moved into IR35 under the new PS ruling, under an inappropriate blanket assessment, therefore making her a worker by default, without awarding her the benefits that a worker is entitled to.

Yes. They changed the rules of the game mid-engagement.

IF a client wants an agency worker, they have to meet their obligations to that worker. HMRC didn't, hence the case being brought. Now all we need is a few tens of thousands of other blanket-assessed workers to do the same thing to their nominal employers, such as the NHS, the BBC and various other PS bodies.

Perhaps. The problem is that anyone who was engaged on a new contract under the PS rules isn't quite in the same situation. They can claim compensation for the worker's rights is included in the fees, and that the worker understood that when entering the contract. They couldn't claim that in Susan's case. That guaranteed they were going to lose, so they settled.

By any measure this was a successful result for the whole contractor workforce.

Not necessarily. It sets a moral precedent, if not a legal one as noted above, that anyone who had the rules changed on them mid-contract by their engager declaring them to be a worker, should get worker's rights. If it had gone further, it might have set a more sweeping, and legal precedent, that anyone declared a worker by their engager should get worker's rights. They cut it off before it got to that.

If it had set that kind of precedent, you would be right about it being a successful result for all contractors. It would make engagers think twice about declaring a contract inside IR35 because by doing so they are declaring something about the worker's status for rights, too. But it didn't go that far because there was no ruling, just a settlement, and no one can guarantee that the ruling would have gone that far.

The people who really have a moral precedent that they can use here are those whose status was changed by their engager mid-contract. It's not a legal precedent but HMRC did settle so there is a moral case that people should be treated equally, and if HMRC agreed on this, it certainly strengthens the hand of anyone else who had it happen mid-contract. Those people should be taking this up. And maybe one of them will win a case that sets the precedent you are talking about. That really would be a win.

It wouldn't be a win because we want worker's rights. It would be a win because it would make clients think twice about declaring us inside IR35. Up until now, in the public sector, they've been able to get away with it to the detriment of contractors, just to cover their back sides. If a case like that were won it would force them to count the cost.

But we're not there, not yet. This was a step forward but it doesn't get there.

But absolutely, everyone who had their status changed mid-contract, like Susan did, should make them pay.

[northernladuk]

I guess HMRC aren't going for retrospective taxation of everyone moving from outside to inside then.

[simes]

Clearly I do not understand the meaning of the word Precedent in the legal context, so thanks for the intelligent follow up fellas. Very interesting dissection of the law.

If IPSE are now asking for more people to come forward, then;

1) the Precedent will only be set once the argument goes through, and a decision made in, a court?
2) the preceding win out of court will keep HMRC busy for years, irrespective of whether HMRC allow the cases into court.

I think my rambling point being that, in my opinion, this puts the change for Private Sector blanket Inside IR35 assessments on rather shaky ground...?

[simes]

“You have to question why the respondents agreed to cough up on the morning of the tribunal,” says Chaplin. “My guess is that they didn’t want this point of law tested in court. Setting a legal precedent to this effect would have been extremely damaging to non-compliant agencies and umbrellas, although the settlement alone says all that needs to be said.”

[mudskipper]

Clearly I do not understand the meaning of the word Precedent in the legal context, so thanks for the intelligent follow up fellas. Very interesting dissection of the law.

If IPSE are now asking for more people to come forward, then;

1) the Precedent will only be set once the argument goes through, and a decision made in, a court?
2) the preceding win out of court will keep HMRC busy for years, irrespective of whether HMRC allow the cases into court.

I think my rambling point being that, in my opinion, this puts the change for Private Sector blanket Inside IR35 assessments on rather shaky ground...?

If you're a member, it's worth following the discussion on IPSE's forums too.

[Hobosapien]

I guess HMRC aren't going for retrospective taxation of everyone moving from outside to inside then.

Bingo! It's a sticky wicket if CEST deems someone inside IR35 after they were previously operating outside.

On one hand HMRC can argue the case for IR35 back taxes, on the other the client may have to stump up employee rights compo.

I doubt the latter would offset the former from a contractor's financial perspective, so it my be better to keep quiet and carry on while gripping the pre-CEST contract review and insurance if HMRC come knocking.

[simes]

If you're a member, it's worth following the discussion on IPSE's forums too.

I am. And I will.

Thanks.