Collective bargaining

[JohntheBike]

I think they want to decide how much tax anyone pays.

Luckily in the UK there has to be a set of rules which can be challenged in court. Though HMRC only get pulled up in a few cases as fighting them is too expensive.

What it really needs is far fewer rules that are more clearly written. I do have a funny story to tell on that - sadly can't be posted publicly.

yes, I've said all along that HMRC's strategy has been to apply the rules to all and concede those individual cases where they know or think they can't win. This strategy is bound to increase the tax take.

Clearly, the majority of contractors will roll over and accept the situation and even those who are incensed by the regulations will be discouraged by the cost and hassle of challenging HMRC. So they will also roll over and be obliged to accept the situation.

On the other hand, that extremely small minority of cases where contractors put up a fight, are likely to be conceded by HMRC before the argument reaches court. HMRC's track record of winning cases is clearly abysmal, so I believe they are more likely to back off now if a reasonable defence is given by the contractor, especially if they have tax investigation insurance.

However, contractors now have another hurdle to clear and convince the clients to correctly assess their status.

[webberg]

yes, I've said all along that HMRC's strategy has been to apply the rules to all and concede those individual cases where they know or think they can't win. This strategy is bound to increase the tax take.

Clearly, the majority of contractors will roll over and accept the situation and even those who are incensed by the regulations will be discouraged by the cost and hassle of challenging HMRC. So they will also roll over and be obliged to accept the situation.

On the other hand, that extremely small minority of cases where contractors put up a fight, are likely to be conceded by HMRC before the argument reaches court. HMRC's track record of winning cases is clearly abysmal, so I believe they are more likely to back off now if a reasonable defence is given by the contractor, especially if they have tax investigation insurance.

However, contractors now have another hurdle to clear and convince the clients to correctly assess their status.

In my view, the above is incorrect and could potentially lead some into a false strategy.

HMRC takes cases to tribunal in pursuit of policy goals and cares nothing for past losses. Those losses will not influence whether a case is taken or not. If the policy is to attack outside IR35 status and the circumstances are marginal but the officer in charge is a strong personality (secure in the knowledge that win or lose he has nothing to fear) then the case goes ahead.

HMRC does not pull out of cases where there is a "reasonable defence" and will ignore completely any insurance policy held. It's more likely in our experience that the insurance company will recommend abandoning a case in exchange for a pay out.

HMRC is playing a long game on IR35 status and losses this early in the campaign will mean nothing.

[JohntheBike]

In my view, the above is incorrect and could potentially lead some into a false strategy.

HMRC takes cases to tribunal in pursuit of policy goals and cares nothing for past losses. Those losses will not influence whether a case is taken or not. If the policy is to attack outside IR35 status and the circumstances are marginal but the officer in charge is a strong personality (secure in the knowledge that win or lose he has nothing to fear) then the case goes ahead.

HMRC does not pull out of cases where there is a "reasonable defence" and will ignore completely any insurance policy held. It's more likely in our experience that the insurance company will recommend abandoning a case in exchange for a pay out.

HMRC is playing a long game on IR35 status and losses this early in the campaign will mean nothing.

well, I can only say that my personal experiences don't correlate with your opinion.

[jamesbrown]

Agree with webberg. There are myriad examples of HMRC pursuing unwinnable cases to the bitter end.

[JohntheBike]

Agree with webberg. There are myriad examples of HMRC pursuing unwinnable cases to the bitter end.

yes, the operative word is "unwinnable"

[webberg]

well, I can only say that my personal experiences don't correlate with your opinion.

Perhaps not.

However I have been working with/against HMRC for over 40 years, have assisted perhaps thousands of clients, dealt with many HMRC campaigns and have spent pretty much every working hour in the past 5 years in the area of contractors.

I consider (rightly or otherwise) that I can bring some dispassionate objectivity to analysing HMRC campaigns and policy and how it applies to large numbers of people.

If you have a better personal experience, good for you. I fear many do not.

[JohntheBike]

Perhaps not.

However I have been working with/against HMRC for over 40 years, have assisted perhaps thousands of clients, dealt with many HMRC campaigns and have spent pretty much every working hour in the past 5 years in the area of contractors.

I consider (rightly or otherwise) that I can bring some dispassionate objectivity to analysing HMRC campaigns and policy and how it applies to large numbers of people.

If you have a better personal experience, good for you. I fear many do not.

I wouldn't say my experience was better, far from it, but what I've learnt is that by not playing by the rules, HMRC can be wrong footed. Given your past activities, and for your own reasons, I guess you wouldn't want to break the rules and rock the boat. But I've I've satisfied myself of the validity of such an approach.

I worked right next to another contractor, in the same team with roughly the same skill set as mine, supporting the same application, who was paying the IR35 taxes. I've never done so. He maintained that his accountant had advised him to do so, to avoid any scrutiny of his other clients by HMRC.

[WordIsBond]

I started this thread thinking that if enough contractors got their head around this issue and managed to see the bigger picture and be willing to lead and not be led, then there was a once in a generation opportunity for contractors to take back some control over their situation.

I think I see now that there is little appetite for this.

We can speculate on why that is but as a non contracting observer, I'll offer my view.

1. Many contractors manage to hold two conflicting views simultaneously. They like to think of themselves as independent specialists and experts who can dictate the manner in which they work (when, how, where, what) but are also happy to conform to established industry norms in terms of agencies because to do otherwise is rocking the boat.

2. The power of the end client - often exercised via a tied agency - is huge. Many contractors are wary of asserting their leverage against these entities.

3. There is a significant population of contractors who have been with one end client for considerable periods and "trust" that they will be looked after as we enter a new reform phase.

4. Contractors are expert in their chosen field and expect others who claim expertise to be the same. To their detriment and my embarrassment there are many who fail to meet the required level of expertise or trustworthiness. However, hope seems to triumph over experience here and many contractors continue to place reliance upon experts but do not want to undertake even the shallowest of due diligence on them.

5. Many contractors regard business admin, tax, finance, accounts, bookkeeping and all the other tasks associated with the structure of a business as a necessary evil, to be undertaken only at the last minute and at the lowest cost possible in terms of time and money.

6. Many contractors will choose an obviously inferior product or service over a better quality one, for the narrowest of margins. That is not unusual in itself and probably happens in all businesses. However, ponder on how that position is reflected in the relationship between a contractor and their client. There I suspect the contractor considers that the end client is getting a bargain price but a quality product.

I'm not disheartened by the above. Rather I suspect that much of this I knew but am now forced to admit.

In the coming months and years, we will continue to push for transparency and openness in all interactions between contractors and those servicing their needs. Only by understanding risk/reward can contractors avoid the sort of nightmare caused by tax enquiries and the like.

Unfortunately HMRC has a pre populated list of "suspects" for IR35 status enquiries and I for one have no confidence that promises of a light touch here are worth anything.

Once we are past that, I can see a new wave of IR35 enquiries, this time into end client practices - an extension of all of this to small companies - and perhaps in a couple of decades the end of self employment.

Thank you all for the contributions.

Contractors are independent, and many became independent primarily because they wanted to be exactly that, independent. It's not just about the money for many contractors.

That sets a high barrier for any kind of collective approach. Contractors do not primarily have a collective mindset. They are independent businessmen. They might chip in to a political group (PCG) but they aren't going to let it bring them into a collective bargaining situation unless they have to.

Groups of independent businesses have formed guilds or cartels in the past, but the incentive has to be strong, either an existential threat or an opportunity to get significantly more wealth or power. There are not enough contractors who view this as an existential threat to incentivise them to consider a collective approach. Nor do those who do see it that way, perhaps, see a way clear to fight it.

Some of us have the ability to blow off UK plc and not be impacted. If they want to spuriously throw us inside we'll just concentrate on foreign clients. It's not an existential threat to us. Others have had a good run and may just retire from contracting. Others are now mortgage free and in pretty good shape and will start funneling loads of money into their pensions, mitigating the effects. Others have a pretty good sense that it has been fun but they can find a reasonably comfortable permanent landing place, and they see benefits to that. Others think that, given the public sector history, there will still be some outside IR35 roles around, and they'll be able to grab some of those, and that being inside occasionally may be mitigated partially by rate uplifts and isn't a disaster.

And of course a lot of contractors just aren't paying attention and won't be until they wake up in Jan/Feb and discover they are on the Titanic and it really is going to hit the iceberg.

You're not going to see collective bargaining unless contractors see that this really is an existential threat to them AND see a way to collectively bring enough power to bear to make a difference. For that to happen you have to have a very, very large percentage of contractors on board, which at this point probably isn't practical. Nice idea but in reality not workable at this point in time.

[JohntheBike]

Contractors are independent, and many became independent primarily because they wanted to be exactly that, independent. It's not just about the money for many contractors.

That sets a high barrier for any kind of collective approach. Contractors do not primarily have a collective mindset. They are independent businessmen. They might chip in to a political group (PCG) but they aren't going to let it bring them into a collective bargaining situation unless they have to.

Groups of independent businesses have formed guilds or cartels in the past, but the incentive has to be strong, either an existential threat or an opportunity to get significantly more wealth or power. There are not enough contractors who view this as an existential threat to incentivise them to consider a collective approach. Nor do those who do see it that way, perhaps, see a way clear to fight it.

Some of us have the ability to blow off UK plc and not be impacted. If they want to spuriously throw us inside we'll just concentrate on foreign clients. It's not an existential threat to us. Others have had a good run and may just retire from contracting. Others are now mortgage free and in pretty good shape and will start funneling loads of money into their pensions, mitigating the effects. Others have a pretty good sense that it has been fun but they can find a reasonably comfortable permanent landing place, and they see benefits to that. Others think that, given the public sector history, there will still be some outside IR35 roles around, and they'll be able to grab some of those, and that being inside occasionally may be mitigated partially by rate uplifts and isn't a disaster.

And of course a lot of contractors just aren't paying attention and won't be until they wake up in Jan/Feb and discover they are on the Titanic and it really is going to hit the iceberg.

You're not going to see collective bargaining unless contractors see that this really is an existential threat to them AND see a way to collectively bring enough power to bear to make a difference. For that to happen you have to have a very, very large percentage of contractors on board, which at this point probably isn't practical. Nice idea but in reality not workable at this point in time.

a very accurate assessment of the issues I'd say. Each contractor will approach the issues from their own personal perspective and circumstances.

[jamesbrown]

You're not going to see collective bargaining unless contractors see that this really is an existential threat to them AND see a way to collectively bring enough power to bear to make a difference. For that to happen you have to have a very, very large percentage of contractors on board, which at this point probably isn't practical. Nice idea but in reality not workable at this point in time.

Agree. Perceptive comments. Also, if any such cooperative were to come about, it would be biased towards completely the wrong people; those in the weakest position. Those at the other end of the spectrum don't really see the upcoming changes as a significant threat because, fundamentally, they are in a position of power and IR35 is not, and has never been, a threat to them. It will take a totally different approach w/ associated legislation before they worry, and contracting will look very different by then (w/ a different political context).