Reply to: Budget commentary - Telegraph

[Zero Liability]

Cameron couldn't give a stuff. He is happy doing what his bosses Osborn and HMRC tell him to because they have convinced him its all about the tax revenue.

There are several fronts this and the expenses attack can be fought on but they require the appetite for a couple of (successful) court cases to get some case law in place.

There is the fact that Cameron isn't going to stand for re-election. Osborne, whom I initially took to be a semi-free market type, seems to be much more of a "balance the books at any cost" cronyist type, and all he really wants to do is appeal to as broad a section of the public as possible, which may involve screwing over some big businesses if need be. Jamesbrown is absolutely right, IMO, that in part they have won based on manipulating the narrative to suit their purposes, and of course most people are not concerned enough to challenge it, on the assumption that it won't affect them (much like when the income tax was introduced in the US, it was only for the "rich" .) A good starting point would be to challenge that narrative, and also put together an evidence-based approach (taking into account the new dividend tax) against the claimed 'protected revenue' figure hector has contrived. When contextualised against their total annual tax take and spend (even a single item like foreign aid dwarfs it), it is insignificant; its direct impact on contractors and end users, OTOH, is not and will not be.

Maybe JB is right and this is just FUD to terrify clients out of using contractors to avoid compliance issues. If there were very clear, unambiguous tests brought in, clients' legal representatives could easily figure out how to maintain an out of IR35 situation that eliminates any risk for them, thus the likely persistence of vague, fuzzy, arbitrary criteria.

[jamesbrown]

In what areas do you see the potential for legal action?

IMHO, for most clients, contracting is not about avoiding NI it's about being able to bin someone easily. If clients are made severally liable then I think we'll see knee-jerk reactions damning contractors to SDC, MoO and no-RoS unless HR/legal perceive an equal risk of having to defend against employment claims.

Yeah, as much as I'd like to disagree, I think you're absolutely right. Having clients and agents police for tax evasion/avoidance/planning/imbalances/mentioning tax in passing etc. is going to be the new normal. The goal is to make IR35 moot, because it's an awful lot easier than addressing employment status.

[Contreras]

Cameron couldn't give a stuff. He is happy doing what his bosses Osborn and HMRC tell him to because they have convinced him its all about the tax revenue.

There are several fronts this and the expenses attack can be fought on but they require the appetite for a couple of (successful) court cases to get some case law in place.

In what areas do you see the potential for legal action?

IMHO, for most clients, contracting is not about avoiding NI it's about being able to bin someone easily. If clients are made severally liable then I think we'll see knee-jerk reactions damning contractors to SDC, MoO and no-RoS unless HR/legal perceive an equal risk of having to defend against employment claims.

[LondonManc]

What they'd be better doing is trapping the migrant contractors for full tax initially - if you're on a visa over here, strip out corp tax and VAT at source - rather than them working for a year and disappearing back abroad.

[LisaContractorUmbrella]

Ultimately, Lisa, I'm not so sure it will be in YourCo's interests. I would imagine that quite a few contractors start with an umbrella company fully expecting to transition to a Ltd once they've become more familiar with how things work. It's difficult to say how all this will play out and impact the wider contracting model, but umbrellas are part of that landscape. Anyway, the spirit of your point is well taken, so thanks for organising what you can

You are right we are part of the landscape - we'll be submitting on the T&S consultation on the brolly side and son of IR35 on principal Strange as it is I love this industry so I'll always help out where I can

[jamesbrown]

That's not the CUK spirit that I know and love It's in my company's interest for son of IR35 to go through but it's just not right so I'll do what I can to fight it

Ultimately, Lisa, I'm not so sure it will be in YourCo's interests. I would imagine that quite a few contractors start with an umbrella company fully expecting to transition to a Ltd once they've become more familiar with how things work. It's difficult to say how all this will play out and impact the wider contracting model, but umbrellas are part of that landscape. Anyway, the spirit of your point is well taken, so thanks for organising what you can

[tractor]

...

You could be right - I am an optimist at heart

However, if son of IR35 goes ahead (as it stands) then it will effectively kill off self-employment in the UK as SDC could be applied to absolutely anyone and the discussion document states:
"those who engage a worker through a PSC would need to consider whether IR35 applies....and, if so, deduct the correct amount of tax and NIC's"
The Tories keep banging on about helping small businesses so can you see Cameron being happy about being responsible for that?

Cameron couldn't give a stuff. He is happy doing what his bosses Osborn and HMRC tell him to because they have convinced him its all about the tax revenue.

There are several fronts this and the expenses attack can be fought on but they require the appetite for a couple of (successful) court cases to get some case law in place.

[LisaContractorUmbrella]

Yes I can. IMHO to them we are not small businesses, we are costs to business. And tax avoiders.

That's not the CUK spirit that I know and love It's in my company's interest for son of IR35 to go through but it's just not right so I'll do what I can to fight it

[LisaContractorUmbrella]

I'm more optimistic than many around here, but it's an uphill battle. I think it's very important that any our representations are unified and evidence-based, rather than based on individual (possibly conflicting) representations. The reason that large banks (for example) are successful in their representations is that they approach HMRC with a single voice, representing a substantial input to the Exchequer. By definition, small business are more fragmented in their views and representations. For that reason, it's critically important to consolidate and present evidence in a unified and fact-based way through organisations like IPSE (rather than fragmented rhetoric).

Edit: I'll also add that it's important for that evidence to be accurate. There have been quite a few posts around here that have referenced the potential "tax loss" to the Exchequer, among other issues, that are simply, factually, incorrect. If these representations are made by individuals, it will dilute the whole process and risk derailing the more cogent representations.

And on that note Umbrella Company News - All Umbrella Companies Are Equal

Eek is also putting a survey on the forum after the weekend and we'll be happy to consolidate the results

[expat]

You could be right - I am an optimist at heart

However, if son of IR35 goes ahead (as it stands) then it will effectively kill off self-employment in the UK as SDC could be applied to absolutely anyone and the discussion document states:
"those who engage a worker through a PSC would need to consider whether IR35 applies....and, if so, deduct the correct amount of tax and NIC's"
The Tories keep banging on about helping small businesses so can you see Cameron being happy about being responsible for that?

Yes I can. IMHO to them we are not small businesses, we are costs to business. And tax avoiders.

[jamesbrown]

I don't think they'd be too easily dismissed if we can prove that the proposed legislation changes will impact the wider economy. Businesses use contractors for a reason (as does the Public Sector) and I think we can assume that those reasons will be financial or simply because the particular project doesn't warrant the recruitment of a full time member of staff. Costs of employment will obviously also be a factor. If changes to the way contractors work mean that, ultimately, costs to business and the Public Sector (the tax payer) will increase then it won't be a popular move and, let's face it, if there's one thing a Government wants to be it's popular.

I think battles have been lost but I don't think we've lost the war

I'm more optimistic than many around here, but it's an uphill battle. I think it's very important that our representations are unified and evidence-based, rather than based on individual (possibly conflicting) representations. The reason that large banks (for example) are successful in their representations is that they approach HMRC with a single voice, representing a substantial input to the Exchequer. By definition, small business are more fragmented in their views and representations. For that reason, it's critically important to consolidate and present evidence in a unified and fact-based way through organisations like IPSE (rather than fragmented rhetoric).

Edit: I'll also add that it's important for that evidence to be accurate. There have been quite a few posts around here that have referenced the potential "tax loss" to the Exchequer, among other issues, that are simply, factually, incorrect. If these representations are made by individuals, it will dilute the whole process and risk derailing the more cogent representations.

[LisaContractorUmbrella]

I'm not a doom-and-gloom merchant (really) but I think you have your rose-tinted optics on. If tax-avoiding incorporated resources like contractors are seen to be hit for tax, while costs to business and government increase slightly but largely unseen, that will be a popular win.

You could be right - I am an optimist at heart

However, if son of IR35 goes ahead (as it stands) then it will effectively kill off self-employment in the UK as SDC could be applied to absolutely anyone and the discussion document states:
"those who engage a worker through a PSC would need to consider whether IR35 applies....and, if so, deduct the correct amount of tax and NIC's"
The Tories keep banging on about helping small businesses so can you see Cameron being happy about being responsible for that?

[expat]

I don't think they'd be too easily dismissed if we can prove that the proposed legislation changes will impact the wider economy. Businesses use contractors for a reason (as does the Public Sector) and I think we can assume that those reasons will be financial or simply because the particular project doesn't warrant the recruitment of a full time member of staff. Costs of employment will obviously also be a factor. If changes to the way contractors work mean that, ultimately, costs to business and the Public Sector (the tax payer) will increase then it won't be a popular move and, let's face it, if there's one thing a Government wants to be it's popular.

I think battles have been lost but I don't think we've lost the war

I'm not a doom-and-gloom merchant (really) but I think you have your rose-tinted optics on. If tax-avoiding incorporated resources like contractors are seen to be hit for tax, while costs to business and government increase slightly but largely unseen, that will be a popular win.

[LisaContractorUmbrella]

This was obvious a couple of years ago when HMRC set up an Anti-Avoidance Unit charged (according to their website) with reducing the "tax gap" which is the difference between the revenue actually collected and that which the government expected. A chilling phrase to me, with its implication that we are there to fulfil government's expectations.

And its clear statement (not just an implication) that the law is what parliament intended it to be, not what they actually wrote. Lewis Carroll or Franz Kafka?

Apparently the reason the consultation on T&S was begun was not because there is anything wrong with the concept but because more people ended up getting tax relief that Government initially intended. To my mind, something is either right or it's wrong; it can't be right only when it suits the Government.

[LisaContractorUmbrella]

The propaganda war has been lost. Really, it was lost before it started. Evasion morphed into evasion and avoidance, then to evasion, avoidance, and aggressive tax planning, then to evasion, avoidance, planning, and imbalances in the tax system. It will continue largely unchallenged because the public (and press) are largely onside and don't care to understand the subtleties of how contractors (operate and) are taxed. It has become an argument about tax, rather than an argument about contracting. Certainly, we should respond to the discussions via IPSE and others (there's some chance to impact those) and, perhaps, to the subsequent consultations, in order to provide substantive evidence about the impacts and collateral damage, but these impacts are, ultimately, too easily dismissed.

I don't think they'd be too easily dismissed if we can prove that the proposed legislation changes will impact the wider economy. Businesses use contractors for a reason (as does the Public Sector) and I think we can assume that those reasons will be financial or simply because the particular project doesn't warrant the recruitment of a full time member of staff. Costs of employment will obviously also be a factor. If changes to the way contractors work mean that, ultimately, costs to business and the Public Sector (the tax payer) will increase then it won't be a popular move and, let's face it, if there's one thing a Government wants to be it's popular.

I think battles have been lost but I don't think we've lost the war