Reply to: Disguised employee, IR35 & fellow contractors

[LandRover]

The Tories have caught the New Labour disease of tinkering, deciding the winners and losers of tax policy, using tax to try to control behaviour rather than simply to try to find a reasonable means of raising revenue. Simplification isn't something they understand. Instead of increasing employer's NI, you have another new tax, an employer's levy. That lets them decide who the winners and losers are, as far as who has to pay it. It's all extraordinarily egotistical. They've got a god-complex where they decide who is good (and gets to pay less tax) and who is bad and pays more.

David Gauke. The man is going to extraordinary lengths, as if its a 24*7 obsession, he seems to have a personal issue with us, and yet look at his background. He really is THE driver in all this.

[WordIsBond]

The mechanic isn't working on-site, in your garage, with your tools, drinking your tea, for an extended period of months (or years even).

Just sayin like.

100% accurate, and 100% irrelevant.

I actually had a mechanic come here and do some work once. And I made him tea.

I had someone working on my house for more than a month and we had him in for dinner a couple times. Horrible. He actually became a friend. But if he'd been working for me here in my home office for six months on an IT project, and he had come to dinner a few times, HMRC would use it against him in an IR35 investigation if they could.

Really doesn't matter where you work or whose tools you use or whose tea you drink. Businesses should build relationships and look to provide a level of service that results in repeat business. If that means actually occasionally doing a little bit of unpaid work to strengthen that relationship, there is no sound business reason in the world you shouldn't do it. It's the same reason stores give BOGOF. It isn't because they expect to make any money on THAT deal, it's the other stuff they expect to sell you.

It is normal business behaviour to have loss leaders, to go above and beyond the call of duty in customer service sometimes, to do things to establish friendly relations (rather than bristly arms-length relations) with customers. That's NORMAL. And any legislation that puts us in a position where normal business behaviour is used to accuse us of being hidden employees is aberrant and distortive.

I expected Labour to pass that kind of legislation but I don't expect the Tories to defend it and strengthen it. I expect them to abolish the ugly monstrosity and replace it with something straightforward and simple.

We have two distortive things. One is the complexity of employment taxation and a significant gap between employment income taxation and business income taxation. That distorts by creating an incentive for TMI. So you have people incorporating who never should have. Distortion.

And then, to counteract that, instead of simplifying and bridging that gap, Gordon Brown invented another distortion.

The Tories actually started to solve one of those problems with their dividend tax. If they went just a little bit farther, the first distortion would be resolved and they could eliminate the stupid second one. You don't need to have equal taxation to eliminate tax-motivated incorporation, because the corporation comes with extra accounting, etc. Just narrow the gap a little more, and few will incorporate to avoid tax -- and by the way, you'd collect more tax, too, and you wouldn't have to have teams chasing IR35, and it would be EASY to enforce.

But it makes too much sense. The Tories have caught the New Labour disease of tinkering, deciding the winners and losers of tax policy, using tax to try to control behaviour rather than simply to try to find a reasonable means of raising revenue. Simplification isn't something they understand. Instead of increasing employer's NI, you have another new tax, an employer's levy. That lets them decide who the winners and losers are, as far as who has to pay it. It's all extraordinarily egotistical. They've got a god-complex where they decide who is good (and gets to pay less tax) and who is bad and pays more.

[Zero Liability]

Well, a consultancy can also have consultants who throw in work for "free" to win further business, without thereby becoming "disguised" employees of the end client. True, they're employed by their consultancy firm, but that is neither here nor there insofar as the end client is concerned. I agree with WiB, it's just an arbitrary crock of shyte when all is said and done, based on an outmoded master/servant worldview of how employment should work. If the tax system were not so heavily predicated on it, no one would even give it a second thought, except union relics and a dying breed of supposed aristocrats.

[Contreras]

My mechanic just fixed something for free for me. No one says, "Naughty, pay more tax."

The mechanic isn't working on-site, in your garage, with your tools, drinking your tea, for an extended period of months (or years even).

Just sayin like.

[WordIsBond]

So a guy is running his business in a way to build a great relationship with his client, and putting himself and potentially others at risk for higher taxes.

My mechanic just fixed something for free for me. No one says, "Naughty, pay more tax."

Someone at IPSE with all their vaunted connections needs to refer the new self-employment ambassador, David Morris, to this thread. IR35 is aberrant legislation from a twisted chancellor and it needs to just die. It distorts normal economic and personal behaviour. It turns good business relationships into a negative that can be used against you.

Tax motivated incorporation has already taken a hit with the dividend tax changes. Hit it farther if you have to. Increase the corporation tax on PSCs another 5%, to 25%. Or increase the dividend tax rate on dividends paid by PSCs by 5%, if that is easier. Either of those, combined with the dividend tax changes already made, would more than gain what IR35 is gaining now, and pretty much eliminate TMI. And either would be easy to understand and enforce, unlike the current dog's breakfast. So do it if you need to. Narrow the gap between PSC taxation and employment taxation if you need to.

But please, can we kill this monstrous legislation that is the brainchild of Gordon Brown and Dawn Primarolo, that is impossible to enforce consistently, is complicated to comply with, distorts everything, tells us we are employees when we aren't without giving us employment rights, and is only going to go on making lawyers wealthy? Please kill it. Do the Tories really think Gordon Brown and Dawn Primarolo gave birth to the right answer? Do they really want to go to the wall for something Broonie invented?

[wantacontract]

Spot on. Remember its the client who gets you the renewal and quite often opinions of the permies will be asked. If they think you're an arse then they'll pick the other guy if its a choice.

All well and good playing the "I'm a contractor" card but I truly believe clients don't give a monkeys. They want someone there who will do the work and not upset the applecart or the permes.

If it goes too far then you''ll be perfectly safe outside IR35 but have no contract to worry about. Seen it happen more than once.

Then again there is a limit somewhere I will agree. I worked with a fellow contractor once who worked weekends for free all the time. Peed me off because I looked a git when I asked them to authorise it in advance if they wanted me to work. This contractor also went 6 weeks without a contract because hiring manager was "a bit busy to sort it all out but I will". Whereas I refused to turn up because they wouldnt even confirm extension via email.

So I understand to a certain extent.

worked for free at the weekends! bananas!

[JRCT]

You must be very, very good at your job.

They keep you on, despite the fact you are...




... a Forest supporter

Flying the flag for the Mighty Reds! Ah, them were the days!

[sociopath]

Yes but charge them a mutually agreeable price for the additional works as would be a variation to services. A proper business would get an agreement in place in advance to ensure they get paid for the works. They would not absorb the costs within existing contract.

True to an extent but if I think the mutually agreeable price is free (for the sake of establishing goodwill) then I should be able to do so without concern for my tax status.

Recently a plumber came to fit my shower and happened to fix a dodgy radiator I mentioned to him when he was at the house for free. I said thanks very much and will probably use his business again. I didn't say, what a naughty boy, go and pay more tax.[/QUOTE]

Fair point on the good will but how long does that good will extend? Fixing a radiator once as good will is one thing. Doing additional works as and when required unconditionally for a client is another thing. It eventually becomes direction and control.

There needs to be limitations. For the plumber it might be "I'll fix the radiator this time to keep you nice and warm but I recommend you get a full service for the winter and I could give you a reasonable price if you want to book it in the now".

[Cirrus]

You must be very, very good at your job.

They keep you on, despite the fact you are...




... a Forest supporter

[supersteamer]

Does a proper business attempt to get repeat and extended business by keeping the client happy and by extending its scope into other aspects of work that the client has that it can provide services for?

Yes but charge them a mutually agreeable price for the additional works as would be a variation to services. A proper business would get an agreement in place in advance to ensure they get paid for the works. They would not absorb the costs within existing contract.[/QUOTE]

True to an extent but if I think the mutually agreeable price is free (for the sake of establishing goodwill) then I should be able to do so without concern for my tax status.

Recently a plumber came to fit my shower and happened to fix a dodgy radiator I mentioned to him when he was at the house for free. I said thanks very much and will probably use his business again. I didn't say, what a naughty boy, go and pay more tax.

[SueEllen]

Apart from acting the awkward b@stard what else distinguishes you? Do you retain evidence you could present that demonstrates you are outside IR35? Forget about the working practices of others as long as your confident you can defend yourself in an IR35 investigation thats what matters.

Agreed.

Proper evidence like being forced to take time off as there was no work for you to do would kill an investigation.

[sociopath]

But I'm not inside IR35. However, the actions of someone else is putting them, potentially, inside and therefore by association, me.

It's like me bailing the water out of a life boat whilst someone else is drilling holes in it. Yes, I could accept my fate and drill holes in it too or I could try and do something to protect myself.

Apart from acting the awkward b@stard what else distinguishes you? Do you retain evidence you could present that demonstrates you are outside IR35? Forget about the working practices of others as long as your confident you can defend yourself in an IR35 investigation thats what matters.

[sociopath]

Does a proper business attempt to get repeat and extended business by keeping the client happy and by extending its scope into other aspects of work that the client has that it can provide services for? [/QUOTE]

Yes but charge them a mutually agreeable price for the additional works as would be a variation to services. A proper business would get an agreement in place in advance to ensure they get paid for the works. They would not absorb the costs within existing contract.

[northernladuk]

As I type this, 2 of my fellow contractors are using the client's Employee Discount facilities to buy items via the client provided credentials.

I kid not!

My last client has a deal with Vodafone and all you had to do was send a mail with your details from your work email to get 10% off for the year. As expected nearly everyone did it and couldn't understand why a few of us wouldn't touch it. The phone that is paid via your limited connect directly to a client employee perk. Not a chance in hell.

I did argue this benefit wouldn't be applied to a business tariff and guess what? Most of them were still on personal contracts that were just paid for from the Ltd company. I didn't know whether to laugh or cry.

[psychocandy]

Or the client will remember how difficult and obnoxious you were and do nothing to help you whilst saying all the right things to help out their good mate who was a laugh at the christmas party.

Spot on. Remember its the client who gets you the renewal and quite often opinions of the permies will be asked. If they think you're an arse then they'll pick the other guy if its a choice.

All well and good playing the "I'm a contractor" card but I truly believe clients don't give a monkeys. They want someone there who will do the work and not upset the applecart or the permes.

If it goes too far then you''ll be perfectly safe outside IR35 but have no contract to worry about. Seen it happen more than once.

Then again there is a limit somewhere I will agree. I worked with a fellow contractor once who worked weekends for free all the time. Peed me off because I looked a git when I asked them to authorise it in advance if they wanted me to work. This contractor also went 6 weeks without a contract because hiring manager was "a bit busy to sort it all out but I will". Whereas I refused to turn up because they wouldnt even confirm extension via email.

So I understand to a certain extent.