Sdc, t&s, wtf?

[SueEllen]

If they don't get employment benefits then they should be given a pay rise.

I don't see how claiming expenses compensates an umbrella employee- especially if the umbrella employee lives close to work and brings in sandwiches and a pack of crisps in for lunch. There should be a universal strategy like an uplift in pay rather than expenses (which is just open to abuse).

Everything is open to abuse in this country simply because we are all afraid of talking about earnings.

Once people know what you earn as well as the kind of work you do, they know if you are doing something dodgy including over claiming your travel expenses.

[JB3000]

They aren't employees though as they do not have the same benefits. One that immediately springs to mind is the various public sector pensions.

Giving them tax relief on T&S is the only benefit they have.

Personally I think everyone should have tax relief on travel to work expenses. (This I've said before.)

If they don't get employment benefits then they should be given a pay rise.

I don't see how claiming expenses compensates an umbrella employee- especially if the umbrella employee lives close to work and brings in sandwiches and a pack of crisps in for lunch. There should be a universal strategy like an uplift in pay rather than expenses (which is just open to abuse).

[SueEllen]

No doubt the odd umbrella employee will go limited but I can't see too many doing this- most don't want the hassle of paperwork, HMRC, or are too low paid. I reckon HMRC will collect more tax than they lose.

Umbrella companies will really need to cut their fees because they are essentially just going to be a payroll bureau, i.e. they won't have to bother with examining the date and time of every receipt!!!!

I think the change is for the good. Why should someone who to all intents and purposes is an employee get relief on t&s when no one else does?

They aren't employees though as they do not have the same benefits. One that immediately springs to mind is the various public sector pensions.

Giving them tax relief on T&S is the only benefit they have.

Personally I think everyone should have tax relief on travel to work expenses. (This I've said before.)

[JB3000]

Although it's not unusual not to have much in the way of help from HMRC, the lack of guidance, information or even helpful hints regarding T&S and SDC is somewhat perplexing. Don't know what you guys are finding but the market seems to have come to a bit of a standstill while everyone waits to see what's going to happen in reality post April 2016.

We have a meeting with our friends at HMRC in a couple of weeks and I really want to be able to go to them with as much feedback from contractors as possible - will lack of T&S force everyone to PSC, are you seeing more dodgy schemes cropping up, are agencies picking particular routes that they're pushing you down? Anything that you can think of that will wake them up to the fact that using SDC as a determinant for anything is a really stupid idea. I know that PSC's won't be affected by the current raft of legislation but you can almost guarantee that if they've come up with this to decide status T&S won't be the only thing they'll be applying it to.

So, if you've got any comments that you want us to pass on please go ahead [keeping profanity and threats of violence to a minimum if possible]

No doubt the odd umbrella employee will go limited but I can't see too many doing this- most don't want the hassle of paperwork, HMRC, or are too low paid. I reckon HMRC will collect more tax than they lose.

Umbrella companies will really need to cut their fees because they are essentially just going to be a payroll bureau, i.e. they won't have to bother with examining the date and time of every receipt!!!!

I think the change is for the good. Why should someone who to all intents and purposes is an employee get relief on t&s when no one else does?

[LisaContractorUmbrella]

Yes, I know. Good luck to you. You may find a few contractors whose clients have started to concern themselves with SDC, but I think it's very early days and I don't think HMRC guidance will help much. It's just another subjective test whose outcome is more about balancing risk than distinguishing between the employed and self-employed. My only suggestion would be that, in making the legitimate case for brolly users, you don't overplay the discrepancy with PSCs as a point of fairness, because it's better to have some people treated "fairly" than everyone treated consistently. In addition, there's probably limited value, for anyone, in over-stating the risks of brolly users incorporating for tax purposes. If that happens, consequences will follow, but I can't see anyone benefiting from overstating that point in advance, not least because no one knows.

Fair enough - points well made

[jamesbrown]

I agree and it's not my intention to encourage any kind of equalization as Ltd Co's and brollies are two totally different business entities BUT HMRC should realise that proper contractors who choose to operate through a brollie (as opposed to low paid workers e.g. in the construction sector who've been forced into using brollies because their employers want to reduce their employment costs) should not be penalised for making this choice. As things stand brollies report their tax take through RTI and, those who operate compliantly, effectively act as tax collection agents for HMRC; if this legislation all goes ahead as planned I can see a fairly sizeable migration to Ltd Co's; IR35 has been a major issue since its inception and HMRC can't police it effectively now so it does seem as though they are shooting themselves in the foot with this but what do I know I do agree that we are likely to sustain some damage through all this although probably not enough to have a significant impact on the business but my main motivation for the post was to get some feedback from contractors to HMRC so that we can say that we are giving them something other than our own opinion (which they obviously believe to be biased)

Yes, I know. Good luck to you. You may find a few contractors whose clients have started to concern themselves with SDC, but I think it's very early days and I don't think HMRC guidance will help much. It's just another subjective test whose outcome is more about balancing risk than distinguishing between the employed and self-employed. My only suggestion would be that, in making the legitimate case for brolly users, you don't overplay the discrepancy with PSCs as a point of fairness, because it's better to have some people treated "fairly" than everyone treated consistently. In addition, there's probably limited value, for anyone, in over-stating the risks of brolly users incorporating for tax purposes. If that happens, consequences will follow, but I can't see anyone benefiting from overstating that point in advance, not least because no one knows.

[LisaContractorUmbrella]

It's difficult to know what to suggest. They aren't going to backtrack on this, so I don't see any mileage in that. It's likely to be coming down the line for PSCs too, although the deferral is welcome. Even if HMRC do provide guidance, you won't be able to rely on it. As HMRC have said all along, they're basing their interpretation of SDC on case law, and that can be interpreted in different ways. Basically, you're stuck with an IR35-type test that is narrower in scope and you (as an industry) can react to it in different ways, bearing in mind the liabilities.

Bottom line, given those liabilities, what are the chances that clients will provide anti-SDC clauses in their contracts with you and what chance do you see of accepting them for your employees? Slim, I would think. Therefore, it's pretty much a non-issue, I'd suggest. You won't be allowing your employees to claim T&S, unless you're willing to take a larger risk for fear of your employees switching to PSCs or going permie with the end client. Pretty grim trade-off. The only silver lining, perhaps, is that it probably won't be a decisive factor for many people that would still prefer to work autonomously and without a PSC. I expect you'll lose some business though, it's almost inevitable.

Edit: also, while I know your motivations are good, Lisa, there's a slight conflict of interest now (short-term, not long-term), insofar as it isn't in our interests to play-up the potential switch to PSCs and elicit a more rapid, knee-jerk, reaction that equalizes the treatment of brollies and PSCs.

I agree and it's not my intention to encourage any kind of equalization as Ltd Co's and brollies are two totally different business entities BUT HMRC should realise that proper contractors who choose to operate through a brollie (as opposed to low paid workers e.g. in the construction sector who've been forced into using brollies because their employers want to reduce their employment costs) should not be penalised for making this choice. As things stand brollies report their tax take through RTI and, those who operate compliantly, effectively act as tax collection agents for HMRC; if this legislation all goes ahead as planned I can see a fairly sizeable migration to Ltd Co's; IR35 has been a major issue since its inception and HMRC can't police it effectively now so it does seem as though they are shooting themselves in the foot with this but what do I know I do agree that we are likely to sustain some damage through all this although probably not enough to have a significant impact on the business but my main motivation for the post was to get some feedback from contractors to HMRC so that we can say that we are giving them something other than our own opinion (which they obviously believe to be biased)

[jamesbrown]

It's difficult to know what to suggest. They aren't going to backtrack on this, so I don't see any mileage in that. It's likely to be coming down the line for PSCs too, although the deferral is welcome. Even if HMRC do provide guidance, you won't be able to rely on it. As HMRC have said all along, they're basing their interpretation of SDC on case law, and that can be interpreted in different ways. Basically, you're stuck with an IR35-type test that is narrower in scope and you (as an industry) can react to it in different ways, bearing in mind the liabilities.

Bottom line, given those liabilities, what are the chances that clients will provide anti-SDC clauses in their contracts with you and what chance do you see of accepting them for your employees? Slim, I would think. Therefore, it's pretty much a non-issue, I'd suggest. You won't be allowing your employees to claim T&S, unless you're willing to take a larger risk for fear of your employees switching to PSCs or going permie with the end client. Pretty grim trade-off. The only silver lining, perhaps, is that it probably won't be a decisive factor for many people that would still prefer to work autonomously and without a PSC. I expect you'll lose some business though, it's almost inevitable.

Edit: also, while I know your motivations are good, Lisa, there's a slight conflict of interest now (short-term, not long-term), insofar as it isn't in our interests to play-up the potential switch to PSCs and elicit a more rapid, knee-jerk, reaction that equalizes the treatment of brollies and PSCs.

[mudskipper]

Not quite that simple if you are not a PSC contractor

Whatever a PSC is!

No, agreed, and I do have sympathy for brolly users who are hit by the new tax, are not subject to SDC, but do not want the (perceived) hassle of a Ltd.

My understanding is that HMRC have, at least for now, postponed the idea of applying the same criteria to IR35 as reported here (although the minutes are not on the IR35 forum page yet).

So most of us, operating via a Ltd, won't be directly affected in the coming year, although there are rumours of certain clients already getting jumpy and writing SDC into contracts, regardless of how you operate.

[LisaContractorUmbrella]

I see no difference - if you are inside IR35 then you are a deemed employee, so you can't claim travel and subsistence expenses.

If you are outside IR35, then you can claim them.

Not quite that simple if you are not a PSC contractor

[MrMarkyMark]

What's the percieved rules concerning IR35 and "wtf"?

[TheFaQQer]

I see no difference - if you are inside IR35 then you are a deemed employee, so you can't claim travel and subsistence expenses.

If you are outside IR35, then you can claim them.

[LisaContractorUmbrella]

Although it's not unusual not to have much in the way of help from HMRC, the lack of guidance, information or even helpful hints regarding T&S and SDC is somewhat perplexing. Don't know what you guys are finding but the market seems to have come to a bit of a standstill while everyone waits to see what's going to happen in reality post April 2016.

We have a meeting with our friends at HMRC in a couple of weeks and I really want to be able to go to them with as much feedback from contractors as possible - will lack of T&S force everyone to PSC, are you seeing more dodgy schemes cropping up, are agencies picking particular routes that they're pushing you down? Anything that you can think of that will wake them up to the fact that using SDC as a determinant for anything is a really stupid idea. I know that PSC's won't be affected by the current raft of legislation but you can almost guarantee that if they've come up with this to decide status T&S won't be the only thing they'll be applying it to.

So, if you've got any comments that you want us to pass on please go ahead [keeping profanity and threats of violence to a minimum if possible]