Reply to: Why does Hector and Co lose so many IR35 cases

[Denny]

SockPuppet, I know you wanted to celebrate your birthday big time, but you need to stop drinking now.

Not sure about the ir35 enforcement teams, but I did deal with a very nice HMRC bod years ago who waived all my surcharges when she realised I had misunderstood the payment on account liability for sole traders. It was not something she did lightly but she was the honcho who had the power to decide and was genuinely very helpful about the stages I had to go thorugh to sort it all out. It was like having a helpdesk bod on my case. She was great! She was just like Paul Burrell was to Princess Di - my rock.

Not saying they are all like that though. The red tape prevents some of them doing what they would like to do and so they have no choice but to come down hard on those who haven't properly met their tax liability. It's the system that is stuffed, and some of the bods in HMRC know this and feel sorry for those who ring up, so don't always blame the individuals who work there. They are only doing their job.

[gingerjedi]

My ex is at HMRC - they use fear and their excessive powers to scare people.

They once had someone who overpaid £16 in tax. They said they would not repay until he spent at least £500 on accountants fees on the matter!

:-(

The assumption is that we are all spivs who continually defraud HMRC
:-(

We should pay most of our income to HMRC to subsidize their generous pension scheme.
:-)

Feck em' then... If they can't see the futility of their own system then they deserve to be given the run around.

The trouble is the general public see us as "spivs who continually defraud HMRC" which is a little unfair, I have a few self employed builders in my family and they get away with far more than I ever could.

[BrilloPad]

I'm certainly no expert on the subject but it does seem ridiculous that HRMC continue to pursue IR35 cases with their track record as it can't be good value for the tax payer.

I'm sure it’s been asked before but do any of you think there will be a fairer replacement for IR35 in the near future? I for one would happily pay a little more tax for peace of mind but feel the current system penalises me so much that I am prepared to take the risk and declare myself outside, surely it would be beneficial to everyone in the long run as HRMC would be able gain extra revenue and not waste huge amounts of tax payers money on perusing cases that they rarely win.

Or is that far too sensible??

My ex is at HMRC - they use fear and their excessive powers to scare people.

They once had someone who overpaid £16 in tax. They said they would not repay until he spent at least £500 on accountants fees on the matter!

:-(

The assumption is that we are all spivs who continually defraud HMRC
:-(

We should pay most of our income to HMRC to subsidize their generous pension scheme.
:-)

[BrilloPad]

Has anyone thought that all HMRC employees are not evil and they may like us contractors so helpfully just flip the investigation up for us.

See, they really are nice people.

there is at least 1 evil HMRC employee - my ex...

[gingerjedi]

I'm certainly no expert on the subject but it does seem ridiculous that HRMC continue to pursue IR35 cases with their track record as it can't be good value for the tax payer.

I'm sure it’s been asked before but do any of you think there will be a fairer replacement for IR35 in the near future? I for one would happily pay a little more tax for peace of mind but feel the current system penalises me so much that I am prepared to take the risk and declare myself outside, surely it would be beneficial to everyone in the long run as HRMC would be able gain extra revenue and not waste huge amounts of tax payers money on perusing cases that they rarely win.

Or is that far too sensible??

[techno]

they don't always lose...

On the front page of this website is an article showing how HMRC do sometimes win odd IR35 fight. It even states that when it goes to the Special Commissioners they win more than they lose.

[malvolio]

You may well be right. As I said it is a suspision. But here is the reasoning - and it could well be complete tosh.

PCG and it's advisers have been involved in 1451 cases. A few of these have gone to the commissioners. A grand total of 4 have been lost. I think one of these was a "rollover".

Now it's speculation. Last I knew the PCG had something in the order of 10,000 members - generally they are not of the rolling over mindset.

The original RIA quoted 66,000 potential people affected. Other industry observers quoted up to 200,000. So lets call it 130,000 - split the difference.

Assume that every single PCG member who has had an enquiry has taken advantage of the insurance and investigation - and that none of them accepted they were caught - this would then imply - if the pattern were repeated nationally that 15% of potentially affected people have been on the receiving end. This is about 20,000 enquirys.

Now, if those who offer representation were flooded with requests for help from these poeple I think there would be more noise about it. Thus it seems reasonable that a large proportion of these have capitulated.

There are two things that would probably suggest this may be a completely flawed train of thought:-

1) IR35 has raised MUCH less than was anticipated.
2) HMRC carefully are completely unable to state the number of enquirys/success rates.

As a general principle, however, most asessments (for anything) issued by HMRC are generally agreed by the taxpayer without representation.

Largely agree: informed guesstimates on the take from IR35 are impossible since there is no base data to work from (at least, none that HMRC are releasing) but most are convinced it's well under the original £900m estimate.

PCG is now a shade over 16,000 members (and growing at around 2% a month). Of the four losses, one was indeed a rollover, the other three were several years ago and would probably be winnable now in the light of more recent case law. IR35 remains a tax on laziness.

[ASB]

I suspect that stat is complete and utter bollox

You may well be right. As I said it is a suspision. But here is the reasoning - and it could well be complete tosh.

PCG and it's advisers have been involved in 1451 cases. A few of these have gone to the commissioners. A grand total of 4 have been lost. I think one of these was a "rollover".

Now it's speculation. Last I knew the PCG had something in the order of 10,000 members - generally they are not of the rolling over mindset.

The original RIA quoted 66,000 potential people affected. Other industry observers quoted up to 200,000. So lets call it 130,000 - split the difference.

Assume that every single PCG member who has had an enquiry has taken advantage of the insurance and investigation - and that none of them accepted they were caught - this would then imply - if the pattern were repeated nationally that 15% of potentially affected people have been on the receiving end. This is about 20,000 enquirys.

Now, if those who offer representation were flooded with requests for help from these poeple I think there would be more noise about it. Thus it seems reasonable that a large proportion of these have capitulated.

There are two things that would probably suggest this may be a completely flawed train of thought:-

1) IR35 has raised MUCH less than was anticipated.
2) HMRC carefully are completely unable to state the number of enquirys/success rates.

As a general principle, however, most asessments (for anything) issued by HMRC are generally agreed by the taxpayer without representation.

[THEPUMA]

The main reason is that HMRC's manuals tell them to ignore mutuality of obligations, whereas the courts invriably find that a lack of MOO is inconsistent with employment status.

Therefore, status inspectors are forced to take cases they have no chance of winning to court.

The rationale behind this is that if they acknowledged the caselaw precedent on MOO they would be less able to bully poorly advised people into submission.

[BrowneIssue]

Has anyone thought that all HMRC employees are not evil and they may like us contractors so helpfully just flip the investigation up for us.

See, they really are nice people.

SockPuppet, I know you wanted to celebrate your birthday big time, but you need to stop drinking now.

[malvolio]

Quite possibly. Would it be possible to get an accurate answer under the FOI act? Anyone currently on the bench fancy killing some time and finding out...?

It's been asked for several times, including at least once in the House ny Mark Prisk. HMCR's offical answer is that they don't keep such statistics...

As to why they lose so many cases, it's because it's a bad law poorly worded. Snag is they can't write a law that says "All IT Contractors will pay 20% too much tax" - although it doesn't seem to stop them trying...

[Tensai]

I suspect that stat is complete and utter bollox

Quite possibly. Would it be possible to get an accurate answer under the FOI act? Anyone currently on the bench fancy killing some time and finding out...?

[r0bly0ns]

The simple fact that the legislation exists has convinved how many thousands of people to go through a brolly and pay PAYE?

[Sockpuppet]

Has anyone thought that all HMRC employees are not evil and they may like us contractors so helpfully just feck the investigation up for us.

See, they really are nice people.

[Ardesco]

I suspect that stat is complete and utter bollox

I suspect that like 84.2% of statistics that one is made up on the spot