Reply to: IR35 - who are the actual targets?

[Wanderer]

When someone is made redundant they can get up to £30,000 tax free - the motive for the company in that case may well have been to save tax and NI! Plus on an ongoing basis they have managed to secure someone on the same rate, but they don't have to pay NI - they've saved 12.8% straight away, not to mention holiday pay, sickness, pensions...

Someone I worked with at a major blue chip company did pretty much exactly that. Took redundancy one day (a big pay off with the first 30k tax free) and turned up the next day as a contractor working for the outsourcing company that was brought in to replace him. Sat back down at the same desk on the same PC and did a six month contract there. Didn't even hand in his ID card or cancel his logon account....

He got money for nothing and fair play to the man. I don't think that HMRC would have taken too kindly to that arrangement though.

[meanttobeworking]

PS. Got anything interesting to say about IR35?

[meanttobeworking]

There is clearly a huge difference between a window-cleaner and an IT contractor.

Yes, you're following the argument so far...

therefore your comparison is useless and your argument stupid. They're totally different situations.

... yep, and that's where it went over your head.

I get that you don't like my comparison - I really do. But I'm not going to carry on justifying it to someone that clearly just doesn't get it. You're right, I'm a total moron, as can be seen by all the other people on here ripping it out of me alongside you...

[d000hg]

No, I use a common method of debate to highlight the absurdity of the opposing argument. The stupidity of the comparison highlights the flaws in the thought process of, in this case, HMRC. It's not my fault if it goes over your head.

There is clearly a huge difference between a window-cleaner and an IT contractor. therefore your comparison is useless and your argument stupid. They're totally different situations.

[IR35 Avoider]

Ermm... Just as an aside, you do realise that every IR35 investigation that's been lost have been ones where the contractor represented themselves? With a win/lose ratio of roughly 99% in favour of the contractor, doesn't that tell you something?

Presumably that 99% success rate is where actual hearings are held, and we know nothing about the outcome of cases where either side (but probably the contractor) folded before a hearing. Contractors who had advice/representation would be advised to fold by their advisors if the advisor thinks they will lose. So what the statistic really means is that represented contractors are never wrongly told there case is winnable, but we don't know how many winnable cases are not contested and how many unwinnable cases are lost without a fight?

[malvolio]

Whilst obviously not wanting the hassle of an investigation I'd love to argue my case with them

Ermm... Just as an aside, you do realise that every IR35 investigation that's been lost have been ones where the contractor represented themselves? With a win/lose ratio of roughly 99% in favour of the contractor, doesn't that tell you something?

[SueEllen]

I'm now in my second stint at the same client and all is rosey, no pimps involved and even have sub-contractors working for me through my ltdco etc.. )

How many employees can choose to subcontract part of their work out?

[DrEvil]

Well I'm kind of a Fri-Monday contractor as sorts.. however I like to think of myself (rightly or wrongly) as a disguised contractor

I was consulting for a company and decided I wanted to be a contractor, I told one of my former clients about this and they said they'd like to set me on. However due to various legal problems I couldn't become a contractor straight away without the risk of both me and the client being sued. Therefore after some legal adivce I took a "permie" job at the client for an agreed three months basis after which I'd become a contractor. There by avoiding all the legal crap because they couldn't legally stop me taking a permie job there due to restriction of trade.

I'm now in my second stint at the same client and all is rosey, no pimps involved and even have sub-contractors working for me through my ltdco etc.. I've always regarded myself as outside IR35 as there is definitely no control or knowledge really about what I do, even when I was a permie for the short-time.

Whilst obviously not wanting the hassle of an investigation I'd love to argue my case with them

[SueEllen]

I never knew that IR35 was born out of Fri-Mon permietractors. I've only been contracting for 4 years now and never seen one of these.

Well you are very unlikely to meet any on the job but may end up knowing some socially.

Most companies are very careful now because if HMRC starts investigating the ex-employee, they know they will get in trouble as well plus would also face a large legal bill defending themselves against a tribunal claim from the ex-employee.

So based on this an IR35 questionnaire should go along the lines of:

"Have you evenr worked for your current client as a permanent employee? If so how long for and when?"

This would only be relevant to SME's who haven't taken any legal advice plus some of the governments own agencies.

I'm a bum-on-seat Mon-Fri 9-5 contractor but I don't see that as making me any kind of employee of the agency/clientco - any more than a builder who spends 6 months doing up a house and works at the same place of work for the duration of the job..

Do you really only work Mon-Fri 9-5 for all your clients? I know I don't.

However I do have clients where the hours I can work are limited for security and transport reasons. Plus in addition if I have to provide support services to client staff members or co-operate with them, then it's easier and more productive if I adapt my working hours to their times.

No sickpay, holiday pay, benefits, redundancy, promise of work and the fact that I have to rectify anything I do wrong in my own time at my own expense says I'll pay myself how I choose.... Even on a 12 monther..

While you have a choice of going as a freelancer if you work direct with clients this option isn't available with agencies, which is the government's own fault.

Thieving opportunistic flippers trying to go after the little guys and letting the big guys ride them like donkeys...

The big guys have enough money to fight HMRC. HMRC have had legal battles with some large companies that have gone on for years i.e. M&S which lasted 13 years.

[Jog On]

I never knew that IR35 was born out of Fri-Mon permietractors. I've only been contracting for 4 years now and never seen one of these.

So based on this an IR35 questionnaire should go along the lines of:

"Have you evenr worked for your current client as a permanent employee? If so how long for and when?"

I'm a bum-on-seat Mon-Fri 9-5 contractor but I don't see that as making me any kind of employee of the agency/clientco - any more than a builder who spends 6 months doing up a house and works at the same place of work for the duration of the job..

No sickpay, holiday pay, benefits, redundancy, promise of work and the fact that I have to rectify anything I do wrong in my own time at my own expense says I'll pay myself how I choose.... Even on a 12 monther..

Thieving opportunistic flippers trying to go after the little guys and letting the big guys ride them like donkeys...

[meanttobeworking]

So you made a stupid comparison to prove you're right on a serious subject? That just strengthens the argument we're a bunch of chancers playing the system.

No, I use a common method of debate to highlight the absurdity of the opposing argument. The stupidity of the comparison highlights the flaws in the thought process of, in this case, HMRC. It's not my fault if it goes over your head.

[d000hg]

It's a little something we like to call hyperbole... Hyperbole | Define Hyperbole at Dictionary.com

So you made a stupid comparison to prove you're right on a serious subject? That just strengthens the argument we're a bunch of chancers playing the system.

[LisaContractorUmbrella]

I've heard this all before [sorry, I don't mean to be argumentative, like I said earlier I've been contracting 12 years, I've read a great deal about IR35 and I was there when it was introduced and the chaos it caused, and I've had to deal with it for a decade].

I'm just saying that my opinion about all this city-boy/footballer/mon-fri stuff is so what? Why should it matter? I think that the tax system would be simpler and better if where there exists a legal way in which to work, i.e. via a Ltd company, then it doesn't matter who your working for, when, how, whether you've worked for them before etc..

If HMRC aren't happy for a footballer or city-boy to work through a Ltd company, then they shouldn't have Ltd companies as a means of working. Why can't the whole population become a Ltd company if they want to? Why is supplying football services not a legitimate business?!

The answer is that HMRC won't get enough tax [or as much as they want], it has nothing to do with what defines a business. So then just tax all Ltds more and forget about all the IR35 type rubbish.

Why should a window cleaner, sweetshop or BP shareholder be taxed less than a footballer anyway? I just hate all this "you are now officially a Ltd company, company law applies to you ... except ... actually you are not because of X, Y, Z".

I'm against IR35 full stop for anybody, including Mon-Fri guys.

Maybe I'm just a bit naive ....

[Of course, all that said, I would be devastated if they did add NI to dividends or introduce an Oz style IR35 that depends upon percentage revenue generated from clients ) ]

HMR&C are of the opinion that, if you act like an employee you should be treated like one for tax purposes. The problem is that, as we all know, it is not that straight foward - IR35 itself is, at best, woolly and it did not have the desired effect as most contractors decided they were outside IR35 and HMR&C tax revenues did not shoot up overnight. Over the years, in order to 'clarify' the situation and try and increase tax revenues HMR&C have begun to rely on employment law to back up their ideas of what is or what is not a deemed employee. The trouble is that every time a contractor claims unfair dismissal or unfair treatment it adds grist to their mill as it widens the scope of what is considered an employee in law.

[meanttobeworking]

That's a pretty daft analogy.

It's a little something we like to call hyperbole... Hyperbole | Define Hyperbole at Dictionary.com

[Lewis]

Well that's where HMRC disagreed. Spending £50 forming a limited company doesn't make you a "business".

My understanding was that a lot of high flying city boys and footballers were leaving their permie jobs and switching to Limited Companies in order to structure their tax affairs more efficiently. They would literally resign one day and return to work the next working through their LTD. The problem was that they weren't actually bonafide business people, they would just work for the same place for years. The sole purpose of the arrangement was to avoid tax and it was completely legal, though it required the employer to be willing to accept the arrangement.

At least on the face of it, this is what IR35 was brought about to tackle. I guess they just couldn't resist roping in a bunch of contractors, some of whom where permietractors working for a single client for years, others were genuinely flexible workers who would take on multiple clients.

Of course the whole IR35 ruleset is so woolly that they could never quite enforce it properly but when a big case came up they would string it out for years and years for fear of losing and destroying the "fear factor" surrounding IR35. Really what they wanted to do was to use Fear, Uncertainty and Doubt to scare people into compliance. For quite a while it worked too.

These days people are smartening up to the fact that IR35 is so vague that even if you trade outside, the worst that could happen is that HMRC get you to pay up the tax you avoided and actually HMRC have a really hard time winning their cases. The only "success" of IR35 has been the FUD factor whereby people who want a quiet life went with umbrellas or PAYE.

Now that a few cases have gone though the system and IR35 is exposed as being toothless they decide it's a good time to replace it. No doubt with something more "fair" which will of course mean that outside IR35 contractors will end up paying more tax.

I've heard this all before [sorry, I don't mean to be argumentative, like I said earlier I've been contracting 12 years, I've read a great deal about IR35 and I was there when it was introduced and the chaos it caused, and I've had to deal with it for a decade].

I'm just saying that my opinion about all this city-boy/footballer/mon-fri stuff is so what? Why should it matter? I think that the tax system would be simpler and better if where there exists a legal way in which to work, i.e. via a Ltd company, then it doesn't matter who your working for, when, how, whether you've worked for them before etc..

If HMRC aren't happy for a footballer or city-boy to work through a Ltd company, then they shouldn't have Ltd companies as a means of working. Why can't the whole population become a Ltd company if they want to? Why is supplying football services not a legitimate business?!

The answer is that HMRC won't get enough tax [or as much as they want], it has nothing to do with what defines a business. So then just tax all Ltds more and forget about all the IR35 type rubbish.

Why should a window cleaner, sweetshop or BP shareholder be taxed less than a footballer anyway? I just hate all this "you are now officially a Ltd company, company law applies to you ... except ... actually you are not because of X, Y, Z".

I'm against IR35 full stop for anybody, including Mon-Fri guys.

Maybe I'm just a bit naive ....

[Of course, all that said, I would be devastated if they did add NI to dividends or introduce an Oz style IR35 that depends upon percentage revenue generated from clients ) ]