Reply to: IR35 Insurance

[jamesbrown]

I don't know that anyone, even HMRC and Georgie, knows exactly where this is going. And I don't have any reason to think Kate Cottrell knows any more about it than anyone else.

There's a lot that can (and probably will) happen between now and next April, although some form of restriction on expenses is close to inevitable.

In terms of IR35, just remember that HMRC doesn't determine employment status and the courts have always interpreted control in the very broadest sense (in terms of what, when, where and how) and there's a very high degree of circularity between C and S and D (i.e. what the overall picture looks like). While HMRC may hold a particular view on these things, it doesn't ultimately matter that much (unless you're overly swayed by their views). Indeed, some of the concern surrounding SD&C (and whether the OR really matters) is likely to be misplaced.

Frankly, even if the rules were implemented and interpreted exactly as described in the consultation, I'd have no issues with claiming relief on H2W travel (not that I have H2W travel, but that's beside the point).

[WordIsBond]

We're not

I'm not naive enough to think that means you are conceding the point.

However, if you're inclined to believe Kate Cottrell (I'm not):

I'm inclined to believe she knows more than most of us about IR35.

On the expenses thing? Well, it's a time-honoured government tradition to send out bad news and then water it down in actual implementation, getting much of what they want in a way that makes it look like they "listened" and modified the horrible thing they were doing. Maybe that is what is going on here, and they are going to bring in something that is bad but not as bad as proposed. Maybe it is an end-run around IR35, along with the dividend thing, so they are intending to just kill IR35 completely (in practice, if not actually withdrawing it).

I don't know that anyone, even HMRC and Georgie, knows exactly where this is going. And I don't have any reason to think Kate Cottrell knows any more about it than anyone else.

[jamesbrown]

Well, if we're reopening that

We're not

However, if you're inclined to believe Kate Cottrell (I'm not):

Kate Cottrell of IR35 specialists Bauer & Cottrell agrees. She said: “If this is adopted by the next government then the issue of IR35 just became all the more important.

"This new policy will affect those in umbrella companies and those that are inside IR35, but PSC users that are outside the IR35 legislation can breathe a sigh of relief."

[WordIsBond]

It's clear from the actions of HMRC that all this minutia is irrelevant to them; there will be no dissuading them other than through professional representation of the facts as pertinent to the case law.

Well, if we're reopening that, a lot of minutiae is said to be relevant in CUK's guide to avoiding IR35, which says to collect badges of business. And the fact is, the things Kate Cottrell called badges of business do appear in case law. Unfortunately, the law is extremely vague, and there is a lot of subjectivity.

We currently have three silver bullets, any of which on its own kills an IR35 case. But if the right of substitution is never exercised, then it is open to interpretation whether it is real or not. Lack of direction / control is also open to interpretation -- the way they are defining it in the expenses consultation means EVERYONE is subject to control or supervision. Even MOO can be challenged, whatever the contract says. If the end client says the wrong thing on any of these to HMRC, your silver bullet turns to lead.

So if you trust one or more of your silver bullets, you could get a rude awakening when they reinterpret those silver bullets to say they aren't there.

And case law is full of examples where a broad range of factors are considered in "painting the picture" of whether a person is employed or not. HMRC's own guidance says there is no checklist for whether a person is an employee / disguised employee, there is a broad range of factors. That guidance cites case law.

In any event, in this thread I wasn't talking about how an HMRC inspector would view the insurance. He won't even find out about it until he is already chasing you.

My accountant was saying it wouldn't look very good in court to have insurance that protects you against the consequences of breaking the law. If your case is strong, and you are properly represented, you'll likely never get to court. If it is weak, having that kind of insurance actually could tip the balance against you.

[tractor]

Playing the devil's advocate and speculating on Hector's game plan...

- Introduce PSC reporting requirements upon 'employers'
- Defined assurances that declaring SDC does not infer employment rights
- Penalties is they fail to declare PSC's found to be under SDC

SDC & PSC can be as loosely or concisely defined as you like (and HMRC would prefer the former), I can see largish clients choosing to igore the finer points of case law and blanket declare their contractors inside. It also brings the proposed FLC entity closer since it could be made a way to 'opt-out' from reporting.

Wild speculation perhaps but I'm actually more concerned about the way T&S rules could be policed than the loss itself.

Not wild speculation at all. Also, I think you're right about the policing aspect. Essentially, HMRC are looking to farm out some of their policing to intermediaries because they simply don't have the resources to do so effectively. In terms of penalties, I think Option 1 in the T&S consultation was to impose joint and severally liability, which is likely penalty enough.

Can't argue with any of that; I think most of us have been expecting it for a while.

The only issue is to recognise the increase in rates to compensate will increase the demand for ICT's which the government will agree to immediately because of the skills shortage, so many contractors will be forced into permanent roles even though there will consequently be far less of them.

The only unknown is whether this is an intended or unintended consequence.

[jamesbrown]

Wild speculation perhaps but I'm actually more concerned about the way T&S rules could be policed than the loss itself.

Not wild speculation at all. Also, I think you're right about the policing aspect. Essentially, HMRC are looking to farm out some of their policing to intermediaries because they simply don't have the resources to do so effectively. In terms of penalties, I think Option 1 in the T&S consultation was to impose joint and severally liability, which is likely penalty enough.

[Contreras]

I have said elsewhere and repeat it here, the case law definition is found in RMC and has a long pedigree. The words supervision, direction, control all have circular meanings and are synonyms, each of the other two.

This one is more likely to be fought and settled in court than any of the other attacks we have seen recently. Clients are likely to find it beneficial to be onside for this one.

Playing the devil's advocate and speculating on Hector's game plan...

- Introduce PSC reporting requirements upon 'employers'
- Defined assurances that declaring SDC does not infer employment rights
- Penalties is they fail to declare PSC's found to be under SDC

SDC & PSC can be as loosely or concisely defined as you like (and HMRC would prefer the former), I can see largish clients choosing to igore the finer points of case law and blanket declare their contractors inside. It also brings the proposed FLC entity closer since it could be made a way to 'opt-out' from reporting.

Wild speculation perhaps but I'm actually more concerned about the way T&S rules could be policed than the loss itself.

[mudskipper]

I have said elsewhere and repeat it here, the case law definition is found in RMC and has a long pedigree. The words supervision, direction, control all have circular meanings and are synonyms, each of the other two.

This one is more likely to be fought and settled in court than any of the other attacks we have seen recently. Clients are likely to find it beneficial to be onside for this one.

Readable wikipedia summary here
https://en.wikipedia.org/wiki/Ready_...onal_Insurance

[tractor]

...

Good work. Unfortunately *if/when mandatory PSC reporting is introduced onto 'employers' their risk averse HR/legal will have their own interpretation of S, D, *and/or C.

* delete as you think applicable, as I have.

I have said elsewhere and repeat it here, the case law definition is found in RMC and has a long pedigree. The words supervision, direction, control all have circular meanings and are synonyms, each of the other two.

This one is more likely to be fought and settled in court than any of the other attacks we have seen recently. Clients are likely to find it beneficial to be onside for this one.

[Contreras]

Absence of direction or (absence of) control puts you outside IR35.

Being subject to direction and control (+ lack of both MOO and RoS) puts you inside.


It's the negative that makes the difference.

The T&S is worded differently - you won't be allowed to claim expenses if you are subject to direction or control, as opposed to you can claim expenses if you're not subject to to direction or (not subject to) control.

(HT to TCD for doing the dogwork - we'll let you out your kennel soon)

Good work. Unfortunately *if/when mandatory PSC reporting is introduced onto 'employers' their risk averse HR/legal will have their own interpretation of S, D, *and/or C.

* delete as you think applicable, as I have.

[malvolio]

Absence of direction or (absence of) control puts you outside IR35.

Being subject to direction and control (+ lack of both MOO and RoS) puts you inside.


It's the negative that makes the difference.

The T&S is worded differently - you won't be allowed to claim expenses if you are subject to direction or control, as opposed to you can claim expenses if you're not subject to to direction or (not subject to) control.

(HT to TCD for doing the dogwork - we'll let you out your kennel soon)

Yes, I know all that, thanks, but the case law from RMC is very clear that it is Direction and Control that categorises employment. The T&S phrase of "direction or control" is likely to be either an error or, rather more likely, a deliberate piece of drafting to ensure as many people as possible are caught by it. Until that is resolved, which will take a while, we all need to be very clear on the difference; this is a lot more fundamental than IR35, it is striking at the whole concept of the independent contractor.

[mudskipper]

That's "direction and control", the attack on expenses notwithstanding...

Absence of direction or (absence of) control puts you outside IR35.

Being subject to direction and control (+ lack of both MOO and RoS) puts you inside.


It's the negative that makes the difference.

The T&S is worded differently - you won't be allowed to claim expenses if you are subject to direction or control, as opposed to you can claim expenses if you're not subject to to direction or (not subject to) control.

(HT to TCD for doing the dogwork - we'll let you out your kennel soon)

[TheFaQQer]

That's "direction and control", the attack on expenses notwithstanding...

It was pre-emptive having looked at the consultation document

[jamesbrown]

Not an argument I'd want to make, but to each his own, I guess. I understand why you buy it.

I think the point is that, once you're under investigation, the assumption is that you're guilty until they're satisfied that the main pillars don't apply (and you'll probably never get direct confirmation of that from them). I think you made a similar comment a while back about a two-person company. It's clear from the actions of HMRC that all this minutia is irrelevant to them; there will be no dissuading them other than through professional representation of the facts as pertinent to the case law.

[malvolio]

My case will be built around having a right of substitution, a lack of mutuality of obligation and a lack of direction or control by the client. Insurance isn't going to come into it at all.

That's "direction and control", the attack on expenses notwithstanding...