Reply to: IR35 win for HMRC

[Dark Black]

Very interesting post WotNxt. I got my last contract reviewed, and after a lot of aggro, the agency agreed to insert some clauses into my contract. I'm pretty sure they didn't change their contract with the client though.

Likewise I had my current contract reviewed by a wellknown company that specialises in such things, they negotiated with the pimp on my behalf and together with some information I supplied relating to actual working practices at the clients we managed to get the contract changed for a proper project-based supply contract.



Moral of the story - if not happy get your contract reviewed and keep pestering...

[WotNxt]

I believe we need this situation to occur and then for the person with the two decisions to ask for a judicial review of the situation.
It is more complicated than that but that is the way forward IMHO.

This has already arisen I believe - the Battersby case? It makes no difference to have two apparently contradictory decisions because they are not, in fact, contradictory. Tax law and employment law are separate and the decisions apply to each part of the law without reference to the other.

The only way to change this will be via new/altered legislation to harmonise the two. Don't hold your breath waiting for this though.

[The Lone Gunman]

You go to a employment tribunal only to be told you arent and have never been an employee of the company!

Wouldnt this be the ideal situation to be in? HMRC saying you are an employee BUT the employment tribunal saying you arent?

Mailman

I believe we need this situation to occur and then for the person with the two decisions to ask for a judicial review of the situation.
It is more complicated than that but that is the way forward IMHO.

[Mailman]

They could take them to a tribunal in order to try and prove they were an actual employee of the client. I would imagine that is doomed to failure due to the lack of contractual nexus but one never knows. [Muscat did win though, but that had some very unusual circumstances].

You go to a employment tribunal only to be told you arent and have never been an employee of the company!

Wouldnt this be the ideal situation to be in? HMRC saying you are an employee BUT the employment tribunal saying you arent?

Mailman

[Burdock]

I have had many contracts put in front of me that have specific clauses stating that taxes are MyCo's responsibility and that I will not claim any additional taxes from the agency and client. These clauses I think were originally designed for another purpose (not sure which prior tax legislation that was - s135 perhaps?) but work quite nicely, I'm sure, to indemnify the client and agency against the effects of IR35.

Part of the current problem is the one-sidedness of the contractor-agency contract. The agencies just bully us into accepting their contract as is with no amendments/negotiation possible. The usual excuses are IME:

i) ignorance about the legal aspects and cannot change
ii) need legal department to look at it and the answer still always comes back as "no changes" - pretty certain this is just a lie and a delaying tactic to put you under pressure to accept
iii) client will not accept the same changes in their back to back contract with the agency

I have tried all sorts of tactics to get them to budge and have even turned down a contract extension because it would have brought me inside IR35 (without a doubt!). Even though the client wanted me to stay the bods on the ground didn't have enough sway to get anything done. They even asked me back a few months later so I quoted them two rates, one on their contract terms (which I had already rejected) and one on mine. They said they couldn't accept my contract terms (not enough influence) and couldn't stand the higher rate (for working inside IR35) that I was quoting for their terms. So again I declined. I don't think it made a jot of difference to the overall situation for contractors. It was water off a ducks back for the agency (Spring) and the only people that suffered (potentially) were the local managers who lost a resource they wanted to keep.

I have also tried paying for a contract reviewed and amended by well respected legal expert and then using that as a starting point for negotiating contractual changes. Again the agency completely refused to change anything and though I would back down at the last minute. I think that agency had some egg on their face as they had told the client I would be accepting and had to tell them at the last minute - due to their brinkmanship - that I declined. However, they probably just spun this as me being unreliable/lying to them/getting another contract - "bloody contractors, eh!".

Maybe some of you guys can pick and choose your agencies and clients, rates and contract terms, but most of us probably cannot and still get the rough end every time.

The PCG offers some hope here and I think is our only hope to improve things for contractors. It is never going to happen overnight but as long as they keep chipping away then it is a good thing. For all their faults (and all such organisations have many) they are the only real voice for contractors and they have and are making a difference.

Very interesting post WotNxt. I got my last contract reviewed, and after a lot of aggro, the agency agreed to insert some clauses into my contract. I'm pretty sure they didn't change their contract with the client though.

I was hoping I would at least be able to get my contract with the agency amended in future roles, very worrying to hear that many won't do this.

What a mess the whole 3-legged triangle is

[WotNxt]

I did get that point - really.

What I was getting at is that it's better to get something put into one's contract that gets around it. Now, how that's done is beyond my ken, but there must be a way of making it clear that in such a "chain", you will only be responsible for that which you have seen and signed. And that obviously wouldn't include any sort of "Eyes Only" contract between pimp & Client.

One for the legal elves, I think.

I have had many contracts put in front of me that have specific clauses stating that taxes are MyCo's responsibility and that I will not claim any additional taxes from the agency and client. These clauses I think were originally designed for another purpose (not sure which prior tax legislation that was - s135 perhaps?) but work quite nicely, I'm sure, to indemnify the client and agency against the effects of IR35.

Part of the current problem is the one-sidedness of the contractor-agency contract. The agencies just bully us into accepting their contract as is with no amendments/negotiation possible. The usual excuses are IME:

i) ignorance about the legal aspects and cannot change
ii) need legal department to look at it and the answer still always comes back as "no changes" - pretty certain this is just a lie and a delaying tactic to put you under pressure to accept
iii) client will not accept the same changes in their back to back contract with the agency

I have tried all sorts of tactics to get them to budge and have even turned down a contract extension because it would have brought me inside IR35 (without a doubt!). Even though the client wanted me to stay the bods on the ground didn't have enough sway to get anything done. They even asked me back a few months later so I quoted them two rates, one on their contract terms (which I had already rejected) and one on mine. They said they couldn't accept my contract terms (not enough influence) and couldn't stand the higher rate (for working inside IR35) that I was quoting for their terms. So again I declined. I don't think it made a jot of difference to the overall situation for contractors. It was water off a ducks back for the agency (Spring) and the only people that suffered (potentially) were the local managers who lost a resource they wanted to keep.

I have also tried paying for a contract reviewed and amended by well respected legal expert and then using that as a starting point for negotiating contractual changes. Again the agency completely refused to change anything and though I would back down at the last minute. I think that agency had some egg on their face as they had told the client I would be accepting and had to tell them at the last minute - due to their brinkmanship - that I declined. However, they probably just spun this as me being unreliable/lying to them/getting another contract - "bloody contractors, eh!".

Maybe some of you guys can pick and choose your agencies and clients, rates and contract terms, but most of us probably cannot and still get the rough end every time.

The PCG offers some hope here and I think is our only hope to improve things for contractors. It is never going to happen overnight but as long as they keep chipping away then it is a good thing. For all their faults (and all such organisations have many) they are the only real voice for contractors and they have and are making a difference.

[shoes]

One for the legal elves, I think.

I thought they were elves. Im glad I'm not alone in this. Eagles are just not smart enough. Owls would be ok though.

[richard-af]

You are missing the important part..one of the major things that counted against him was the agency/client contract, which there is no way to vet because rarely will you ever see it even if you ask

I did get that point - really.

What I was getting at is that it's better to get something put into one's contract that gets around it. Now, how that's done is beyond my ken, but there must be a way of making it clear that in such a "chain", you will only be responsible for that which you have seen and signed. And that obviously wouldn't include any sort of "Eyes Only" contract between pimp & Client.

One for the legal elves, I think.

[pisces]

Spring eh, no wonder they couldn't give me an answer when I asked if my contract was IR35 friendly

[Epiphone]

And as an example of how this effects our businesses a gig just popped up in the RSS feed that would be perfect for me (and vice versa) but I didn't apply because it was from Spring.

I wonder if we could make a case that Spring is damaging business due to their unfair contract terms.

I really hope the poor guy who got stung fights back and the PCG make a big thing about the agency-client contract.

Hell, if the guy is skint set-up a Paypal jobby and we can all chuck a tenner in.

[kingshuk]

The guy representing HMRC was called Peter Death....how appropriate...

Goes on to show that nothing is certain but death and taxes

[malvolio]

Tell me about it. I've been banging that drum for a few years now...

[WotNxt]

That's where the PCG is going on behalf of the one-in seven workers in the country who are self-employed. Needless to say, HMG are ignoring that approach (and the 1 in 7 voters...) and seem to prefer levelling the taxation between us and employees, which is why we are seeing a scaling up of CT for small businesses.

Unfortunately, "1 in 7 workers" is not the same as "1 in 7 voters". Factor in all the students, unemployed, pensioners, long-term sick, etc. In fact all the groups that don't give a stuff about IR35, S660 or anything at all that us contractors have thrown at us. To them, as well as the "normally employed" we are fair game for milking for as much tax as the government can get away with so as to pay for their and their families' needs.

What we need is better PR. Stories like: "Small contractors allow government to cut billions from spending budgets by offering better value for money and higher quality" or "More money available in NHS for treatment and increased nurses pay because contractors do it better" or "Contractors take it up the **** so you can sit on yours".

Well, maybe not the last one, even though it is true - metaphorically speaking.

[WotNxt]

I don't believe this is the first loss for the PCG - wasn't there that case that was heard in the poor chap's living room as he was too ill to attend court? An oil industry contractor I think.

I agree that Spring and the client should suffer the legal consequences of this and should be made to pay the tax bill the they appear to have brought on the contractor through their actions and not his.

I have tried negotiating a Spring supplied contract to bring it outside of IR35 before and failed - turned down a nice extension because of it! So Spring know all about it and basically don't care about the impact on either clients or contractors.

The reality is, though, that any action taken against agents or clients will always be spun to reflect badly on contractors. It will be used by agents to persuade ignorant clients to go along with everything the agent says and collaborate (knowingly or otherwise) in screwing contractors - as has happened here.

Having been through an IR35 investigation (luckily we passed) I know what it is like and the stress/worry/despair involved. I really feel for this person who has been screwed over - yes, they have been. If it was me then I would seriously be looking for redress from somewhere. I really hope the person involved does not lose their house, marriage, kids, etc. because of this and I wish them all the best in whatever actions they take to obtain redress.

[The Lone Gunman]

Well, yes, I agree actually. Can't quote it here but I posted on the PCG boards to the effect that we should not be relying on sustaining poorly implemented rules to keep out of IR35 and got roundly shouted down. Seems some people prefer uncertainty!

Bloody hell. Dunno what to say now.
Point me in the right direction and will support your cause.