Reply to: More than 2,000 'off payroll' civil servants face tax probe

[MyUserName]

Am i missing something? Surely if you "legally avoid" something, you've done nothing wrong, so how can you be punished for it? I know Im not a solicitor, but even thick fairly young me can see that you could easily build a defence / arguement around this...

The issue is that it is open to interpretation whether it is legal or not.

HMRC do not tax contractors in the same way as permies.

Permies change to Ltd companies and become contractors to pay less tax and get more money but change nothing else in their working conditions (no additional risk etc. They are not really running a company as such), these are disguised employees.

HMRC think that they are being robbed and attempt to clarify that disguised employees should be taxed in the same way as employees (ish).

Loads of disguised employees immediately claim that they are not disguised employees and restructure contracts etc to 'prove' it.

HRMC try to provide a checklist of some kind which catches every disguised employee and misses every genuine contractor (the moment they do diguised employees change their position) and HMRC misses the mark time and time again so HMRC become unwilling to commit a firm list of points to what is and is not a disguised employee as it will be used against them and there is almost always a genuine counter example somewhere in the working world.

Hence the water becomes very murky with the HMRC trying to seek out people who are disguised employees (who should therefore legally be within IR35) and those who are not. It becomes a judgement call but one that most people can figure out it they want to.


These people in question are almost definitely within IR35 but are claiming they are not. Whilst this is legal I guess, HMRC have the right to contest that judgement and claim tax back that should have been paid. Not paying this would be illegal and very unwise.

So it is not a simply black and white, one size fits all rule but there are principles which are employed which anyone running a business should be familiar with and also there are dangers with intentionally manipulating one's tax status which everyone should be familiar with.

[EternalOptimist]

If they can't implement the law in a manner that they think is correct using a system they design, blaming accountants for manipulating it is being rather simplistic.

If we had a flat rate tax system, we wouldn't have to put up with a broken tax system. But with too many vested interests againsts it including HMRC it won't happen

To make it worse most of the tax advisors in Accountancy practices are ex HMRC, so apart from having a vested interest in perpetuating the farce, they also have a good understanding of how far they can push

Tax doesn't need to be taxing, it's a simple concept made complicated by the machinations of HMRC. The only effective way to avoid loopholes in the long term is to make the tax system as simple and transparent as possible

HMRC aren't idiots, it's their intention to keep system full of loopholes

flat rate tax system.

I am hearing this more and more lately.

something else that sort of complements it is the idea that it is wrong for faceless buraucrats to commit to obligations that others have to honour

[amcdonald]

No, but you need to think a bit about it so I can see why it is a struggle.

With every system there is a loophole or way around it and it is just a game of catch up. They make rules for business which they try to keep simple and manageable. Keeping it simple means plenty of wording loopholes to exploit which they then have to work on and close down or manage. HMRC have openly said they are going after aggressive avoidance schemes. They are, in theory legal as well but are not operating as the system was designed so they just have to chase them and close them.

It's a constant game of catch up. Many quite obviously use this loophole to do nothing else but their normal job and not pay the taxes. If that is the case it should be brought in to line.

Their ways and means of doing this are highly questionable and almost as flawed as the systems we exploited but that is another matter.

If they can't implement the law in a manner that they think is correct using a system they design, blaming accountants for manipulating it is being rather simplistic.

If we had a flat rate tax system, we wouldn't have to put up with a broken tax system. But with too many vested interests againsts it including HMRC it won't happen

To make it worse most of the tax advisors in Accountancy practices are ex HMRC, so apart from having a vested interest in perpetuating the farce, they also have a good understanding of how far they can push

Tax doesn't need to be taxing, it's a simple concept made complicated by the machinations of HMRC. The only effective way to avoid loopholes in the long term is to make the tax system as simple and transparent as possible

HMRC aren't idiots, it's their intention to keep system full of loopholes

[BolshieBastard]

I wonder what the civil service union makes of all this, especially the one (whose name escapes me) for higher echelon public servants.

That'll be the FDA (First Division Association)

Ambivalent probably, but they have been complaining bitterly about pension cuts and job cuts in the civil service, and one thing about contractors is that their clients needn't worry about paying them a pension or other benefits and nor do they have "job" security.

On that basis it sounds like ministers and top civil servants are being greedy and thick, the classic combination as usual, wanting to have their cake and eat it, by hiring contractors for the flexibility but now demanding these be taxed like permies.

I'm sure it'll come back to bite them, and hardly seems worth all the fuss for the paltry sums HMR&C will gain.

Lat's face it here. The majority of these 2500 or so people are 'off the payroll' because Government wanted a quick and easy solution to remove these people's salary from departmental payrolls and be able to declare they had reduced a significant portion of civil service pay.

I mean who in their right mind really thought the guy heading up Student Loan Finance was a 'civil servant'? I dodnt, I presumed he was a chief exe brought in to do the job on a contract irrespective of how incompetent his organisation is.

If I get a departmental contract, am I back to being a 'civil servant' just because Im working there? Not in my opinion, Im not (although I will no longer be even considering applying for contracts with DWP etc).

[northernladuk]

Rubbish either somethings legal or it isn't, you can't be illegally legally avoiding tax

Morality doesn't come into taxation,or are you suggesting someones tax bill should be decided by the court of public opinion rather than the law

No, but you need to think a bit about it so I can see why it is a struggle.

With every system there is a loophole or way around it and it is just a game of catch up. They make rules for business which they try to keep simple and manageable. Keeping it simple means plenty of wording loopholes to exploit which they then have to work on and close down or manage. HMRC have openly said they are going after aggressive avoidance schemes. They are, in theory legal as well but are not operating as the system was designed so they just have to chase them and close them.

It's a constant game of catch up. Many quite obviously use this loophole to do nothing else but their normal job and not pay the taxes. If that is the case it should be brought in to line.

Their ways and means of doing this are highly questionable and almost as flawed as the systems we exploited but that is another matter.

[amcdonald]

Because you are using loopholes and not adhering to the spirit of the rule. The fact it isn't illegal (yet) doesn't mean it is right.

Rubbish either somethings legal or it isn't, you can't be illegally legally avoiding tax

Morality doesn't come into taxation,or are you suggesting someones tax bill should be decided by the court of public opinion rather than the law

[OwlHoot]

I wonder what the civil service union makes of all this, especially the one (whose name escapes me) for higher echelon public servants.

Ambivalent probably, but they have been complaining bitterly about pension cuts and job cuts in the civil service, and one thing about contractors is that their clients needn't worry about paying them a pension or other benefits and nor do they have "job" security.

On that basis it sounds like ministers and top civil servants are being greedy and thick, the classic combination as usual, wanting to have their cake and eat it, by hiring contractors for the flexibility but now demanding these be taxed like permies.

I'm sure it'll come back to bite them, and hardly seems worth all the fuss for the paltry sums HMR&C will gain.

[scooby]

Did you miss the part where you get squashed like a bug?

Sorry, I didnt read between the lines!

[AtW]

Exactly! Fair is only fair when every player plays the same way...

Did you miss the part where you get squashed like a bug?

[Platypus]

Am i missing something? Surely if you "legally avoid" something, you've done nothing wrong, so how can you be punished for it? I know Im not a solicitor, but even thick fairly young me can see that you could easily build a defence / arguement around this...

If you're head of a council or some other civil servant, you should be caught by IR35 according to every indicator in the book. Even more so if you look at the new "tests" that HMRC has just published. What's sauce for the goose should be sauce for the gander.

If Hector decides that there is "nothing to see here" I'll be utterly appalled. PCG or somesuch should file for judicial review to look at why these people get off and "nasty" IT contractors are targeted.

This makes my blood boil.

Yours,

Mr. Angry, Purley.

[scooby]

They've got far more resources than you, this means you can be squashed like a bug.

HTH

Exactly! Fair is only fair when every player plays the same way...

[AtW]

Also doesnt mean that it is wrong... Do they play to the spirit of the rule all the time?

They've got far more resources than you, this means you can be squashed like a bug.

HTH

[scooby]

Because you are using loopholes and not adhering to the spirit of the rule. The fact it isn't illegal (yet) doesn't mean it is right.

Also doesnt mean that it is wrong... Do they play to the spirit of the rule all the time?

[SimonMac]

Because you are using loopholes and not adhering to the spirit of the rule. The fact it isn't illegal (yet) doesn't mean it is right.

Welcome to the world of GAAR!

[northernladuk]

Am i missing something? Surely if you "legally avoid" something, you've done nothing wrong, so how can you be punished for it? I know Im not a solicitor, but even thick fairly young me can see that you could easily build a defence / arguement around this...

Because you are using loopholes and not adhering to the spirit of the rule. The fact it isn't illegal (yet) doesn't mean it is right.