Reply to: HMRC IR35 complaints ignored for 7 months and counting

[plannercontractor]

Apologies, I must have misinterpreted it. I don’t hold a grudge with the council. If I was in their place or yet better running business and needed staff I couldn’t afford on permanent contracts, I would have done exactly the same if there was nothing stopping or no repercussion on me.

Anyway, thanks for all the advice again.

[northernladuk]

I never said I look down on council workers. I said I beg to differ about councils being good employers. I can't think of many places that would have treated more shabbily than you have been here for starters, but as I said, that's for another thread.

[plannercontractor]

Well if you think that, then just wait till IR35 hits the private sector, then you’ll hear about respect for workers etc. They already work an average of 6 hours a week more than public sector workers for similar pay. Councils are run by people and people will always look for the easiest option available to them. If you think for a minute that a private sector employer in the same situation would have done it differently then good.

Yes we’re done, thanks for everything. If you look down on council workers then it’s no different to the way southerners look down on northerners. But born & bred in London, I was brave enough to go to a northern uni (to the dismay of my friends) but although I wouldn’t chose to live up north again, it was 4 years well spent. It’s not that grim up north or at councils.

[northernladuk]

Councils are not so bad as employers after all

I'd beg to differ but that's for another thread.

Guess we are done now?

[plannercontractor]

Not sure what else you want us to say now.

Not much but thanks for the input, it seems that there's been some heart softening for contractors who are not in the same position as most of you are, this is appreciated. I am very soon about to start my permanent contract, my income would be more than I am getting with the umbrella plus with a possible 52 days paid holiday a year, if you account for annual entitlement, bank holidays and flexi leave allowed, a very good pension scheme, funding for additional training and short courses, payment for professional membership fees, and sick leave and other benefits. Things I couldn't enjoy as a contractor.

Councils are not so bad as employers after all but the HMRC needs to address the issues of who is responsible to pay certain tax when someone is working as a contractor, who is the employer for those caught by IR35 (i.e. agency or umbrella? or are we classed as self-employed?), if we are not self-employed then why are we paying employers contribution from our agreed rate prior to IR35? I made some sacrifices after April 2017 and I hope others don't have to do the same through no fault of their own.

[plannercontractor]

Sorry, it was indeed a mistake. My umbrella operates under several company names. They're called orange genie but companies house lists about 10 different registered companies/subsidiaries with the same address for them. My figures were for one of those listed but not the one that pays me which is listed as orange genie cover ltd. They had a turnover of £97.7m and a cost sales of £94.8m last year, their filing can be found here https://beta.companieshouse.gov.uk/c...filing-history

[DeludedKitten]

My umbrella, according to Companies House made a profit of £1.58m last year and their turnover was £1.7m. They paid no tax on profits in 2017 as their reconciliation tax of expense in 2016 (@ £6,472) was higher than the standard the rate of corporation tax. If the HRMC had devised a way for us to pay tax normally without umbrella companies they’ll collect way more than they do now. Umbrella companies are just Ltd. companies on steroids, it’s so obvious!

Who is the umbrella company? Making that percentage profit isn't something that umbrella companies can do.

For example, Contractor Umbrella had turnover of £33.9 million last year, cost of sales of £33.2 million, leaving a gross profit of £750k. Then paid wages of £450k leaving a profit after tax of £77k on a turnover of nearly £34million.

Your figures don't stack up.

[northernladuk]

Not sure what else you want us to say now.

[plannercontractor]

Since about 2010 the large unions have been fighting councils who use loads of temporary staff to make them permanent after 18months - 2 years.

Thank you, I've been told this constantly but with the pay-cut I've had since IR35, I've been careful to spend on extras like unions. Just to clarify, I was only on a 1 year FTC and 2 years 3/4 as an agency temp. I took a break of 2 weeks between that FTC and the contractor posts but that was of my own accord and I was not advised to do so by the council. I had booked a holiday (for the end of the contract) at the beginning of my contract.

[SueEllen]

It's interesting how most of you say blame the council but think the HMRC is somehow blameless. Councils are being forced to cut-cost everywhere and they will look at easy targets like employment rather than services due to possible public challenge. Who's going to complain about the council not giving out perm contracts?

Since about 2010 the large unions have been fighting councils who use loads of temporary staff to make them permanent after 18months - 2 years. The councils I know about responded by outsourcing every department possible to the lowest bidder, and if it couldn't be outsourced e.g. children's services they tried joining up with a neighbouring council (or 2) to provide the services.

<snip>I think I made a mistake coming on here for help as it seems that this is for those who love and enjoy contracting and got there by pure choice, not everyone does and it explains the lack empathy.

You actually need one of the large unions to help you. They are interested in cases like yours. Though they won't be able to help you with your tax affairs you need to sort that out yourself.

It seems that many of you agree with the HMRC's ruthlessness and accept that it doesn't care where it gets the tax money from as long as it does, for most of you, moving around is the way around it and that is your prerogative. <snip>

If you explore this forum more you find that lots of us detest HMRC but know they are not the people to run to if you want anything done about any tax situation in the UK. Depending what your issue is you have to join a lobby group, join a union and/or involve your MP. (And I've done all 3 for different reasons and I'm a contractor by choice.)

[cojak]

HMRC IR35 complaints ignored for 7 months and counting

It’s a crappy situation, no doubt about it. But I honestly don’t know what to say to make it any less crappy.

If I you didn’t use an umbrella you would have to pay the same amount of tax and both NI’s. The commission for an umbrella is about the same as the fees for an accountant.

I can understand your anger, but this is the working situation of the 21st century. The government needs the tax and it’s the government that make the tax law; HMRC enforces the law - the fact that they are aggressive and ruthless in their application makes not a jot of difference to the majority of PAYE voters.

There are others in a far worse situation than you, and the best that they can do is to settle with HMRC and close down any attempts by HMRC to claim inheritance tax from them.

The best I can advise is to speak to HMRC and try to arrange payment over a couple of years.

[plannercontractor]

HMRC are not an employment ombudsman.
...and most of us on here hate them.

I’ll give you a comparable situation....

You get a £200k mortgage with the bank @ 5% interest (say this was a bailed-out bank from the government after the banking crash). However, the government some years after the bank had paid off its debt, finds that they only charged the bank the interest rate of the 1st year of the debt repayment, although the bank took 10 years to repay its debt.

Now the government ask the bank to make up the additional payments and the bank turns around and says it can't and the only way to do that is to increase the interest rate of say 100,000 of its mortgagees by 15%. The government is warned that these people would lose their homes and most of them live in an area where the government just spent millions improving infrastructures (say schools, stations, roads etc.) and house prices are fairly high in the area. The government says it doesn't care as long as it gets the money back from the bank and the bank goes ahead and raise the interest rate, and the people move out as predicted, the government gets its money budget as interest rate over the 10 year period.

The bank then sells the houses to an investment company (at a low rate) who re-sells them as 2nd homes (say in London, where this is more common). In the end, these houses are only occupied by rich foreigners who only live there in the summer and don't use the facilities. The infrastructure investments are then in vain.

Moral of the story is that the HMRC is responsible for a fair tax system and they can’t penalise contractors who through no fault of theirs are forced to use umbrellas who charge them fees, E-NIC and AP. Councils will still employ contractors at no loss to them but the umbrella companies capture the contractors, use their money for E-NIC and AP then claim it back as tax deductible expenses and pay CT on profits only.

My umbrella, according to Companies House made a profit of £1.58m last year and their turnover was £1.7m. They paid no tax on profits in 2017 as their reconciliation tax of expense in 2016 (@ £6,472) was higher than the standard the rate of corporation tax. If the HRMC had devised a way for us to pay tax normally without umbrella companies they’ll collect way more than they do now. Umbrella companies are just Ltd. companies on steroids, it’s so obvious!

[jamesbrown]

I can imagine they do. I wonder what would happen if someone challenged it though? That said I guess there is no benefit to do so.

I don't think there's much to challenge if the employer's HR is semi-competent. If you take unis, for example, they're heavily unionized, but plenty of people work for way longer than two years on FTCs, each typically funded by a separate increment/source of funding. I don't know the employment law details, but I do know they get away with it.

Some info here, for example:

https://www.ucu.org.uk/article/3567/...-of-permanence

[northernladuk]

I think you get redundancy rights after a couple of years, but the reality is that the FTC model is full of holes, and it's really quite easy to keep the same people chugging along on FTCs for way more than two years without their becoming permies. Some sectors, like universities, do this wholesale for temp staff because the work is funded in fixed increments.

I can imagine they do. I wonder what would happen if someone challenged it though? That said I guess there is no benefit to do so.

[jamesbrown]

I do think the council is totally to blame. If they had offered you a role at then end of the two years then you wouldn't be in this mess. The convulated route they've gone down has exposed you to all of this and put you in a situation you don't like or really understand.

I can't help thinking the council is pushing the law a bit here. They can't extend the FTC. 2 years is the legal maximum at which point they have to offer you a job or get rid. They've done neither of those things. I'm sure by doing this they are either breaking the law or at the very least their own policies.

I think you get the same redundancy rights after a couple of years, but the reality is that the FTC model is full of holes, and it's really quite easy to keep the same people chugging along on FTCs for way more than two years without their becoming permies. Some sectors, like universities, do this wholesale for temp staff because the work is funded in fixed increments.