Reply to: IR35 - Write to your MP

[JohntheBike]

They also care if they get sued in the an ET for not providing benefits or unfair/discrimination terminations of employment. HR have been happy to look the other way as many contractors come out of the capex budget and have zero employee benefits. HR are now being asked to get involved and conduct determinations if a role sits inside or outside for tax purposes using the same evidence that the worker/employer/contractor would present to a tribunal. This makes the blanket everyone is inside with no benefits a much more risky decision for the business and may prompt some to start producing real B2B relationships.

agreed

[JohntheBike]

I'm not as prescient as you unfortunately and need to rely upon what I'm told by those who have some knowledge of the situation. I've found that relying on hearsay and reported views is often a recipe that ends with egg on face.

I'll try to find some time to initiate a meeting.

yes, hearsay often leads to that conclusion. However, I've only offered an opinion.

[BlueSharp]

C) The situation is changed, it is the clients who make the determination now. That adds more weight to the unfairness argument -- the client who won't give benefits also says you have to pay as much tax as their employees. You can actually present their determination that you are an employee for tax in an ET -- that's a new fact that was never there before, with unknown ramifications. But as I said above, the employer is just acting as unpaid tax collector. They really don't care if the tax arises by employment, deemed employment or operation of a wholly unjust law. All they care about is whether they might get punished for not collecting the tax. The link between collecting tax - a necessary evil and unavoidable overhead as far as they are concerned - and providing benefits to employees such as statutory sick/maternity pay, holidays, etc, is not a direct or causal one. Therefore the fairness argument is rather wounded?

They also care if they get sued at an ET for not providing benefits or unfair/discrimination terminations of employment. HR have been happy to look the other way as many contractors come out of the capex budget and have zero employee benefits. HR are now being asked to get involved and conduct determinations if a role sits inside or outside for tax purposes using the same evidence that the worker/employer/contractor would present to a tribunal. This makes the blanket everyone is inside with no benefits a much more risky decision for the business and may prompt some to start producing real B2B relationships. We have already seen HMRC settle a case (Winchester) for an inside ir35 contractor and employee benefits so the threat to businesses is very real. If you could still claim expenses (hotel, food, transport) and be inside that would be a different argument IMO but you can't.

[webberg]

OK.

It's been clear to me for many years that they have a different agenda to most. The fact that they didn't sign up to the recent letter sent by CUK and other respected organisations to HMG, would seem to indicate this.

I'm not as prescient as you unfortunately and need to rely upon what I'm told by those who have some knowledge of the situation. I've found that relying on hearsay and reported views is often a recipe that ends with egg on face.

I'll try to find some time to initiate a meeting.

[JohntheBike]

If I was your MP I'd reply back saying that surely if you're outside of IR35, then you have nothing to fear?

as one commentator has already put it, I suspect that most MP's have not read any of the communications and would certainly not have a clue about IR35, given the standard format of most of the replies that I've seen from others.

[PerfectStorm]

If I was your MP I'd reply back saying that surely if you're outside of IR35, then you have nothing to fear?

[JohntheBike]

Because I am not a member of IPSE.

We have made a number of approaches to them, seeking to work together on some matters. Given that we are very much anti "scheme" and very much into solving historic issues and do not have or promote any form of current or proposed tax planning arrangement, I would have thought that we would pose no threat to what they are doing.

For reasons that remain unclear to us however, our approaches have failed to yield any meaningful relationship.

Doing the same thing many times and expecting a different result is either insanity or quantum physics. I think I'm sane and no nothing about physics.

OK.

It's been clear to me for many years that they have a different agenda to most. The fact that they didn't sign up to the recent letter sent by CUK and other respected organisations to HMG, would seem to indicate this.

[WordIsBond]

Perhaps this needs a different thread?

Probably, it is somewhat off the OP's topic....

I think some of this we've already discussed, and some of this I'd view as worth exploring, but this probably isn't the thread. If you or someone else starts one specifically on something like 'The Employment Rights counterattack on IR35' or something similar, I'll be glad to take part (though I might be limited this week after today).

[JohntheBike]

1. It's pretty clear that as of today paying employee taxes does NOT entitle you to employee benefits. That may be unjust and may be subject to change.
2. I also think it is pretty clear why IPSE have taken this up.
A) Direct attacks on IR35 have failed.
B) An argument that the tax/benefits distinction is unfair is probably winnable, and HMRC's argument has consistently been based on 'fairness', so pointing out the unfairness of their solution has some moral and political force. (Whether it can gain any legal impact is yet to be determined.)
C) The situation is changed, it is the clients who make the determination now. That adds more weight to the unfairness argument -- the client who won't give benefits also says you have to pay as much tax as their employees. You can actually present their determination that you are an employee for tax in an ET -- that's a new fact that was never there before, with unknown ramifications.
D) The Taylor report said that these should be aligned and the government has given at least lip service to it. That can't hurt the chances of a push on this front succeeding. Again, that's a relatively new fact, it wasn't present in the past.
E) This also constitutes an indirect attack on IR35 by giving clients pause about throwing contractors inside. Without this counterattack, there is little reason for clients to take the risk of an outside determination that HMRC may challenge. This throws another item on the scale as clients weigh costs/benefits/risks.
F) If even a few clients are influenced to enter into real B2B relationships as a result of this, it begins to create the split market we need to see between inside and outside roles. If all clients make blanket inside determinations, contractors pay the price. If some go outside, it creates a more competitive market -- to get the best contractors, clients will either have to go B2B with outside determinations or pay more for inside, which is as it should be.

agreed

[webberg]

why don't you ask IPSE then? It would be interesting to hear their reasons for doing so.

Because I am not a member of IPSE.

We have made a number of approaches to them, seeking to work together on some matters. Given that we are very much anti "scheme" and very much into solving historic issues and do not have or promote any form of current or proposed tax planning arrangement, I would have thought that we would pose no threat to what they are doing.

For reasons that remain unclear to us however, our approaches have failed to yield any meaningful relationship.

Doing the same thing many times and expecting a different result is either insanity or quantum physics. I think I'm sane and no nothing about physics.

[webberg]

1. It's pretty clear that as of today paying employee taxes does NOT entitle you to employee benefits. I agree. By employee taxes we actually mean tax that the employer collects on behalf of the Government but which otherwise brings no benefit to the employer. That may be unjust and may be subject to change.
2. I also think it is pretty clear why IPSE have taken this up.
A) Direct attacks on IR35 have failed.
B) An argument that the tax/benefits distinction is unfair is probably winnable, and HMRC's argument has consistently been based on 'fairness', so pointing out the unfairness of their solution has some moral and political force. (Whether it can gain any legal impact is yet to be determined.) I think that argument has more legs than most but it requires political buy in and probably a change of law and certainly a change of Gov't policy.
C) The situation is changed, it is the clients who make the determination now. That adds more weight to the unfairness argument -- the client who won't give benefits also says you have to pay as much tax as their employees. You can actually present their determination that you are an employee for tax in an ET -- that's a new fact that was never there before, with unknown ramifications. But as I said above, the employer is just acting as unpaid tax collector. They really don't care if the tax arises by employment, deemed employment or operation of a wholly unjust law. All they care about is whether they might get punished for not collecting the tax. The link between collecting tax - a necessary evil and unavoidable overhead as far as they are concerned - and providing benefits to employees such as statutory sick/maternity pay, holidays, etc, is not a direct or causal one. Therefore the fairness argument is rather wounded?
D) The Taylor report said that these should be aligned and the government has given at least lip service to it. That can't hurt the chances of a push on this front succeeding. Again, that's a relatively new fact, it wasn't present in the past. Agreed, especially the "lip service". In my head at least, that's kicking it into the long grass.
E) This also constitutes an indirect attack on IR35 by giving clients pause about throwing contractors inside. Without this counterattack, there is little reason for clients to take the risk of an outside determination that HMRC may challenge. This throws another item on the scale as clients weigh costs/benefits/risks. Agreed but how much it weighs is going to be interesting.
F) If even a few clients are influenced to enter into real B2B relationships as a result of this, it begins to create the split market we need to see between inside and outside roles. If all clients make blanket inside determinations, contractors pay the price. If some go outside, it creates a more competitive market -- to get the best contractors, clients will either have to go B2B with outside determinations or pay more for inside, which is as it should be. I'll need to digest and think about this one.

I've made a couple of observations above.

Perhaps this needs a different thread?

[webberg]

I never claimed this U turn by IPSE was anything to do with my case. All I'm saying is that I have been consistent in my message ever since IR35 was introduced, i.e. no employee taxes without employee benefits..

Please see above.

Being inside IR35 DOES NOT MEAN that you are paying "employee taxes".

[WordIsBond]

Even if I did agree that paying employee taxes entitles you to employee benefits, (and I'm not sure I do), I remain confused as to why IPSE have taken this up.

1. It's pretty clear that as of today paying employee taxes does NOT entitle you to employee benefits. That may be unjust and may be subject to change.
2. I also think it is pretty clear why IPSE have taken this up.
A) Direct attacks on IR35 have failed.
B) An argument that the tax/benefits distinction is unfair is probably winnable, and HMRC's argument has consistently been based on 'fairness', so pointing out the unfairness of their solution has some moral and political force. (Whether it can gain any legal impact is yet to be determined.)
C) The situation is changed, it is the clients who make the determination now. That adds more weight to the unfairness argument -- the client who won't give benefits also says you have to pay as much tax as their employees. You can actually present their determination that you are an employee for tax in an ET -- that's a new fact that was never there before, with unknown ramifications.
D) The Taylor report said that these should be aligned and the government has given at least lip service to it. That can't hurt the chances of a push on this front succeeding. Again, that's a relatively new fact, it wasn't present in the past.
E) This also constitutes an indirect attack on IR35 by giving clients pause about throwing contractors inside. Without this counterattack, there is little reason for clients to take the risk of an outside determination that HMRC may challenge. This throws another item on the scale as clients weigh costs/benefits/risks.
F) If even a few clients are influenced to enter into real B2B relationships as a result of this, it begins to create the split market we need to see between inside and outside roles. If all clients make blanket inside determinations, contractors pay the price. If some go outside, it creates a more competitive market -- to get the best contractors, clients will either have to go B2B with outside determinations or pay more for inside, which is as it should be.

[JohntheBike]

Let me correct something here.

If somebody is within IR35 definitions, they do NOT pay employee taxes.

They pay tax and NIC at the same rate as employees and in the same way (i.e. deduction at source by the payer) but this is courtesy of the intermediaries legislation and NOT the rules in ITEPA that charge tax on remuneration or employment income.

Even if I did agree that paying employee taxes entitles you to employee benefits, (and I'm not sure I do), I remain confused as to why IPSE have taken this up.

why don't you ask IPSE then? It would be interesting to hear their reasons for doing so.

[JohntheBike]

I'm not going to argue the point yet again, but the world is changing and this has nothing to do with your 20-year-old case but the rather different point that clients will in all senses be hiring employees not service providers, and so those employees should get all relevant taxes. If the client doesn't want to do that then the solution is in their hands - hire service providers.

It's not a U-turn but a recognition of a new set of circumstances. You should try it sometime...

I guess you meant benefits rather than taxes?

I never claimed this U turn by IPSE was anything to do with my case. All I'm saying is that I have been consistent in my message ever since IR35 was introduced, i.e. no employee taxes without employee benefits.. Others haven't been so consistent. The gradual erosion of our position shows how short sighted those who continued to promote the IBOYOA ideology were.