It's just dawned on me that, in many cases, IR35 means that HMRC are effectively charging VAT on salaries. Let me explain...
If Company A employs Person B, the cost to Company A is the gross salary paid to the employee plus employers' national insurance contributions. (I'm ignoring other possible costs, like health insurance, pension contributions, etc.)
If Company A contracts Company C to provide some service, the cost to Company A is the agreed fee for the work, plus VAT. Normally VAT is a zero-sum game for VAT-registered businesses, but if Company A is a bank, then it's quite likely that they can't claim most of that back - so it's a genuine cost. (This is the scenario I'm thinking of hereafter.)
As of April 2020, if Company C uses Person D to provide the services to Company A, and that contract is such that Person D is considered to be a "disguised employee" of Company A, then that contract is quite rightly subject to employment taxes. But why then is it also subject to VAT? If the relationship is treated as an employer/employee one for tax purposes, than no VAT would be payable, surely?
Or are HMRC really trying to collect VAT (payable on goods and services, but not payable on salaries) and employers' national insurance contributions (not payable on goods and services, but payable on salaries)? How can they justify that?
