Reply to: IR35 Forum Minutes from December

[RokkieContract]

Potential Solutions

Just an observation, the current practice of trying to differentiate via case law and contract to identify those that fall within or outside of the IR35 / service co v employee relationship I think is difficult for HMRC. If every contractor opposed and took legal advice and each case determined on merits, then this is not really going to work. The retrospective taxes appears to be used as a 'stick' to get people to agree to statements which may or may not be correct. Those with significant resources will fight it, others will just comply. So it is one method. Working practices are likely to change in the next decade as they had done in the past decade and case law very rarely keeps up to date with current time lines it can take 3-5 years for the case to reach a proper judgment, even longer sometimes. Also there is sometimes no clear right or wrong answer and no one wants to test this out in a Tribunal every time.

The best alternative for them (HMRC) to recover some of this 'missing' tax is to approach it a different way...obviously needs some thinking around umbrella contracts...

- Is limited company closed company - yes / no
- Does company derive 80% of its revenue from single source in the previous 12 months yes / no

If the above 2 are yes then corporation tax surcharge of say 15% or something...

May capture some of the 'lost' taxes and at least allow individuals to provide much needed flexibility (using their own resources) to the labour market which we will need post Brexit. This will also overcome very intrinsic testing on contracts.

This may cause some complications for some smaller businesses, but they have always wanted to capture additional tax and NI for all small businesses where the effective rate of tax is so low.

In some ways HMRC have created their own beast by creating the most complex tax system in the world.. in the long run a clean transparent and easy to navigate would be best for all business.

[FK1]

good-work-taylor-review-modern-working-practices-rg.pdf

Good Work: The Taylor Review of Modern Working Practices p.71

the different rates of tax on different
forms of work also have an impact on how much money the Government raises in tax revenue. HMRC estimates that
the government loses out on £5.1bn a year from the lower rates of NICs paid by the self-employed.

Good Work: The Taylor Review of Modern Working Practices p.72

The Review believes that, over time, there is a case for
moving to a more equal tax treatment of self-employment:
it follows that there is a case for companies and others who
engage self-employed labour to contribute more to the
overall NI payments made by the self-employed, in the
same way as they do for employees.

The Review believes that the principles underlying
the proposed NI reforms in the 2017 spring
budget are correct. The level of NI contribution
paid by employees and self- employed people
should be moved closer to parity while the
Government should also address those remaining
areas of entitlement – parental leave in particular
– where self-employed people lose out.

Good Work: The Taylor Review of Modern Working Practices p.75

As an example, many self-employed people experience
greater financial certainty than some employed
people, such as agency workers or those on zero-hours
contracts. On the other hand, median annual earnings
from self-employment have been falling, from £14,535
in 2007/8 to only £10,800 in 2013/14 and so many
self-employed people also rely on the state to top up
earnings and support them in their day-to-day lives or
when they retire.

Good Work: The Taylor Review of Modern Working Practices p.77

The changes made to state pension provision last
year, increasing the level of state pension that selfemployed
people could accrue, is a welcome move and
part of the justification for the increase in Class 4 NICs
proposed at Budget

Source:
https://www.gov.uk/government/upload...actices-rg.pdf

[PurpleGorilla]

[eQUOTE=madame SasGuru;2527680]Given HMRC's answer to



I wouldn't be so sure about that.

April 2018 will see this rolled out to the private sector. And before then we will see in December 2018 the historic investigations begin just to really scare everyone.

I hope everyone has their escape plan ready...[/QUOTE]

Meh - every year I hear this.

[MarkT]

Given HMRC's answer to



I wouldn't be so sure about that.

April 2018 will see this rolled out to the private sector. And before then we will see in December 2018 the historic investigations begin just to really scare everyone.

I hope everyone has their escape plan ready...

Fully expect a huge number of Ltd companies closing, with IR35 history disappearing with the dissolution, especially as HMRC won't have the resources to appeal each closure.

I'd shut down and start again if you don't have much in your Ltd once it's announced.

[malvolio]

The CBI getting involved again maybe a good thing? Although when IR35 was introduced didn't that lobby against employment rights being aligned with Tax status?

No, the CBI is only interested in the CBI. They will not support independent working any more than the unions will, other than as a source of cheap labour. They are there, I suspect, to try to ensure they don't get hit with extra costs.

[poorautojobber]

The CBI getting involved again maybe a good thing? Although when IR35 was introduced didn't that lobby against employment rights being aligned with Tax status?

[SeanT]

A talking shop then. In other words as much use as a jobbie in a swimming pool, a chocolate fire guard, a fart in a spacesuit, a square wheel, a bicycle for riding on the sea floor. You get my drift.

At least two of these are useful for making you no longer want to be there anymore, and one is good for emptying the whole place in a panic.

[washed up contractor]

It's a fair point. However, if no-one did turn up then HMRC could claim that no-one is interested in engagement over IR35 and we would be even more in the dark as to what their line of thinking is.

A talking shop then. In other words as much use as a jobbie in a swimming pool, a chocolate fire guard, a fart in a spacesuit, a square wheel, a bicycle for riding on the sea floor. You get my drift.

[jamesbrown]

What does point 10 mean.

. It is assumed that a person using CEST will have already
established MOO, which is necessary for a contract to exist, otherwise there would be no
need to be using CEST to determine the status of the existing or hypothetical contract.

If both parties agree no MOO exists then you don't need to use CEST. That just leaves us where we currently are surely.

If you have a contract that shows a purely commercial relationship and your working practices reflect this you should be ok. I must be missing something the wording on these things can be so open to interpretation!

In short, it means that HMRC haven't got a fecking clue what MoO means.

Their argument appears to be that MoO is a given, because there is a contractual relationship. It other words, it appears that they are totally ignorant of the case law that establishes the sufficient MoO necessary for a contract of service. It is one, among many reasons, that the CEST is strongly biased in favour of a contract being found inside.

[poorautojobber]

What does point 10 mean.

. It is assumed that a person using CEST will have already
established MOO, which is necessary for a contract to exist, otherwise there would be no
need to be using CEST to determine the status of the existing or hypothetical contract.

If both parties agree no MOO exists then you don't need to use CEST. That just leaves us where we currently are surely.

If you have a contract that shows a purely commercial relationship and your working practices reflect this you should be ok. I must be missing something the wording on these things can be so open to interpretation!

[cojak]

I hope everyone has their escape plan ready...

Already activated and archived...

[stek]

Entrepreneur Visa is mentioned is NOT a self-employment visa.

[madame SasGuru]

This the only good point that I could see:

Other than that, it all rather looked like a turkey shoot...

Given HMRC's answer to

viii) Concern that contractors are moving to non-compliant structures, driven by a desire to retain the same level of take-home pay, or in some cases by public bodies themselves. Also that supply chains in the private sector are more complex than in the public sector, making reform more difficult.
HMRC is keen to work with the forum members on non-compliance with IR35 rules. In the context of the upcoming consultation views on visibility of the supply chain, particularly any differences between public and private sector supply chains would be welcomed. HMRC also welcomed the suggestion that CBI should also be invited to contribute to these discussions.

I wouldn't be so sure about that.

April 2018 will see this rolled out to the private sector. And before then we will see in December 2018 the historic investigations begin just to really scare everyone.

I hope everyone has their escape plan ready...

[cojak]

This the only good point that I could see:

18: What more could HMRC do to help people understand what compliant umbrella companies look like, and address the issue of non-compliant umbrella companies and promotors of avoidance schemes? HMRC is interested in doing further work in this area in partnership with members. It was agreed that HMRC would work with forum members to develop guidance products for businesses.

Other than that, it all rather looked like a turkey shoot...

[ladymuck]

It's a fair point. However, if no-one did turn up then HMRC could claim that no-one is interested in engagement over IR35 and we would be even more in the dark as to what their line of thinking is.