Freelance Limited Company (FLC) offering from IPSE

[malvolio]

Mal is no more "from IPSE" than you are. He is a member. You are a member. He has access to exactly the same material, FAQs and documents as you. WIB's questions are addressed in the FAQs. You may not like or agree with the answers given, but that's a separate issue.

Precisely.

And I have answered the question you set to save you the bother of looking it up for yourself. Not my problem if you don't like the answer, since it then destroys your argument completely. But I'll say it one more time, just so we are also crystal clear.

Using an FLC as envisaged by IPSE would give HMRC a level of confidence that you are operating as a business and are not abusing the taxation reliefs, and are not therefore a reasonable target for an IR35 investigation.

So IR35 still exists, obviously, and will be applied. Just not to FLC people.

[DaveB]

Precisely.

And I have answered the question you set to save you the bother of looking it up for yourself. Not my problem if you don't like the answer, since it then destroys your argument completely. But I'll say it one more time, just so we are also crystal clear.

Using an FLC as envisaged by IPSE would give HMRC a level of confidence that you are operating as a business and are not abusing the taxation reliefs, and are not therefore a reasonable target for an IR35 investigation.

So IR35 still exists, obviously, and will be applied. Just not to FLC people.

But how will it be optional if Clients and Agents decide that it is in their best interests to insist that contractors use it in order to be put forward for roles or enaged?

This is the question that hasn't been answered.

The reason that we now (mostly) operate through brollies or Ltd's is that agents and clients dont want the percieved liability of taking on Sole Traders. How will this will not be repeated for FLC's?

[eek]

But how will it be optional if Clients and Agents decide that it is in their best interests to insist that contractors use it in order to be put forward for roles or enaged?

This is the question that hasn't been answered.

The reason that we now (mostly) operate through brollies or Ltd's is that agents and clients dont want the percieved liability of taking on Sole Traders. How will this will not be repeated for FLC's?

Not quite true. Agencies have to use either PAYE, or pay via a brollie or a limited company. They cannot pay directly someone who claims to be self employed that option was removed back in the late 70's when agencies were caught abusing that possibility....

The problems with the FLC are multiple but the first few boil down to...

1) The statement that the FLC is optional. No they won't be. The market will rapidly make them compulsory in the same way that opting out of Agency Regs is compulsory. You can opt in, but either you CV doesn't go forward or the contract will put you well and truely inside IR35... Heck some agencies even title their opted in contract - Contract for contractor Inside IR35..

2) That the FLC is a guarantee that you are save from IR35. Firstly I can't see how that would be the case and secondly once people see something that can be abused they will find a way to abuse it... And that brings me to argument 3

3) The FLC cannot be abused by companies wishing to abuse the concepts.... Really, how?

My very first argument against the FLC concept is that it will be abused. So far the best answer I've seen saying it won't be is because of the requirement for a business plan..... Really, anyone trying to abuse an FLC on mass will provide a default template one good enough to pass the test and vague enough to allow people to abuse the concept for ever more..

[WordIsBond]

Using an FLC as envisaged by IPSE would give HMRC a level of confidence that you are operating as a business and are not abusing the taxation reliefs, and are not therefore a reasonable target for an IR35 investigation.

So IR35 still exists, obviously, and will be applied. Just not to FLC people.

Giving HMRC "a level of confidence" is not what I was asking for. I was asking if it comes with a "guarantee."

If HMRC backs up that "level of confidence" by giving a guarantee, that removes one of my biggest objections. As I've said more than once on this thread, I am not opposed to the general concept of an FLC.

But telling me HMRC will have a "level of confidence" is not exactly making me jump up and down with glee over the idea. I'm interested in certainty, not in their level of confidence.

[DaveB]

Not quite true. Agencies have to use either PAYE, or pay via a brollie or a limited company. They cannot pay directly someone who claims to be self employed that option was removed back in the late 70's when agencies were caught abusing that possibility....

Fair enough, my mis-understanding.

Strike that last bit from my post, the question still stands though. If Agents and Clients see FLC as a better option for them, how will it be optional for us?

[WordIsBond]

But how will it be optional if Clients and Agents decide that it is in their best interests to insist that contractors use it in order to be put forward for roles or enaged?

This is the question that hasn't been answered.

The reason that we now (mostly) operate through brollies or Ltd's is that agents and clients dont want the percieved liability of taking on Sole Traders. How will this will not be repeated for FLC's?

Yes, this is the other big issue / question, for me, and should be for everyone.

Think about what happened with BETs in the public sector. Clients wanted to know if you could pass the BETs so they didn't get tarred with something. Well, imagine that across industry, with everyone insisting you have to be FLC.

Sorry, I don't see any realistic scenario where that doesn't happen. It's not going to be optional for most people.

[Contreras]

Giving HMRC "a level of confidence" is not what I was asking for. I was asking if it comes with a "guarantee."

If HMRC backs up that "level of confidence" by giving a guarantee, that removes one of my biggest objections. As I've said more than once on this thread, I am not opposed to the general concept of an FLC.

But telling me HMRC will have a "level of confidence" is not exactly making me jump up and down with glee over the idea. I'm interested in certainty, not in their level of confidence.

There's a cats chance in hell that FLC would be implemented "as envisaged by IPSE". Just look at the BETs for example, "if they do this everyone will be judged outside IR35. Wahay!" - anyone believing that is on another planet sadly.

The only "guarantee" would be if FLC turnover was close to 100% treated as PAYE. Still like the idea? It won't be optional you know.

[malvolio]

OK, it will be compulsory because the agencies will make it so for some arcane reason that escapes me at the moment.

Since we're now in fantasy land, if the FLC has a better tax advantage and claimable expenses than what will have happened to the normal contractor Ltd Co - which will be IR35 caught (you know, as a result of those pesky market forces meaning the clients take the path of least resistance), paying full taxes and not being able to claim expenses for its workers - why is the FLC such a bad idea?

And don't give me the "painting a target" guff. As of the last budget we already are already stood against the wall and have finished the last cigarette. Or hadn't you noticed?

[DaveB]

OK, it will be compulsory because the agencies will make it so for some arcane reason that escapes me at the moment.

Agencies will make it compulsory because Clients will insist on it, because it removes the liability from them that is being put forward by HMRC c.f. Putting the onus on the end clients to establish employment status.

If that goes through clients will look for the path of least resistance in order to comply, which will be to insist that contractors are operating as an FLC. Just look at what happened with BET's and reporting in the Public Sector. No-one really understood what they were supposed to be checking so just insisted on getting a bit of paper that said you were outside IR35.

[WordIsBond]

OK, it will be compulsory because the agencies will make it so for some arcane reason that escapes me at the moment.

Because HMRC is talking about holding clients liable for IR35.

So what will happen? Clients will say, "You have to give us a way to not have open ended liability." And the net result will be that if HMG will agree that if clients engage FLCs, they've done their due diligence, and so aren't liable. So then clients will only engage FLCs.

But HMRC still won't give a guarantee that FLCs are IR35 exempt. So we'll get the worst of all worlds. Contractors will be forced into FLCs, and since everyone will be in FLCs, HMRC will no longer see FLCs as the tough target. So FLCs will be investigated for IR35 just as Ltd Cos have, the liability will still fall on the contractors, so we'll have all the risks we've had before, but now we'll be paying more tax than we have been.

So we'll have changed our corporate structure (and we pay to do that), we now have PSCs defined in law and easily targeted, we pay more tax, but a capricious investigatory body can STILL declare that we're IR35 and tax us more heavily than a permie gets taxed.

If you think that scenario can't happen, then go ahead and proceed. But if there is a reasonable risk of it happening, then maybe someone should look at how they can tweak the proposal to protect against that.

I get that some people will oppose it just because it costs more than what they currently have. That's not my objection. As I said, in principle, I think the idea has merit.

It's not what I'd prefer. I'd prefer something simpler that addresses the concerns. Why are you so wedded to this particular idea?