IR35 - Back to first principles....

[eek]

The biggest drawbacks with it are that it won't catch enough people for HMRC's liking (I suspect) and it's very easy to avoid.
It doesn't stop abuse of the system either. Employers who force low-paid employees to incorporate will now sack them just under the 2 years.

+1. Abuse and forced self-employment is something we need to focus on. Otherwise it will be used to justify ignoring sane rules for their utterly insane ones.

And from what I heard yesterday utterly insane may be winning the day..

[DaveB]

Because the reward for business success shouldn't be increased uncertainty over taxation.

How is that increasing uncertainty?

You know up front that if you are with a client for more than 2 years you will be inside IR35. If you have multiple clients you will be outside anyway.

Everyone knows where they stand from day one.

Multiple extensions beyond 2 years are not automatic indicators of business success, it just says that Client Co. can't be arsed to recruit a permie to replace you. Having multiple clients is an indicator of success, and that you are behaving more like a genuine business.

[jamesbrown]

I've not yet heard a decent reason why the two year, with an exception for multiple clients isn't the most straight forward test.

We were asked to come up with some easy to test, easy to police, easy to understand option - that seems it to me.

No single test is going to be enough. All tests are likely to sit on top of SDC, but may allow us to mitigate the impacts of SDC (e.g. by providing scenarios where SDC is presumed to apply or not to apply).

A project-based test is preferable to any time-based test. Suppliers operate on project timeframes. The timeframes that you may be familiar with do not apply in all industries. For this reason, additional complexities must be introduced, such as the "multiple client" scenario you cite. But multiple clients over what period? What gap is acceptable? What happens when the criteria are breached part-way through a longer contract? When does the clock reset? On the latter point, one could adopt the current expenses rules, but these are going to be replaced soon. Furthermore, contract length has no basis in case law that distinguishes between employment and self-employment, whereas the project-based versus rolling distinction does have a basis in case law (whether or not you like the case law focus, it establishes principles that are meaningful in reality). Also, I can't see HMRC being particularly keen on a time-based test unless it is much shorter. I've made these points before. You may not feel that they are "decent reasons", but some specifics would help. Some combination of a project-based test and a few P&P indicators would be preferable in this area IMHO (as well as some more specific, if less common, scenarios that are emphatically outside).

Again, though, let's be completely clear about this; a single rule, whether a time-based rule or anything else, regardless or how simple or complex it might be, is not a remote possibility on its own. For example, with a time-based rule alone, there will be many short-term contracts (weeks or months) that involve a high degree of SDC, so should be emphatically caught (think "temp" staff that are covering someone on leave, for example).

[eek]

How is that increasing uncertainty?

You know up front that if you are with a client for more than 2 years you will be inside IR35. If you have multiple clients you will be outside anyway.

Everyone knows where they stand from day one.

Multiple extensions beyond 2 years are not automatic indicators of business success, it just says that Client Co. can't be arsed to recruit a permie to replace you. Having multiple clients is an indicator of success, and that you are behaving more like a genuine business.

+1

Unfortunately multiple clients as a test would be equally open to abuse (you can see care suppliers using multiple companies explicitly to break those rules)..

[Danglekt]

I understand the 2 years thing has down side but I don't see the minimum salary *x being any better an alternative in as much as they will all have down sides and unintended consequence.

My point is, shouldn't we be providing a range of alternative solutions for HMRC to consider rather than just focusing on one?

[jamesbrown]

Having multiple clients is an indicator of success, and that you are behaving more like a genuine business.

Not really. I'll often have periods when I have multiple clients, including some fixed-price work on a relatively short timeframe, coupled with some longer-term projects, often on a T&M basis or some combination of T&M and fixed price. At other times, I'll have a single client on T&M. Does a business become more and less genuine over time, depending on what work it is doing at that particular moment? Of course it doesn't.

[jamesbrown]

I understand the 2 years thing has down side but I don't see the minimum salary *x being any better an alternative in as much as they will all have down sides and unintended consequence.

My point is, shouldn't we be providing a range of alternative solutions for HMRC to consider rather than just focusing on one?

Sure, but we should start with the attributes of status that we're trying to represent, rather than starting with the rules and thinking about what status indicators they cover. For example, with time, I assume you're trying to capture the status of being P&P whereby someone becomes part of the client furniture, onsite for multiple years on a rolling contract, moving around without any prescribed projects, timeframes or deliverables in the contract? The issue here is not specifically "time", but being P&P (if that's what you're alluding to). Likewise, one could have a 6mo contract and become P&P by being engaged in performance reviews, generic training, and other client crap that should not apply to contractors.

[DaveB]

+1

Unfortunately multiple clients as a test would be equally open to abuse (you can see care suppliers using multiple companies explicitly to break those rules)..

Not sure the Care Suppliers example works.

Care Workers may be among those who are forced into self employment by their "Employers" but they dont work directly for the end recipients of the care, nor are they paid by them. Their relationship is with the larger Care Agencies that provide services, usually to a Council social service dept. and via that to the end recipients.

If the Care Workers are working for multiple Care Agencies then there is a legitimate argument that they are actually in business for themselves as permanent staff are not generally permitted to do this. They need to balance their clients requirements and meet SLA's much like a normal service company.

There are some instances of individual care workers having direct relationships with care recipients but these are on a one to one baisis, arranged privately and covered by normal employment law.

[DaveB]

Sure, but we should start with the attributes of status that we're trying to represent, rather than starting with the rules and thinking about what status indicators they cover. For example, with time, I assume you're trying to capture the status of being P&P whereby someone becomes part of the client furniture, onsite for multiple years on a rolling contract, moving around without any prescribed projects, timeframes or deliverables in the contract? The issue here is not specifically "time", but being P&P (if that's what you're alluding to). Likewise, one could have a 6mo contract and become P&P by being engaged in performance reviews, generic training, and other client crap that should not apply to contractors.

Yes you could, but the trade off here is that in return for the assumption that after 2 years you are automatically P&P, up until then is is assumed you are not.

[eek]

Not sure the Care Suppliers example works.

Care Workers may be among those who are forced into self employment by their "Employers" but they dont work directly for the end recipients of the care, nor are they paid by them. Their relationship is with the larger Care Agencies that provide services, usually to a Council social service dept. and via that to the end recipients.

If the Care Workers are working for multiple Care Agencies then there is a legitimate argument that they are actually in business for themselves as permanent staff are not generally permitted to do this. They need to balance their clients requirements and meet SLA's much like a normal service company.

There are some instances of individual care workers having direct relationships with care recipients but these are on a one to one baisis, arranged privately and covered by normal employment law.

I have seen a plan which was:

Care company becomes multiple new care companies (each dealing with a subset of clients).
Care workers / clients are assigned in such a way that they work across a few of the new care companies.
Care workers instantly have multiple employers paying them..

Added benefit is that it allows a care company to pretend to be competition for itself...

Two big abusers of the current system are home care workers and delivery companies both are in a race to the bottom to minimise costs...