IR35 Consultation Responses?

[jamesbrown]

+1

The point is to generate more tax revenue WITHOUT increasing the number of employees.

That is absolutely the stated aim in the discussion document. To paraphrase, we don't believe that IR35 is effective (=we want more tax) and we don't propose to merge tax and employment law (=we don't want more employees).

[DaveB]

+1

The point is to generate more tax revenue WITHOUT increasing the number of employees.

^ This.

If HMRC proposes a system that forces clients to take on staff as employees when all they want is a short term resource they will face a huge backlash from business as it will push their costs up over the long term.

[jamesbrown]

Thanks all for this.

Firstly, it was not my intention to denigrate or "shaft" anybody. If my comments have come across that way, you have my apologies.

Secondly, it is a simple test and whilst it could be developed further, it is perhaps too simple.

Thirdly, I used the "employed to employee" analogy crudely. More accurately I should have said increase the tax take, so again my apologies.

Lastly, I have assumed that HMRC will treat one man bands differently from bigger companies. In theory they should not, in practice they do.

I'll cease defending this further.

No need to apologise or feel bad about this. You also made some good points IMHO, and there are very few responses where I've agreed with everything raised. The fundamental problem arises at the point a particular model/approach is accepted as a starting point. If you accept case law as a starting point, that has both serious problems and advantages. If you accept a statutory test (deeming criteria) as a starting point, that has both serious problems and advantages. If you accept that employment status should be removed from the equation altogether and that the differences between self-employed and employed taxation should be much narrower, that also has serious problems (in the sense that HMG/HMRC aren't willing to go this far) as well as advantages. Much of this stems from the starting point, and HMG/HMRC have dispensed with some options upfront.

[LisaContractorUmbrella]

That is absolutely the stated aim in the discussion document. To paraphrase, we don't believe that IR35 is effective (=we want more tax) and we don't propose to merge tax and employment law (=we don't want more employees).

Can't help thinking that the danger in taking this approach is that, at some point, tax law and employment law will be merged by some forward thinking Judge or other - if HMG believes that a large percentage of contractors are, in fact, disguised employees and disadvantage them through the tax system, how long will it be before someone challenges it from the employment law side and demands employee rights? The combination of changes to the dividend tax, proposed T&S changes and proposed IR35 changes would, effectively, disadvantage contractors to such a point that they could actually worse off than permies financially and still be deprived of any employment rights. At this point there is then a financial risk to the client or even the agency that they could be forced to take on employer responsibilities. Take all this to its logical conclusion and may be more people could end up outside IR35 than in - just a thought

[GB9]

Can't help thinking that the danger in taking this approach is that, at some point, tax law and employment law will be merged by some forward thinking Judge or other - if HMG believes that a large percentage of contractors are, in fact, disguised employees and disadvantage them through the tax system, how long will it be before someone challenges it from the employment law side and demands employee rights? The combination of changes to the dividend tax, proposed T&S changes and proposed IR35 changes would, effectively, disadvantage contractors to such a point that they could actually worse off than permies financially and still be deprived of any employment rights. At this point there is then a financial risk to the client or even the agency that they could be forced to take on employer responsibilities. Take all this to its logical conclusion and may be more people could end up outside IR35 than in - just a thought

No doubt people are bored of me saying this but i'm going to do it again anyway!

I think that if asked, a large number of clients would not want contractors to be seen as employees and hence would state there is no SDC. How HMRC could prove otherwise I have no idea as one of their common habits is to ask the client what their perspective is!

To reiterate, one client I worked with had a contractor on board for 15 years. When the contract was ended the contractor sued for employee rights and won. As a result the client brought in a strict policy on when contractors could be brought in and for how long. They went to an extreme length to ensure that future contractors could not be seen as employees.

Of course they could just as easily change their policy the other way, however, I don't see why they would as they didn't want employees but DID want the flexibility of contract resource.

[LisaContractorUmbrella]

No doubt people are bored of me saying this but i'm going to do it again anyway!

I think that if asked, a large number of clients would not want contractors to be seen as employees and hence would state there is no SDC. How HMRC could prove otherwise I have no idea as one of their common habits is to ask the client what their perspective is!

To reiterate, one client I worked with had a contractor on board for 15 years. When the contract was ended the contractor sued for employee rights and won. As a result the client brought in a strict policy on when contractors could be brought in and for how long. They went to an extreme length to ensure that future contractors could not be seen as employees.

Of course they could just as easily change their policy the other way, however, I don't see why they would as they didn't want employees but DID want the flexibility of contract resource.

fair point - could go either way really as there is risk on both sides for the client. Oh well we'll just have to wait and see what happens - could all end up being a storm in a teacup

[GB9]

Oh well we'll just have to wait and see what happens - could all end up being a storm in a teacup

If only!

Maybe HMRC'S objective is to slowly grind us into dust

[northernladuk]

If only!

Maybe HMRC'S objective is to slowly grind us into dust

Well if it cuts the newbie money chasing chaff out of the equation and we can start to pick and chose and negotiate what's left it won't be that bad... Dunno what's going to happen though.

[webberg]

The point raised above about a long term contractor suing for employment rights is probably exactly why the HMRC papers make the distinction about not becoming an employee.

I wonder what would happen if most contractors said "OK, forget it, either I work as an employee or not at all!" would make the Red Book arithmetic interesting?

[webberg]

No need to apologise or feel bad about this. You also made some good points IMHO, and there are very few responses where I've agreed with everything raised. The fundamental problem arises at the point a particular model/approach is accepted as a starting point. If you accept case law as a starting point, that has both serious problems and advantages. If you accept a statutory test (deeming criteria) as a starting point, that has both serious problems and advantages. If you accept that employment status should be removed from the equation altogether and that the differences between self-employed and employed taxation should be much narrower, that also has serious problems (in the sense that HMG/HMRC aren't willing to go this far) as well as advantages. Much of this stems from the starting point, and HMG/HMRC have dispensed with some options upfront.

Agreed, if HMRC put into law a definition of "employee", "employer" etc whilst that would produce some certainly for many, it would be a starting gun for those clever minds who can use it to create a "non-employee" or "non-employer".

A combination of statute and case law and frankly common sense is best in determining status.

Unfortunately HMRC has managed to allow public confidence and trust in its ability to operate a fair system to evaporate or be sacrificed on the altar of political expediency (non doms?) and they are 50 years away from regaining that precious commodity.