November 22nd - The death of contracting as we know it

[Swamp Thing]

If they blanket IR35 everybody in the private sector like they did in the public and the majority of the Ltd company contractors decide to close up shop, what will happen to the rather large support industry that has grown up around contractors like accountants, recruitment agents etc? If I were the larger contractor accounting firms I'd be getting especially worries right about now.

I think it's been raised on this thread already, but the smart thing for recruitment agencies to do would be to develop insurance against incorrect outside IR35 assessments - assuming end clients do the likely thing which is to put the liability back onto them. I'm sure the case could be made - based on case law to date - that the incidence of incorrect assessments would be low, so that the insurable risk is manageable. If the coverage doesn't yet exist, they need to get talking with the insurance companies. The premiums could be paid out of contractor day rates (yes, I don't think we'd get off scott-free) and/or the fees charged to end clients. It just needs courage and imagination.

It would however require the insurers to accept that case law is the true arbiter of inside/outside assessment decisions - not the crappy HMRC-rigged CEST tool.

[Guvernator]

My local MP is Labour, if I wrote to her I'd probably get even more short change as I'm not sure who hates contractors more at the moment so what's the point? We really don't have any friends to fight our cause on this one, even the general public have been turned against us.

I've written to MP's before, as with most politicians they are very good at replying in a placating manner and disassembling without actually answering your question or promising to bring it up. I really wouldn't trust anything they say, If the allegedly pro small business Tories are trying to shaft us what do you think Labour think of us overpaid tax dodging contractors?

I've also thought of something else. If they blanket IR35 everybody in the private sector like they did in the public and the majority of the Ltd company contractors decide to close up shop, what will happen to the rather large support industry that has grown up around contractors like accountants, recruitment agents etc? If I were the larger contractor accounting firms I'd be getting especially worries right about now.

[eek]

This is a fair observation, however I work with procurement teams and have seen all kinds of consultancy contracts where named individuals appear on the statement of work or services schedule. This includes the large consultancies including the Big 4. Getting quite common now, because end clients want transparency and for certain staff with specific skillsets to deliver the project. Yes, things really are at this micro-level regarding consultancy contracts.

So, if that's what's happening with big consultancies, I don't think being named on a services schedule is an issue now for micro-businesses like ourselves.

The key issues to remain outside IR35 are still the key contractual clauses that we all know off heart by now, and to ensure that your working practices mirror the contract.

If HMRC want to run a bulldozer through all of this PS-style, then I think it will underestimate the appetite of private sector to challenge. Clients have too much to lose in terms of cost and resource flexibility - especially pre-Brexit, and recruitment agencies don't want to give up on the contractor fees model.

Also bear in mind that the PS bodies were more likely to not put up a fight with Treasury/HMRC - they didn't want to prejudice their other agendas, e.g. funding, resources. Many private sector clients don't have this relationship with HMRC/Treasury and so aren't in the same position.

Everything SW says.

Both my final end customers explicitly have my name on the contract between the consultancy and themselves - as I know their staff and internal systems / procedures.

[Swamp Thing]

Much of the confusion is due to how over the years various entities have sought to protect themselves from liabilities (employment/tax law) when wanting to offer work to an individual rather than a company.

So we have all the hassle of individuals having to operator via a Ltd as the client/agency wouldn't offer a direct contract to the individual, yet the individual is still named on the contract as they don't want the Ltd sending just anyone to do the work the individual interviewed for.

This is a fair observation, however I work with procurement teams and have seen all kinds of consultancy contracts where named individuals appear on the statement of work or services schedule. This includes the large consultancies including the Big 4. Getting quite common now, because end clients want transparency and for certain staff with specific skillsets to deliver the project. Yes, things really are at this micro-level regarding consultancy contracts.

So, if that's what's happening with big consultancies, I don't think being named on a services schedule is an issue now for micro-businesses like ourselves.

The key issues to remain outside IR35 are still the key contractual clauses that we all know off heart by now, and to ensure that your working practices mirror the contract.

If HMRC want to run a bulldozer through all of this PS-style, then I think it will underestimate the appetite of private sector to challenge. Clients have too much to lose in terms of cost and resource flexibility - especially pre-Brexit, and recruitment agencies don't want to give up on the contractor fees model.

Also bear in mind that the PS bodies were more likely to not put up a fight with Treasury/HMRC - they didn't want to prejudice their other agendas, e.g. funding, resources. Many private sector clients don't have this relationship with HMRC/Treasury and so aren't in the same position.

[TheFaQQer]

My local MP is Labour, if I wrote to her I'd probably get even more short change as I'm not sure who hates contractors more at the moment so what's the point? We really don't have any friends to fight our cause on this one, even the general public have been turned against us.

You won't know until you try.

My Labour MP has a greater understanding of the issues facing us than the previous Lib Dem MP, and has always been very supportive of the issues that I've raised with her.

"what's the point?" - if they don't understand, educate them. If they still don't understand, educate them more. "All that is necessary for the triumph of evil is that good men do nothing" and all that.

[Guvernator]

My local MP is Labour, if I wrote to her I'd probably get even more short change as I'm not sure who hates contractors more at the moment so what's the point? We really don't have any friends to fight our cause on this one, even the general public have been turned against us.

[jamesbrown]

You're perfectly entitled to hold that opinion of course

Transparently, you've taken an anti-IPSE rant and hung it on a technical point that is pedantic at best. The term self-employment is widely used to mean "not employment", which is the antonym of employment in the relevant case law, including cases involving intermediaries, where the intermediary is cast aside in the hypothetical contract. As an aside, it's amusing that you've sought clarification from the pages of HMG/HMRC.

[mudskipper]

So use whatever terms you're comfortable with (but make sure they are ones that your MP will understand)

I doubt there's nearly as many constituencies where the contractor community is larger than the majority - sometimes it's useful to throw our hat in with others who work for themselves, regardless of vehicle.

Whilst IR35 does not apply to SchedD self-employed, their employment status is still subject to challenge. They have seen their own attacks. The message 'leave the self employed alone' is a good one.

If course, you're perfectly within your rights to do nothing, say it's all pointless and that IPSE and others do not know what they're doing. Or you can write to your MP, using your own language to describe what you do and the impact that such a rollout would have on your way of working.

[poorautojobber]

I ' run a business' and I'm 'self-employed' the terms get used interchangeably whatever you use doesn't really matter except to HMRC and a judge.
What HMRC are trying to do is take your right to present your argument to a judge away and put it in the hands of someone who maybe can barely read let alone understand the law.

I'm getting out of a big Co as we speak because I'm not convinced they would have the skill or knowledge to implement any changes in the short term correctly they will get wise but could take years.
Get your contracts reviewed confirm you really do have a right of substitution and as far as HMRC CEST seems concerned you are not subject to IR35. I'm not btw just incase hectors watching <modsnip>

[Hobosapien]

Much of the confusion is due to how over the years various entities have sought to protect themselves from liabilities (employment/tax law) when wanting to offer work to an individual rather than a company.

So we have all the hassle of individuals having to operator via a Ltd as the client/agency wouldn't offer a direct contract to the individual, yet the individual is still named on the contract as they don't want the Ltd sending just anyone to do the work the individual interviewed for.

The only way to avoid it is to enter a true b2b relationship where no individual is named on the contract, like consultancies and tender winning companies achieve. The client is sold on the company's ability to deliver what they need not on specific individuals within that company having passed an interview.

Of course for the majority of contracts that is not possible as the client just wants an individual as a specific resource. Hence why the government is chasing tax from those individuals due to them appearing to be employees similar to those on fixed term contracts with no employment rights and only a limited term in contract.

So the solution is for individual contractors to form consultancies based on their skillset and the consultancy enters contracts with the clients on a b2b basis. It's been tried and done before but has its own set of issues, but if the majority of contractors only operated that way the clients would start to entertain it more. That or they'd get more cheap labour from abroad that are willing to operate as temporary employees and pay the tax accordingly.