Hammond plans tax crackdown on 'synthetic self-employed'

[Gibbon]

Isn't one of the greatest risks that, if the client chooses to declare a contractor within IR35, then potentially the short-sighted HMRC will deem that contractor as always having been within IR35 at that client, for however long the contract has run.

This could see many thousands on contractors forced to pay IR35 tax going back up to 6 years, i.e. however long the contractor has been at business with that client.

Another retro-tax.

This is my take, and why every business person should walk as soon as they are found to be under IR35.

[madame SasGuru]

This is my take, and why every business person should walk as soon as they are found to be under IR35.

I would go further and suggest that if you've been at a client for a long time it would be very wise to move before April 2019 (or 2020 in the very unlikely event that things are delayed)..

[DaveB]

Isn't one of the greatest risks that, if the client chooses to declare a contractor within IR35, then potentially the short-sighted HMRC will deem that contractor as always having been within IR35 at that client, for however long the contract has run.

This could see many thousands on contractors forced to pay IR35 tax going back up to 6 years, i.e. however long the contractor has been at business with that client.

Another retro-tax.

This is where the recent case against HMRC becomes important. If a client arbitrarily declares that the contractor is now caught under IR35 then that triggers a potential liability for employment benefits for the entire period of the contract. This will make many clients think twice about it as the costs could be considerable and actually offset the financial liability for the contractor, as compensation for lost holidays etc tgether with refunded Corporation Tax ( since under an IR35 cuaght contract there is little to no CT to pay) could add up to a considerable sum.

[Whorty]

I think you've not been an employee for so long, you forget how businesses are run. They follow all legislation! Religiously! And they'll start scrutinizing everyone they hire, and ensure their hires are following IR35 to the letter of the law.

In fact, they'll probably go overboard and only hire contractors who adhere to IR35 I imagine.

£35k a year employees, earning £100k+ a year, was never really sustainable. I know it's fantastic for you, because there's no chance in hell you'd ever earn a really high salary as an actual employee, but why on earth are the people in the government just turn a blind eye to all this stuff.

You had a nice run, and I'm sure you think you're something special, but you're not. You're people who would be earning £30-40k if you were an employee. So why on earth should you earn double that (a lot of which is tax avoidance) just because you have to pay your own pension, and holiday pay.

IT Contractors should be earning e £50k a year max. That compensates them fully for the pension, holiday pay, health insurance, sick pay

Bit of green eyed monster there mate. Do you not have the skills and experience to go freelance?

[webberg]

This is where the recent case against HMRC becomes important. If a client arbitrarily declares that the contractor is now caught under IR35 then that triggers a potential liability for employment benefits for the entire period of the contract. This will make many clients think twice about it as the costs could be considerable and actually offset the financial liability for the contractor, as compensation for lost holidays etc tgether with refunded Corporation Tax ( since under an IR35 cuaght contract there is little to no CT to pay) could add up to a considerable sum.

Is that strictly true?

The judgement on the contract is being made for tax purposes. I see that holiday pay might be due if the engagement was "always" an employment, but other benefits?

Most other benefits arise out of employment law and here that is not in point.

Also if the contractor has recorded contract income as company income, but it is subsequently held to be employment income, the tax rules work by "deeming" the income to be salary. There is a CT double tax relief provision but I think that operates for the year the adjustment/decision is made rather than being back dated.

I'd be interested in hearing of any practical experinces here, especially if my view is incorrect.

[cojak]

Haven't they become advocates for benefits for contractors who are caught inside? I thought they'd pretty much abandoned trying to get IR35 overturned.

Yes, they have, and many forced contractors will be grateful for that.

[cojak]

Interesting times will see the rise of interesting "solutions".

Some of those solutions will have the potential to create the same tax problems we see today from the use of schemes in the past.

And we have just had the first whiff of that:
https://www.contractoruk.com/forums/...ml#post2591643

And my response:

Do you have that in writing?

This is where dealing with IR35 skids you into EBT-type Tax Avoidance schemes.

Take great care that you aren’t setting yourselves up to be moved into the HMRC Enquiries forum, people...

[DaveB]

Is that strictly true?

The judgement on the contract is being made for tax purposes. I see that holiday pay might be due if the engagement was "always" an employment, but other benefits?

Most other benefits arise out of employment law and here that is not in point.

Also if the contractor has recorded contract income as company income, but it is subsequently held to be employment income, the tax rules work by "deeming" the income to be salary. There is a CT double tax relief provision but I think that operates for the year the adjustment/decision is made rather than being back dated.

I'd be interested in hearing of any practical experinces here, especially if my view is incorrect.

I think you could make an argument that if the client unilaterally declares a contract inside, when previously it was out side, and there are no other material changes to the arrangements, then the contract was always inside and as such tax relief would be available for the full period of the contract and employee benefits should have been provided from the start. ISPE are actively looking for people to whom this has happened following the settlement with HMRC on the Winchester case.

HMRC will certainly argue that if a contract declared to be outside is found on investigation to be inside they would expect all previous payments received to be recategorised as deemed income and tax payable appropriately. If that is the case the the payments no longer count toward CT and a refund would be due.

[PTP]

Isn't one of the greatest risks that, if the client chooses to declare a contractor within IR35, then potentially the short-sighted HMRC will deem that contractor as always having been within IR35 at that client, for however long the contract has run.

This could see many thousands on contractors forced to pay IR35 tax going back up to 6 years, i.e. however long the contractor has been at business with that client.

Another retro-tax.

Like these guys I think that's the case.

So if you're in a contract with your preferred client and you've had 2 spells there (2 years + 1 year) + if contracting was dead they'd be your preferred for perm.......then do you risk burning bridges by quitting if they say you are Inside IR35? Or do you offer to stay in exchange for a rate rise and risk retro-tax? I'd expect that QDOS & co would still win cases for the period they try to retro-tax......& any retro holiday & benefits would reduce the impact if caught..............So maybe it would be worth the risk, especially if you've already set aside the cash for potential disputes

[edison]

Brilliant.

Same here. Was on a high salary but being controlled by idiots.
I take home a similar amount (a little more if I want to but not always), but am happier, have more freedom, and am NOT under direction and control.

I'm the same too. I've got plenty of friends who were on £100k plus salaries contracting/working as interims. It's definitely a growth area of the market.