The All Things IR35 Related Thread

Don
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Working practises are critical as they represent the truth of the engagement, if you can demonstrate that you don’t get paid when there is no work great (and this is muddied by contract extensions and being paid for time rather than deliverables). Same with substitution, if it’s seen that a client refuses a substitute then they can argue that the clause is a contrivence for merely making the contract look compliant.

The changes to IR35 will massively reduce the number of entities that could be the subject of an investigation, so those who are still left contracting for small clients can likely expect more scrutiny from next year.
 
Associate
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Also, it’s worth noting the updated IR35 only applies to medium/large businesses (250+ staff), if the pharmacies you work for are smaller then this change doesn’t apply to you so conceivably you would still be potentially liable for any unpaid tax.

Incorrect.

The changes for medium and large organisations are that they are the ones responsible for determining whether IR35 applies and accounting for the tax accordingly. For small businesses, they can rely on the IR35 assessment made by the contractor but would still have to account for the tax where they are told IR35 applies.
 
Don
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Incorrect.

The changes for medium and large organisations are that they are the ones responsible for determining whether IR35 applies and accounting for the tax accordingly. For small businesses, they can rely on the IR35 assessment made by the contractor but would still have to account for the tax where they are told IR35 applies.
So the client is always responsible for taxes going forward regardless of the size of the business?
 
Associate
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So the client is always responsible for taxes going forward regardless of the size of the business?

Nope, I was talking rot. Or in political terminology "I misspoke". I mean it's not like I'm supposed to know this sort of stuff for a living! :rolleyes: For small companies, the tax obligation remains with the intermediary (the personal service company), not the company that is procuring the services of the contractor.

As you were. Sorry. :(
 

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Soldato
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Doesn't affect me anymore, started my first ever permie job today :)


My contract finished end of October along with some others, everyone who ended end of November were also told they would not be renewed but apparently the week before december they were all renewed again for 3 months - and I'm being told they're now advised to be employed by agencies to work for santander, who apparently aren't offering much money.


They're already going under from workload as a lot of the offshore people they brought in have quit or gone off on stress. Sinking ship at the moment...
 
Soldato
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I guess we need to still wait and see what happens in reality. I'm starting to see a lot more positions advertised with explicit 'Outside IR35' notes, how reliable that is though is up for debate.

I'm still permie but was considering contract work for 2020, it seems the only way to make a reasonable salary in Software :(.
 
Don
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It doesn’t really matter if it’s reliable from your point of view - the client will be responsible for the assessment (assuming they’re a large business - might be worth verifying this if you go for it) and if they get it wrong they would be the responsible party for unpaid tax (at least after April) Obviously if HMRC investigated the client and came to the conclusion the role was inside IR35 the client would be put in the position to either terminate your contract or take you on as PAYE.
 
Soldato
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There's been no impact assessment from HMRC regarding IR35, which is the saddest thing. Instead of pulling in £4bn over the next 4 years, it already looks like they're going to lose so much more. Large private sector firms are getting rid of PSCs instead of engaging with them and assessing them individually. That's a classic "we've left it too late to fix so what's our option" approach. The sectors already showing signs of struggle are Haulage, Oil and Gas, IT/Software, Food. The knock effects to accountancy firms, large and small, and the economy overall, has not been taken into account. Less money being earned equals less money being spent. There are several large companies that have lost 40% of their workforce, walked out or handed notice in, because no one has been able to strictly give a determination and contractors aren't waiting around to find out.

Umbrella companies however, are rubbing their hands together.

As a side note, HMRC are losing 80% of cases when challenged through the courts, with most of those cases being won on mutuality of obligation.
 
Man of Honour
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It's all a bit of a mess, no-one (in terms of agencies or clients outside the financial sector) knows what's going on which is crazy given how close it is to coming in to effect. I've got 6 or so months worth of dividends and salary in my business account, so I'm going to enjoy a few months off and wait for the market to stabilise. I've also started doing in house training for teams which has gotten some interest from a couple of clients which should see some money come in if contracting goes belly up.

Going back to perm roles is out of the question for me though unless it was absolutely the only choice. Not even from a money point of view, just things like appraisals and all the one-to-one type management stuff you get as a permie...couldn't go back to it
 
Commissario
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I'll go back to working abroad if it does go full **** up, IR35 seems to not be a problem with contracts out in mainland Europe so I'm told :)
 
Soldato
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Oh, and forgot to add to my last post. IPSE calculated than an extra 8th of a penny on income tax would earn the Revenue double what they're trying to achieve with IR35, and that would be year on year.
 
Soldato
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Oh, and forgot to add to my last post. IPSE calculated than an extra 8th of a penny on income tax would earn the Revenue double what they're trying to achieve with IR35, and that would be year on year.

But that's a rather silly comparison for someone to make. Increasing tax for everyone a small amount will normally raise far more than tackling what HMRC perceive to be abuse by a small minority. Even more fundamentally, why should I have to pay to compensate for someone else taking abusive steps to avoid paying tax?
 
Soldato
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But that's a rather silly comparison for someone to make. Increasing tax for everyone a small amount will normally raise far more than tackling what HMRC perceive to be abuse by a small minority. Even more fundamentally, why should I have to pay to compensate for someone else taking abusive steps to avoid paying tax?

You're not. The 8th of a penny increase comparison was only on the same PSCs and contractors that HMRC are targeting. And who's avoiding tax? No one. I probably pay far more in tax than most, and corporation tax (which everyone seems to forget) and VAT (which everyone seems to forget) and I don't get your pension, holiday or sick pay entitlement.

If it's abuse by a minority, surely they have the manpower to tackle the minority, allowing the majority to continue as they were. There is no relief here for HMRCs poor tactics, poor choice of words, massively biased tool and pure short sightedness.
 
Soldato
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You're not. The 8th of a penny increase comparison was only on the same PSCs and contractors that HMRC are targeting.

Ok, that wasn't clear from your original post. I'm not sure exactly how adding 1/8 of a penny increase to a specific subset of individuals would actually achieve anything helpful given you'd have to end up with a similar set of rules to identify who would be paying these higher rates of income tax. Unless you mean all contractors, which if so refer back to my earlier comment about why should all contractors have to pay to ensure those who should be within IR35 are taxed correctly?

And who's avoiding tax? No one.

IR35 is an anti-avoidance provision. It's meant to be targeted at tax avoidance. So by definition if you legitimately fall foul of IR35 you are using a contrived arrangement.

I probably pay far more in tax than most, and corporation tax (which everyone seems to forget) and VAT (which everyone seems to forget) and I don't get your pension, holiday or sick pay entitlement.

I guarantee you I haven't forgotten about corporation tax. Or VAT. Or National Insurance. Or Capital Gains Tax. Or Benefit in Kind rules. Or most other forms of direct taxation.

Indirect is a different matter. I'm not particularly au fait with things like Landfill Tax or the Aggregates Levy.

If it's abuse by a minority, surely they have the manpower to tackle the minority, allowing the majority to continue as they were.

Why must they "surely" have the manpower to tackle things? They don't have the manpower. Hence all the sledgehammer powers they've been given in recent years to move the burden onto taxpayers. Despite appearances HMRC actually have to deal with the tax affairs of millions of people (11.5 million last year, that doesn't include corporates).

There is no relief here for HMRCs poor tactics, poor choice of words, massively biased tool and pure short sightedness.

Yes there is. You can complain if you feel you are being treated unfairly. If you feel HMRC's internal complaint mechanisms don't deal with your issues you can complain to the Adjudicators Office. If you feel that isn't dealt with appropriately you can ask your MP to refer the complaint to the Parliamentary and Health Service Ombudsman.

If your complaint is legal you can appeal through the tax tribunals, or if appropriate through the normal judicial review route if it falls outside the statutory functions of the tax tribunals.
 
Associate
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IR35 has been a complete shambles for almost 2 decades. HMRC have had few victories - and those are usually down to very specific circumstances. As per usual, knowing they can't win, they decide to change the rules. Why did they make employers liable for determinations? Simple - it solves the problem for them, because few employers will take that risk. As we've seen in the financial sector and others. Blanket inside IR35 determinations - which is actually against the law, but who is going to enforce it? Not HMRC - that's the outcome they wanted.

There was a recent tax case where HMRC kept delaying and delaying the tribunal hearing, knowing they would lose. The reason for the delay? Because they were getting legislation changed to allow them to win.

Given the sledgehammer they have, why are these dirty tactics necessary? Why can't they follow due process, as they expect their "customers" to do?
 
Soldato
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IR35 has been a complete shambles for almost 2 decades. HMRC have had few victories - and those are usually down to very specific circumstances. As per usual, knowing they can't win, they decide to change the rules. Why did they make employers liable for determinations? Simple - it solves the problem for them, because few employers will take that risk. As we've seen in the financial sector and others. Blanket inside IR35 determinations - which is actually against the law, but who is going to enforce it? Not HMRC - that's the outcome they wanted.

There was a recent tax case where HMRC kept delaying and delaying the tribunal hearing, knowing they would lose. The reason for the delay? Because they were getting legislation changed to allow them to win.

Given the sledgehammer they have, why are these dirty tactics necessary? Why can't they follow due process, as they expect their "customers" to do?

what recent tax case was this?
 
Soldato
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Ok, that wasn't clear from your original post. I'm not sure exactly how adding 1/8 of a penny increase to a specific subset of individuals would actually achieve anything helpful given you'd have to end up with a similar set of rules to identify who would be paying these higher rates of income tax. Unless you mean all contractors, which if so refer back to my earlier comment about why should all contractors have to pay to ensure those who should be within IR35 are taxed correctly?



IR35 is an anti-avoidance provision. It's meant to be targeted at tax avoidance. So by definition if you legitimately fall foul of IR35 you are using a contrived arrangement.



I guarantee you I haven't forgotten about corporation tax. Or VAT. Or National Insurance. Or Capital Gains Tax. Or Benefit in Kind rules. Or most other forms of direct taxation.

Indirect is a different matter. I'm not particularly au fait with things like Landfill Tax or the Aggregates Levy.



Why must they "surely" have the manpower to tackle things? They don't have the manpower. Hence all the sledgehammer powers they've been given in recent years to move the burden onto taxpayers. Despite appearances HMRC actually have to deal with the tax affairs of millions of people (11.5 million last year, that doesn't include corporates).



Yes there is. You can complain if you feel you are being treated unfairly. If you feel HMRC's internal complaint mechanisms don't deal with your issues you can complain to the Adjudicators Office. If you feel that isn't dealt with appropriately you can ask your MP to refer the complaint to the Parliamentary and Health Service Ombudsman.

If your complaint is legal you can appeal through the tax tribunals, or if appropriate through the normal judicial review route if it falls outside the statutory functions of the tax tribunals.

Looks like we have a civil servant fanboy in the thread :D

1). It's not to glean out tax avoidance, it's to identify "disguised employees", a common HMRC propaganda phrase. There's a subtle, but unique difference. The crux of any contract is mutuality of obligation, which is the one question HMRC a) removed from CEST and b) won't put back in, because it's the one question that puts everyone outside IR35. Why is that? Simply. If you're not in contract, the project ends early, work dries up, the employer will not pay a contractor whereas a permanent employee would continue to get paid. It's the one key fact that wins 80% of cases against HMRC, without any need to investigate further.

The irony is, I know full well that they don't have the manpower, which is why no-one ever gets investigated, the large Amazons of this world pay £10k a year in tax and there's nothing they can do about it. The other is simple, Civil Servants move around in post like shelves in a supermarket. One day you're a cyber analyst, the next day you're an IPO project manager and the following week you're at HMRC pretending you know the difference between tax avoidance, tax evasion and tax efficiency. They're a complete farce.
 
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