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The All Things IR35 Related Thread

Discussion in 'Careers, Employment and Professional Development' started by NVP, Aug 23, 2019.

  1. fezster

    Hitman

    Joined: Jan 7, 2007

    Posts: 506

    Of course the biggest problem being that "inside /outside IR35" is not (and has never been) clear. If HMRC had their way, every contractor is a disguised employee and inside IR35. Their CEST tool has been criticised for being biased towards finding people inside IR35, and not taking all of the relevant factors into account (eg. MOO). So contractors relied on expert advice to make IR35 determinations. HMRC made their own and took people to court. A lot of contractors (especially lower paid, who could not necessarily pay for expensive advice) were lured in by so-called financial advisers offering remuneration via loans, to avoid the entire IR35 debacle. HMRC remained largely silent for 20+ years about these loan arrangements, trying (mostly unsuccessfully) to take some schemes to court more recently, but providing letters to contractors who asked them about the legitimacy of these schemes saying they are fine (yes, this is true - google will allow you to look at some of them, they have been posted on twitter) - thus tacitly approving such arrangements (and let's not even get started on DOTAS).

    Then in 2017, they claim "they've always been clear" the arrangements never worked. Despite having to introduce a new retrospective law in 2017 to be able to recover the tax they say is due - if they never worked, why the need for a new law?

    My advice is that take whatever precautions you can, but ultimately it seems HMRC are acting in bad faith. They can and will (and have) bend the rules in their favour to get the outcome they want to achieve.
     
  2. ChrisD.

    Capodecina

    Joined: Sep 20, 2006

    Posts: 24,217

    All good points. I'm glad I'm permanent now however I'm under no illusions that I may yet be targeted.

    For those wanting more interest, follow the likes of Dave Chaplin on LinkedIn etc, always posting great advice.
     
  3. Pudney

    Soldato

    Joined: Sep 6, 2005

    Posts: 5,545

    Location: Essex

    This is absolute rubbish. HMRC has never been "silent" on remuneration schemes, despite the propaganda spouted by those who have fallen foul of the laws (and I do sympathise with those affected by the Loan Charge despite what I've just said).

    The simple fact is there has never been one "scheme" used, every scheme, even from the same promoters, have been slightly different from each other at best, at worst they've been drastically different. What this means from a technical tax perspective is that each individual scheme needs to be analysed, assessed and investigated with HMRC having to identify scheme users. Over the past 2 decades HMRC has gained many new powers to make their lives easier, including DOTAS (introduced 2006), Disguised Remuneration rules (introduced 2011), APNs (introduced 2015) and now the Loan Charge (which IMO has gone too far). But to charecterise this as HMRC being "silent" is at best misleading, at worst an outright lie. The simple proof of this is that the Glasgow Rangers case (now the leading case on disguised remuneration) was begun to be investigated by HMRC in 2004. Some of the delays will be down to HMRC in this example, but certainly the taxpayer and their advisors were obstructive and withheld/hid relevant documentation from HMRC to prevent them reviewing the scheme (and this isn't a tactic uncommon in this particular industry).

    Sorry for the rant, but I see this said so many times in the contractor community and it is fundamentally untrue and disingenuous to those contractors who were forced into the situation by employers who would only pay via loans. Giving them some form of hope that this is suddenly a volte-face by HMRC is just another tactic dreamed up by promoters to cover their unscrupulous tactics and legitimatise what they've done.

    For those who chose to take the risk, well it's a risk and sometimes they work, sometimes they don't.
     
  4. fezster

    Hitman

    Joined: Jan 7, 2007

    Posts: 506

    I don't necessarily disagree with a lot of what you have said - I, too, think those who took the risk with these schemes (differentiating from those who were forced to use these arrangements) took a calculated risk, but where I disagree is that they should have their day in court, which the LC removes. Even the Rangers case implicitly found employers liable (the technical argument being that PAYE should have applied, which employers are responsible for applying).

    On the specific point you disagreed with me about HMRC being silent -

    I did make clear that HMRC took schemes to court

    But this does not discount their silence, otherwise. They didn't start publishing spotlights on the issue until around 2010 when the new DR rules were introduced. And putting spotlights up on a website, which hardly anybody looks at, is not being vocal about their disapproval of schemes. DOTAS registration, despite what HMRC claim now, was used to promote schemes as being "HMRC compliant". At the very least, HMRC could have taken the promoters to task with the ASA - they didn't even do that. Hindsight is lovely, but from 1999 to around 2010, these schemes were being mass marketed and there was barely a peep out of HMRC to the wider contractor community about what their position was on the use of them.

    And you've conveniently ignored the numerous HMRC letters, which have been published by those caught up in the Loan Charge. Letters which specifically say that HMRC do not have any problem with the arrangements used. In many, MANY cases, HMRC provided tax refunds to scheme users. If they were "always clear" - why did this occur? Sorry, but I stand by my assertion that HMRC were largely silent.

    EDIT - I do agree with you on the role of promoters in all of this. They have taken advantage of the naivety of a lot of taxpayers, especially those in the social care and public sector, many of whom are lower paid. And they have effectively gotten away with it all - the Treasury Minister Jesse Norman recently said that promoters did nothing illegal and could not be pursued, which is quite frankly, a travesty of natural justice.
     
  5. Pudney

    Soldato

    Joined: Sep 6, 2005

    Posts: 5,545

    Location: Essex

    I've calmed down a bit now :D

    Well, getting technical, it is possible to move the burden of PAYE onto the individual if they knew, or ought to have known, that PAYE wasn't deducted from their salary. Further, if the amount of the tax isn't paid back (assuming it isn't grossed up by the employer, doubtful in that case) then the employee is still potentially liable for tax.

    I do think the LC is significantly unfair for the taxpayer and shouldn't exist for closed years, the UK system is built upon a system of finality. If your tax years are still open then I think the LC is fair game for HMRC.

    Again, I think you don't understand the legislative history of disguised remuneration. HMRC has finite resources, and has been challenging, and winning, cases for decades. The Ramsay line of cases (particularly prevalent in the banking industry with various schemes of avoiding tax for bankers' bonuses) were all to do with some for of disguised remuneration. They established the principle that taxation follows the general interpretation of civil law that legislation is taken with a purposive view and not a literal view (the literal view being favoured by scheme promoters). These were mainly being dealt with in the 2000s (when loan schemes really took off, maybe to do with the fact HMRC was dealing with a different type of scheme at the time?)

    In the late 2000s, early 10s, HMRC was dealing with a lot of film schemes, the various Ingenious/Icebreaker schemes are still getting argued today.

    The fact HMRC were "silent" on these schemes (which I dispute) has nothing to do with implicit approval and everything to do with finite resources and a tax avoidance market that 20 years ago was enormous. HMRC weren't just dealing with loan schemes, they had abusive arrangements including double tax agreements, film/game partnerships, round the world schemes to name a few off the top of my head.

    See above r.e. finite resources and what HMRC was challenging in the 2000s. And I don't see how you can blame HMRC for promoters lying. DOTAS was never HMRC approval and the only ones I've ever heard of claiming otherwise are those who fully sit in the "dodgy" spectrum of advice.

    1) I've never seen a letter saying HMRC doesn't have a problem with the arrangements, do you have an example?
    2) Refunds are due to HMRC processes, mainly process first check later. HMRC doesn't have the resources to always check before issuing refunds, which is actually why DOTAS was introduced so that they could capture and hold refunds before they were issued. HMRC has long moved on from an organisation with local inspectors who know their areas and taxpayers within them.

    I agree, unfortunately justice says that taxpayers can always pursue for negligent advice. Scant help where the promoters are offshore and/or have gone out of business. It's especially infuriating when you see individuals setting up new businesses and carrying on the same old tricks to fleece even more people now.

    Edit: anyway, going to have to leave this now, have my own tax advice work to do! :D
     
  6. fezster

    Hitman

    Joined: Jan 7, 2007

    Posts: 506

    Some good points, and I think we largely agree.

    The agreeing with arrangements from HMRC is in material published by the LC APPG, if you wanted to see it.

    Also, as you said, for open years, HMRC already had the means to challenge arrangements. The problem (for them) was that it was very difficult for them to do so given a) the time which had passed, and b) the surprising judgment in Rangers, which meant they could transfer liability to employees only in very (difficult) circumstance. Neither was convenient, so they dreamt up LC instead to bypass all of it.

    Anyway - just glad I'm permie, and have been for a while (!). The war on contracting does not entice me to go back anytime soon. The injustice of it all does wind me up, though.
     
  7. dowie

    Caporegime

    Joined: Jan 29, 2008

    Posts: 47,092

    Surely the professional body should be getting involved in that case? They surely can't just shut down the company and open a new one like some dodgy second hand car dealer or cowboy builder? They're supposed to be chartered professionals - or are some of these guys not chartered accountants or chartered tax advisers?

    Perhaps that is something else for the government to look into, not just cracking down on these schemes but somehow striking off the people behind them/banning them from practicing. I wonder if that might well be a more efficient use of resources too in the long run if there is currently relatively little comeback for them...

    I don't know if tax advisers need to be approved persons/on the FCA register (presumably only if they're IFAs etc.. too) - I mean you have examples there of say a fund manager losing his career after being caught dodging his train fares to work - he was no longer a fit and proper person. Some of these dodgy tax advisors behind some of the schemes are taking the Mickey quite a bit and certainly don't seem to be "fit and proper" if they're shutting down companies and re-opening them to avoid any comeback etc..
     
    Last edited: Aug 29, 2019
  8. ChrisD.

    Capodecina

    Joined: Sep 20, 2006

    Posts: 24,217

    True to an extent, but for every 10 contractors I know, I would say 7-8 of them are in permanent roles. They're doing 2nd/3rd line BAU as it's easier for the hiring company providing that service to supply contractors instead of permanent staff due to various factors. They are not there to cover maternity leave, long-term sickness etc, someone leaving, they're there purely to milk money and it's easier for all parties to have a contractor there. I've warned those people plenty enough, they just seem to bury their head in the sand and don't appear to want to take action.

    Every single contract I have done since 2013 is either to cover a gap or to provide project resource with defined project tasks. I have ensured that all contracts are written in such a way and I think my longest engagement was 23 months - due largely to the complexity of the system we were migrating. I have had IR35 assessments carried out for each of them and IR35 insurance in place from both IPSE and QDos. I've done as much as I can I feel, if HMRC do come knocking I'm fairly confident I will be able to argue my case in court.

    This is a good read and I would suggest all contractors take heed.

    https://www.linkedin.com/pulse/ir35-easily-avoided-its-time-get-programme-pete-wilcock/

    While my take home is now less (not significantly so), I am glad I've made the switch to permanent. I don't have to worry about this moving forward but I am well aware that HMRC can and probably will look into the majority of IT PSCs as time goes on.
     
  9. Pudney

    Soldato

    Joined: Sep 6, 2005

    Posts: 5,545

    Location: Essex

    At risk of seeing a tangent and then travelling miles off course down it I will endeavour to keep this reply fairly short.

    Essentially being an accountant in the UK is a regulated profession and you have to be a member of a professional body. Certainly some individuals have been members and have subsequently been expelled from the body for their activities relating to selling these schemes. Unfortunately, if you do not hold yourself out to be an accountant providing accounting services then you're not under the umbrella of the accounting bodies. Therefore, typically these individuals would go off and set up a company that doesn't fall under the remit of any accounting body.

    The situation with tax advisors is even worse. There is no regulation in the UK. There is no requirement to be part of a professional body (e.g. the CIOT), nor even to have any specific training in tax. If you decide you want to set up tomorrow as a tax advisor and sell your services to the public then there's nothing stopping you. You'd have to register with HMRC, but that's for the purposes of things like Money Laundering, not to regulate whether your services are professional.

    Generally the best piece of advice for someone receiving accounting/tax advice in this country is to ensure they are registered with at least one professional body. At least that way you know they have to adhere to professional standards and ethics, or at least should do so.
     
  10. wonder_lander

    Soldato

    Joined: Oct 18, 2002

    Posts: 5,529

    Location: Stone, Staffordshire

  11. Freakbro

    Capodecina

    Joined: Jul 29, 2010

    Posts: 17,323

    Location: Lincs

    Sorry if I am taking this out of context (not read the thread), but I didn't think that was true? Anyone can call themselves an accountant without needing to be in a professional body (or even qualified!), unlike Solicitors, IFA's, architects etc
     
  12. NVP

    Soldato

    Joined: Sep 6, 2007

    Posts: 7,321

  13. dowie

    Caporegime

    Joined: Jan 29, 2008

    Posts: 47,092

    Since agencies, consultancies etc.. will still exist then I wonder if we'll see some long term contractors banding together to call themselves an agency/small consultancy... I mean presumably it only requires two of them at a minimum? Obvs a bit more complicated but...

    I mean in banking it isn't exactly uncommon on the business side for say a team to be poached together - and that is when they're all perm employees. Will we start getting some IT bods moving together etc..?
     
  14. randomshenans

    Capodecina

    Joined: Sep 11, 2009

    Posts: 11,556

    Location: France, Alsace

    I'd guess so. People will find a way, that's for sure. Doubt you'll see literally everyone going FTE.
     
  15. Chris1712

    Sgarrista

    Joined: Jul 29, 2004

    Posts: 8,970

    Location: Somerset

    Bit of a bummer all this. I was considering contract work from next year, but looks a bit risky. This government just seems obsessed with making hard working people as poor as possible.

    Hope that existing contractors stick to their guns and get rate rises accordingly, else we could see permie salaries even more crushed by the sudden glut of talent looking for work :(.
     
  16. dowie

    Caporegime

    Joined: Jan 29, 2008

    Posts: 47,092

    To be fair, in many cases it is just about getting people to pay the appropriate amount of tax when they're blatantly hidden employees.

    It shouldn't do that, the roles are still there to be filled but in some cases the contractors will need to be PAYE via an agency/umbrella rather than their own ltd. If anything it might well cause some of those contractor roles to need an increase in the daily rate.
     
  17. Chris1712

    Sgarrista

    Joined: Jul 29, 2004

    Posts: 8,970

    Location: Somerset

    But if the individual is taking the burden of DIY pensions, sick days, holidays, training and other expenses why shouldn't they be able to offset that increased risk with less tax? Are they saying that all short term employees now should get the higher rates and all the perks of permanent employment?
     
  18. Chris1712

    Sgarrista

    Joined: Jul 29, 2004

    Posts: 8,970

    Location: Somerset

    So we will see contracts moved to Umbrella only designation, with a sharp rate increase? Fair to assume a lot of new Umbrella startups will join the scene then? Might be room for something leaner.
     
  19. ChrisD.

    Capodecina

    Joined: Sep 20, 2006

    Posts: 24,217

    End clients and agencies need to start getting smart with the regulations, such as agreed working agreements over and above the usual contract, signed by both parties.
     
  20. dowie

    Caporegime

    Joined: Jan 29, 2008

    Posts: 47,092

    The abuse is coming more from people who are long term - I don't know if you've encountered it yourself but you'll find some people art places for several years (a longer tenure than the average perm employee) and still supposedly contractors/non-employees. They're quite blatantly hidden employees and in general the tax benefits on top of the daily rate more than outweigh having to fund a pension or sick days else they'd not be choosing that arrangement in the first place.

    Yup, I think so - as per the above - I'd not be surprised to see some new umbrella companies and indeed some contractors becoming a "consultancy"... I mean surely even a two person "consultancy" gets around the rules - if you've got colleagues you've worked with for a while then it could be a no brainer.