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The All Things IR35 Related Thread

Discussion in 'Careers, Employment and Professional Development' started by Le Clandestin Brun, 23 Aug 2019.

  1. fezster

    Hitman

    Joined: 7 Jan 2007

    Posts: 734

    If I find reference to that example, I'll send it across.

    You can find similar examples littered all over the place - just check Keith Gordon's twitter feed (Tax Barrister at Temple Tax Chambers).

    Here's another example of their underhand tactics and use of retrospection to their advantage: https://www.accountingweb.co.uk/tax/hmrc-policy/tax-community-slams-retrospective-tax-law-change

    https://www.gov.uk/government/publi...framework-for-hmrc-to-use-automated-processes

    [​IMG]

    https://twitter.com/keithmgordon/status/1189960468460429312

    [​IMG]
     
  2. fezster

    Hitman

    Joined: 7 Jan 2007

    Posts: 734

    Indeed. When the rules dont suit them, they change them.

    The CEST tool has been a complete failure - despite numerous attempts "to fix it": https://www.contractorcalculator.co...ForPurpose-ContractorCalculatorWhitepaper.pdf

    HMRC themselves say not to rely on CEST for an accurate determination. You could not make it up!

    https://www.qdoscontractor.com/news/2019/07/09/hmrc-disregard-cest-tool
     
  3. Pudney

    Soldato

    Joined: 6 Sep 2005

    Posts: 5,689

    Location: Essex

    As a tax advisor I have to deal with the ineptitude of HMRC frequently. However, your charecterisation of the organisation is flawed and unfair. So yes, I will stick up for someone or something that is on the receipt of unfair criticisms.

    ...
    ...
    ...
    Disguised employment is tax avoidance. That's the whole point of disguised employees.
     
  4. Pudney

    Soldato

    Joined: 6 Sep 2005

    Posts: 5,689

    Location: Essex

    I read a lot of tax cases already. A lot. Really a lot. Across all levels (FTT, UTT, Court of Appeal and Supreme Court. Sometimes I even venture into Scottish decisions but their system is a bit weird and they like caps lock far too much).
     
  5. Django x2

    Capodecina

    Joined: 28 Sep 2008

    Posts: 13,786

    Location: Britain

    And as a tax advisor, your definition of "disguised employee" is...?

    You'll also be familiar with the legal battle recently between a "disguised employee" and HMRC whereby the PSC used the CEST tool to determine that they were outside IR35. HMRC told the courts that CEST output was not evidence and could not be submitted to a court because it was "unreliable". Their attempts to extort are nothing short of criminal, and if you can honestly say that my characterisation of them is flawed and unfair, then the blinkers must have been superglued to your eyes. If the law doesn't work in their favour, they just find another way around it. The CEST tool was/is a classic example. Written for HMRC by HMRC contractors, who had the Mutuality of Obligation question, from the start, when HMRC realised that one question alone would place people outside IR35, they had the question removed.

    Another is retrospective legislation. That is simply not legal, otherwise it would have to apply to any and all judicial cases. You cannot bring in a law, and then apply that law to a period of time before the law became applicable. I still also firmly stand behind my assessment of HMRC as a workforce, they are nothing more than junior Civil Servants. The chain or promotion and post roles within the CS are beyond comprehension. You can be an IT analyst one week, but in for a promotion and be a PMO the next followed quickly by a career change to DoD, Home Office or HMRC. The only route promotion questions are based around aptitude and key phrases (which the interview panel look for).

    I, and I suspect many others, find it slightly unnerving that John from the PMO team of the DoE is now sitting and a post 7 within HMRC, having no tax or accountancy experience at all.

    As I said earlier, when IR35 conversations became mainstream, a senior civil servant who saw the potential for the damage done by a reduction in workforce, asked who IR35 was and how could he contact them to discuss it...
     
    Last edited: 15 Jan 2020
  6. Jokester

    Don

    Joined: 7 Aug 2003

    Posts: 42,739

    Location: Aberdeenshire

    HMRC indeed are overstepping their legal remit with IR35, it’s amusing that the experts that are shooting them down in terms of doing IR35 assessments for people are in the main all ex HMRC inspectors.
     
  7. bJN

    Mobster

    Joined: 23 Nov 2009

    Posts: 3,644

    Location: Norwich

    Let's be real, the country is soon to be going through a phase that will undoubtedly hurt the economy, so surely the best thing to mitigate that is encourage entrepreneurship and small enterprise; whereas IR35 is having the exact opposite effect. The base theory of IR35, whilst I don't necessarily agree with it, does make some sense. However, no industry is going to do well as a result of this change.

    The CEST tool and it's uselessness is absolutely hilarious though, hearing HMRC saying it cannot be used despite it originally being touted as the official line of IR35 status for contractors. I'm sure the courts would really entertain companies falsely advertising products and their defense being "our products can't be trusted to do what they say" and continue to sell said products. :rolleyes:
     
  8. Pudney

    Soldato

    Joined: 6 Sep 2005

    Posts: 5,689

    Location: Essex

    You were arguing tax avoidance isn't an issue. But that's exactly what IR35 was originally enacted to target. My definition (which, obviously is the same as everyone elses in this country as it relies on case law) is irrelevant to the position that IR35 has been enacted to target abusive arrangements.

    For the record, my personal view is that there needs to be a statutory definition.

    Not only am I familiar with the court case, I have read it and know your charecterisation of it is flawed. The actual position that HMRC took is that whether or not someone falls within the rules is fact specific and that in this case HMRC believed that the taxpayer had given incorrect information to the CEST tool. As such any results were unreliable as the CEST tool cannot look into the true facts and anyone lying (or mistaken) when completing it cannot expect to rely on the end result. I believe the FTT agreed with the taxpayer (you haven't specified which case you're referring to, there have been several over the past 6 or so months) but that agreement was because they agreed with the taxpayer on the relevant facts, including areas that HMRC alleged the taxpayer had incorrectly classified within the tool.

    This is my entire issue with your posts. I recognise this is an emotive subject, and generally I steer clear of being involved in emotive postings about tax as they are cathartic for the poster. But there comes a time when emotional posts are in danger of leading other users to incorrect positions. There are numerous times where taxpayers take, and spend money, on cases to the FTT where professionally it is clear they have no hope of success, but the emotive position is easy to see. Sometimes it is necessary for a neutral person to step in and say hold on, this may suck but unfortunately the position is XYZ.

    And this is when HMRC will stop taking you seriously. Because it's blatantly not criminal and to suggest otherwise is ridiculous.

    Retrospective legislation isn't "not legal". It is uncommon, but it is certainly legal to do so. Whether it is proportionate to do so is arguable, and whether it is necessary to do so is political. But your argument is flawed from the starting position.

    This falls into the category of posts that I wouldn't respond to.
     
  9. Pudney

    Soldato

    Joined: 6 Sep 2005

    Posts: 5,689

    Location: Essex

    This is the fun part of tax (to me, I have a strange notion of "fun"). These articles and opinions are now incorrect, see:

    https://www.bailii.org/uk/cases/UKUT/TCC/2019/406.html

    The FTTs were wrong in their interpretation of the law, the proposed legislation is not retrospective and now in fact formalises the current position in law (unless and until there is a successful appeal to a higher court), and the decision of the UTT is binding upon all FTT decisions.
     
  10. Django x2

    Capodecina

    Joined: 28 Sep 2008

    Posts: 13,786

    Location: Britain

    So, if I have been at a company for 10 years, don't receive holiday pay or sick pay and if there is no work, do not get paid, am I a disguised employee? That is what HMRC believe... Yet, those questions are distinctly lacking from CEST.

    Retrospective legislation is incredibly hard to prove and most courts won't entertain it (hence HMRCs recent reversal of the directors loan tax). If I was driving at 40mph on a 40mph road which then became 30mph the following week, it would not be possible to be prosecuted for the retrospective speed I was driving at the week before, it would be even more harder to prove.

    Furthermore, my characterisation of the case Alcock Vs HMRC is not flawed. HMRC stated:

    So nothing about the taxpayer giving false information. In fact, HMRC said the CEST assessment was detailed.

    Why are you so hell bent on thinking HMRC are doing the right thing here. They aren't. I've spent 15 years in civil service engagements and know full well the application and promotion process of civil servants. To state that you have "categories" of posts you do and do not reply too is laughable given how little you seem to know about the impact of what will happen post April. I suggest you read up a little further about how HMRC are dealing with this and how their "closed group, invite only" review is just another farce. The expected £4bn they are hoping to receive is going to be much closer to £0bn and all that it will do is push the genuine tax paying contractors into different ways to avoid paying more tax.
     
  11. Pudney

    Soldato

    Joined: 6 Sep 2005

    Posts: 5,689

    Location: Essex

    So what? Do I think the CEST tool is good? Not really. What has that to do with the fact that IR35 is an anti-avoidance rule?


    You said retrospective legislation is not legal. Now you're saying it's hard to prove (this is a strange statement btw, I'm positive you don't mean "prove" but not really sure what you mean). The simple fact is that retrospective legislation is entirely legal, although frowned upon unless necessary.

    No, your interpretation of the quote is incorrect. The FTT is a fact finding tribunal (among other things). One of its principle purposes is to find facts, not to be dictated to what the facts are. The conclusion of the CEST is irrelevant, it's the FTT's purview to decide on the facts, particularly where the facts in this example are key to the outcome.

    HMRC's application is entirely appropriate. It is for the FTT to conclude what the contract is based on the documentary and witness evidence provided to them. They may take into account the CEST result if they deem it appropriate to do so, but it is the FTT's responsibility to determine the facts. Notwithstanding HMRC's known issues with the CEST are as I have stated previously.

    Again, you start from a flawed premise. I don't actually agree with HMRC and I don't think how they are changing the burden is appropriate until and unless there is a clearly delineated definition of what is meant to be caught by the rules. However, just because I may agree with the end result of your argument it doesn't mean I actually have to agree to your arguments. You are clearly invested, annoyed and outraged by the changes, and that is leading you to flawed conclusions and rationalisations. Those are what I take issues with. Calling HMRC "criminal" and the like is just hyperbole at best, and outright dangerous to others who may read your views and think them to be correct.

    The reason I choose not to reply is because you are venting. It serves no purpose to reply and has no bearing on the technical position, but it is cathartic for you to express your feelings.

    I don't need to read up on the changes. I'm already aware of them.
     
  12. fezster

    Hitman

    Joined: 7 Jan 2007

    Posts: 734

    I think it has the following to do with it:

    You have implied that he (as well as hundreds of thousands of others in a similar position) have taken "abusive steps" because they have determined themselves to be outside of IR35 and operated in such a manner - which allowed them to take advantage of more generous tax arrangements which offset some of the risks associated with not being permanent and some of the benefits they do not qualify for.

    Yet, at the same time, you seem to want to take a neutral position of not really agreeing with HMRC's stance on IR35, without actually saying it with any vigour.

    So which is it? Admitting CEST is flawed is a good start. But this completely contradicts your position on IR35 being abusive, despite the legislation being unclear (I'm being kind here) for decades.
     
  13. Pudney

    Soldato

    Joined: 6 Sep 2005

    Posts: 5,689

    Location: Essex

    IR35 is an anti abuse rule. If someone falls foul of it they are in an arrangement that is abusive as decided by Parliament. You and the other poster are using CEST and IR35 in interchangeable ways. They're not interchangeable. CEST is just a tool whether your arrangements has indicators that the anti-avoidance rules are intended to address.

    If someone doesn't fall foul of IR35 then the anti-avoidance rules don't apply and their arrangements aren't abusive. In contractor speak, if you're "outside IR35" then you're not in an abusive arrangement.

    For clarity "fall foul" in my posts means that the particular arrangements would treat a contract as within IR35.

    Understanding the above is incredibly important. IR35 isn't just a tool to make some money. So solutions that raise money in alternative ways doesn't address the mischief that the legislation is aimed at, because it's an anti-avoidance rule. Solutions need to address the mischief, not raise funds. There are numerous anti-avoidance rules nowadays that don't generate much tax, but that's because their entire existence prevents the abuse from occurring.

    If you can understand the above, you can see why what I said isn't contradictory.

    To be clear, I think IR35 is a necessary anti-avoidance rule. I think recent changes are problematic as they shift the burden of decision making onto companies who can't be bothered to consider the individual facts (because quite frankly it would be a ridiculous cost to do so) leading those companies to make blanket assessments. I strongly disagree with policy making that leads to blanket decisions that ignore individual factual circumstances.

    I understand why HMRC wanted this. But I don't agree with how they have changed it.
     
  14. Django x2

    Capodecina

    Joined: 28 Sep 2008

    Posts: 13,786

    Location: Britain

    What has that to do with IR35? It's the only mechanism HMRC will use to determine IR35 status. That's what it has to do with IR35. If you're not avoiding tax, but the tool deems you inside or indeterminable, are you avoiding paying tax? Possibly, but for the majority, probably not, because the tool fails to ask one simple question which (if answered truthfully) would deem those inside, as outside. The tool is not fit to determine, legitimately, someone's IR35 status. HMRC are using this tool to ultimately ensure the majority are ruled inside, in an attempt to boost the coffers.
     
  15. Pudney

    Soldato

    Joined: 6 Sep 2005

    Posts: 5,689

    Location: Essex

    It's clearly not the only mechanism that HMRC will use when HMRC will happily take someone to a tribunal regardless of the outcome of that mechanism.
     
  16. sHo0sH

    Mobster

    Joined: 10 Apr 2011

    Posts: 3,263

    Location: London

    If anyone is interested this website is amalgamating different clients and their decisions on the matter - might be of some use to people.

    www.offpayroll.org.uk

    I work as a recruiter of IT contractors, and I for one am very worried. At the moment at least it seems to be one of the closing chapters in the use of a LTD company as a vehicle of employment. Hopefully the same thing will happen in the private sector as it did in the public - when everyone's projects are behind they will change their minds and design their engagements to be outside of IR35.
     
  17. Steedie

    Man of Honour

    Joined: 29 Jun 2004

    Posts: 20,775

    Location: Oxfordshire

    Interesting. You're one of the few recruiters I've spoken to who are worried. Guess it depends how long you've been doing it, but all the ones I've spoken to who were about for the public sector roll-out and saw how that didn't really have the effect people thought it, seem to think after a few months it will be a non issue for the good contractors. The market will disappear for those who probably shouldn't be contracting in the first place but the good contractors who are at the top end of what they do will be ok.
     
  18. sHo0sH

    Mobster

    Joined: 10 Apr 2011

    Posts: 3,263

    Location: London

    Let's put it this way, anyone leaving a role as it's deemed inside ir35, before finding a new role in the hope that is outside of IR35 is nuts!

    Hopefully it'll just be a few months of turmoil then BAU
     
  19. mr tommo

    Soldato

    Joined: 13 Dec 2004

    Posts: 5,395

    Location: Stoke-on-Trent

    I work in the IT sector on software implementation projects (9-24 months). Whats the impact if you were to start a contract outside of IR35 now, then they deem you inside. Is it simply that you need to switch to be a sole trader and pay full income tax instead as part of the self assessment?
     
  20. fezster

    Hitman

    Joined: 7 Jan 2007

    Posts: 734

    Have a think about what HMRC will make of a role which is suddenly deemed inside IR35. A discovery assessment can be issued within 6 years, so I would expect them to open one and claim you have always been inside IR35.