IR35 - does it need binning?

Perhaps the number of ex Ministers on the boards of the big consultancies plays a part, and the desire of HMRC to push as many people in permanent employment as possible

It's always been HMRC pushing the government into more IR35 legislation, no matter whether it's been Labour or the Tories in power
The bizarre thing is - Contractors to HMRC are deemed to be working OUTSIDE of IR35, after most of them left when they were brought inside IR35:


Duplicity indeed.
 
One minute something is legal in tax law, then suddenly in the past it is declared illegal, it sets rather a dangerous precedent
I believe the issue is in part that lower courts kept saying it was legal but finally the Supreme Court came to a different verdict for different reasons. Retrospective legislation is much abused as a concept but has a long history. I've read that the Welsh Bastard retrospectively legislated that he was King of England the day before Bosworth so if you fought against him at battle you were a traitor, which rather puts a bit or tax collection into perspective.
 
Well said that man.
I stand by my original comment that contracting is a lifestyle choice. You choose to forego the benefits of employment for flexibility and for financial reasons. Equally, choosing employment, entrepreneurship, retirement or the dole are lifestyle choices.

My original response to the OP was regarding his assertion that contracting is somehow entrepreneurial. It isn’t. A contractor working an hourly rate is not taking any entrepreneurial risk. In fact, they are doing little different Roman employee; selling their personal time and expertise for compensation.

A contractor who agrees to deliver a defined service or product for a fixed price is taking entrepreneurial risk. They are producing a product for which they are funding the inputs and making a profit on the output.

Ultimately that is what IR35 was about; stopping those who take no entrepreneurial risk from claiming tax benefits that are designed for those that do. And no, the risk of not getting paid because your client goes broke is not an entrepreneurial risk; it’s a risk shared with employees who are in the same situation.

It’s not as if this is anything new. IR35 is nearly 20 years old and the tests are chrystal clear. Other industries (eg construction) cleaned their act up years ago.

Zero sympathy from me for businesses and individuals who have evaded tax by disgusting employment as contracting.
 

A.N.Other

Old-Salt
Tax evasion = illegal. Eg. cash in hand working to avoid Vat when getting a plumber to fix a tap.

Tax avoidance = legal. Eg. Tax free saving using an ISA

Philip Hammond and the current minister responsible for HMRC have both admitted to select committees that the schemes were tax avoidance. They were legal, even if some people considered then immoral.

The big concern is the retrospective nature of the legislation. Its like the speed limit outside your house being changed from 30mph to 20mph, then being sent 20 years worth of speeding tickets for doing 25mph.

If they can get away with it this time what's to say they won't do it somewhere else. What if they decide to start taxing ISAs at a low rate and backdate that? Vat? Buy a car this year and have to pay another 10% Vat next year?

This sets a dangerous precedent for everyone, not just contractors.

While you may disagree with the schemes, they were legal.
 

A.N.Other

Old-Salt
Once we brexit and achieve the low tax, light touch regulatory regime we voted for, I predict IR35 will expire next spring
Problem is peoples' mental health is suffering today. There are bankruptcies, suicides and divorces now.

If IR35 is binned and Loan Charge dropped next year there will still be a shed load of damage done now. Boris needs to stand by his word today in order an investigation now. They announced the HS2 inquiry today. Why hasn't Sajid announced the promised investigation in to HMRC and implemented the All Party Parlimentary Group's recommendations?
 
Did they “innocently” use a tax loophole. Did they ****. They evaded tax by misrepresenting their employment status.

They’ll be front of the queue to complain about “big business avoiding tax”. The tests were and are clear.....
It was something a lot of accountants routinely advised to do, because they got commission for doing so, just as they get it for flogging IR35 insurance to people now

More clued up people knew they were at the edge of legal tax avoidance, but there were many people who took their accountants advice and went for it

The worst bit it back dating the tax demands back beyond when the legislation was introducing to make it classified as tax evasion, to make tax demands to people using what was a legal tax avoidance measure

As out politicians go on about 'fairness' so often, you'd think they'd be up in arms about the precedent this sets

A later government wanting to raise revenue, could look at other things and retrospectively declare them illegal, the personal allowance would be lucrative one for starters
 
Tax evasion = illegal. Eg. cash in hand working to avoid Vat when getting a plumber to fix a tap.

Tax avoidance = legal. Eg. Tax free saving using an ISA

Philip Hammond and the current minister responsible for HMRC have both admitted to select committees that the schemes were tax avoidance. They were legal, even if some people considered then immoral.

The big concern is the retrospective nature of the legislation. Its like the speed limit outside your house being changed from 30mph to 20mph, then being sent 20 years worth of speeding tickets for doing 25mph.

If they can get away with it this time what's to say they won't do it somewhere else. What if they decide to start taxing ISAs at a low rate and backdate that? Vat? Buy a car this year and have to pay another 10% Vat next year?

This sets a dangerous precedent for everyone, not just contractors.

While you may disagree with the schemes, they were legal.

The schemes were legal as long as you intended to pay back the loan.

The aggrieved tax evaders were giving the option by HMRC to start repaying the loans they were allegedly servicing and quelle surprise! They couldn't afford to repay the loans.

Ergo, they never made any arrangements to repay the loan, ergo, it was never a loan and they are guilty of tax evasion.


When you have allegedly intelligent people complaining they will now have to work on an extra 10 years to repay the money they owe, it shows just how much tax they were evading.
 

Brexit_Pride

Old-Salt
The schemes were legal as long as you intended to pay back the loan.

The aggrieved tax evaders were giving the option by HMRC to start repaying the loans they were allegedly servicing and quelle surprise! They couldn't afford to repay the loans.

Ergo, they never made any arrangements to repay the loan, ergo, it was never a loan and they are guilty of tax evasion.


When you have allegedly intelligent people complaining they will now have to work on an extra 10 years to repay the money they owe, it shows just how much tax they were evading.
You appear to be a paid up member of the politics of envy club.
 

A.N.Other

Old-Salt
The schemes were legal as long as you intended to pay back the loan.

The aggrieved tax evaders were giving the option by HMRC to start repaying the loans they were allegedly servicing and quelle surprise! They couldn't afford to repay the loans.

Ergo, they never made any arrangements to repay the loan, ergo, it was never a loan and they are guilty of tax evasion.


When you have allegedly intelligent people complaining they will now have to work on an extra 10 years to repay the money they owe, it shows just how much tax they were evading.
You call it tax evasion?

Better have a chat with Phillip Hammond and Jesse Norman. They both told MPs that it was "aggressive tax avoidance".

Also set the Supreme Court on the right path. Its judgement in the Glasgow Rangers case was that tax liability sits with the employer at the point they pay in to the Employee Benefit Trust. They ruled that the employee is not liable for tax at the point the EBT pays the loan to the employee.

While you're at it you can correct Ian Duncan Smith, David Davies (former chair of the public accounts committee, with oversight of HMRC) and the 150 MPs who are all members of the Loan Charge All Party Prlementary Group. This mass of MPs all have the mistaken belief that it was legal tax avoidance and that HMRC is using aggressive retrospective legislation which contravenes many of the protections put in place to protect employees and freelance staff.

As for how much we are being threatened in to paying back:
- demands include penalties dating back to the year the money was earned, even though the freelancer did not know they "owed" the tax
- HMRC's calculations are estimates, which have often been proved to be wrong (in one case, when challenged dropped their demand from £90k to £30k)
- demands include interest at 4.5%, as they are charging commercial rates way above inflation
- demands include "future charges". I've asked HMRC what this means but they cannot explain it

This whole affair is an abuse of power fuelled by a drive to claw in as much money as possible without regard for fair and just taxation and the wellbeing of the individual and their family.
 
You call it tax evasion?

Better have a chat with Phillip Hammond and Jesse Norman. They both told MPs that it was "aggressive tax avoidance".

Also set the Supreme Court on the right path. Its judgement in the Glasgow Rangers case was that tax liability sits with the employer at the point they pay in to the Employee Benefit Trust. They ruled that the employee is not liable for tax at the point the EBT pays the loan to the employee.

While you're at it you can correct Ian Duncan Smith, David Davies (former chair of the public accounts committee, with oversight of HMRC) and the 150 MPs who are all members of the Loan Charge All Party Prlementary Group. This mass of MPs all have the mistaken belief that it was legal tax avoidance and that HMRC is using aggressive retrospective legislation which contravenes many of the protections put in place to protect employees and freelance staff.

As for how much we are being threatened in to paying back:
- demands include penalties dating back to the year the money was earned, even though the freelancer did not know they "owed" the tax
- HMRC's calculations are estimates, which have often been proved to be wrong (in one case, when challenged dropped their demand from £90k to £30k)
- demands include interest at 4.5%, as they are charging commercial rates way above inflation
- demands include "future charges". I've asked HMRC what this means but they cannot explain it

This whole affair is an abuse of power fuelled by a drive to claw in as much money as possible without regard for fair and just taxation and the wellbeing of the individual and their family.

Let me remind you again....

The schemes were legal as long as you intended to pay back the loan.

The aggrieved tax evaders were giving the option by HMRC to start repaying the loans they were allegedly servicing and quelle surprise! They couldn't afford to repay the loans.

Ergo, they never made any arrangements to repay the loan, ergo, it was never a loan and they are guilty of tax evasion.”


The ones getting burned are the ones who when HRMC said, pay back the loan, can’t.
One bleating individual is whining bitterly about having to find £240,000.....

Top tip, when a tax avoidance scheme looks too good to be true, (Trust me! You will never have to pay this!), it almost 99.99999% is.
And another top tip, punitive charges when caught out in a tax evasion scheme are the accepted norm. Don’t cry ‘not fair!’ when caught.
 

A.N.Other

Old-Salt
Let me remind you again....

The schemes were legal as long as you intended to pay back the loan.

The aggrieved tax evaders were giving the option by HMRC to start repaying the loans they were allegedly servicing and quelle surprise! They couldn't afford to repay the loans.

Ergo, they never made any arrangements to repay the loan, ergo, it was never a loan and they are guilty of tax evasion.”


The ones getting burned are the ones who when HRMC said, pay back the loan, can’t.
One bleating individual is whining bitterly about having to find £240,000.....

Top tip, when a tax avoidance scheme looks too good to be true, (Trust me! You will never have to pay this!), it almost 99.99999% is.
And another top tip, punitive charges when caught out in a tax evasion scheme are the accepted norm. Don’t cry ‘not fair!’ when caught.
Let me remind you again....

The Chancellor of the Exchequer and Financial Secretary to the Treasury have both stated on the record that it is tax avoidance. If you feel you have a greater understanding of the legal situation then please feel free to contact them to set them straight. If not, then you have an opinion that it is tax evasion and we know what people say about opinions....
 
Let me remind you again....

The Chancellor of the Exchequer and Financial Secretary to the Treasury have both stated on the record that it is tax avoidance. If you feel you have a greater understanding of the legal situation then please feel free to contact them to set them straight. If not, then you have an opinion that it is tax evasion and we know what people say about opinions....

Tax avoidance as long as you intended to replay the loan.

There’s the badger right there, when invited to repay these ’loans’ rabbit in the headlamps - ‘but I can’t afford too’. = tax evasion.
 
I thought that the loans were written off at regular intervals so that there was no need to pay them back.
I looked into it a while back but I would never trust HMRC as far as I can throw them so I stuck with my Ltd company.
 

A.N.Other

Old-Salt
Tax avoidance as long as you intended to replay the loan.

There’s the badger right there, when invited to repay these ’loans’ rabbit in the headlamps - ‘but I can’t afford too’. = tax evasion.
Let's agree to disagree. I believe there is a stated legal position that it was tax avoidance. You believe that not intending to repay the loans makes it tax evasion. We're both firm in our beliefs and will not change our positions.

RE "too good to be true", I'm not a tax expert. I'm an experienced IT Programme Manager and have been responsible for multimillion pound programmes. However, our tax laws are so complex that I do not pretend to understand the. I rely on the advice of tax professionals and do not want the hassle of running my own limited company.

I was advised to take the scheme by an accountant on the basis I'd pay @20% in tax and fees. This was to simplify management (less paperwork for me) and to make a reasonable increase in my take home to offset IR35, lack of company pension, lack of sick pay, training (it cost me £3.5k in costs and lost earnings to get a professional certification. I believed I was till paying more each week in taxes than my daughter's gross pay in her minimum wage job.

This was not the case and I have since found that the breakdown of tax vs umbrella company fees meant there was very little tax paid on the loan portion of my income. I was lied to and misled by the umbrella company.

However, no action has been taken by HMRC against the promoters of these schemes. HMRC is cracking down on people who acted in good faith.

I have no problem paying taxes which are legally due. But in this case it was a change in the law which closed the loophole, which was then applied retrospectively, against all principle of the just application of law and taxation.
 

A.N.Other

Old-Salt
I thought that the loans were written off at regular intervals so that there was no need to pay them back.
I looked into it a while back but I would never trust HMRC as far as I can throw them so I stuck with my Ltd company.
Exactly.

Debts and loans are written off all the time. It is a matter between both parties.

I trusted HMRC and my tax advisors, as this is not my area of expertise. I freely admit I was naive but at no time was I dishonest.
 
I thought that the loans were written off at regular intervals so that there was no need to pay them back.
I looked into it a while back but I would never trust HMRC as far as I can throw them so I stuck with my Ltd company.
Yes, there was that ‘clever’ruse, and the ‘our loan is offshore’ so HRMC aren’t interested.
Benefits in kind and HRMC are always interested in aggressive tax avoidance schemes.

All these schemes obviously too good to be true and anyone who took even the most rudimentary advice from an accountant will have avoided them like the plague.
 

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