IR35 - does it need binning?

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Which is were employment and tax law need to converge, you shouldn't be able to tax someone as an employee whilst denying them the employment rights of an employee
Employers are telling candidates for permanent posts to register as IR35 and de facto ‘employing’ them.
 
Which is were employment and tax law need to converge, you shouldn't be able to tax someone as an employee whilst denying them the employment rights of an employee
They do converge. Of you’re an employee you get employees rights whether or not you are on a temporary or permanent contract. If you’re a contractor, then you don’t get employee rights but you get the tax benefit.

If you’re an employee masquerading as a contractor in order for you and your employer to avoid tax then tough. It’s not like IR35 is new.
 
They do converge. Of you’re an employee you get employees rights whether or not you are on a temporary or permanent contract. If you’re a contractor, then you don’t get employee rights but you get the tax benefit.

If you’re an employee masquerading as a contractor in order for you and your employer to avoid tax then tough. It’s not like IR35 is new.
If you're IR35 caught you're deemed to be an employee of the end client for tax purposes and your company is your employer under employment law

If you can't see that is inequitable, there is no hope for you
 

jrwlynch

LE
Book Reviewer
They do converge. Of you’re an employee you get employees rights whether or not you are on a temporary or permanent contract. If you’re a contractor, then you don’t get employee rights but you get the tax benefit.

If you’re an employee masquerading as a contractor in order for you and your employer to avoid tax then tough. It’s not like IR35 is new.
What's "new" with IR35 has been blanket imposition with no assessment or appeal, on contractors who were provably outside it. (Sorry, won't be around for October, I'll be in Stavanger for TRIDENT JUNCTURE...) At that point, while getting hit with PAYE and employee's NI is annoying, it's paying employer's NI and the apprenticeship levy as well that really stings - paying more than an employee, for the privilege of having no benefits and no security, is a little irksome.


Of course there's a simple solution from the contractor's point of view, if you're good enough to get a job elsewhere...
 
If you're IR35 caught you're deemed to be an employee of the end client for tax purposes and your company is your employer under employment law

If you can't see that is inequitable, there is no hope for you
The other way of looking at that is that you have been caught avoiding tax by claiming to be a contractor when in fact you were an employee. You’ve then been instructed by HMRC to pay back part of the tax benefit you gained by avoiding tax.

You’ve still gained a mass of other benefits that aren’t available to the employee, like vehicle depreciation and input VAT.

Funny old thing, employment benefits are for employees. If you mislead HMRC over your status and get caught, how can those benefits be retrospectively applied?
 
Funny old thing, employment benefits are for employees. If you mislead HMRC over your status and get caught, how can those benefits be retrospectively applied?
The same way as the tax is retrospectively applied
 

jrwlynch

LE
Book Reviewer
The other way of looking at that is that you have been caught avoiding tax by claiming to be a contractor when in fact you were an employee. You’ve then been instructed by HMRC to pay back part of the tax benefit you gained by avoiding tax.
In my case, no; I wasn't "avoiding tax", I was outside IR35 according to my employer and HMRC's own assessment. Then my employer imposed a blanket change without consultation. investigation or appeal, and I found myself paying a great deal more in tax and NI for the assumed benefits of "being an employee" without receiving any of those benefits.

This struck me as grossly inequitable, so I explored renegotiating my position (since the terms of my contract had just unilaterally worsened), discovered that "wasn't allowed", so left for greener pastures elsewhere (after all, since my employment wasn't protected, I could either be dismissed or leave without notice... not allowed if I were actually an employee as I was being taxed and assessed as, but when was consistency ever a feature?)

Again, I ask - if I was "an employee" then where was my paid holiday, my sick pay, my employment protection, et cetera? Why could I walk away without notice when actual employees had to give one or three months' notice? (I actually took the time to wrap up and hand over - my issues were with the top management, not the engineers I was working with,, but that was my choice not a requirement - I could have walked out and not returned with no penalty beyond reputation) I was paying tax and employee's NI as if I were in receipt of them, and paying employer's NI as well for... reasons nobody could explain but were absolute and beyond dispute. What was I meant to be getting for that?

Funny old thing, employment benefits are for employees. If you mislead HMRC over your status and get caught, how can those benefits be retrospectively applied?
Back pay for holiday at employee rates (paid leave plus Bank Holidays), retrospective assessment of sick leave, refund of employer's NI contributions paid, for the period in question - just the same way that HMRC would seek to assess and recover underpaid tax in the period.

Doesn't seem particularly complicated.
 
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ugly

LE
Moderator
It's not just the sick pay, holiday etc that's the issue.

Pretty much all of my contracts are in the SE. As such I have to stay away in hotels. If I'm outside IR35 I can claim travel and subsistence expenses against the profits of my Ltd company. Inside IR35 I can't. That's a big difference for me. As much as a 33% drop in my income before adding in the difference in Income Tax vs Corporation Tax, and the increased NI.
I was called yesterday for an inside ir35 contract. I told them to make me an offer as permanent staff at the consultancy and they have. It's a better salary than I am on now and when the contract ends I've still got a job so if they want me to go to the other side of the country it will be the consultancy that coughs up not me.
I've just settled my tax code finally and I'm doing ok if no longer cash flush.
Sod contracting for myself it's no longer worth it.
 

A.N.Other

Old-Salt
Sod contracting for myself it's no longer worth it.
Agreed. I've been trying to go permie for a few months. Day rates in South Wales are so low that I'm effectively on the same wage as a permie doing this job. May as well take the benefits of a permie role and drop the hassle of contracting. It looks like I've managed to create a permie job for myself. My program team is transitioning to a BaU team and in March the roles will go permie. The director has told me to apply for my job
 
They're achieving what they want, the civil service get to push more people into permanent employment where they can be more easily taxed and controlled and they keep onside of the big consultancies by reducing the UKs supply of self employed consultants

It's a win win for them, if their tax take goes down it's worth the cost to them
 
Just been out for a couple of scoops with some friends who are individual contractors; seems like, as always, ways and means are being found around the IR35 ruling. Sounds like a couple of the larger Recruitment Agencies are recruiting groups of individual contractors and offering them as a “managed service” to clients, thus avoiding the IR35 trap.

No idea how true/accurate that may be, but they’re certainly happy.
 

A.N.Other

Old-Salt
They found ways around IR35 in the past. Then HMRC came up with the retrospective Loan Charge. Up to 100,000 contractors reassessed for 20byears of back taxes and 7 suicides so far.

I don't trust HMRC not to introduce legislation to do the same for any other schemes/approaches. I'm 50 and "owe" £110,000. Time to get out of contracting and get ready for a quiet slide in to retirement.
 

Cyberhacker

Old-Salt
Sounds like a couple of the larger Recruitment Agencies are recruiting groups of individual contractors and offering them as a “managed service” to clients, thus avoiding the IR35 trap.
That's been the case for a good few years, especially before HMRC brought in the Managed Service Company regulations, in which case all payments made to the worker are subject to PAYE.

The only sure-fire way of not being IR35-fodder, as a consultant, is to not have an employee-like engagement (eg M-F 9-5) or similar.
 
The whole point of IR35, is not to punish the people avoiding NI, but to punish the workers instead. It benefits the big consultancies, as they are immune to IR35, the idea is to punish the self employed and push them into employment, that although this means less tax for government, it makes people more reliant on the state which is always the end game

If the companies or agencies directly employed the workers they would have to pay employers NI, and be responsible for PAYE and making tax and employees NI deductions, as well as holiday pay and sick pay

Much better to push the risk onto the worker, then if they're declared an employee, the deemed employee is only an employee for tax law purposes, conveniently in employment law they will still be self employed, even though the will have to pay the taxes due as an employee. Quite convenient for both the government and the end employer this 'deeming' really

As far as i can make it out, once IR35 catches me, I'll be doing tbe same work for less money; paying NI a d tax like an employee; but have literally no employment rights, as well as no paid holiday, sick pay, paternity etc.

It's literally impossible to imagine a fairer development, nor one that the Conservative party could hold up as more aligned with its entrepreneurial aspirations.
 
Has anyone yet asked the OP if this thread is going the way that he/she thought that it would?
 

Cyberhacker

Old-Salt
In all the 20 years of discussion on IR35, one fact remains true: whatever its aims, HMRC have been duplicitous in their undertaking.

From day one, when it was pushed out as a press release (Inland Revenue press release number 35, hence its nickname), which only talked about "leaving employment on Friday and returning on Monday as a consultant", through to the default "you are caught" that their assessment tool gives...

I have no sympathy for those who have tried to buck the system (whether through umbrella companies, managed service companies or loan arrangements) or even bum-on-seat pseudo-employees who are indistinguishable in all respect from their colleagues (other than a declaration that they are self-employed, and the associated tax mitigation) but I have every sympathy for those genuinely trying to establish themselves in business.

But fundamentally, it is absurd that you can be deemed an employee for tax purposes, but not even a worker (never mind an employee) for the worker protection and benefits. In this regard IPSE (nee PCG) scored an own goal when they successfully lobbied for an exemption.
 

ugly

LE
Moderator
In all the 20 years of discussion on IR35, one fact remains true: whatever its aims, HMRC have been duplicitous in their undertaking.
That really comes as no surprise in fact if everyone consulting took the perm road it would mean less hmrc as big companies generally file the paperwork needed saving on inspectors!
It will mean less inspections and eventually those who really do work for themselves will be left to get on with it!
 

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