IR35 Update following discussion group yesterday - survey request IR35 Update following discussion group yesterday - survey request
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  1. #1

    Umbrella Queen

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    Default IR35 Update following discussion group yesterday - survey request

    Morning Chaps

    Well, the bad news is that they are not scrapping IR35 They also seem to have had a bit of a re-think on the SDC option saying that it is not necessarily the focus now of the changes but it is being considered. What's more important is whether or not it's a good idea to pass the burden of status determination to the end client and how they can ensure greater compliance with the legislation (in whatever form it takes). HMRC's analysts have told them that only about 10% of contractors who should be working under IR35 are and that this costs the Treasury (or the tax payer) £430 million per year. I questioned their figures as I cannot see how analysts can possibly determine working practices with any particular effectiveness but the team heading the discussion were not able to provide information on how the data was gathered or how it was analysed in order to produce these figures. It's my feeling that the figures are inaccurate and that we should provide them with something a bit more reliable.

    There was a contractor at the meeting and he pointed out that, if he was an employee, why should he pay VAT - simple question but it got me thinking. For the last 14 years HMRC have been asking contractors to prove that they are not a disguised employees; wouldn't it be simpler to prove that you are in business? The Business Entity Tests were over complicated and unrealistic as the questions were more appropriate for larger businesses than single person Limited Companies.

    HMRC are also concerned about the number of low paid workers operating through PSC's (the same complaint that we had at the T&S consultation). We tried to explain to them that, if that's the problem then these proposed changes to IR35 are unlikely to stop the practice, it just means that the low paid workers who are being forced to work through PSC's will be worse off than they are now and contractors who are genuinely in business on their own account will be unjustly affected.

    To this end we would like to prove to HMRC that 1. their numbers are incorrect and their assumptions wrong and 2. there is a difference between a genuine contractor and a temp/labourer/shelf stacker who's been forced into running a PSC without knowing the first thing about it.

    To do this we need your help (again) and would ask you to please complete another survey (I know, I know)HMRC issue discussion document on IR35 Legislation, AUCAE urge contractors to #haveyoursay - All Umbrella Companies Are Equal .

    HMRC are again asking for written submissions which, as with the T&S consultation, have to be in by the end of this month so I will be spending the next week frantically typing - can you lot please complete the survey and then get it out to as many people as possible via social media.

    For those of you who are cynical - it would help my business if these new proposals came in as, if determination lay with the end client, no-one would be working outside IR35 especially if the determinant is SDC, making umbrella companies more appealing. However, I believe that contractors are not employees and should be free to chose to work in the way that's most suitable for them within the law. HMRC are attempting to bring in legislation which will force highly specialised, highly skilled contractors down the PAYE route because they don't think it's 'fair' to bring in alternative legislation which would remove low paid workers who've been forced into self-employment back into employment.

    Last point - if any of you have any proposals for an alternative to IR35 that would solve the problems above please let me know and I will forward to HMRC - they did ask for alternatives so maybe if we can come up with something better than IR35 we will finally see the back of it.
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  2. #2

    Still gathering requirements...


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    Done IR35 Update following discussion group yesterday - survey request

  3. #3

    Respect my authoritah!

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    Question 14 doesn't look right. I suggest you ditch the "or the right thereof".
    Boomers tend to believe in “freedom of speech”, which is a fascist concept used to spread hateful ideas.Given that hate speech is not possible without free speech, any defence of free speech is a form of hate speech. - Titania McGrath

  4. #4

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    Thanks, Lisa. Question 13 reads: substitution, direction and control. We can will it to be that, but...

  5. #5

    Umbrella Queen

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    Sorry about the guys It was all put together after the meeting yesterday so all pretty quick
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  6. #6

    My post count is Majestic

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    Quote Originally Posted by LisaContractorUmbrella View Post

    Last point - if any of you have any proposals for an alternative to IR35 that would solve the problems above please let me know and I will forward to HMRC - they did ask for alternatives so maybe if we can come up with something better than IR35 we will finally see the back of it.
    How about...

    1st year of LTD is PAYE
    A vast number of contractors don't have a clue about legislations and how to be a business so would therefore still be disguised employees so taxed as such for the first year until they understand the business side. It would also deter people shutting down companies regularly to claim any relief associated with it.

    23 month rule
    More than 23 months at a client then PAYE kicks in. Stops people becoming part and parcel

    Retrospective taxation of 4 years at a client
    From the 1st of April anyone that is contract and been there more than 4 years get anything over 23 months taxed as PAYE. 4 years is more than enough to become part and parcel.

    PAYE when returning to a perm site within 4 years
    High likelihood of being treated as perm and would save years of man days of people asking about IR35 when going back.

    T&S capped under 80 miles per day
    Only long journeys and overnight stays applicable to remove journeys that permies would make.

    Ban on LTD owners claiming JSA
    This should save the economy £75 a week for 6 weeks every couple of years.

    That should start to clean up contracting and weedle out the disguised permies.
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  7. #7

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    Quote Originally Posted by northernladuk View Post
    How about...

    1st year of LTD is PAYE
    A vast number of contractors don't have a clue about legislations and how to be a business so would therefore still be disguised employees so taxed as such for the first year until they understand the business side. It would also deter people shutting down companies regularly to claim any relief associated with it.

    23 month rule
    More than 23 months at a client then PAYE kicks in. Stops people becoming part and parcel

    Retrospective taxation of 4 years at a client
    From the 1st of April anyone that is contract and been there more than 4 years get anything over 23 months taxed as PAYE. 4 years is more than enough to become part and parcel.

    PAYE when returning to a perm site within 4 years
    High likelihood of being treated as perm and would save years of man days of people asking about IR35 when going back.

    T&S capped under 80 miles per day
    Only long journeys and overnight stays applicable to remove journeys that permies would make.

    Ban on LTD owners claiming JSA
    This should save the economy £75 a week for 6 weeks every couple of years.


    That should start to clean up contracting and weedle out the disguised permies.
    Waiting for PC to comment on that one

  8. #8

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    Quote Originally Posted by northernladuk View Post
    How about...
    How about anyone with 20k+ posts is considered a disguised employee of CUK and needs to have 65% of their posts eliminated at source.

  9. #9

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    They want suggestions? I ranted at length in the "anything else you want to say" box.

    Yes, employees don't pay VAT. Employees don't put up websites advertising their services, and you don't have to spend £1000 on advertising to be acting like a business. Employees don't go on the bench for three weeks. They don't buy PI insurance. They don't pay an accountant to file their business accounts. They don't have their contracts reviewed by both a lawyer and an IR35 specialist.

    I've thrown out suggestions before. Here's another.
    1. Construct a decent Business Entity Test that fits reality. Keep the high/med/low risk categories.
    2. Hold the engagers (and not the contractors) liable for the employer NI if the risk is high.
    3. Hit engagers with heavy penalties if a contract of a high-risk contractor is found to be within IR35.

    If engagers want to avoid that liability, they can require contractors to document that they are medium or low risk, or pay the NI up front. QDOS will develop, within a week, a BETs certification service, insurance backed.

    A decent BET could be constructed. Length of service in current and previous engagement could certainly factor, as NLUK suggested, though it shouldn't be the only indicator -- what if you have multiple contracts running at once? Somebody posted yesterday about a continuing contract that is only like 10 days a year. That's not employment, even if it lasts 10 years. That's a successful businessman with a happy client. A ten days a year contract is more likely a strong indicator of being in business for yourself.

    Most false self-employment among the low paid would be caught by this because they couldn't pass the BETs. So engagers (instead of the low-paid) would be on the hook for the employer NI, which is the biggest place HMRC is missing revenue.

  10. #10

    Faqqed Off

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    Quote Originally Posted by LisaContractorUmbrella View Post
    For the last 14 years HMRC have been asking contractors to prove that they are not a disguised employees; wouldn't it be simpler to prove that you are in business?
    At the risk of this sounding like an official IPSE Post (and it isn't!) - that sounds like exactly what the FLC is designed to do.
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