"IR35 could well be dead in a few months" ?

[ZebraSnake]

IR35 could become irrelevant within months, with new rules taking effect from April

I wasn't aware that the employment intermediaries legislation applied to ltd company contractors. Am I missing something?

[TheCyclingProgrammer]

I wasn't aware that the employment intermediaries legislation applied to ltd company contractors. Am I missing something?

Generally they don't - and HMRC clarified this - although I believe the way the legislation is written means it potentially could be.

IIRC the important bit was about remuneration, not D&C - if a contractor's remuneration (not dividends) is not directly linked to the services they are performing for the client, then the legislation doesn't apply and IR35 and MSC rules are applied as normal. Dividends don't count and your salary if you have one is already taxed under PAYE.

See https://www.ipse.co.uk/sites/default...rmediaries.pdf

In short, that ContractorCalculator article is rubbish.

[Goatfell]

Workers, including limited company contractors, are considered caught by the legislation only where it cannot be proved that there is no supervision, direction and control, or any right of supervision, direction and control. There is now an incentive for agencies and clients to be bothered about a contractor’s IR35 status, where previously there was none.

If the agency/client does not want to report quarterly to HMRC about potentially thousands of limited company contractors on their books, then all they have to do is make sure they confirm that there is no supervision, direction and control of their contractors by the client.

When an inspector comes along and attempts to entrap the agency, client and contractor into giving evidence that implies there is SDC, the taxman will be totally scuppered. The contractor’s IR35 defence becomes much stronger.

Once the word spreads following the imposition of the new reporting rules from April 2015, IR35 could well be dead within months.

Strikes me as an unintended consequence of ill-thought out legislation...who'd have thunk it from Hector

What if the ‘PSC’ is supplying a worker on a self-employed basis to the client?
PCG is not aware that this ever happens. If it does, the legislation will apply. The agency would have
to demonstrate that the worker is not under the supervision, direction and control of the client. If it is
unable to do this, the agency would be liable for income tax and NICs on that engagement.

Many moons ago (20+ years) this was recommended by some accountants as an effective way of maximising expenses and profits.

[TheCyclingProgrammer]

Strikes me as an unintended consequence of ill-thought out legislation...who'd have thunk it from Hector

No. An agency who understands the rule will not have to consider a Limited company contractor's position as far as direction and control goes at all because the new legislation simply isn't relevant - IR35 will continue to be relevant and this is of no concern of the agency.

[ZebraSnake]

That is my thought process as well. The article writer is assuming that ltd company contractors are workers and that the new legislation applies to them, in order for SDC to have an effect. But if it doesn't apply to ltd company contractors anyway, then they wouldn't have to prove there was no SDC and therefore IR35 would still apply to the ltd company contractor.

[TheCyclingProgrammer]

This is a response I had from ContractorCalculator regarding the article:

You are is absolutely correct about the false self-employment legislation not applying to limited company contractors for that reason - dividends are not employment income received for personal services supplied. That's the get out that HMRC confirmed at the Lawspeed seminar, and which we reported on earlier this year.

However, we are talking about the reporting requirements which is separate legislation and currently it is not clear from HMRC's guidance whether limited company contractors are included. We are saying that if agencies/clients are required to report on workers under SDC they will do their best to ensure they can prove SDC does not apply, and if SDC does not apply then IR35 can't apply.

Personally, I'm not convinced that just because an agency/client reports that D&C doesn't apply, that HMRC will accept that as a solid defence against an IR35 investigation.

But it does appear that HMRC guidance on whether Limited company contractors should or shouldn't be included under the new reporting rules is ambiguous at best.

[ZebraSnake]

However, we are talking about the reporting requirements which is separate legislation and currently it is not clear from HMRC's guidance whether limited company contractors are included. We are saying that if agencies/clients are required to report on workers under SDC they will do their best to ensure they can prove SDC does not apply, and if SDC does not apply then IR35 can't apply.

I attended an HMRC talk by Robert Burton in November and he said that the legislation does not apply to ltd company's (as we know), but anyone who is not on RTI or PAYE need to be on this report. It has nothing to do with whether or not they are under SDC of the client or not, because they are checking all payments made from the agency to the worker/company. The article is very black and white, "this means this, so IR35 is dead" and IR35 is as far from black and white that it could possibly get! IR35 isn't affected by this and there are more status tests to consider other than SDC.

[LisaContractorUmbrella]

I attended an HMRC talk by Robert Burton in November and he said that the legislation does not apply to ltd company's (as we know), but anyone who is not on RTI or PAYE need to be on this report. It has nothing to do with whether or not they are under SDC of the client or not, because they are checking all payments made from the agency to the worker/company. The article is very black and white, "this means this, so IR35 is dead" and IR35 is as far from black and white that it could possibly get! IR35 isn't affected by this and there are more status tests to consider other than SDC.

This: https://www.gov.uk/government/upload...ITEPA_2003.pdf

[original PM]

Not sure there is anything overly new here?

Generally if HMRC come knocking they will give your contract a cursory glance but they will base their judgement on the reality of the employment relationship?

E.g. if they feel you are a disguised employee then you will get a tax bill.

But maybe I have missed the point somewhere?

[TheCyclingProgrammer]

But maybe I have missed the point somewhere?

I exchanged another email with CC. In short, they are suggesting that it is now in everyone's interests to show that workers were not under D&C. So where previously HMRC might interview a client to try and show that D&C existed, agencies and clients are no longer want to play ball with this, particularly if its been reported that D&C was *not* a factor.

I think the implication that this will effectively kill IR35 is hyperbole. But they may have a point.