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mudskipper
26th November 2015, 19:36
I can't see a thread on this

Treasury ready to overhaul employment status :: Contractor UK (http://www.contractoruk.com/news/0012324treasury_overhaul_employment_status.html)

Includes letter from Gauke detailing which OTS recommendations are accepted and being considerd

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/480002/FST_Update_on_Tax_Simplification_Measures.pdf

jamesbrown
26th November 2015, 20:44
The most noteworthy part is their concurrence in rejecting the "third way", at least for now (no. 27), which is essentially the FLC (noting that the OTS recommendations have been available for several months). Otherwise, I don't think it adds much clarity, beyond a few points of interest. In particular, the "rejection" of no. 16 (synergies between IR35 and OTS) leaves things completely open w/r to the approach taken for IR35 versus employment status more generally, including the possibility that any updates to the ESI may not be intended for IR35 status checks (as is currently the case). I doubt much will emerge until December 9, and even then...

ps. I think the absence of any reference to SDC or a de minimis rule for time (as opposed to money) is neither here nor there, esp. given the point on no. 16.

mudskipper
26th November 2015, 22:21
Agree - we knew back when the report was published that the OTS was not recommending a "third way" at this time.

MarkT
26th November 2015, 23:26
The most noteworthy part is their concurrence in rejecting the "third way", at least for now (no. 27), which is essentially the FLC (noting that the OTS recommendations have been available for several months). Otherwise, I don't think it adds much clarity, beyond a few points of interest. In particular, the "rejection" of no. 16 (synergies between IR35 and OTS) leaves things completely open w/r to the approach taken for IR35 versus employment status more generally, including the possibility that any updates to the ESI may not be intended for IR35 status checks (as is currently the case). I doubt much will emerge until December 9, and even then...

ps. I think the absence of any reference to SDC or a de minimis rule for time (as opposed to money) is neither here nor there, esp. given the point on no. 16.

Don't you think it could mean they do actually do something for 16/17 rather than 17/18? I'm wondering if they just say - all dividends via PSCs are now banned. The Only way to work is payroll (yours or someone else's) The get out being that you have more than one customer (client) in a 1 month period.

So 9th December it is! Never stops does it. Still, whatever, I'm more confident they'll not do something insane like above, but that ESI scares me.

jamesbrown
26th November 2015, 23:57
Don't you think it could mean they do actually do something for 16/17 rather than 17/18?

No, the reasons for a delay would be for other businesses to adapt, as much as PSCs.


I'm wondering if they just say - all dividends via PSCs are now banned.

There's no definition of a PSC, and none will be forthcoming, so they won't do anything that relies on a definition of a PSC. There's a definition of a close company, but that includes a much broader group, so it's effectively useless. Anyway, they've agreed that PSCs are perfectly legitimate, in principle.


Still, whatever, I'm more confident they'll not do something insane like above, but that ESI scares me.

Call me a cynic, but they'll probably do whatever they've been planning to do; they just weren't ready yet, for whatever reason. We're essentially no wiser than when the IR35 discussion and T&S consultation were released, but we've expended a lot of words on CUK :eyes All these letters to MPs and efforts in lobbying make feck all difference, as should be evident from the way many others (with a louder voice than ours) were hit in the AS. Incidentally, as well as the T&S changes, umbrellas (and hence their workers) are likely to be hit by the 0.5% apprenticeship levy.

MarkT
27th November 2015, 00:05
There's no definition of a PSC, and none will be forthcoming

Yeah - sorry I meant intermediary. Anyway I think you are probably right, even though it doesn't make a huge amount of sense when aligned to the new div tax. They probably will do whatever they were thinking of.

I do find it confusing about whether the OTS report is looking at IR35 or not though, it says they seemed to want to, proposed that they would, then the govt said no, so they are anyway. Effectively anyway....it's been a long week, so maybe I've got that half arsed....

jamesbrown
27th November 2015, 00:13
Yeah - sorry I meant intermediary. Anyway I think you are probably right, even though it doesn't make a huge amount of sense when aligned to the new div tax. They probably will do whatever they were thinking of.

I do find it confusing about whether the OTS report is looking at IR35 or not though, it says they seemed to want to, proposed that they would, then the govt said no, so they are anyway. Effectively anyway....it's been a long week, so maybe I've got that half arsed....

An intermediary is a generic entity that falls in between a worker and an engager; it could be an individual, partnership or company. People often don't realise that the Intermediaries Legislation is defined quite broadly, certainly beyond PSCs.

The OTS review never intended to include IR35 and it doesn't. The IR35 Forum considered this. However, everyone understands that the two are unavoidably linked and, more generally, that employment and tax status need to be better aligned. However, there will be a lot of tinkering before anything substantial and permanent is implemented (such as the better alignment of employment and self-employment taxes and consistent application of employment and tax status). Without tinkering, politicians and civil servants would have feck all to do.

MarkT
27th November 2015, 00:17
No, the reasons for a delay would be for other businesses to adapt, as much as PSCs.



There's no definition of a PSC, and none will be forthcoming, so they won't do anything that relies on a definition of a PSC. There's a definition of a close company, but that includes a much broader group, so it's effectively useless. Anyway, they've agreed that PSCs are perfectly legitimate, in principle.



Call me a cynic, but they'll probably do whatever they've been planning to do; they just weren't ready yet, for whatever reason. We're essentially no wiser than when the IR35 discussion and T&S consultation were released, but we've expended a lot of words on CUK :eyes All these letters to MPs and efforts in lobbying make feck all difference, as should be evident from the way many others (with a louder voice than ours) were hit in the AS. Incidentally, as well as the T&S changes, umbrellas (and hence their workers) are likely to be hit by the 0.5% apprenticeship levy.


An intermediary is a generic entity that falls in between a worker and an engager; it could be an individual, partnership or company. People often don't realise that the Intermediaries Legislation is defined quite broadly, certainly beyond PSCs.

The OTS review never intended to include IR35 and it doesn't. The IR35 Forum considered this. However, everyone understands that the two are unavoidably linked and, more generally, that employment and tax status need to be better aligned. However, there will be a lot of tinkering before anything substantial and permanent is implemented (such as the better alignment of employment and self-employment taxes and consistent application of employment and tax status). Without tinkering, politicians and civil servants would have feck all to do.

Well, I've a plan to pay everything I owe off by Sept 2018, if I get that long at this, with these rules, I'll be happy (!)

ShandyDrinker
27th November 2015, 07:30
Call me a cynic, but they'll probably do whatever they've been planning to do; they just weren't ready yet, for whatever reason. We're essentially no wiser than when the IR35 discussion and T&S consultation were released, but we've expended a lot of words on CUK :eyes All these letters to MPs and efforts in lobbying make feck all difference, as should be evident from the way many others (with a louder voice than ours) were hit in the AS. Incidentally, as well as the T&S changes, umbrellas (and hence their workers) are likely to be hit by the 0.5% apprenticeship levy.

Not sure I agree with you. It's better that some of us did something like respond to the consultations, write to or visit MPs and so on. There are far too many apathetic contractors out there who will take no action and then whine when the changes impact them. Even if the end result is nothing, I'm glad I did something rather than just be a passenger.

I've little doubt this isn't over yet and as many others have said we'll have to wait and see what further announcements are made in the coming weeks/months.

LisaContractorUmbrella
27th November 2015, 07:33
No, the reasons for a delay would be for other businesses to adapt, as much as PSCs.



There's no definition of a PSC, and none will be forthcoming, so they won't do anything that relies on a definition of a PSC. There's a definition of a close company, but that includes a much broader group, so it's effectively useless. Anyway, they've agreed that PSCs are perfectly legitimate, in principle.



Call me a cynic, but they'll probably do whatever they've been planning to do; they just weren't ready yet, for whatever reason. We're essentially no wiser than when the IR35 discussion and T&S consultation were released, but we've expended a lot of words on CUK :eyes All these letters to MPs and efforts in lobbying make feck all difference, as should be evident from the way many others (with a louder voice than ours) were hit in the AS. Incidentally, as well as the T&S changes, umbrellas (and hence their workers) are likely to be hit by the 0.5% apprenticeship levy.

I have to say that I think your cynicism is well placed but it does read that their 'intention' is to give contractors a greater degree of certainty - whether they achieve it remains to be seen of course :ind

webberg
27th November 2015, 09:32
It always makes me nervous when HMRC (or bodies associated with them such as Treasury or OTS) start using words like "certainty".

I think I read somewhere that the ESI tool most often defaults to "don't know" effectively. It would not take much to default it to "employee/IR35".

Tools like this meant for mass use will always go for the lowest common denominator and allied with HMG desire to collect more tax I think that the cynicism mentioned above is a lot closer to realism than is comfortable.

MarkT
27th November 2015, 12:13
It always makes me nervous when HMRC (or bodies associated with them such as Treasury or OTS) start using words like "certainty".

I think I read somewhere that the ESI tool most often defaults to "don't know" effectively. It would not take much to default it to "employee/IR35".

Tools like this meant for mass use will always go for the lowest common denominator and allied with HMG desire to collect more tax I think that the cynicism mentioned above is a lot closer to realism than is comfortable.

The ESI is the most worrying thing of all, mind you if we knew what the questions were it'd help hugely......so who's brave enough to be first up?

jamesbrown
27th November 2015, 12:19
Not sure I agree with you. It's better that some of us did something like respond to the consultations, write to or visit MPs and so on. There are far too many apathetic contractors out there who will take no action and then whine when the changes impact them. Even if the end result is nothing, I'm glad I did something rather than just be a passenger.

I've little doubt this isn't over yet and as many others have said we'll have to wait and see what further announcements are made in the coming weeks/months.

FWIW, I did all of those things (wrote to my MP, responded to both consultations), but I'm under no illusions whatsoever.

jamesbrown
27th November 2015, 12:23
The ESI is the most worrying thing of all, mind you if we knew what the questions were it'd help hugely......so who's brave enough to be first up?

Currently, the ESI isn't designed for us. That said, as long as you have a legitimate RoS as a sole trader, you'll pass. I can't see that applying in future if they decide to extend the ESI to us, but it isn't clear they will (the rejection of no. 16 in the response from Gauke essentially leaves all options open).

webberg
27th November 2015, 12:58
The ESI is a very generic and therefore blunt instrument but it's quite worrying that it's seen as a base for what should be a sophisticated test.

However I'd agree that the "consultation" and "discussion" is nothing of the sort. The die is already cast and the agenda is clear - as many contractors as possible should be paying tax as close to employee rates as possible.

The legal status of the ESI tool could be interesting. It's a given that if the tax rules are made more complex as they attempt to define the indefinable then the avoiding of the written parameters becomes easier. Fitting in with or outside of strict rules is relatively easy.

To make the tool have any impact it has to be subject to law. That means, not just the algorithm used, but the reasons for that algorithm and that will lead to a lot of arguments about how the largely Judge led definitions and dicta will be applied.

TheFaQQer
27th November 2015, 13:13
All these letters to MPs and efforts in lobbying make feck all difference, as should be evident from the way many others (with a louder voice than ours) were hit in the AS.

I disagree.

Fact-based evidence makes a big difference, and those that responded to the consultations, contacted their MP, and got involved in the campaign all deserve credit for the impact that their contribution made.

mudskipper
27th November 2015, 13:47
However I'd agree that the "consultation" and "discussion" is nothing of the sort.

The T&S proposal did change in light of responses to the consultation. I know it's not the best news for brollies, but it does make sense - if you're a disguised employee, then you don't get T&S, if you're not, you do.

Of course, as has been pointed out, it does rather depend on who becomes a "disguised employee" in the future.

jamesbrown
27th November 2015, 13:58
I disagree.

Fact-based evidence makes a big difference, and those that responded to the consultations, contacted their MP, and got involved in the campaign all deserve credit for the impact that their contribution made.

"Get your facts first, and then you can distort them as much as you please" - Mark Twain.

Then we disagree. Fact-based evidence makes very little difference unless it is consistent with the intended direction of policy. Otherwise, for example, the central "facts" surrounding the expected tax revenues from a tightening of policy (£400m) would've been revised in response to the quite obvious accusation that they don't account for the forthcoming dividend tax increases. Facts are disputable, manipulable, and contextual. Intentions and actions are clear.

Ultimately, quite soon, we'll see who's correct. If my cynicism is misplaced, I will happily retract and renew my faith in the political process :D

jamesbrown
27th November 2015, 14:04
The ESI is a very generic and therefore blunt instrument but it's quite worrying that it's seen as a base for what should be a sophisticated test.

However I'd agree that the "consultation" and "discussion" is nothing of the sort. The die is already cast and the agenda is clear - as many contractors as possible should be paying tax as close to employee rates as possible.

The legal status of the ESI tool could be interesting. It's a given that if the tax rules are made more complex as they attempt to define the indefinable then the avoiding of the written parameters becomes easier. Fitting in with or outside of strict rules is relatively easy.

To make the tool have any impact it has to be subject to law. That means, not just the algorithm used, but the reasons for that algorithm and that will lead to a lot of arguments about how the largely Judge led definitions and dicta will be applied.

Agreed. In other words, recommendations 17-21 in Gauke's response are inseparable (no. 21 being the "statutory employment test").

DotasScandal
27th November 2015, 14:04
However I'd agree that the "consultation" and "discussion" is nothing of the sort.

You mean just like this "consultation" ? (https://www.dotas-scandal.org/gauke-performs-magic-trick-transforms-847-responses-into-20-and-lies-to-parliament-in-the-process/)

Gauke's idea of a "discussion" can be summed up by the proverbial "boot trampling a mouth" image. Just look at the guy, FFS! Textbook sociopath.

webberg
27th November 2015, 15:27
In my opinion, the ONLY hope of deflecting, even slightly, the juggernaut is to produce a FACT based analysis that demonstrates just how damaging forcing contractors to become employees for tax purposes (and not for the employment protection rights).

These threads are full of people saying that they will no longer be able to travel long distances without suitable recompense and various other impacts.

That is why this https://www.gov.uk/government/news/government-examines-support-for-self-employed is very important.

However contractors need to be ORGANISED.

There was a survey running on the T&S but I don't know where that got to. I was happy to help but the organiser there had valid reasons for not wanting my involvement, which I respect.

That sort of survey is however exactly what is needed.

I'm not familiar with what IPSE does but would/could/should they be banging the drum and use their resources to pull together a submission?

If there is no central source within the contractor community willing to take this on, my opinion is that a CROWD FUNDING effort be made with the aim of engaging a full time analyst.

My opinion is that said analyst should carry some kudos in the form of a Big 4 accounting firm who will not only have some experience here but also probably connections with Government and quite possibly staff on secondment in the various departments.

However for so long as contractors continue to operate in small groups (relatively) the above is pipe dream.

LisaContractorUmbrella
27th November 2015, 15:40
In my opinion, the ONLY hope of deflecting, even slightly, the juggernaut is to produce a FACT based analysis that demonstrates just how damaging forcing contractors to become employees for tax purposes (and not for the employment protection rights).

These threads are full of people saying that they will no longer be able to travel long distances without suitable recompense and various other impacts.

That is why this https://www.gov.uk/government/news/government-examines-support-for-self-employed is very important.

However contractors need to be ORGANISED.

There was a survey running on the T&S but I don't know where that got to. I was happy to help but the organiser there had valid reasons for not wanting my involvement, which I respect.

That sort of survey is however exactly what is needed.

I'm not familiar with what IPSE does but would/could/should they be banging the drum and use their resources to pull together a submission?

If there is no central source within the contractor community willing to take this on, my opinion is that a CROWD FUNDING effort be made with the aim of engaging a full time analyst.

My opinion is that said analyst should carry some kudos in the form of a Big 4 accounting firm who will not only have some experience here but also probably connections with Government and quite possibly staff on secondment in the various departments.

However for so long as contractors continue to operate in small groups (relatively) the above is pipe dream.

AUCAE submitted a 5000 word plus written response to the T&S consultation which was delivered to Downing Street and HMRC along with written submissions and survey responses from over 700 contractors - happy to do the same thing for any IR35 consultation :smile

jamesbrown
27th November 2015, 15:40
I don't think we need an overarching effort. Any consistency that stems from a common interest in maintaining a strong contracting market speaks for itself. A convergence of opinion is better than an overarching effort that HMRC can dismiss as a single response, which is precisely what they do when referring to "160" responses, for example. Furthermore, while there's agreement on maintaining a strong contracting market, there are significant differences in opinion and significant vested interests in shaping that market.

I think IPSE, AUCAE, APSCo, REC, CIOT, ICAEW, and many smaller organisations (e.g. Abbey Tax) have done an excellent job of responding to the T&S and IR35 consultations with plenty of factual information. There's no dearth of factual information being presented.

webberg
27th November 2015, 15:51
I've contributed to the CIOT submission and that is ongoing. Ideally I'd be more involved but there is a balance between paid work and "investment" in this sort of issue and I can't see that happening in the short term.

Whilst I note and applaud the efforts from the Umbrella community and the professional bodies, (not sure who some of them are) my experience here is that a coherent and definitive, fact based paper with a letter head from a Big 4 (or a magic circle law firm if that's a better fit) does make a difference.

Having sat in some of the "consultations" meetings, I've seen HMRC dismiss good evidence as conflicted, partisan, unbalanced, too niche, biased and altogether presenting a hopelessly diverse picture that they then feel compelled to rationalise or force into a common shape. In that instance the industry I was representing got well and truly hammered and essentially was out of business within 12 months. (Perhaps a reflection on my contribution?)

I fear the same here.

However, I recognise that serious efforts are being made and that is perhaps all that can be asked for.

TheFaQQer
27th November 2015, 15:54
There was a survey running on the T&S but I don't know where that got to. I was happy to help but the organiser there had valid reasons for not wanting my involvement, which I respect.

That sort of survey is however exactly what is needed.

I'm not familiar with what IPSE does but would/could/should they be banging the drum and use their resources to pull together a submission?

IPSE had over 2600 responses (I think closer to 3000 but I don't have the exact figures to hand, whereas I know 2600 was a number of responses at one stage) to their survey, which were then used in the submission that they made.

They had over 100 specific examples of how the proposed T&S changes would have hit people. They had case studies of people who were willing to speak to the press about the impact, which resulted in one lucky member talking on Radio 5 Live about the impact to an audience of about 3.5 million people.

Fact-based submission highlighting the detrimental effect on the economy the proposals would have had - now the next challenge is doing the same with IR35...

WordIsBond
28th November 2015, 13:53
Fact-based evidence makes very little difference unless it is consistent with the intended direction of policy.
Two responses:
1. Fact-based evidence can achieve modifications of planned policy if it can be showed that an alternative that accomplishes the same general direction is better or less detrimental.
2. Fact-based evidence can cause a reconsideration if it can be shown that the intended direction of policy is detrimental to larger goals.

What we're up against here is that the Tories have become New Labour, "fairness" appears to be the Larger Goal (if we had any misguided idea that a balanced budget was the larger goal, it died on Wednesday), the way we are taxed is perceived to be unfair, and the greatest equality in this country is no longer equality of opportunity but equality of result. If you have more than your neighbour, no matter how it happened, it isn't fair, and You Should Pay More.

LisaContractorUmbrella
30th November 2015, 08:02
Two responses:
1. Fact-based evidence can achieve modifications of planned policy if it can be showed that an alternative that accomplishes the same general direction is better or less detrimental.
2. Fact-based evidence can cause a reconsideration if it can be shown that the intended direction of policy is detrimental to larger goals.

What we're up against here is that the Tories have become New Labour, "fairness" appears to be the Larger Goal (if we had any misguided idea that a balanced budget was the larger goal, it died on Wednesday), the way we are taxed is perceived to be unfair, and the greatest equality in this country is no longer equality of opportunity but equality of result. If you have more than your neighbour, no matter how it happened, it isn't fair, and You Should Pay More.

Has anyone in the current Government ever run a business?? Or had a proper job for that matter??

WordIsBond
30th November 2015, 08:49
Has anyone in the current Government ever run a business?? Or had a proper job for that matter??
Philip Hammond would be one.

From his wiki page:

Hammond joined the medical equipment manufacturers Speywood Laboratories Ltd in 1977, becoming a director of Speywood Medical Limited in 1981.[4] In 1982, an automatic electrocardiograph electrode manufacturing plant figured among his notable achievements. He left in 1983 and, from 1984, served as a director in Castlemead Ltd.

From 1993 to 1995, he was a partner in CMA Consultants and, from 1994, a director in Castlemead Homes.[5] He had many business interests including house building and property, manufacturing, healthcare, and oil and gas. He undertook various consulting assignments in Latin America for the World Bank in Washington, D.C., and was a consultant to the Government of Malawi from 1995 until his election to Parliament.
I have no idea if there are any others. Osborne has not had a real job since he graduated, maybe he delivered papers for the newsagent or something when he was a schoolboy. Maybe not.

TheFaQQer
30th November 2015, 14:58
Has anyone in the current Government ever run a business?? Or had a proper job for that matter??

Grant Shapps


Oh.

eek
30th November 2015, 15:25
Grant Shapps


Oh.

Did you include his business's practices in that oh or should I add a second oh.

Personally, I still don't believe the Government has it in for contracting. I know they want to do something to destroy various means of tax abuse (trouble is we are to a greater / lesser extent collateral damage within that desire)..

webberg
30th November 2015, 15:44
In theory the equation is simple, even if the answer is not.

Is the economic benefit of a flexible workforce with expert skills and making their own pension and other arrangements, more than the tax that is allegedly "lost" through that workforce choosing to be self employed (or at least pay less tax than an employee)?

Given that the Government control the statistics, (and the OBR is laughably not independent), proving the above will be like looking for the space the needle took up in the haystack but which can move every time a new set of numbers is produced.

Perhaps a project for Christmas week (yes, my life is that exciting).

DonkeyRhubarb
4th December 2015, 09:04
In theory the equation is simple, even if the answer is not.

Is the economic benefit of a flexible workforce with expert skills and making their own pension and other arrangements, more than the tax that is allegedly "lost" through that workforce choosing to be self employed (or at least pay less tax than an employee)?

Arguably, there is very little loss.

Let's suppose you changed the tax code to extract £1Bn more in tax from contractors.

That's taking £1Bn out of the economy which could be spent on goods & services. Goods & services attract VAT. Goods & services create employment which attracts income tax and nics.

Net effect - the amount the Government would be better off, overall, would be a tiny fraction of £1Bn.

It's just smoke and mirrors, and mickey mouse accounting.