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mudskipper
24th March 2016, 14:53
Finance bill for bedtime reading

https://www.gov.uk/government/publications/finance-bill-2016-legislation-and-explanatory-notes

moggy
30th March 2016, 08:47
Finance bill for bedtime reading

https://www.gov.uk/government/publications/finance-bill-2016-legislation-and-explanatory-notes

Has this now been updated to include Ltd's for the SDC test?

Saw it reported yesterday, and was surprised there was no uproar on here..

jamesbrown
30th March 2016, 09:09
Has this now been updated to include Ltd's for the SDC test?

Saw it reported yesterday, and was surprised there was no uproar on here..

What SDC test? If you're referring to the recently announced reform w/r to the public sector, they haven't even released the consultation yet, so it's a long way off legislation in a Finance Act. Expect something in the Autumn Statement, following a summer consultation.

moggy
30th March 2016, 09:19
What SDC test? If you're referring to the recently announced reform w/r to the public sector, they haven't even released the consultation yet, so it's a long way off legislation in a Finance Act. Expect something in the Autumn Statement, following a summer consultation.

apologies, no was referring to a link/press release from the FCSA website detailing how Ltd's operating outside ir35 would also need to confirm their sdc status in order to claim T&S - granted the release was a little light on info - so wanted to see if i had misunderstood or if this had slipped under the radar?

"The latest amendments will now prevent the organised misuse of personal service companies (PSCs) to avoid the restrictions; the original draft meant that PSCs would not be caught if they were outside of IR35, whereas other intermediaries would be caught unless they could prove the worker is not subject to supervision, direction or control (SDC). Therefore, it would be possible for PSCs outside of IR35 to receive the tax relief even if they were subject to SDC and it is this potential abuse that has been addressed."

TheFaQQer
30th March 2016, 09:20
What SDC test? If you're referring to the recently announced reform w/r to the public sector, they haven't even released the consultation yet, so it's a long way off legislation in a Finance Act. Expect something in the Autumn Statement, following a summer consultation.

And if it's referring to the brolly tests for SDC, then no - they have enough information apparently.

jamesbrown
30th March 2016, 09:34
apologies, no was referring to a link/press release from the FCSA website detailing how Ltd's operating outside ir35 would also need to confirm their sdc status in order to claim T&S - granted the release was a little light on info - so wanted to see if i had misunderstood or if this had slipped under the radar?

"The latest amendments will now prevent the organised misuse of personal service companies (PSCs) to avoid the restrictions; the original draft meant that PSCs would not be caught if they were outside of IR35, whereas other intermediaries would be caught unless they could prove the worker is not subject to supervision, direction or control (SDC). Therefore, it would be possible for PSCs outside of IR35 to receive the tax relief even if they were subject to SDC and it is this potential abuse that has been addressed."

Not sure what they're on about. Scanning the legislation, the carve out for IR35 is at the top of p19, i.e clause 14 (1) (4), where chapter 8 part 2 of the ITEPA 2003 is referring to IR35.

http://www.publications.parliament.uk/pa/bills/cbill/2015-2016/0155/160155.pdf

mudskipper
30th March 2016, 11:13
See analysis here

https://www.linkedin.com/pulse/travel-subsistence-expenses-final-finance-bill-stuart-marquis

mudskipper
30th March 2016, 11:18
See analysis here

https://www.linkedin.com/pulse/travel-subsistence-expenses-final-finance-bill-stuart-marquis

OK, I'm confused :confused:

"The PSC is not caught by IR35, but were the PSC not present as an intermediary, the worker would be considered an employee of the client/end user"

- which bit of the new legislation does this relate to - i.e. is that an accurate interpretation, and how is that test applied?

What are section 51, 52 or 53?

mudskipper
30th March 2016, 11:25
What are section 51, 52 or 53?

Income Tax (Earnings and Pensions) Act 2003 (http://www.legislation.gov.uk/ukpga/2003/1/section/51)

That doesn't seem relevant?

Think it's just saying MSCs are 'caught'.

jamesbrown
30th March 2016, 11:32
OK, I'm confused :confused:

"The PSC is not caught by IR35, but were the PSC not present as an intermediary, the worker would be considered an employee of the client/end user"

- which bit of the new legislation does this relate to - i.e. is that an accurate interpretation, and how is that test applied?

What are section 51, 52 or 53?

I scanned the analysis, and it seems confused in places, but it also isn't a 10-minute job to read through the legislation carefully and compare with the earlier clauses. However, as I say, I think (4) is the critical part for most of us, as this eliminates (3), which is the SDC test, when outside of IR35 (assuming not an MSC).

Sections 51-53 are part of IR35 (the conditions of liability), i.e: part 2, chapter 8 of the ITEPA

Income Tax (Earnings and Pensions) Act 2003 (http://www.legislation.gov.uk/ukpga/2003/1/part/2/chapter/8)

Edit: and (5).

moggy
4th April 2016, 15:54
Contractor body backs T&S loophole closure :: Contractor UK (http://www.contractoruk.com/news/0012474contractor_body_backs_tands_loophole_closur e.html)

hmmm..

jamesbrown
4th April 2016, 17:00
Contractor body backs T&S loophole closure :: Contractor UK (http://www.contractoruk.com/news/0012474contractor_body_backs_tands_loophole_closur e.html)

hmmm..

In think their understanding (or at least how they've communicated what they understand) is wrong. Indeed, were it necessary to consider SDC, additionally, when outside of IR35 it would render the carve outs for IR35 in clauses (4) and (5) moot, because SDC would be the determining factor, not IR35. I suspect the correct interpretation is a much narrower one, in relation to MSCs (i.e. PSCs that are being managed by umbrella companies, rather than offering umbrella services directly), and not in relation to PSCs in general (indeed, if the MSC legislation applies, it is that legislation that must be complied with, not IR35). If I'm right - and it will take an lawyer to confirm, but it needs to be confirmed for obvious reasons - then whomever designed that press release needs a slap.

Anyway, If I were IPSE or similar, I'd be following up on this, because it is either a very misleading press release, or a very serious issue indeed.

mudskipper
4th April 2016, 18:11
I wouldn't describe them as a "contractor body". They're a body of accountants and umbrellas.

Unfortunately it's in the interests of brollies to push the "we're all in it together" message, and spread a bit of uncertainty.

jamesbrown
4th April 2016, 18:45
I wouldn't describe them as a "contractor body". They're a body of accountants and umbrellas.

Unfortunately it's in the interests of brollies to push the "we're all in it together" message, and spread a bit of uncertainty.

Either way - but especially if they've done it deliberately - they need to be called out on this if they're wrong (e.g. by IPSE), because it will otherwise have the desired effect of propagating misinformation.

mudskipper
5th April 2016, 20:02
Either way - but especially if they've done it deliberately - they need to be called out on this if they're wrong (e.g. by IPSE), because it will otherwise have the desired effect of propagating misinformation.

Confirmation from IPSE

https://www.ipse.co.uk/news/contractors-using-%E2%80%98personal-service-companies%E2%80%99-do-not-need-consider-supervision-direction-or

and the original article has been corrected too.

http://www.contractoruk.com/news/0012474contractor_body_backs_tands_loophole_closur e.html

jamesbrown
5th April 2016, 20:05
Here you go

https://www.ipse.co.uk/news/contractors-using-%E2%80%98personal-service-companies%E2%80%99-do-not-need-consider-supervision-direction-or

Excellent, job well done.

jamesbrown
5th April 2016, 20:11
It would be good if we could get the CUK article (http://www.contractoruk.com/news/0012474contractor_body_backs_tands_loophole_closur e.html) pulled or corrected. I'll PM admin, unless someone has done that already?

I wouldn't be too surprised if this was a case of FSCA reading what they wanted to see, without thinking about it too carefully. Perhaps it was an honest mistake. Either way, it does nothing for their reputation. I've seen other umbrella companies trying to spread FUD in the hope that their clients won't switch to a Ltd company. TBH, I doubt many will, because there are other factors, but it won't help their cause to lie about the situation.

jamesbrown
5th April 2016, 20:12
and the original article has been corrected too.

Contractor body backs T&S loophole closure :: Contractor UK (http://www.contractoruk.com/news/0012474contractor_body_backs_tands_loophole_closur e.html)

Wow, that was quick :laugh Thanks.

Edit: I see their clarification now refers to managed PSCs (i.e. MSCs), which I concur is the correct interpretation, in my non-expert opinion.

mudskipper
5th April 2016, 20:17
Wow, that was quick :laugh Thanks.

Edit: I see their clarification now refers to managed PSCs (i.e. MSCs), which I concur is the correct interpretation, in my non-expert opinion.

Indeedy.

TheFaQQer
5th April 2016, 20:24
Wow, that was quick :laugh Thanks.

Edit: I see their clarification now refers to managed PSCs (i.e. MSCs), which I concur is the correct interpretation, in my non-expert opinion.

The article was corrected earlier today to add the "managed" clarification.

TheFaQQer
6th April 2016, 09:44
It's a shame that today CUK publishes even more incorrect "advice" about this:

"Consequently, HM Revenue & Customs decided that workers who operate through an intermediary (recruitment agency, umbrella company or PSC) would no longer be able to claim tax relief on travel and subsistence expenses if they are under the Supervision, Direction or Control (SDC) of anyone within the contractual chain."

THAT IS NOT CORRECT AND WAS CONFIRMED YESTERDAY AS SUCH - although the story does contradict itself nicely by later saying that "workers who operate through a PSC will only fall under this legislation if they also fall inside IR35.", it's frustrating to see the umbrella industry peddle what they know (or should know) is a lie.

moggy
7th April 2016, 10:05
https://www.gov.uk/government/publications/employment-intermediaries-personal-services-and-supervision-direction-or-control/employment-intermediaries-personal-services-and-supervision-direction-or-control

why can we not get concise and consistent information.. my guess is this is where the original misinterpretation came from?

matzie
7th April 2016, 15:24
seems pretty clear to me from reading that doc that HMRC would consider a code review as evidence of SDC... it also seems obvious to me that their long term plan for 'Son of IR35' is to replace all existing case law with 'simple' SDC tests :-(

https://www.gov.uk/government/publications/employment-intermediaries-personal-services-and-supervision-direction-or-control/employment-intermediaries-personal-services-and-supervision-direction-or-control#esm2055---meaning-of-supervision-direction-or-control-as-to-the-manner


Supervision over the manner in which the worker provides the services is the action or process of watching or overseeing what a person does or how something is to be done. If a person checks or has the right to check the work that the worker is doing to make sure it meets a required standard, the manner in which the worker provides the services is subject to supervision.

Supervision can involve helping the worker develop their skills and knowledge.

Direction over the manner in which the worker provides the services is making a worker do their work in a certain way by providing them with instructions, guidance, or advice as to how the work must be done. Someone providing direction will often co-ordinate how the work is done as it’s being undertaken.

Control over the manner in which the worker provides the services is telling or instructing a worker about how they do the work. Control over how the person does work also includes someone having the power to move the person from one job to another. If someone can say “don’t do it like that” or “do it like this” then they have a right of control as to the manner in which a person works.

jamesbrown
7th April 2016, 15:45
seems pretty clear to me from reading that doc that HMRC would consider a code review as evidence of SDC... it also seems obvious to me that their long term plan for 'Son of IR35' is to replace all existing case law with 'simple' SDC tests :-(

https://www.gov.uk/government/publications/employment-intermediaries-personal-services-and-supervision-direction-or-control/employment-intermediaries-personal-services-and-supervision-direction-or-control#esm2055---meaning-of-supervision-direction-or-control-as-to-the-manner

It really doesn't matter what HMRC consider to represent a sufficient degree of control (which will form the basis for judging SDC in future case law). What matters is the future case law. This (SDC) will play out in a similar way to IR35, although SDC certainly represents a narrowing of the focus to one element of control (to the detriment of MoO and RoS).

jamesbrown
7th April 2016, 15:58
It's a shame that today CUK publishes even more incorrect "advice" about this:

"Consequently, HM Revenue & Customs decided that workers who operate through an intermediary (recruitment agency, umbrella company or PSC) would no longer be able to claim tax relief on travel and subsistence expenses if they are under the Supervision, Direction or Control (SDC) of anyone within the contractual chain."

THAT IS NOT CORRECT AND WAS CONFIRMED YESTERDAY AS SUCH - although the story does contradict itself nicely by later saying that "workers who operate through a PSC will only fall under this legislation if they also fall inside IR35.", it's frustrating to see the umbrella industry peddle what they know (or should know) is a lie.

Agreed, this really needs to be called out wherever it is seen. Such companies should be aware that they receive business on the basis of personal recommendations from other contractors (us) who are not engaged through an umbrella. Those recommendations are likely to disappear pretty quickly if myths are being peddled.

colinrobinson
12th April 2016, 19:37
Change management is an essential and well used IT Practice Contractors would be expected to adhere to the process, question is would it be deemed as controlling how the work is provided i.e. "Do it like this" ?

jamesbrown
12th April 2016, 19:46
Change management is an essential and well used IT Practice Contractors would be expected to adhere to the process, question is would it be deemed as controlling how the work is provided i.e. "Do it like this" ?

To whom and for what purpose? If you read the HMRC guidance and believed it, almost certainly, yes, but the only case law on SDC relates to control (and, specifically, the sufficient degree of control); future case law is obviously unknown. If you're an employee of a brolly, it's a probably a moot point, because you're unlikely to get agreement on lack of SDC from all relevant parties. Beyond that, it's also moot, because SDC is not a test that applies beyond the Agency legislation (which itself doesn't apply to PAYE salary or dividends) or beyond T&S for H2W travel for umbrella employees.