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meanttobeworking
14th December 2017, 10:31
'Tax crackdown on the self-employed has cost me £1,000 a month – and it will only get worse' (http://www.telegraph.co.uk/tax/income-tax/tax-crackdown-self-employed-has-cost-1000-month-will-get-worse/)

BrilloPad
14th December 2017, 10:38
Times one is better: -

https://www.thetimes.co.uk/article/budget-2017-tax-savings-enjoyed-by-agency-staff-under-threat-t6gvx7p0g

Case study
Brillo Pad, 54, lives in Llandudno, north Wales, with his wife and three children. He works as an IT contactor for a large investment bank in the city, renting a room in the suburbs during the week and returning home at weekends. Changes to IR35 — the rule which would tax workers as if they were regular employees — could cost him thousands of pounds a year, he claimed and said that he would probably have to emigrate.

“When contractors are forced out, their place will be taken by large consultancies, paying little tax,” Mr Pad added.

Then there is a picture of a scourer.

malvolio
14th December 2017, 10:53
Loved the comment on the Telegraph one - "Should have set himself up as an LLP"... :rollin:

vwdan
14th December 2017, 10:58
I wish more would focus on the travelling nature of contract consultants and the fact that our permie counterparts can claim the exact same expenses as we (currently) can outside of IR35.

Personally, I think the advantages of paying dividends will be eroded completely over the next few years - and, to a degree, I find the "Reward for taking risks" argument a little bit hollow. Let's face it, everyone starts business to make some business and hopefully get rich- I'm not sure I feel I should be rewarded for deciding to take some risk in the hope of big rewards.

But, I do expect to be able to operate on a level playing field. Why can I join a permie consultancy, be home based, and claim all travel expenses to wherever I go - but not do that when I work in almost the exact same role as a contractor.

Of course, the real issue isn't that IR35 exists, it's the aggressive nature of HMRC in attempting to force all contractors under that banner.

LondonManc
14th December 2017, 11:23
I wish more would focus on the travelling nature of contract consultants and the fact that our permie counterparts can claim the exact same expenses as we (currently) can outside of IR35.

Personally, I think the advantages of paying dividends will be eroded completely over the next few years - and, to a degree, I find the "Reward for taking risks" argument a little bit hollow. Let's face it, everyone starts business to make some business and hopefully get rich- I'm not sure I feel I should be rewarded for deciding to take some risk in the hope of big rewards.

But, I do expect to be able to operate on a level playing field. Why can I join a permie consultancy, be home based, and claim all travel expenses to wherever I go - but not do that when I work in almost the exact same role as a contractor.

Of course, the real issue isn't that IR35 exists, it's the aggressive nature of HMRC in attempting to force all contractors under that banner.

WRONG!!!!! It costs them not a penny; we simply get the tax relief on it, it still comes out of our money that we can pay to ourselves.

vwdan
14th December 2017, 13:07
WRONG!!!!! It costs them not a penny; we simply get the tax relief on it, it still comes out of our money that we can pay to ourselves.

Well, not really. Not if you're treating your Ltd Co as a Ltd Co and you as yourself. A little bit pedantic I know, but considering your company income as "your" income is the first step into disaster.

ProInDisguise
14th December 2017, 13:21
Personally, I think the advantages of paying dividends will be eroded completely over the next few years - and, to a degree, I find the "Reward for taking risks" argument a little bit hollow. Let's face it, everyone starts business to make some business and hopefully get rich- I'm not sure I feel I should be rewarded for deciding to take some risk in the hope of big rewards.



A little bit hollow? The reason it is encouraged is because it's good for the economy. If no one took risks then the economy would never grow. Sometimes people get rich and sometimes people go bankrupt when running a business and it's in the governments interest that risk taking is encouraged and supported.

vwdan
14th December 2017, 13:30
A little bit hollow? The reason it is encouraged is because it's good for the economy. If no one took risks then the economy would never grow. Sometimes people get rich and sometimes people go bankrupt when running a business and it's in the governments interest that risk taking is encouraged and supported.

I know where you're coming from - I just dislike the whole "Oh, look at us - doing it for the good of the country" argument. Let's face it, none of us went into contracting to help the economy - yes, tax breaks are a way to encourage behaviour and that's fine. But, personally, I'm very conscious that I made a very personal decision to go contracting and I don't really feel deserving of any thanks. What I would like, as I say, is to compete on a level playing ground with larger consultancies.

Anyway, look at this tulip that we're up against:

Nigel Meek
Just ensure you work for multiple employers simultaneously. I usually invoice 3-4 clients a month and so can in no way be classified as an employee. That is all IR35 is trying to do. If you work for a single client you are basically an employee of them as far as HMRC is concerned. The fact you may well have to have PI Insurance, Public Liability Insurance, Employer's Insurance in any event seems to have been lost on the those idiots.

Nigel Meek, if you're here, you're a fool.

LondonManc
14th December 2017, 14:25
Well, not really. Not if you're treating your Ltd Co as a Ltd Co and you as yourself. A little bit pedantic I know, but considering your company income as "your" income is the first step into disaster.

Semantics I know but I'm thinking as a shareholder :)

WordIsBond
16th December 2017, 20:53
I know where you're coming from - I just dislike the whole "Oh, look at us - doing it for the good of the country" argument. Let's face it, none of us went into contracting to help the economy - yes, tax breaks are a way to encourage behaviour and that's fine. But, personally, I'm very conscious that I made a very personal decision to go contracting and I don't really feel deserving of any thanks. What I would like, as I say, is to compete on a level playing ground with larger consultancies.

Anyway, look at this tulip that we're up against:

Nigel Meek
Just ensure you work for multiple employers simultaneously. I usually invoice 3-4 clients a month and so can in no way be classified as an employee. That is all IR35 is trying to do. If you work for a single client you are basically an employee of them as far as HMRC is concerned. The fact you may well have to have PI Insurance, Public Liability Insurance, Employer's Insurance in any event seems to have been lost on the those idiots.

Nigel Meek, if you're here, you're a fool.
Nigel is probably right. Forget what the law actually says, in reality HMRC is not likely to go after someone with multiple simultaneous engagements. And even if they do, if you are paying yourself a salary and making pension contributions, you can always attribute them to the contract they challenge which means they'll gain very little by going after you. Which means they probably won't do it. So yes, having 3-4 concurrent clients probably makes you effectively IR35 proof, even though the law says differently.

As to incentivising risk taking, the government incentivises lots of different kinds of behaviours. Let's talk about fuel-efficient cars, for instance. If you buy a fuel-efficient car, you have the satisfaction of saving petrol cost and feeling environmentally noble and virtuous. You probably don't need a government incentive to do it. But the government gives an incentive anyway (lower tax) because they want to encourage that behaviour. A lot of people, when deciding what kind of car to buy, are influenced by the lower road tax.

The government incentive isn't for those who would take the risk anyway. It's for those who are trying to decide whether to make the leap. There are a lot of people who have talked about quitting this game because the tax situation is gradually getting worse and worse, and will continue to do so. Maybe you aren't influenced by it, but there are a lot of people who are, and if anyone in government is actually thinking (I know, no one should expect that), they should be waking up to the fact that they are going to lose a lot of their entrepreneurs / risk-takers / flexible work force because for some people, the risk isn't going to be worth it without favourable tax treatment.

I left behind a far better position than most do when I went independent. If there weren't favourable tax treatment I wouldn't have done it. And I have people working for me because I made the jump. If they force a pass-through treatment on us or find a way to force everyone into IR35, I'll keep at it because I've found satisfaction in it that I didn't have before. But what I'm doing would have never happened. And most of my revenue is foreign-source, so I'm bringing in money they would have never seen and providing jobs as well.

Incentives matter. That's why they keep providing incentives and disincentives for different behaviours in the tax system. They know those things affect behaviour. They've just forgotten that it is a good idea to incentivise economic risk-taking in their rush to pander to envy.

Lance
17th December 2017, 11:45
Nigel is probably right. Forget what the law actually says, in reality HMRC is not likely to go after someone with multiple simultaneous engagements. And even if they do, if you are paying yourself a salary and making pension contributions, you can always attribute them to the contract they challenge which means they'll gain very little by going after you. Which means they probably won't do it. So yes, having 3-4 concurrent clients probably makes you effectively IR35 proof, even though the law says differently.

In fact with multiple simultaneous engagements there is a legal IR35 defence albeit circumstantially evidence.
How can multiple companies be demonstrated to have S, D and C over you?
HMRC know this and leave those well alone.

malvolio
17th December 2017, 11:55
In fact with multiple simultaneous engagements there is a legal IR35 defence albeit circumstantially evidence.
How can multiple companies be demonstrated to have S, D and C over you?
HMRC know this and leave those well alone.
Ermm, no...

IR35 is judged on a contract by contract basis, one at a time. You can be done for one of your multiple gigs just as easily as someone with a single client. Multiple clients is not a defence.

HTH... :wink

Lance
17th December 2017, 12:01
Ermm, no...

IR35 is judged on a contract by contract basis, one at a time. You can be done for one of your multiple gigs just as easily as someone with a single client. Multiple clients is not a defence.

HTH... :wink

you miss my point. You are right but still miss the point that WIB and I are making.

With multiple clients it's difficult to demonstrate that you are under SDC for any of them.
And yes if there was one you did most work for they'd pick on that one first, but IMO if your revenue is split equally between more than 3 clients they'll move swiftly on to an easier target.

I am not suggesting this is the correct legal definition just how it works in practise.

eek
17th December 2017, 12:04
you miss my point. You are right but still miss the point that WIB and I are making.

With multiple clients it's difficult to demonstrate that you are under SDC for any of them.
And yes if there was one you did most work for they'd pick on that one first, but IMO if your revenue is split equally between more than 3 clients they'll move swiftly on to an easier target.

I am not suggesting this is the correct legal definition just how it works in practise.

That argument only works while the contractor determines whether the contract is inside or outside IR35. Once determination is made by the customer - it's likely that we will have more situations like one I've heard of in the NHS where a consultant is deemed inside on one contract and outside on the other 3 (he worked across 4 trusts - I have to check as I suspect he now only works for 3)....

Lance
17th December 2017, 12:09
That argument only works while the contractor determines whether the contract is inside or outside IR35. Once determination is made by the customer - it's likely that we will have more situations like one I've heard of in the NHS where a consultant is deemed inside on one contract and outside on the other 3 (he worked across 4 trusts - I have to check as I suspect he now only works for 3)....

Indeed.

mattfx
19th December 2017, 10:33
Ermm, no...

IR35 is judged on a contract by contract basis, one at a time. You can be done for one of your multiple gigs just as easily as someone with a single client. Multiple clients is not a defence.

HTH... :wink

How can it not be? If you worked at Client A for 3 days then at Client B for 2 days in a week, you are clearly demonstrating that you're a consultant who is free from any kind of "disguised employment" at either client, no? I have two clients in addition to my current "main" contract who I've been doing bits and pieces of work for here and there, some of which I've done in evenings and weekends and others I have taken days out of being on site at my main client to do. Surely that demonstrates quite clearly I cannot be a disguised employee at any of them!?

MrMarkyMark
19th December 2017, 10:41
How can it not be? If you worked at Client A for 3 days then at Client B for 2 days in a week, you are clearly demonstrating that you're a consultant who is free from any kind of "disguised employment" at either client, no? I have two clients in addition to my current "main" contract who I've been doing bits and pieces of work for here and there, some of which I've done in evenings and weekends and others I have taken days out of being on site at my main client to do. Surely that demonstrates quite clearly I cannot be a disguised employee at any of them!?

What you think does not count in HMRCs eyes as far as contracts go.
They could say a person was contracted to do a couple of part time jobs.

However, I would wager your working practices would cover you in this particular instance.

malvolio
19th December 2017, 10:55
How can it not be? If you worked at Client A for 3 days then at Client B for 2 days in a week, you are clearly demonstrating that you're a consultant who is free from any kind of "disguised employment" at either client, no? I have two clients in addition to my current "main" contract who I've been doing bits and pieces of work for here and there, some of which I've done in evenings and weekends and others I have taken days out of being on site at my main client to do. Surely that demonstrates quite clearly I cannot be a disguised employee at any of them!?
No idea. Sadly you have to defeat the original legislation and case law to win that argument.

As people have said, it is a risk mitigation, but it is not a defence if challenged. The prosecution and the bench will simply ignore the other contracts

jamesbrown
19th December 2017, 11:21
No idea. Sadly you have to defeat the original legislation and case law to win that argument.

As people have said, it is a risk mitigation, but it is not a defence if challenged. The prosecution and the bench will simply ignore the other contracts

Ignore is too strong, but they’ll only use it in assessing whether the contractor is in business on their own account, and not to establish whether the contract in question is caught (this is a truism). Either way, the case law supports what you’re saying. It’s contract-by-contract, both in theory and in practice. It’s perfectly possible to have multiple caught contracts, some caught and some not, a change in the status of a contract over time etc. Case law supports this.

mattfx
19th December 2017, 16:58
I appreciate what you're saying, but the other pieces of work aren't even contracts - they are professional services engagements. Work I have tendered for, produced a proposal for, won the business for and then executed on. No agents, direct, competing against other competitive consultants who also want the work.

Surely this sets me apart as a "true" consultant? And that surely would have to be strongly factored in to any argument relating to disguised employment elsewhere? I.E. the chances are if that's how I conduct myself at multiple other clients, that pattern of behavior will be consistent across other engagements as well, no?

If HMRC would even dare attempt to start accusing other contractors who had undertaken work in a similar manner of being disguised employees it'd be enough to make me want to quit contracting, and i've only just started! There seems to be a massive air of them just wanting everyone inside IR35 and not stopping until the market gets to that point.

jamesbrown
19th December 2017, 17:17
I appreciate what you're saying, but the other pieces of work aren't even contracts - they are professional services engagements. Work I have tendered for, produced a proposal for, won the business for and then executed on. No agents, direct, competing against other competitive consultants who also want the work.

Surely this sets me apart as a "true" consultant? And that surely would have to be strongly factored in to any argument relating to disguised employment elsewhere? I.E. the chances are if that's how I conduct myself at multiple other clients, that pattern of behavior will be consistent across other engagements as well, no?

If HMRC would even dare attempt to start accusing other contractors who had undertaken work in a similar manner of being disguised employees it'd be enough to make me want to quit contracting, and i've only just started! There seems to be a massive air of them just wanting everyone inside IR35 and not stopping until the market gets to that point.

I'm not sure what "aren't contracts" means TBH. Contract law is the basis for any engagement between two parties, whether explicit or implied.

I'm not talking about your personal circumstances, because I have no idea what they are, but I suspect that you're making a few different points here:


HMRC would see a bunch of contracts and back-off.
If they didn't, they'd look at the individual contracts and then back-off.
If they didn't, they'd have a tough time arguing that I wasn't in business on my own account.


I think you misunderstand the process. There's absolutely no evidence whatsoever that HMRC "backs-off" under any superficial circumstances. They pursue a case until the detailed facts are established. That's the whole point of operating a deterrent. This isn't about saving tax payer's money though the timely closure of individual investigations. There are countless anecdotes on CUK and elsewhere that support this (one that comes to mind involved a demonstrated, valid, substitution, which did not close down further investigation).

The reality is that HMRC would ask to see all your contracts, and they would then take the contract(s) that looked best for further investigation. All the anecdotal stuff about other contracts (especially if they account for a small fraction of your turnover) will be completely unconvincing, pre-tribunal. In short, of the enumerated points above, the final point may be correct, but it won't be established until you're way down the pipeline of due process. They won't "back off" because a certain % of your contracts look watertight. If one looks arguable, that will be pursued (and even if it doesn't, it will be pursued to some extent).

WordIsBond
22nd December 2017, 09:53
A significant factor in the ECR Consulting (Elaine Richardson) case was that she was in business on her own account, and having multiple clients concurrently was specifically cited as evidence to that effect.

That is probably not a precedent that HMRC want to have reinforced by further rulings, which is a risk they would run if they bring cases against people with multiple concurrent clients. Have there been any cases since then that HMRC have pursued where the contractor had multiple concurrent contracts?

People with multiple concurrent contracts, unless they are idiots in what they allow to be written into their contract, can argue there is no MOO (they don't have to take work because they can just go work for their other clients) and can argue that there is no SDC at least on when they work, and often on other aspects of SDC.

Having multiple contracts is not a silver bullet but unless you are a fool you are likely to have a strong case on other points.

HMRC do not want losing precedents, nor to reinforce losing precedents. They don't care about the money that much but every case they lose lessens the FUD factor.

jamesbrown
22nd December 2017, 11:49
A significant factor in the ECR Consulting (Elaine Richardson) case was that she was in business on her own account, and having multiple clients concurrently was specifically cited as evidence to that effect.

This was a minor factor in ECR, alongside many other minor, "in business", factors. As I recall, that case passed on every single major determinant (Moo, D&C, unfettered RoS).


That is probably not a precedent that HMRC want to have reinforced by further rulings, which is a risk they would run if they bring cases against people with multiple concurrent clients. Have there been any cases since then that HMRC have pursued where the contractor had multiple concurrent contracts?

Hardly a precedent for concurrent clients or, indeed, in business factors being critical more generally. It's well established that they contribute to the overall picture and that the overall picture is important. By implication, they could be important in marginal cases. I'm not disputing that. What I am disputing is that "in business" factors are sufficient when all of the major tests are failed for any one contract.

On your specific question: how many IR35 cases have there been since 2011 fullstop? We have a body of about 20 IR35 cases to draw on, in addition to employment cases over many decades.

mattfx
22nd December 2017, 12:30
I'm not sure what "aren't contracts" means TBH. Contract law is the basis for any engagement between two parties, whether explicit or implied.

I'm not talking about your personal circumstances, because I have no idea what they are, but I suspect that you're making a few different points here:


HMRC would see a bunch of contracts and back-off.
If they didn't, they'd look at the individual contracts and then back-off.
If they didn't, they'd have a tough time arguing that I wasn't in business on my own account.


I think you misunderstand the process. There's absolutely no evidence whatsoever that HMRC "backs-off" under any superficial circumstances. They pursue a case until the detailed facts are established. That's the whole point of operating a deterrent. This isn't about saving tax payer's money though the timely closure of individual investigations. There are countless anecdotes on CUK and elsewhere that support this (one that comes to mind involved a demonstrated, valid, substitution, which did not close down further investigation).

The reality is that HMRC would ask to see all your contracts, and they would then take the contract(s) that looked best for further investigation. All the anecdotal stuff about other contracts (especially if they account for a small fraction of your turnover) will be completely unconvincing, pre-tribunal. In short, of the enumerated points above, the final point may be correct, but it won't be established until you're way down the pipeline of due process. They won't "back off" because a certain % of your contracts look watertight. If one looks arguable, that will be pursued (and even if it doesn't, it will be pursued to some extent).

Thanks for the super comprehensive and well written response JB :)

Depending on the work and value of the work to be undertaken, I put a quote together for my client and, if the work is fairly low value / quick to complete, the deliverables go on the quote. Once I have it in writing they wish to accept, I complete the work and invoice for it.

If it's a larger / longer term piece, I follow the same process only I also define a Scope of Works; which I guess you could say is a contract. I then put on my quote "for detailed deliverables see SoW". Process is then the same going forward.

So yeah - there is a contract between myself and the end client to deliver a service or product, but the terms of that are largely implied I would suspect.

jamesbrown
22nd December 2017, 12:55
Thanks for the super comprehensive and well written response JB :)

Depending on the work and value of the work to be undertaken, I put a quote together for my client and, if the work is fairly low value / quick to complete, the deliverables go on the quote. Once I have it in writing they wish to accept, I complete the work and invoice for it.

If it's a larger / longer term piece, I follow the same process only I also define a Scope of Works; which I guess you could say is a contract. I then put on my quote "for detailed deliverables see SoW". Process is then the same going forward.

So yeah - there is a contract between myself and the end client to deliver a service or product, but the terms of that are largely implied I would suspect.

Sure :D

But you presumably have T&C, right? Having an arrangement based on Purchase Orders is perfectly viable, and something that I've used in the past for small pieces of work. It sounds like you do this. However, I would also attach my T&C when signing the PO (a one-pager). The main reason for having the T&C explicit, rather than implied, is not for IR35, but for commercial reasons. That said, having a solid contract isn't going to hurt w/ IR35 either.

mudskipper
22nd December 2017, 16:18
I appreciate what you're saying, but the other pieces of work aren't even contracts - they are professional services engagements. Work I have tendered for, produced a proposal for, won the business for and then executed on. No agents, direct, competing against other competitive consultants who also want the work.

Surely this sets me apart as a "true" consultant? And that surely would have to be strongly factored in to any argument relating to disguised employment elsewhere? I.E. the chances are if that's how I conduct myself at multiple other clients, that pattern of behavior will be consistent across other engagements as well, no?

If HMRC would even dare attempt to start accusing other contractors who had undertaken work in a similar manner of being disguised employees it'd be enough to make me want to quit contracting, and i've only just started! There seems to be a massive air of them just wanting everyone inside IR35 and not stopping until the market gets to that point.


The problem is unlikely to be your other bits of work, which, from what you've said, should be clearly outside. The problem is always going to be the main contract.

MrMarkyMark
22nd December 2017, 16:42
The problem is unlikely to be your other bits of work, which, from what you've said, should be clearly outside. The problem is always going to be the main contract.

Correct.

Even a part time, 20 hour a week contract can easily fall under IR35.