HMRC IR35 complaints ignored for 7 months and counting

[plannercontractor]

Thanks all for your views and advice. I think one thing is clear here, this forum is almost exclusively for people who enjoy contracting and would move to different assignments to ensure they can get the best deal, which is understandable. It feels like the empathy towards people who are left with no choice but to contract to keep some stability in their professional life is not mutually shared and the HMRC doesn't really care, as long as it gets its tax money.

Whether or not I should have been within IR35 from the beginning is neither here nor there, it was an option available to me and my employer saw it as the best way to compensate me from losing out of a fixed-term contract. In any case, the HRMC introduced the legislation to catch people like me, which it has succeeded to do some extent only because the root cause of the problem hasn't and will probably never be addressed. People like me are not really the problem at all, we are honest individuals who enjoy our work stability/satisfaction in one place and will take all available options to stay in it. Yes, some might say I should have never accepted a fixed-term contract in the first place but I did so with the hope of it turning into a permanent post, not to be told it would not be extended only then be asked to stay as a contractor. At the time, the ltd. company option looked attractive and meant that my income would be roughly the same as when I was when I was on a fixed term with 32 days annual leave, pension and 12 days a year allowed as flexi days (one every month).

I work for one of the wealthiest local authorities in the country in terms of residents income/demographic which means, as a result, the Council gets very little from government funding. Plus with all the cuts, I can see why they have to be careful in recruiting permanent staff. They also have one of the best pension schemes (only 2nd to the Civil Service, I think). However, IR35 has meant that what happened to me, will carry on happening (i.e. Public sector recruiting on fixed-term contracts then asking staff to work through agencies instead of making them permanent to cut employment cost), so the HMRC hasn't really tackled the problem at all, they've just ensured that they can collect more tax from contractors at all cost, even if this means that agency staff are now earning less than their permanent counterparts doing the same job with no benefits (pension, paid holidays and sick leave).

Again, regardless on whether or not the HMRC have control on what public sector workers get paid, they have a duty to ensure that everyone is taxed fairly and at the moment agency workers are not being taxed fairly. Whilst some might get higher hourly rate than the perms, this so that they compensate for other benefits the perms get and not to pay additional tax such as employer's NI and apprenticeship levy, we are not classed as being self-employed.

And before you tell me move on to improve my situation etc. just remember that if someone wasn't really looking to contract in the first place and finds themselves in this situation by reason of circumstances, it might be that they don't like to change job frequently. Starting a new job is a big thing for some people, workplaces are all different and so are colleagues, management, working conditions, rules etc. It is extremely hard to leave a job where you are very happy as complete job satisfaction is very rare to find indeed regardless of pay.

[plannercontractor]

Did the agency not offer you PAYE though them?

When you were with the LTD were you paying yourself low wage and dividends? I'm guessing so as that is the only way there would be spare money for the loan and to need corp tax?

Yes, that's correct. I paid accountants for all that and also claimed expenses etc.

[plannercontractor]

First problem, doing a job that is probably also a permie role within the local authority - always would have been seen as an "employee" so more than likely have always been inside IR35 - just that the onus on who decides it has changed.

As they have all said, if you had done the research, you would have seen the difference between umbrella and Ltd take home, and it is then your choice as to whether you take it and accept it, negotiate a rate increase or walk away.

HMRC will not care about your current role as they are getting the tax take they expect (assuming the brolly is calculating it correctly), the bigger problem is if you highlight this to them and they revisit the previous years and determine that these too shuld have been paid PAYE - that is likely to hurt more if they retrospective declare an inside IR35 verdict!

As for the umbrella making deductions from you, the umbrella should always explain that the rate you are give is the contract rate and employment costs must be met before your taxable salary is available - it is not determined that you are paying this and HMRC are very aware of how compliant brollies operate.

Simplest suggest - leave it be, and either look for a higher rate or another outside IR35 assignment. Sorry to be the bearer of bad news.

Well I wasn't going to leave a job I was very happy in for those reasons, it wouldn't be worth it as I value my job satisfaction too much. It was a previous recruitment agency I had used who facilitated the move from fixed-term to contractor (ltd.) then on to umbrella. They said at the time (of IR35) that there wasn't much negotoation to be done as the Council said they couldn't increase the rate to compensate and they gave me a list of 3/4 umbrellas all of which offered similar rates with marginal differences like up to £10 a week more or less than the other.

[cojak]

They said at the time (of IR35) that there wasn't much negotoation to be done as the Council said they couldn't increase the rate to compensate and they gave me a list of 3/4 umbrellas all of which offered similar rates with marginal differences like up to £10 a week more or less than the other.

This is because there is very little difference in pay if you use compliant umbrellas. A compliant umbrella’s USP is their customer service and how prompt they are to pay you.

The agency actually did you a favour by pushing you into this route as your original ‘incompliant’ choice of umbrella would have put you in bigger trouble with HMRC - they would have demanded their tax next year and you would have been in massive trouble trying to pay 10s of thousands of pounds back. As it is you’ll probably get away with earning outside IR35 after your FTC ended (it is most not ‘neither here nor there’ to HMRC).

As it is I would go back to HMRC and try to arrange terms of payment - they may allow you a longer period to pay this tax back than you have at the moment.

This is a contractor’s forum - contracting is a working model that you need to understand, even if you don’t like it.

I agree that this is outrageous in your instance - but if you want to blame anyone, blame the council - they are the ones who want the work done without the hassle or expense of employing people.

For those people such as you who have been pushed into it without their consent and against their will, I would genuinely advise that you join the Unite union. I was told just last week (by a union rep) that contractors can join them and it may be the best way for you to get the support you need (just don’t tell the council that you’ve joined).

[plannercontractor]

As it is I would go back to HMRC and try to arrange terms of payment - they may allow you a longer period to pay this tax back than you have at the moment.

You say blame the council, which is a fair point but ultimately they're having the last laugh. They're still getting away with it because HMRC targeted people rather than organisations. It's the worker who ends up paying the tax councils should be paying. This was badly planned and poorly executed by the HMRC and the government. There should have been a structure in place to support the workers.

At the end of the day, no worker could decide that they'll just resign and come back as a contractor (especially in the public organisations as they are heavily audited and risk being accused of wasting public money), it's the organisation that approves things like that and they're still doing it as it's no cost to them. I was in the same job for 2 & a half years as a 'temp'. It would have been much better if the HMRC had said that after a certain amount of time, say 24 months, for people in similar situations to mine that the council either let them go, offer permanent employment or renew FTCs. They can't justify needing you as a temp for such an extended period of time.

What's really frustrating is that this cowboy practice would be much more widespread in the private sector and judging by how the public sector IR35 has been criticised, it will be a very long time (if ever) that IR35 is extended to the private sector where the real culprits to tax dodging operate.

[cojak]

Contractors operating in a way that you do not wish to do does not make it tax dodging. We move and enjoy working with different clients on different technologies and projects.

It does appear that Public Sector IR35 rules might be pushed into the private sector and if it does it will shake out a lot of contractors. But it will not end contracting.

Contractors will cut their cloth to suit their circumstances- either charge more or work more locally.

[cojak]

I have reread your post and apologise - I can see your point regarding dropping people, making them permanent or giving them a FTC. I’m just not sure how it could be put into legislation.

[northernladuk]

I agree that this is outrageous in your instance - but if you want to blame anyone, blame the council - they are the ones who want the work done without the hassle or expense of employing people..

Totally this. The FTC route in to PS is a disgrace. I've could write a list the length of your arm of people that joined on an FTC without fully understanding the contract and the fact they could have nothing after 2 years. I've seen people in tears worrying about it. PS aren't quick at anything so sorting moving someone to perm at the 2 year limit isn't smooth either. Poor sods sitting there with the realization they won't have a job in a few weeks and the slow process of making them an offer is a horrible situation for someone who just wants a job.

This and then all the dicking around pushing you ltd and so on. I know you keep going on about job satisfaction but why on earth would you want to work for someone that doesn't want you and can't make you a decent offer in return for your services. Doesn't sound like anyone I'd like to work for and surely doesn't give you job satisfaction?

Sounds like you are just a feet under the table type of guy that's been pushed into a situation that you aren't comfortable with. It's what we do and we are happy with it. You are just out of your depth.

I'd have my CV on every board I can find and go get myself a job where a company respects and rewards me.

[plannercontractor]

It's interesting how most of you say blame the council but think the HMRC is somehow blameless. Councils are being forced to cut-cost everywhere and they will look at easy targets like employment rather than services due to possible public challenge. Who's going to complain about the council not giving out perm contracts?

Totally this. The FTC route in to PS is a disgrace. I've could write a list the length of your arm of people that joined on an FTC without fully understanding the contract and the fact they could have nothing after 2 years.

I took the FTC knowing full well that the chances of being made perm after it finishes were quite slim; there is a skill shortage in the UK in my profession, many local authorities, particularly in London rely on the constant availability of qualified Kiwis and Aussies on youth mobility visas (for under 30s) which allow them to work here for 2 years. They often recommend their friends to the councils when they return home and they don't mind contracting as they don't have permanent rights to stay, so can't get a perm job. So the councils can recruit temps fairly easily and hence they are not too bothered. About half of my department's qualified staff are Aussies and Kiwis, to give you a good picture!

I know you keep going on about job satisfaction but why on earth would you want to work for someone that doesn't want you and can't make you a decent offer in return for your services. Doesn't sound like anyone I'd like to work for and surely doesn't give you job satisfaction?

The department is told by finance, HR, Councillors and the CEO as to how many perm staff they can recruit, my managers did try to get an exception approved after the FTC but they were told that there was no flexibility (by HR) but are allowed to use their annual budget to pay temps, so why should I hold this against my managers when they tried? I could hold it against HR but they work in a different building, I don't see them and up until recently when I got a perm contract, I knew no one from HR. I have a very good relationship with my managers and the fact that an exception couldn't be made did not affect this at all, it would have been rather petty of me to be angry at them since they don't make the rules...I don't work with the CEO, councillors etc.

I think I made a mistake coming on here for help as it seems that this is for those who love and enjoy contracting and got there by pure choice, not everyone does and it explains the lack empathy. It seems that many of you agree with the HMRC's ruthlessness and accept that it doesn't care where it gets the tax money from as long as it does, for most of you, moving around is the way around it and that is your prerogative. The HMRC has done nothing to tackle the root cause of PS IR35, councils are still able to do backdoor recruitment through umbrellas and some have even uplifted their hourly rate to compensate for the loss from Ltd. earnings, some are telling contractors to work more from home and use their own equipment etc. or they give specific projects to work on (I am town planner and this is easily done by getting one big major planning application which takes months to assess and decide). However, the council where I work has decided that they will not employ through Ltd. companies and this was a general decision and not my department's own. The HRMC therefore lacks efficiency in tackling off payroll working.

[WTFH]

It's interesting how most of you say blame the council but think the HMRC is somehow blameless. Councils are being forced to cut-cost everywhere and they will look at easy targets like employment rather than services due to possible public challenge. Who's going to complain about the council not giving out perm contracts?

...
I think I made a mistake coming on here for help as it seems that this is for those who love and enjoy contracting and got there by pure choice, not everyone does and it explains the lack empathy. It seems that many of you agree with the HMRC's ruthlessness and accept that it doesn't care where it gets the tax money from as long as it does, for most of you, moving around is the way around it and that is your prerogative. The HMRC has done nothing to tackle the root cause of PS IR35, councils are still able to do backdoor recruitment through umbrellas and some have even uplifted their hourly rate to compensate for the loss from Ltd. earnings, some are telling contractors to work more from home and use their own equipment etc. or they give specific projects to work on (I am town planner and this is easily done by getting one big major planning application which takes months to assess and decide). However, the council where I work has decided that they will not employ through Ltd. companies and this was a general decision and not my department's own. The HRMC therefore lacks efficiency in tackling off payroll working.

We do not think HMRC is blameless in all cases. Public sector is to blame.
Councils are cutting costs. HMRC are not to blame for that.
Councils are outsourcing as much as they can - where people used to be employed by them, they now bring in contractors. HMRC are not to blame for that.
The root cause of the lack of council funding is not HMRC.
The root cause for councils not employing people full time is not HMRC.
The root cause for councils bringing external contractors in - through whatever root that may be, is not the fault of HMRC.

HMRC are not an employment ombudsman.
...and most of us on here hate them.