IR35 caught contactor wins holiday pay from HMRC

[Guvernator]

I think I have to agree with a few others on this. Some people are celebrating this like it's a big victory for freelance contractors, I see it as exactly the opposite. She has won some holiday back pay, big deal. What this just proves is that she isn't actually a freelance contractor and is a disguised employee which is exactly what HMRC want.

If I wanted holiday pay, sick pay and all the other benefits a permie gets I'd avoid all the hassle and just become a permie. One of the reasons I work as a contractor is I don't really give a hoot about that stuff and am more than willing to forego them for the other benefits working freelance brings.

Can't help but feel this is shooting ourselves in the foot.

[DaveB]

I think I have to agree with a few others on this. Some people are celebrating this like it's a big victory for freelance contractors, I see it as exactly the opposite. She has won some holiday back pay, big deal. What this just proves is that she isn't actually a freelance contractor and is a disguised employee which is exactly what HMRC want.

If I wanted holiday pay, sick pay and all the other benefits a permie gets I'd avoid all the hassle and just become a permie. One of the reasons I work as a contractor is I don't really give a hoot about that stuff and am more than willing to forego them for the other benefits working freelance brings.

Can't help but feel this is shooting ourselves in the foot.

No. She was a contractor with an IR35 friendly contract operating outside the regulations. The client decided unilaterally to declare her inside with no other change to working arrangements or contract terms and without adjusting the rate to compensate.

This result means that clients (including HMRC!)cannot simply toe the line from HMRC regarding IR35 status without facing consequences. They will now understand that it is not a risk free decision and blanket application of IR35 is not the route of least resistance.

[Guvernator]

No. She was a contractor with an IR35 friendly contract operating outside the regulations. The client decided unilaterally to declare her inside with no other change to working arrangements or contract terms and without adjusting the rate to compensate.

This result means that clients (including HMRC!)cannot simply toe the line from HMRC regarding IR35 status without facing consequences. They will now understand that it is not a risk free decision and blanket application of IR35 is not the route of least resistance.

In which case would it not have been far better for her to contest the IR35 assessment? Surely if the facts are as clear cut as you say, she would have won and it would have been a far more meaningful victory to say "IR35 blanket assessments are wrong" rather then winning by what is in effect a technicality, a technicality which in fact could have negative connotations for the future health of a flexible workforce.

Celebrating that someone won a case based on holiday pay\employment rights for a contractor?? Frankly to me that sounds more like Turkey's voting for Christmas. What is the most likely outcome of this "win" from the corporates? OK you can have holiday pay, sickness cover and all the other benefits of a perm, we'll just deduct that from your day rate and still tax you like a permie, oh and you'll have to pay employers NI on top too. No thanks.

[DaveB]

In which case would it not have been far better for her to contest the IR35 assessment? Surely if the facts are as clear cut as you say, she would have won and it would have been a far more meaningful victory to say "IR35 blanket assessments are wrong" rather then winning by what is in effect a technicality, a technicality which in fact could have negative connotations for the future health of a flexible workforce.

Celebrating that someone won a case based on holiday pay\employment rights for a contractor?? Frankly to me that sounds more like Turkey's voting for Christmas. What is the most likely outcome of this "win" from the corporates? OK you can have holiday pay, sickness cover and all the other benefits of a perm, we'll just deduct that from your day rate and still tax you like a permie, oh and you'll have to pay employers NI on top too. No thanks.

There is no appeal process for IR35 decisions, this was the only route available and hence the one she and IPSE took.

It may not look like it but it has serious consequences. Lazy clients cannot now impose IR35 decisions without consequences, and costs. Up until this result it was a no risk, no cost decision for them to make.

[Guvernator]

I could be mistaken but I was under the impression that there was another case where a judge had overruled a CEST evaluation which would surely be the better way to go?

At any rate I didn't become a contractor because I was worried about my employment rights, quite the opposite, after over 10 years as a perm, I found the "benefits" you get as a full time employee to be highly overrated. I became a contractor for the flexibility and the money, a cause which I don't think is promoted by suing a firm for holiday money.

Yes this might send a message to corporates that they can't just blanket IR35 people with impunity but like I said, what is likely to be the response? Corporates are risk averse, they aren't going to be championing the cause for contractors like some deluded people believe. They will take the least path of resistance and either draw up new watertight contracts where you sign your right to sue for benefits away or if they can't enforce that, will take a cut out of your day rate to cover the expenses for giving you those extra benefits and\or take out insurance for getting sued.

I've been contracting for nearly 10 years, I've yet to meet that mythical contractor everyone talks about who can dictate terms to there client regarding rate rises, working status and getting a multi-million\billion dollar company to fight your corner for you against HMRC.

[DeludedKitten]

They will take the least path of resistance and either draw up new watertight contracts where you sign your right to sue for benefits away

They can't do that - you have a statutory right to be classed as either an employee, a worker, or neither of these. No contract can trump the statute.

or if they can't enforce that, will take a cut out of your day rate to cover the expenses for giving you those extra benefits and\or take out insurance for getting sued.

They could take out insurance if such a product exists (it might, I don;t know). They might say up front "we will keep some of this money and roll it up into holiday pay because you're really a worker and therefore you need to be taxed and treated like one". They might say "we aren't interested in ever engaging a contractor again because of this".

What they cannot say is that they will treat people like employees and / or workers for tax purposes and not give any rights that the law says that they individual is entitled to.

[Guvernator]

What they cannot say is that they will treat people like employees and / or workers for tax purposes and not give any rights that the law says that they individual is entitled to.

That's absolutely brilliant for those who went into contracting because they were interested in claiming fair employment rights, however I suspect that isn't the case for many contractors.

Just my opinion, other people seem pleased so what do I know but for me it just seems to fly in the face of what a freelance contractor should be and just gives HMRC more ammunition for forcing everyone to become perms.

[TestMangler]

That's absolutely brilliant for those who went into contracting because they were interested in claiming fair employment rights, however I suspect that isn't the case for many contractors.

Just my opinion, other people seem pleased so what do I know but for me it just seems to fly in the face of what a freelance contractor should be and just gives HMRC more ammunition for forcing everyone to become perms.

I really think you're missing the point.

I agree with what you're saying in principal, but the facts are that she was placed under a 'blanket inside IR35' decision by her client, after being considered outside. She can't fight the IR35 decision in court unless HMRC take her to court for previously unpaid IR35 taxes, which are absent in this case.

What she has proven is that a client can't make an IR35 determination without the consequences falling on them, which, from a freelance perspective, has to be a good thing.

imagine your client does the same to you. Yesterday, you're outside IR35 and today you're in, with no other changes to your contract terms or remuneration. What's your next move ? Walk ? (fair enough, that's what I'd have done, but it's not for everyone). Make the client face up to the responsibilities behind the decision THEY made ? Seems fair to me.

[northernladuk]

I really think you're missing the point.

I agree with what you're saying in principal, but the facts are that she was placed under a 'blanket inside IR35' decision by her client, after being considered outside. She can't fight the IR35 decision in court unless HMRC take her to court for previously unpaid IR35 taxes, which are absent in this case.

What she has proven is that a client can't make an IR35 determination without the consequences falling on them, which, from a freelance perspective, has to be a good thing.

imagine your client does the same to you. Yesterday, you're outside IR35 and today you're in, with no other changes to your contract terms or remuneration. What's your next move ? Walk ? (fair enough, that's what I'd have done, but it's not for everyone). Make the client face up to the responsibilities behind the decision THEY made ? Seems fair to me.

***k me!

[swamp]

I still don't think it's a done deal that Hammond will extend the IR35 reforms to the private sector.

Rumour has it that Osbourne restricted the original reforms to the public sector as he wasn't confident his budget would make it through Parliament. Big businesses would presumably kick up a fuss and pressure Tory rebels to vote the budget down. Hammond is on much thinner ice, and has already u-turned on his increase to self employed tax rates.