Why do HMRC pick IR35 cases that they lose? Why do HMRC pick IR35 cases that they lose?
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  1. #1

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    Default Why do HMRC pick IR35 cases that they lose?

    The only contractors I have ever known (and I have known hundreds) - including myself - are "permietractors" as they are fondly known on this forum. We work within a team, doing exactly the same work that a permie would do, under exactly the same sort of job-related instructions, e.g. we use the same document templates or processes that a permie is supposed to use, and we are required to be in the same offices as the permies.

    So if HMRC really came after us armed with their definition of "control", then 99.9% of us would get nicked.

    Why then do HMRC pick the wrong battles? They seem to go after those 0.1% cases that are "genuine" contractors (i.e. who deliver a piece of work using their own processes, sitting in their own offices, largely outside the control of the client co), and then go on to lose the cases.

    Anyone else mystified by this?

  2. #2

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    Alternative interpretation: they find cases to pursue more-or-less randomly (often that began with another issue or records check) and most contractors pass one one or more of the three pillars (RoS, MoO, D&C) and, hence, they lose many cases.

    In other words, the statistics they like to push about whatever high percentage of contractors are disguised permies is, in fact, horsetulip.

    Why do you think the implementation of the rules is about to change? If you can't win, change the game.

  3. #3

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    They would be better off picking those without IR35 insurance.

  4. #4

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    Quote Originally Posted by OneManBand View Post
    The only contractors I have ever known (and I have known hundreds) - including myself - are "permietractors" as they are fondly known on this forum. We work within a team, doing exactly the same work that a permie would do, under exactly the same sort of job-related instructions, e.g. we use the same document templates or processes that a permie is supposed to use, and we are required to be in the same offices as the permies.

    So if HMRC really came after us armed with their definition of "control", then 99.9% of us would get nicked.

    Why then do HMRC pick the wrong battles? They seem to go after those 0.1% cases that are "genuine" contractors (i.e. who deliver a piece of work using their own processes, sitting in their own offices, largely outside the control of the client co), and then go on to lose the cases.

    Anyone else mystified by this?
    I know two permietractors who both engaged by a client I worked at. One had been 'employed' continuously by the client for 10 years. The second had been continuously 'employed' for 7 years. The second guy was still claiming travel expense through his company.

    I was at the same client for about 18 months and both were still there a further year after I left.

    These two were so much 'part and parcel' of the client organisation they each had an allocated on site parking space.

    Another permietractor at another client had been engaged continuously for 5 years when I started. I left after just over 6 months when the project was canned. He stayed on for another year in his same role.

    I know of a couple of permietractors working in the DWP offices near me. They have been in situ for 10 years. They always used to ask me 'why dont you stay in a contract for very long?'!

    Another contractor I know was effectively engaged by one client over a 10 year period although he did have breaks of a month or so every 3 or 4 years which nicely co incided with 'holidays.'

    The truth is there are many easy hit targets for HMRC but their selection criteria is like a lottery draw. To be fair, I dont think they can target one contractor who stays for years at a client from one who has frequent contracts.

    Some people say just because you're years at the same client doesnt mean you're caught. You either agree with them or you dont.

  5. #5

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    Default Easy enough to avoid...

    1 - Don't call your company "Joe Bloggs IT consulting services" or something similar, it's obvious but amazingly people do this.

    2 - Don't use SIC 62020 - Information Technology Consolutancy activities, there are PLENTY of other SIC codes which could be used legitimately instead.

    The vast majority of people I know have done both 1 and 2, bait.

  6. #6

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    Quote Originally Posted by splitbrain View Post
    1 - Don't call your company "Joe Bloggs IT consulting services" or something similar, it's obvious but amazingly people do this.
    Ah. How easy is it to change one's company name? Asking for a friend.

  7. #7

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    Quote Originally Posted by fiisch View Post
    Ah. How easy is it to change one's company name? Asking for a friend.
    Tell him to Google it.
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  8. #8

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    HMRC has a pattern in how it uses litigation in areas where there can be considerable scope for a Judge to blow off course an internal policy that has probably absorbed many hours of senior time and upon which a gong or two might be riding.

    They will pick some truly egregious cases - probably rising out of an enquiry into a tax return of an individual or a company - and try to engineer a Tribunal hearing. If the case really is hopeless, you would have to think that the adviser to the taxpayer would be saying "settle" but perhaps they don't for a variety of reasons.

    If such an egregious case gets to Tribunal and is lost (by the taxpayer), then that's a strike for HMRC and the beginning of a pattern. However, FTT decisions are not usually binding precedent.

    Therefore the next step is to find not only a case that they can win, but also one which attract a lot of publicity. A famous name, a lot of money at stake, an obvious attempt to cheat, etc are all good for this.

    We see elements of this in the Christa Ackroyd case. Lost at FTT and now going to UTT. Win or lose, a marker has been set and the message is out that no matter who you are, HMRC is coming for you.

    (In this instance, the BBC may well use licence payers money to settle, partly or fully, the tax bills of 800 or so people who were "forced" to use a PSC. I'm in two minds whether HMRC is happy about that or not.)

    This pattern has been used in the past - and has blown up in HMRC's face - but they persist.
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