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Taxed but not benefiting

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    #11
    Originally posted by webberg View Post
    There was no Winchester case.

    My understanding is that the lady at the centre of it, was prepared to go to an employment tribunal in order to enforce holiday pay entitlement. However the public service end client and/or the intermediary concerned decided to settle out of court. We have no idea why.

    Ms Winchester took that settlement and therefore there is was no case; no arguments rehearsed in court; no precedent set.

    As a consequence, in the event that case goes to Tribunal, there is no help from that source.
    I believe most commentators would say that there was an out of court settlement because HMRC, who were the client, could not afford to have any judgement which undermined their position. What's questionable is that those supporting the case claimed there was an important principle to establish, yet the appellant settled for what in reality was an insignificant amount. So much for establishing an important principle.

    Comment


      #12
      Originally posted by JohntheBike View Post

      I'm sure there have also been cases in the FTT where HMRC has tried to prove the opposite of what an individual contended, even outside of IR35. i.e. HMRC has tried to prove an employee relationship and vice versa.
      I don't understand this.

      A FTT hearing requires HMRC and the taxpayer to have opposing views. That is a function of how our legal system works and save a few rare instances, Courts will not hear a case in which the parties broadly agree and are just seeking clarification.

      If you are saying that are cases in which an individual has been taxed as equivalent to an employee but HMRC wants to place them outside IR35, I confess I have never read one.

      I can certainly imagine some circumstances in which this might be a means for HMRC to make the individual liable for tax rather than the employer, but there are plenty of rules in that space, certainly enough to make the uncertainty that such a case would create, otiose.
      Best Forum Adviser & Forum Personality of the Year 2018.

      (No, me neither).

      Comment


        #13
        Originally posted by webberg View Post
        I don't understand this.

        A FTT hearing requires HMRC and the taxpayer to have opposing views. That is a function of how our legal system works and save a few rare instances, Courts will not hear a case in which the parties broadly agree and are just seeking clarification.

        If you are saying that are cases in which an individual has been taxed as equivalent to an employee but HMRC wants to place them outside IR35, I confess I have never read one.

        I can certainly imagine some circumstances in which this might be a means for HMRC to make the individual liable for tax rather than the employer, but there are plenty of rules in that space, certainly enough to make the uncertainty that such a case would create, otiose.
        I believe there have been cases heard in the FTT, irrespective of and prior to IR35 where HMRC has tried to prove an employee relationship when the individual has claimed to be self employed, and also the reverse, i.e. the individual has claimed to be an employee and HMRC has tried to prove the reverse, i.e. they were self employed.

        Comment


          #14
          The way I see it is that the contractor is opting out of any possible employee benefits by way of a signed contract saying they are not an employee (a contract of service rather than a contract of employment) that allows them to receive a monetary value to offset such benefits.

          The unfairness in the current implementation of being inside IR35 is that there is no tax break given to the contractor to offset the lack of employee benefits in the remuneration. This may be because the remuneration also includes Employer NI so needs to be taxed to close that loophole as HMRC sees it. So to ensure the contract is fair the rate needs to be sufficiently high that the tax is taken into account allowing a net beneficial gain to the contractor over a similar employee, to offset the lack of employee benefits that the contractor could then arrange themselves if they wanted them.

          This is further compounded by there being no tax break on travel and accommodation where an employee in a similar geographic situation would likely receive some form of relocation expense, so again the rate needs to be high enough to compensate.
          Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.

          Comment


            #15
            Originally posted by Hobosapien View Post
            The way I see it is that the contractor is opting out of any possible employee benefits by way of a signed contract saying they are not an employee (a contract of service rather than a contract of employment) that allows them to receive a monetary value to offset such benefits.

            The unfairness in the current implementation of being inside IR35 is that there is no tax break given to the contractor to offset the lack of employee benefits in the remuneration. This may be because the remuneration also includes Employer NI so needs to be taxed to close that loophole as HMRC sees it. So to ensure the contract is fair the rate needs to be sufficiently high that the tax is taken into account allowing a net beneficial gain to the contractor over a similar employee, to offset the lack of employee benefits that the contractor could then arrange themselves if they wanted them.

            This is further compounded by there being no tax break on travel and accommodation where an employee in a similar geographic situation would likely receive some form of relocation expense, so again the rate needs to be high enough to compensate.
            The problem there is that we are talking about fairness, and the only fairness HMRC see is that contractors should pay the same tax as an employee would on the same income. HMRC is not concerned about employment benefits or the cost to the client.

            Comment


              #16
              Originally posted by webberg View Post
              There was no Winchester case.

              My understanding is that the lady at the centre of it, was prepared to go to an employment tribunal in order to enforce holiday pay entitlement. However the public service end client and/or the intermediary concerned decided to settle out of court. We have no idea why.

              Ms Winchester took that settlement and therefore there is was no case; no arguments rehearsed in court; no precedent set.

              As a consequence, in the event that case goes to Tribunal, there is no help from that source.
              Mea culpa, you are perfectly correct - although the conviction in some areas is that it was settled out of court purely to prevent her case going to tribunal and appeal.
              Blog? What blog...?

              Comment


                #17
                Originally posted by malvolio View Post
                Mea culpa, you are perfectly correct - although the conviction in some areas is that it was settled out of court purely to prevent her case going to tribunal and appeal.
                agree entirely. So this is what we need to watch for in the current crop of cases.

                Comment


                  #18
                  Originally posted by JohntheBike View Post
                  I believe most commentators would say that there was an out of court settlement because HMRC, who were the client, could not afford to have any judgement which undermined their position. What's questionable is that those supporting the case claimed there was an important principle to establish, yet the appellant settled for what in reality was an insignificant amount. So much for establishing an important principle.
                  And I'm sure those commentators have their own reasons for making up a reason the end client/intermediary settled. Regardless of those reasons and their views - there is no case.

                  This thread is meant to explore possibilities and directions that the IR35 package might take us. It is therefore speculative in looking forward.

                  However, where there are known facts, we should judge and weigh them and use them as a base for that speculation.

                  If we start off with "Well, the Winchester case decided ...." when there is no case, any proposed outcome is ill founded.

                  Commentators (including me) are adept at identifying confirmatory statements and positions in situations that have a degree of uncertainty about them. We all do it. I think here though we need to be dealing in real politik and not some world that we have imagined into being.
                  Best Forum Adviser & Forum Personality of the Year 2018.

                  (No, me neither).

                  Comment


                    #19
                    There is also the question of expenses. Inside IR35 you can no longer claim travel and subsistence outside you obviously can still claim. An employee will typically have travel and subsistence covered by their employer under a fixed term contract T&S should be paid for by the client, inside ir35 who knows?

                    Pension contributions made by the company are tax efficient for those employed and outside ir35 but inside ir35 no longer an option to make; worse still the pension contribution for an inside ir35 worker now as to be made after employer NI deductions!

                    So the question begs why on earth would you take an inside ir35 contract especially when T&S and pension contributions are involved.
                    Make Mercia Great Again!

                    Comment


                      #20
                      Originally posted by JohntheBike View Post
                      I believe there have been cases heard in the FTT, irrespective of and prior to IR35 where HMRC has tried to prove an employee relationship when the individual has claimed to be self employed, and also the reverse, i.e. the individual has claimed to be an employee and HMRC has tried to prove the reverse, i.e. they were self employed.
                      There have certainly been cases exploring the boundary between employed and self employed and some of these go back to the late 1800's.

                      All of those I have read seek to show that the individual was an employee.

                      I am not aware of any case in which somebody being subjected to tax via what would have been pre IR35, Schedule E, was claimed by HMRC to be self employed (Schedule D).

                      If you can point to such a case, I'll gladly read it.
                      Best Forum Adviser & Forum Personality of the Year 2018.

                      (No, me neither).

                      Comment

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