IR35 reforms could put contractors at risk of 'second wave' of loan charge bills

[cojak]

There is a third point here that I've so far forgot to mention:-

A contract outside IR35 is a business to business relationship. In a court of law the judge will expect both businesses to have do due diligence such as confirming the terms of engagement.

A contract inside IR35 is a business to employee relationship. As with all consumer legislation it is up to the business to ensure the employee knows what is expected of them.

Now the above didn't matter when IR35 was a personal decision - now that is no longer the case (and the business determines the type of relationship) the agency / contractor relationship is very different and I don't think many agencies will grasp that immediately. I suspect we will eventually see court cases where agencies can be shown not to have taken appropriate care when recommending an umbrella and get held liable for all costs.

Ooh, now that's a good point.

I can see clauses in contracts appearing were they will try to wriggle out of that.

[eek]

Ooh, now that's a good point.

I can see clauses in contracts appearing were they will try to wriggle out of that.

I'm sure agencies will try to add such clauses but remember this is consumer legislation - a clause won't be enough - it would need to be a full on paper trial...

[Paralytic]

The point is HMRC won't send things in writing because well - it's their get out clause.

Exactly, which is why I was wondering what cojak was referring to when he said "HMRC approved in writing."

They especially won't put anything useful on their website - for instance they now say be careful when choosing an umbrella company (heck that took them 18 years to put on the website) but they still don't say on that page what you should look for nor how to look for it.

I'm not one to defend HMRC, but I'm not sure it is their responsibility to advise people on what to look out for.

[Paralytic]

There is a third point here that I've so far forgot to mention:-

A contract outside IR35 is a business to business relationship. In a court of law the judge will expect both businesses to have do due diligence such as confirming the terms of engagement.

A contract inside IR35 is a business to employee relationship. As with all consumer legislation it is up to the business to ensure the employee knows what is expected of them.

Now the above didn't matter when IR35 was a personal decision - now that is no longer the case (and the business determines the type of relationship) the agency / contractor relationship is very different and I don't think many agencies will grasp that immediately. I suspect we will eventually see court cases where agencies can be shown not to have taken appropriate care when recommending an umbrella and get held liable for all costs.

Would this not also be the case for people going via Umbrella because their client will no longer engage with PSCs? So, not just inside IR35 determinations, but anyone that goes via an Umbrella?

Assuming so, why would this scenario not exist today?

[simes]

I'm not one to defend HMRC, but I'm not sure it is their responsibility to advise people on what to look out for.

Agreed, but;

It seems to be their form to be just vague enough to allow everyone to swim in, and then to later clean them up with the enforcing of retrospectively launched law.

However, disappointment aside, if they have asked for all Tax Avoidance schemes to be sent into the HMRC for approval prior to use, then perhaps the same could be done for Umbrellas...?

[eek]

Would this not also be the case for people going via Umbrella because their client will no longer engage with PSCs? So, not just inside IR35 determinations, but anyone that goes via an Umbrella?

Assuming so, why would this scenario not exist today?

In that circumstance it's true today - the contract on offer is not (as it cannot be) a business to business relationship and so should be being treated as a business to employee / consumer relationship.

It's why I'm paying close attention to what Unison and Community TC are doing as they are far better advised in this area than anyone else.

[eek]

Agreed, but;

It seems to be their form to be just vague enough to allow everyone to swim in, and then to later clean them up with the enforcing of retrospectively launched law.

However, disappointment aside, if they have asked for all Tax Avoidance schemes to be sent into the HMRC for approval prior to use, then perhaps the same could be done for Umbrellas...?

Technically any umbrella not working under PAYE should be registered as a Tax Avoidance scheme but from memory most schemes no longer register.

[simes]

Technically any umbrella not working under PAYE should be registered as a Tax Avoidance scheme but from memory most schemes no longer register.

How comforting!

[ComplianceLady]

Umbrella regulation is supposed to be coming in from next year but as far as I'm aware it just means them falling under the Conduct Regs, not sure how much it will actually improve things and there are rumblings it will be delayed.

I'm surprised how little sympathy there is for contractors caught up by schemes dressed up as umbrellas, I get approached by them regularly and as it's been my job for a long time find it relatively easy to determine legitimacy but I'm not sure the same could be said for most contractors - their specialism is whatever services they deliver, not sufficient due diligence on engagement types.

The number of schemes popping up and the sales pitches are definitely concerning to me and I think it's inevitable some will be caught up in that. It also makes life difficult for Agencies, you want an ASL to protect the Agency and the Contractor (and Client) but it can be restrictive and create liability.

[cojak]

Exactly, which is why I was wondering what cojak was referring to when he said "HMRC approved in writing."



I'm not one to defend HMRC, but I'm not sure it is their responsibility to advise people on what to look out for.

I said that sarcastically because you won't get it, as it could be used as evidence against the promoter.

They'll lie through their teeth over the phone.