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Supply of services with no named workers always outside IR35?

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    Supply of services with no named workers always outside IR35?

    The proposed off-payroll rules would amend Chapter 8 of the Income Tax (Earnings and Pensions) Act 2003 with effect from 6th April 2020. Within Chapter 8, Section 49 states “Engagements to which this Chapter applies (1) This Chapter applies where — (a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person] (“the client”)”.

    I assume that, where the legislation states "personally performs", this doesn't mean a human person as opposed to for example a cat or dog, but means a specific person as opposed to a company. Therefore the legislation, even after the proposed amendments, does not appear to apply where a company (as opposed to an individual worker) performs services for another person. If the contract for the performance of services does not name or specify an individual worker and instead names only the company that will perform the services (as is common for example with a plumbing company or a photocopier maintenance company), then would the engagement not always fall outside the scope of the legislation?

    Some people perceive that a scenario where a supplying company uses unspecified consultants to perform the services creates a risk for the client, but this is not the case. Clients, particularly banks, will have screening procedures before any of the supplying company’s consultants can gain access to the client’s buildings or systems. There is often a lead time of around one month for such screening, which conveniently matches the typical notice period for termination of the services. Therefore a client in practice can retain control over who accesses its buildings and systems, even if the contract does not name any individuals. Right of substitution becomes a moot point because there is no named worker to substitute.

    Therefore why are end-clients not moving towards hiring named companies instead of hiring named individuals? This would get around all the problems of IR35.

    #2
    don't know.
    next.

    Comment


      #3
      Oh no. I wish we'd thought about this back in 2000 when IR35 was the liability of the contractor. How much worry we would have avoided.

      For the hard of thinking:
      1. HMRC look at who is doing the work
      2. They spot you're the only employee
      3. They decide that it is clear that whether you're named or not is immaterial - it's you.
      4. They look carefully at all the contracts involved in the chain between the worker (you) and the end client, and decide whether it is is contract for service or a contract of service.
      5. If they decide that it is a contract of service, then the end client is liable.
      6. The end client says **** if, too risky. We'll only take on people who work via a brolly.
      Down with racism. Long live miscegenation!

      Comment


        #4
        Originally posted by NotAllThere View Post
        Oh no. I wish we'd thought about this back in 2000 when IR35 was the liability of the contractor. How much worry we would have avoided.
        For the hard of thinking:
        1. HMRC look at who is...
        Hello. How HMRC operates is reasonably clear.
        The original post, however, was about the text of the law and its proper interpretation. I think NFH is on to something, and is correct to bring attention to the wording, especially:

        (a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person] (“the client”)”.


        The wording appears to indicate that the law applies only when it's a specifically designated individual supplying the service. Especially the second part: "under an *obligation* personally to perform." A contract between a large bank (a client) and limited company (the supplier) would establish no personal obligation whatsoever (in the normal senses of the word "personal"), unless there was a named individual in the contract.

        Other possible interpretations:
        1) in the US Tax code, the term "a person" can mean an individual as well as a legal entity. Perhaps it is used in the same fashion in the quoted legislation? (although this would be rather odd, to mix it in such a way for this particular legislation that's aimed at individuals, as that would only confuse matters greatly).
        2) maybe "personally performs" is meant in the sense of "supplies personal services"? One would need to look at other, similar, legislation for the comparable wordings. If what is meant here is the supply of personal services (consulting, repairs, etc), then whether it's supplied by a company or not, is possibly beside the point.

        Comment


          #5
          Brilliant!

          Hint: IR35 establishes a hypothetical contract between you (a person) and the end client. Does that hypothetical contract point to the type of service redolent of employment? For example, if you have a not unreasonably fettered right to substitute you-person for a-n-other person, that points away from you-personal service.

          The intermediaries legislation isn't some clever ploy to distinguish between services delivered by people and, say, AI; it is designed to look through intermediaries to the reality

          Comment


            #6
            Originally posted by NotAllThere View Post
            Oh no. I wish we'd thought about this back in 2000 when IR35 was the liability of the contractor. How much worry we would have avoided.
            Clearly you are indeed NotAllThere. The Income Tax (Earnings and Pensions) Act 2003, from which I quoted, did not even exist in 2000. The clue is in the name of the legislation, and many parts of it have been added by amending legislation since 2003. Your comments are totally irrelevant, even if meant sarcastically.

            The question in this thread is the wording of the legislation that would apply if the proposed changes, which have not been enacted, are implemented with effect from 6th April 2020. There appears to be no obligation on an end-client to deduct PAYE etc unless "an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person] (“the client”)”. If a company is supplying services to another company without any resources being named or specified, then a reasonable person would not interpret that any service is being personally performed. Otherwise no large business could even use the services of a plumbing company to fix broken pipes without having to make a case-by-case assessment whether to deduct PAYE from each plumber who fixes the pipes.

            Originally posted by NotAllThere View Post
            For the hard of thinking:
            2. They spot you're the only employee
            Maybe that's how you personally work, but some of us are genuinely in business with multiple employees and being hit equally by these proposed changes. Clients will no longer engage us as a company and instead want our employees to become employees of some umbrella, putting us out of business. It is killing genuine small consultancies as well as one-man-band personal service companies like you.

            Comment


              #7
              Originally posted by NFH View Post
              Clearly you are indeed NotAllThere. The Income Tax (Earnings and Pensions) Act 2003, from which I quoted, did not even exist in 2000. The clue is in the name of the legislation, and many parts of it have been added by amending legislation since 2003. Your comments are totally irrelevant, even if meant sarcastically.

              The question in this thread is the wording of the legislation that would apply if the proposed changes, which have not been enacted, are implemented with effect from 6th April 2020. There appears to be no obligation on an end-client to deduct PAYE etc unless "an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person] (“the client”)”. If a company is supplying services to another company without any resources being named or specified, then a reasonable person would not interpret that any service is being personally performed. Otherwise no large business could even use the services of a plumbing company to fix broken pipes without having to make a case-by-case assessment whether to deduct PAYE from each plumber who fixes the pipes.


              Maybe that's how you personally work, but some of us are genuinely in business with multiple employees and being hit equally by these proposed changes. Clients will no longer engage us as a company and instead want our employees to become employees of some umbrella, putting us out of business. It is killing genuine small consultancies as well as one-man-band personal service companies like you.
              If you are a genuine small consultancy and not a one-man-band then I can’t see how it can put you out of business, as you are excluded from the new IR35 regs.
              "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
              - Voltaire/Benjamin Franklin/Anne Frank...

              Comment


                #8
                Originally posted by NFH View Post
                Clients will no longer engage us as a company and instead want our employees to become employees of some umbrella, putting us out of business.
                I could be wrong, but that doesn't sound like a proper consultancy. Sounds like you're providing bums on seats, and the clients are saying we want to make sure these girls/guys are on a payroll come April.

                Comment


                  #9
                  Originally posted by cojak View Post
                  If you are a genuine small consultancy and not a one-man-band then I can’t see how it can put you out of business, as you are excluded from the new IR35 regs.
                  We are in theory excluded, but the large banks are refusing to engage engage any small consultancies, even outside IR35, as a result of the proposed legislation, which has not even been enacted. They insist that our employees become employees of an umbrella. The proposed legislation was not intended to affect genuine businesses like ours that operate outside IR35, but it is destroying our business because of the negligent way that the government plans to implement the new rules, creating an unreasonable burden on our clients.

                  But anyway, this is getting off-topic.

                  Comment


                    #10
                    Originally posted by NFH View Post
                    Maybe that's how you personally work, but some of us are genuinely in business with multiple employees and being hit equally by these proposed changes. Clients will no longer engage us as a company and instead want our employees to become employees of some umbrella, putting us out of business. It is killing genuine small consultancies as well as one-man-band personal service companies like you.
                    Originally posted by cojak View Post
                    If you are a genuine small consultancy and not a one-man-band then I can’t see how it can put you out of business, as you are excluded from the new IR35 regs.
                    As Cojak says if they are genuinely your employees. And you are providing a service to the client then there is no worry for you.
                    If the clients are insisting that your 'employees' work via an agency then the client disagrees with your assertion. That suggests you're just body shopping them in. The big consultancies will have this problem where they are a body shop as well.


                    Additionally..... If they are your employees then PAYE is already being paid by you so no umbrella is required as that's what you already do. What is it about your situation that the client won't allow you to be the umbrella?

                    There is something missing to your story.... Or are your 'employees' contractors?
                    See You Next Tuesday

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