My story, and how it's relavent to recent IR35 determinations and corporate scapegoat My story, and how it's relavent to recent IR35 determinations and corporate scapegoat
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  1. #1

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    Lightbulb My story, and how it's relevant to recent IR35 determinations and corporate scapegoat

    This post is mostly a reply to OP in #1 and relevant to the sticky in #2. I feel my response (to OP #1.) deserves it's own thread for discussion due to the effort that went into writing it. I will inform the OP (#1) of this reply once after it's been approved by the admins (I'm a new member)

    #1. Inside IR35 Determination Response (Inside IR35 determination response - by @geefrew)

    #2. IR35: Planning for April 2020 – should I stay or should I go? (Should I stay or should I go) (Sticky)
    UPDATE (19 Feb 2020): I apologise for the confusion: the link in #1. was completely wrong and pointed to an HMRC page not relevant to this post/response. I've now updated the link to correctly point to the thread/question asked by @geefrew.

    My Story:

    You need to make sure you UNDERSTAND the consequences of signing any letter from your client in relation to their IR35 determination of your position and also investigate the possibility of their being an ulterior motive behind the determination. Most people, all to often, sign contract for service or services blindly for a fear or losing the opportunity. If there is one thing I've learned in my 22 years of employment and contracting is that employees/contractors make decisions based on good faith largely due to the master/servant doctrine that’s been instilled in most of us. However, most corporations irrespective of their size hardly EVER act in good faith and in most cases their actions will be limited to the bare minimum as required by statue. Their actions become more scrupulous when it involves possible litigation or monetary loss at which point they have only their own interest at heart and couldn’t give less about the employee/contractor. As such, it’s important to carefully observe the actions and/or motives of these corporations during interesting times, such as the IR35 reform.

    As mentioned in the “IR35: Planning for April 2020 – should I stay or should I go?” sticky...if all previous contracts/extensions with your client had expressed terms which are generally considered to be on par with that of an independent contractor and the reality of the working relationship is a reflection of that, then having your client make a determination of inside IR35 and asking you to sign and confirm such a determination could have serious consequences as an inference could be made that your position was inside IR35 all along. By signing their letter of determination you expressly accept and agree (without them having to spell it out) that you've been an off-payroll (“disguised”) employee. As many have warned already, a sudden change of status with the same client could have serious implications as this could trigger a HMRC investigation and in the event that you signed a letter of determination (inside IR35) you would have little defense against this. Of-course you could claim Vi Coactus (V.C.) as long as you have the goods to back it up (real proof that you are an independent contractor).

    Scenario 1:

    If you accept their determination that your position falls inside IR35 and you’ve not been with the client for that long, i.e: you’ve signed an initial 6 months contract for services and you're already 4 months into the contract then accepting your client’s determination of inside IR35 would pose little risk as it’s unlikely that HMRC would bother chasing you for what could only be 4 months of unpaid NI, assuming you made no such payments and had no previous contracts that could increase the recovery amount. In this case it would make sense to accept their determination and thereby securing an a new contract with your client.

    Scenario 2:

    If you accept their determination that your position falls inside IR35 after having already provided your services to the client for many years under numerous contracts/extensions then acceptance of this could be suicide! Not only do you open yourself up to accepting full liability for unpaid NI during previous years with the client but possibly forfeit whatever rights you may have acquired (unknowingly) under the Employment Rights Act 1996 and Equality Act 2010.

    UPDATE (19 Feb 2020): It seems that the above paragraph is open to misinterpretation and could be seen as contradicting. So allow me to elaborate and provide an example of what I meant: By accepting the determination of inside IR35 in the scenario above you not only accept the status of being a disguised employee for PAYE purposes but also likely to reduce your chances of successfully bringing any claims in the employment tribunal (where determinations on based on finding of fact, NOT law). A signed determination (inside IR35) letter could be used by the client should you ever come to realise that the true nature of your engagement with the client was that of employer/employee. There exists a distinct line between IR35 status for tax purposes and the effect of this on employment status. The two are very different nonetheless inferences have been drawn in the past by solicitors acting on behalf of respondents and this could paint a different picture of you to the tribunal despite it having little bearing in relation to employment rights law.
    If you DO NOT accept their determination and as a result you are forced to leave then it’s possible to bring a number of claims in the employment tribunal (based on acquired employments rights over time) or county court (breach of contract). For example: If you’ve been with the client for more than 4 years and you can prove to the employment tribunal that the true nature of the engagement was that of employer/employee or master/slave contrary to that expressed in the contract of services (i.e: independent contractor) then such a finding of fact will take precedence over what is expressed or implied terms in your contract. If you secure worker status (you need 4 years continuous) or employee status (2 years continuous) to bring a claim for unfair dismissal (or whatever claims may apply). Should you win then possible compensation could easily exceed £100,000 depending on your situation, taking into account such things as calculated future income loss/detriment/discrimination etc..

    UPDATE (19 Feb 2020): Again, the above paragraph is being misinterpreted. Allow me to clarify: You are 30 years old. A recruitment company calls you up, successfully introducing you to their client who now mandates that you contract with the recruitment company via a limited company, despite you requesting PAYE with the recruitment business (which would have afforded you worker rights). Four years later, February 2020 and your client hands you a letter of determination that your position is inside IR35. You are not surprised by the finding as the client did not treat you any different to it's own employees. You were subjected to full control, had no independence and were even called in for a "chat" when you tried to exercise your obligations under the contract as an independent contractor by sometimes "ASKING to work from home" or arriving 30min "late" in the morning.

    Those who wrongly perceive what I meant are most likely those who would be found genuinely guilty if properly investigated. These are the individuals who are trying to get away with something. You are very different to the person being described in the example above. The person in the example above never wanted independence granted by being a TRUE independent contractor, did not want to operate a limited company, and was 100% of the time subjected to full control as a full time employee. In this case, why should such a person accept possible liability by signing an inside IR35 determination letter? NO! Such a person should refuse to sign and rather claim employee status, which is what he/she was all along. If successful, the client would be liable for all unpaid NI to date and can request to join as full time employee or walk away with compensation and go and find another master who is less sly in it's operations.
    Scenario 3:

    Refute their determination of inside IR35 and do not sign anything! You should strongly advocate for yourself that you consider yourself to be an independent contractor working outside IR35 and that you request a copy of their findings that highlight the factors that that taken under consideration that resulted in the determination of inside IR35. I guarantee you that most of those factors were as a result of the client’s conduct and not yours. For example, the amount of control they imposed on you and the general fear and mentality of not being extended should you not consent to your control over you as if you were an employee.

    It’s simple – you either insist that you are outside IR35 and highlight the fact that you wish to be treated as such. If you state your rights as above and they continue to treat you as an employee then they are likely to repudiate the contract resulting in a constructive dismissal.

    As you can see...the case before us is not that simple! The nature behind these determination letters could be very sinister (and most likely are). BE VERY careful.

    PS: As a litigant in person, I was successful in securing worker status after being used for 4.5 years by a very well known corporation under the false pretense that I was an independent contractor. And NO, there was nothing in it for me and I do not accept the misconception that most contractors preach (“oh but you earned more money as a contractor”). I wanted to be an employee from day 1; I was forced to contract through a limited company; I only ever worked for this particular client; my take home net pay was on par with full time employment salaries.

    Employment Claims without a Lawyer: A Handbook for Litigants in Person: Amazon.co.uk: David Curwen: 9780993583681: Books (Amazon: Employment Claims without a Lawyer)

    The book above was my lifeline.
    Last edited by phillyleads; 19th February 2020 at 22:05. Reason: correct grammer and spelling. Added clarification updates where needed.

  2. #2

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    Hmmm.... Have you been talking to JtB?

    And if your "client" has decided not to use PSC contractors for their own reasons and so hasn't made a determination of any kind...?

    And your basic premise is wrong. Most contractors in my fairly wide experience don't want to be employees of any kind. It's not about rights - I get all the ones I need from my own company, thanks - but the freedom from being someone's servant.

    And the money argument doesn't stand up either, since most roles work out at much the same net take home these days when you get to the bottom line and the fact we don't routinely work 12 months a year.

    And finally, we have been saying very loudly hat your new permanent/umbrella/agency temp/whatever contract needs to be as far away as possible from your previous freelance one. Anyone who simply changes status without a completely new contract is a fool.
    Blog? What blog...?

  3. #3

    My post count is Majestic

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    Tried to read twice. Gave up both times. Anyone care to summarise?
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  4. #4

    Contractor Among Contractors

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    Quote Originally Posted by northernladuk View Post
    Tried to read twice. Gave up both times. Anyone care to summarise?
    JTB brother thinks most clients are determining IR35 status, while most on here know that’s about 2-3%, (the rest are blanket banning PSC) and that 2-3% will soon reduce when they realize the liability is on them.




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  5. #5

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    Quote Originally Posted by northernladuk View Post
    Tried to read twice. Gave up both times. Anyone care to summarise?
    Try this: -

    Quote Originally Posted by phillyleads View Post
    If you DO NOT accept their determination, and as a result you are forced to leave, then it’s possible to bring various claims in the county court of employment tribunal.
    So client says you are an employee. You say you are not an employee. So you sue for employee rights.....

    Now try this bit: -
    Quote Originally Posted by phillyleads View Post
    employees/contractors make decisions based on good faith largely because due to master/servant doctrine that’s been instilled in most of us.
    I sort of agree. But the master here is HMRC. The fight against here is against HMRC. That was lost when retrospection came in.
    Fight HMRC now! Help sue HMRC individual officers/government ministers for malfeasance in office. Visit https://www.loanchargejustice.com/ and scroll to the bottom of the page to donate.

  6. #6

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    Quote Originally Posted by phillyleads View Post

    Scenario 2:

    If you accept their determination that your position falls inside IR35 and you’ve been providing services for the client for many years over many contracts and extensions, then accepting such a determination would be suicide! Not only do you open yourself up to full liability should HMRC decide to pick on you, but possible also forfeit rights under the Employment Rights Act 1996 and Equality Act 2010 that may arise as a result of this determination.

    If you DO NOT accept their determination, and as a result you are forced to leave, then it’s possible to bring various claims in the county court of employment tribunal. For example: If you’ve been with the client for more than 4 years, and you can prove to the employment tribunal that the true nature of the engagement was that of employer/employee or master/slave and not independent contractor then such a finding will take precedence over what is expressed or implied terms in your contract. If you secure worker status (you need 4 years continuous) or employee status (2 years continuous) then you can easily bring a claim for unfair dismissal and should you win, could result in a payout of over 100,000.
    So what you are saying is that if found inside, you can take them to the county court and receive over 100,000 (I'm guessing pounds) which you will then pay to HMRC after the investigation for having been found inside? So as well as collecting VAT for HMRC, you are suggesting contractors collect 'lost' employers NI too - in a roundabout way?

    In all seriousness though - I understand what you were saying. It seems you were forced to incorporate and this is exactly what the IR35 regulations are about - to prevent employers taking advantage of their staff by avoiding NICs.

    Most professional contractors are not in this position. They go into contracting with their eyes open, wanting to provide professional services to clients, very much under a contract for services basis. They are happy to forego the 'employment' perks for running their own lives.

  7. #7

    Some things in Moderation

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    Quote Originally Posted by pacontracting View Post
    So what you are saying is that if found inside, you can take them to the county court and receive over 100,000 (I'm guessing pounds) which you will then pay to HMRC after the investigation for having been found inside? So as well as collecting VAT for HMRC, you are suggesting contractors collect 'lost' employers NI too - in a roundabout way?

    In all seriousness though - I understand what you were saying. It seems you were forced to incorporate and this is exactly what the IR35 regulations are about - to prevent employers taking advantage of their staff by avoiding NICs.

    Most professional contractors are not in this position. They go into contracting with their eyes open, wanting to provide professional services to clients, very much under a contract for services basis. They are happy to forego the 'employment' perks for running their own lives.
    Yep, that’s how I read it too PAC.

    The OP should have read this first... Forced into contracting? Read this first.

    (Although I appreciate that he doesn’t sound like a minimum wage kind of guy.)
    "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."
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  8. #8

    Some things in Moderation

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    Quote Originally Posted by phillyleads View Post
    This post is largly in reply to the OP in #1 and relavent to the sticky in #2. I feel it's deserves it's own thread for discussion due to the effort that went into it. I will inform the OP from the 2nd link that he/she can see my reply here.



    My Story:

    You need to make sure you UNDERSTAND the motive of your client and their determination. Most people, all to often, allow themselves to fall into traps as a result of fear. If there is one thing that I have learned in my 22 years of employment and contracting, is that employees/contractors make decisions based on good faith largely because due to master/servant doctrine that’s been instilled in most of us. However, Corporations NEVER act in good faith and in most cases their actions will be limited to the bare minimum as required by statue. Their actions become more scrupulous when it involves possible litigation or monetary loss, at which point they have only their own interest at heart and couldn’t give less about the employee/contractor. As such, it’s important to carefully observe the actions and motives of companies or corporations during troubled times (private sector IR35 reform)

    As mentioned in the “IR35: Planning for April 2020 – should I stay or should I go?” sticky...if all your previous and current contract with the client had expressed terms in the contract that services are provided “outside IR35” and your client determines that your current position falls within IR35, then you need to be VERY careful how you proceed as such a determination would suggest that you’ve been in IR35 all along. By accepting this determination you expressly agree that your position is that of a “disguised employee”, and this could have serious implications should you want to defend against this finding in the future (defending against HMRC NI recovery whereby your defence is that you were outside IR35)

    It is VERY IMPORTANT to note that there is a distinct difference between having your IR35 status determined for HMRC tax purposes and having your employment status determined for employment rights purposes. The importance of this cannot be overstated!

    Scenario 1:

    If you accept their determination that your position falls inside IR35 and you’ve not been with the client for that long, i.e: you’ve signed an initial 6 months contract for services the contract is now in it’s 4th month of maturity, then accepting the client’s determination that your position is inside IR35 wouldn’t pose much risk as it’s unlikely that HMRC would bother with any recovery. In this case it would make sense to accept the determination and thereby securing an extension.

    Scenario 2:

    If you accept their determination that your position falls inside IR35 and you’ve been providing services for the client for many years over many contracts and extensions, then accepting such a determination would be suicide! Not only do you open yourself up to full liability should HMRC decide to pick on you, but possible also forfeit rights under the Employment Rights Act 1996 and Equality Act 2010 that may arise as a result of this determination.

    If you DO NOT accept their determination, and as a result you are forced to leave, then it’s possible to bring various claims in the county court of employment tribunal. For example: If you’ve been with the client for more than 4 years, and you can prove to the employment tribunal that the true nature of the engagement was that of employer/employee or master/slave and not independent contractor then such a finding will take precedence over what is expressed or implied terms in your contract. If you secure worker status (you need 4 years continuous) or employee status (2 years continuous) then you can easily bring a claim for unfair dismissal and should you win, could result in a payout of over 100,000.

    Scenario 3:

    Refute their determination of inside IR35 and do not sign anything! You should strongly advocate for yourself that you consider yourself to be an independent contractor working outside IR35 and that you request a copy of their findings that highlight the factors that that taken under consideration that resulted in the determination of inside IR35. I guarantee you that most of those factors were as a result of the client’s conduct and not yours. For example, the amount of control they imposed on you and the general fear and mentality of not being extended should you not consent to your control over you as if you were an employee.

    It’s simple – you either insist that you are outside IR35 and highlight the fact that you are an independent contractor and that you wish to be treated as such (using your own hardware, own email address, not attention downhill meetings, year end functions, working from home on your own terms without being ridiculed). If you state your rights as above, and they continue to treat you as an employee then they will repudiate the contract which entitles you to constructive dismissal (and if you combine this with equality act or a PART 10 then it’s automatically unfair dismissal, meaning there is no minimum continuous employment period required in order to bring a claim).

    As you can see….BE careful and make the decide on what is most beneficial to you but also to what is true of the nature of the relationship.

    PS: As a litigant in person, I was successful in securing worker status after being used for 4.5 years by a very well known corporation under the false pretence that I was an independent contractor. And NO, there was nothing in it for me and I do not accept the misconception that most contractors preach (“oh but you earned more money as a contractor”). I wanted to be an employee from day 1; I was forced to contract through a limited company; I only ever worked for this particular client; my take home net pay was on par with full time employment salaries; the client benefitted enormously from my service; they had no reason for not extending and the reason behind it was shown to be strategic as to void me of possible rights that may arise due to my long service;

    Employment Claims without a Lawyer: A Handbook for Litigants in Person: Amazon.co.uk: David Curwen: 9780993583681: Books

    The book above was a lifesaver and I think every employee and IT contractor should read it as it gives you an appreciation of the rights that are afforded to you as an employee, and a wakeup call for IT contractors who take for granted what they forfeit in return for a “false sense of freedom” which 90% of the gig-economy clients hiring IT contractors exploits. You gave up your rights so that you may work freely and in turn the corporation benefits as they have less liability and obligations towards you…but THEY can’t have both while you have none! (as is the case in 90% of gig-economy contractor engagements)
    We are genuinely sorry for your situation OP, but we aren’t your audience, you want to be showing this to your MP.
    "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."
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  9. #9

    bored now

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    Quote Originally Posted by cojak View Post
    We are genuinely sorry for your situation OP, but we aren’t your audience, you want to be showing this to your MP.
    It's a blooming long winded way to say:-

    1) If you've been working in a place for a long time leave if they decide you are inside IR35

    2) Employment tribunals may give you a means of recovering any tax HMRC seek but I suspect that will cost a lot more money than the OP expects (that £100,000 is a sum of millions when others could use the same case law you are trying to create). You really will need someone (a union say) to back you up as such a case would be appealed to the Supreme court..
    merely at clientco for the entertainment

  10. #10

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    If you were forced to incorporate, and earned no more than a perm employee, why did you stay there? We’re there no other roles available at other companies?

    Sorry for your situation but I can’t get my head around how you could end up in a situation where you have to start consider tribunals etc. Why not leave for a better situation on another companies payroll?

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