IR35 - Back to first principles....

[jamesbrown]

Is it even needed? I think SDC and a project-driven test would suffice, and they would cover much overlapping territory anyway.

Possibly not. The last thing we want to do is over-complicate things. OTOH, it would be nice to outline and justify as many clear-cut cases of being outside as we possibly can (including relatively simple criteria that move beyond SDC, without arriving back at IR35 as currently formulated), because the removal of MoO and RoS as considerations will also impact many legitimate contractors.

Well, the party that is the "friend" of small business and allegedly pro-free markets (we know their actual track record in these areas, but nevermind that) could always opt to make it one of the most business-friendly countries in the Anglo-saxon world for freelancers...

Yep. Rank and file politicians are generally good people IMO, but the leaders of all parties are unwavering pragmatists when they smell power and the Tory leadership saw an opportunity to occupy the centre ground (drawn with some space each way), forever removing Labour from the picture. It's New Labour Tory.

[Zero Liability]

How do you envision that a P&P test would achieve that? My worry is that it could end up becoming another case of he said/she said and this is already a case of introducing quite a lot of complexity to this area. Beyond that, by establishing a test that can relate a contract role to a definable, finite project and its budget, you've already gone quite some way to distinguish resource the client engages with a view to completing that project and its employees which it requires for enduring functions where it doesn't envision an expiry date. Even if a contractor goes from one project to the next, these are discrete in nature and relate to genuine business needs of the client; and this is consistent, anyway, with how businesses interact with suppliers that do a good job. So I think this is an excellent test in that respect, and better than arbitrary metrics like time spent at a client, multiple clients, % of business from 1 client etc.

Ultimately, all this is making the best of a bad situation. One thing the government is going to have to get to grips with is that, however unscrupulous some of these employers at the lower paid end may be, employment is costly. Come the next crisis, when cost-reduction really becomes a priority again, some of these people whom it now wishes to migrate to PAYE may simply not be employable at that cost; this may even be the case now but I think Gideon is throwing in some sweeteners to blunt the effect of that, as he did with the "living wage". That goes beyond the scope of either the IR35 discussion document or T&S consultation but what I am getting at is that longer term they will have to take some tough decisions and look to merging PAYE/NIC, rather than falling back on stopgap measures like these, which may be fine in the interim to prevent a race to the bottom but which still don't solve the root of the problem (which may also relate to low productivity levels, a broader economic issue).

[Contreras]

The two unfair dismissal cases I remember went to the appeal courts. The legal arguments where on SDC, MOO and the meaning of "service".

The discrimination cases are often more clear cut in this regard.

Doesn't that demonstrate a potential downside for clients judging everyone under SDC by default?

And if they judge workers not to be under SDC then they had better be sure this is reflected in reality (and no MoO either) or risk suffering penalties for mis-reporting?

It becomes a different matter when you are asked to indemnify the other parties in the chain...

Yes. Which in part is why I believe potential employment claims are the greatest concern for clients. Statutory rights cannot be so easily dismissed.

[SueEllen]

Doesn't that demonstrate a potential downside for clients judging everyone under SDC by default?

And if they judge workers not to be under SDC then they had better be sure this is reflected in reality (and no MoO either) or risk suffering penalties for mis-reporting?

Yes.

However the law does not align tax status, employment status and H&S status. If we worked out criteria that would work so the first two are aligned it would help us and those at the low pay end.

Though I can see care companies/agencies getting round everything e.g. unlike now all would ensure the same carers(s) cared for the same individual at the same time per day rather than just the better companies, the carers would only be employed part-time on specific days/hours forcing them to use other agencies to get a living wage, etc.

[LisaContractorUmbrella]

This case might be relevant FTT agrees no control over agency workers | Gabelle LLP Tax Consultants. Could IR35 be determined according to whether or not the services that are provided are not the services that the client themselves provide? If you provide IT services to a bank you are offering a service which is not integral to their business and therefore you shouldn't be considered a deemed employee. Whereas if you provided financial analysis of some sort you would be doing something that's integral to the business.

Not perfect I know but might have some merit?

[WordIsBond]

What's the alternative?

Well, you could institute a dividend tax to discourage tax-motivated incorporation, thus narrowing significantly the gap between employment and self-employment taxation. Then, for one-man bands, you could remove the employment allowance (since it is intended to encourage employment, not be a nice bonus for one-man bands. And then, you could simply STOP since you've done enough.

But if you really, really need to do more, narrow the gap further between employment and non-employment taxes. That is simple and eliminates the need to establish somewhat arbitrary distinctions between what is and isn't employment for tax purposes.

[jamesbrown]

How do you envision that a P&P test would achieve that? My worry is that it could end up becoming another case of he said/she said and this is already a case of introducing quite a lot of complexity to this area. Beyond that, by establishing a test that can relate a contract role to a definable, finite project and its budget, you've already gone quite some way to distinguish resource the client engages with a view to completing that project and its employees which it requires for enduring functions where it doesn't envision an expiry date. Even if a contractor goes from one project to the next, these are discrete in nature and relate to genuine business needs of the client; and this is consistent, anyway, with how businesses interact with suppliers that do a good job. So I think this is an excellent test in that respect, and better than arbitrary metrics like time spent at a client, multiple clients, % of business from 1 client etc.

Yes, we're on the same page. Fundamentally, the P&P test, at least in terms of how it is traditionally defined, is a messy collection of subjective factors. It wouldn't meet the requirements of a test that is objective, powerful and straightforward to evidence. There are, however, elements of P&P that are more straightforward, such as participating in performance reviews or generic activities that are beyond the scope of a project. However, as you say, there is some overlap here between P&P and doing project-based work. I'm not ready to give up on any particular attribute, but P&P is a tough one, and is perhaps better formulated as a moderately good indicator for being inside (part of the client furniture) than a powerful indicator for being outside (not part of the furniture).

[pr1]

This case might be relevant FTT agrees no control over agency workers | Gabelle LLP Tax Consultants. Could IR35 be determined according to whether or not the services that are provided are not the services that the client themselves provide? If you provide IT services to a bank you are offering a service which is not integral to their business and therefore you shouldn't be considered a deemed employee. Whereas if you provided financial analysis of some sort you would be doing something that's integral to the business.

Not perfect I know but might have some merit?

so in an engineering firm; all receptionist, HR, cleaners, tea ladies, IT helpdesk contractors would be fine (outside IR35) but all the contracted engineers would be inside?

far from perfect in my view!

[jamesbrown]

This case might be relevant FTT agrees no control over agency workers | Gabelle LLP Tax Consultants. Could IR35 be determined according to whether or not the services that are provided are not the services that the client themselves provide? If you provide IT services to a bank you are offering a service which is not integral to their business and therefore you shouldn't be considered a deemed employee. Whereas if you provided financial analysis of some sort you would be doing something that's integral to the business.

Not perfect I know but might have some merit?

Yes, it definitely has merit, and can be formulated in terms of SDC (although it overlaps a few areas). I see this as being somewhat akin to cases where SDC is difficult to apply in principle. For example, it is difficult for a client to impose (or to seek to impose) the "how" element of control (very important) on a recognized expert conducting specialist work; this is established in case law. Obviously, it isn't entirely impossible if other experts are involved and imposing a structure for how the work is completed. I think the same applies to a worker that is delivering services outside the normal scope of the client's business. No indicators are perfect, but I definitely think this has merit and can be formulated in the context of SDC.

[jamesbrown]

far from perfect in my view!

It depends how you formulate it. I think it applies to "skilled" work, but obviously not to generic support workers for whom SDC will almost certainly apply (I don't mean that to come across in a condescending way, but I think it's a pointer in the context of SDC).