IR35 - Back to first principles.... IR35 - Back to first principles.... - Page 3
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  1. #21

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    Quote Originally Posted by JB3000 View Post
    I think we are heading to a situation where the end client will need to issue a 1 page doc for all gross payments made for workers' services (including payments to agencies) clearly stating if the "project worker" or "temp" will be SDorC or not. If there's an agency in the chain this detail should be included in the employment intermediary report.

    This compulsory page should be part of the contract.

    If the end client gets their decision wrong (i.e. they say no SDorC even when SDorC applies) the end client will folk out the extra cash when hector comes knocking.

    Any end client not willing to make a in or out SDorC decision would need to put the "project worker" or "temp" onto payroll.

    It seems like the only unambiguous long term way forward.
    I believe that is exactly what HMRC are proposing. The question is what simple proof / barrier can be used to allow a company to decide whether SDorC applies or not in such a way that a company will have confidence in their decision.

    Otherwise we will end up with a default blanket answer of you are under SDorC tough...
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  2. #22

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    Thinking about it more if the logic is that the end client has to decide I think part and parcel can be part of the test.

    1) Would an outside observer believe the worker to be part and parcel of the company - Y/N

    1b) if No why do you believe that

    i) project based work of a one off nature....
    ii) additional resources for project work...

    What other valid excuses are there for not being part and parcel?
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  3. #23

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    Quote Originally Posted by eek View Post
    Thinking about it more if the logic is that the end client has to decide I think part and parcel can be part of the test.

    1) Would an outside observer believe the worker to be part and parcel of the company - Y/N

    1b) if No why do you believe that

    i) project based work of a one off nature....
    ii) additional resources for project work...

    What other valid excuses are there for not being part and parcel?
    It's not the way the question is posed that makes P&P difficult. Without breaking it down into smaller attributes that can be measured, it is both ambiguous (i.e. unclear about what attributes need to be measured) and subjective (i.e. unclear about the degree of integration required). If we're going to suggest simple criteria, they need to meet all of these requirements:

    1. Objective (as unambiguous as possible)
    2. Straightforward to evidence directly (e.g. via the contract/schedule of work) or through third-party checks
    3. Powerful (identifying the desired groups)


    Obviously, the last one is somewhat divisive and will lead to different opinions, but we need to straddle the fence between us and HMRC here. There's no point in suggesting something that doesn't address the case studies they provide (however bad they may be) or addresses only edge cases, because they're looking to increase tax take.

    The problem with P&P is that it's difficult to break down into small pieces without having a very large number of small pieces (as some other posters alluded to, it may be greater than the sum of its parts when you get a lot of small pointers than need to be assessed in the round). Nevertheless, perhaps there are some elements we can point to that are more powerful and straightforward than others and capture some aspects of being P&P. Let's try. Here's one list of possibilities (some of them are trivial, others more powerful):

    IR35 - Part and parcel of the organisation :: Contractor UK

    Personally, I would view attending non-project-related meetings (i.e. all hands meetings, generic training) as a strong indicator of being P&P. This should be easy to evidence from the client-side (i.e. any such meetings or training are beyond the scope of your contract). Conversely, working offsite would be a strong indicator of not being P&P. Again, this would be easy to demonstrate, but it would be a much tougher test. If you're going to consider multiple factors in the round, you'd have to meet a certain fraction of them, I suppose.

  4. #24

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    Quote Originally Posted by eek View Post
    So what can we use to define a project in a what that isn't easily contrivable...
    I would think this could be achieved with a schedule of work that prescribes:

    1. A named project
    2. A set of objectives/deliverables
    3. A fixed timeframe
    4. A fixed budget/allowance for the contractor's work (e.g. T&M for a fixed number of days)


    Perhaps there are other elements too...

  5. #25

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    Quote Originally Posted by jamesbrown View Post
    I would think this could be achieved with a schedule of work that prescribes:

    1. A named project
    2. A set of objectives/deliverables
    3. A fixed timeframe
    4. A fixed budget/allowance for the contractor's work (e.g. T&M for a fixed number of days)


    Perhaps there are other elements too...
    How does the idea of having staged (regular or irregular) payments impact of the project model?

  6. #26

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    Quote Originally Posted by yakitoo View Post
    How does the idea of having staged (regular or irregular) payments impact of the project model?
    Generally speaking, basis of payment has been established as only a weak indicator of employment status, because there are different standards across different industries w/r to frequency and units of payment. With any project based work, you'd expect invoices to reference the work completed under specific project milestones during the invoiced period of performance, rather than simply X days at Y per day, but the basis of payment is otherwise inconclusive. Fixed price work, for which payments are made on the completion of project milestones, would be somewhat more indicative of self-employment, and I think that is also emphasized in HMRC guidance, but it isn't necessarily conclusive. Thus, IMHO, there needs to be a separation between the nature of the work as being project-based and the basis of payment.

    BTW, while I remember, another indicator of being P&P would be a contract that requires exclusivity, but I assume these clauses are very rare. Conversely, having multiple clients at once is probably indicative of not being P&P of any one client (edit: although these could also fall into other categories of indicator than P&P).
    Last edited by jamesbrown; 23rd August 2015 at 13:02.

  7. #27

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    HMRC's problem stems from the inconsistency of the tax system. There's no particular reason why two people who each have X thousand pounds of income should be taxed at different rates. In particular there's no reason for self-employment to be taxed less than employment. (The historical justification was less benefits for self-employed, years of social security system evolution have killed that.)

    With that in mind, the ultimate simplification of the tax system would be to abolish NI and raise income tax.
    a) all income above the personal allowance taxed at a single rate, whatever was needed to preserve current revenues, so probably somewhere over 40%
    b) transitional arrangement for pensioners, to prevent the shock of basic rate marginal rate doubling, give them a larger personal allowance so that the total tax collected from them is initially unchanged, but freeze the allowance until eventually after a decade or three, the non-pensioner personal allowance catches up, thereafter age-based discrimination can be eliminated.
    c) transitional arrangement for employer's NI, rename it employer's income tax contribution, as such it becomes part of employee's taxable income as a taxable benefit, being a part-payment of the employees tax bill. Then reduced it by 1% a year until it vanishes. So effectively employees would initially only be paying aprox. 30% rather than 40% on their contractual salary, same as now.
    d) self-employed transitional arrangement ... something, cba.
    e) investment income: credit given for tax already incurred in the underlying investment, so dividend for listed company would have a small credit, dividend from a PSC would have a 20% credit, with another 20% to pay.

    IR35 would then be irrelevant, as employment status would be irrelevant.

    (I realise such utopian simplification will never happen, as it will make people realise just how much tax they are paying, and probably rebel. Even blue governments actually need/want tax revenues, so won't want to do this.)

  8. #28

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    So do you think contractor working as a 'project support' can in any way be outside IR35?

  9. #29

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    Quote Originally Posted by squirrel99 View Post
    So do you think contractor working as a 'project support' can in any way be outside IR35?
    This is a discussion about possible future, not current, legislation.

    Do you mean 'could' rather than 'can'?

  10. #30

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    Quote Originally Posted by cojak View Post
    This is a discussion about possible future, not current, legislation.

    Do you mean 'could' rather than 'can'?
    Sorry, I should have been clearer.

    I was referring to Eek's comment (sentence below). Does this mean that a person providing support would be 'clearly inside' of IR35?

    'Part and parcel (Secretary, Waitress) - clearly inside - very hard to define so probably not a suitable criteria'

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