IR35 - Back to first principles.... IR35 - Back to first principles....
Page 1 of 15 12311 ... LastLast
Posts 1 to 10 of 146
  1. #1

    bored now

    eek's Avatar
    Join Date
    Jun 2010
    Location
    😂
    Posts
    22,919

    Default IR35 - Back to first principles....

    Reading the discussion document again (its too hot outside and unless I do it now I'll only have to do it later) I'm struck by a simple question....

    What do all the parties actually want from the issue / IR35 marketplace?

    HMRC - want as many people as possible paid by PAYE especially those who work for companies who force self employment or support staff to pretend to be self employed when clearly working like permanent staff... They also what as much money as possible (but that goes without saying)...

    Some companies - want people to be bogusly self-employed to save them costs and responsibilities.

    Consultancies and our end clients - want contractors either for specific periods / projects (to fill a resourcing or skills gap) or because the market can't provide those skills within the permanent market

    Us - we want to be freelance because of our skill sets (or possibly just the cash). We pretend to be able to provide substitutes for the sake of it, happily use Moo and try to ignore the whole SDorC thing.

    Other freelancers - may simply want to know who their employer is and being treated as an employee (examples from the CAB bogus employment survey are available)...

    Some freelancers - are actually permanent staff but want the tax saving options and flexibility..

    We know that every test HMRC have used for IR35 is insane and has made things worse. The question is can we identify the view point from all participants (I'm probably missing loads in the few actors above) and see if there are some sane features that could be used instead...
    Last edited by eek; 22nd August 2015 at 15:31.
    merely at clientco for the entertainment

  2. #2

    Contractor Among Contractors


    Join Date
    Sep 2012
    Posts
    1,230

    Default

    Good set of questions, and analysis.

    It's struck me for a while the missing link is integration.

    A genuine freelancer/contractor/consultant won't be integrated into the client business.

    An interim manager might be, slightly separate discussion.

    But the integration question could well solve 80% of cases to a common sense conclusion.

    Years ago I remember a HMRC status inspector telling me about a case he had in where a cafe claimed the waitress was a freelancer, and another where the secretary in a building company was self employed. These cases, along with the low end mass transfers (which I refer to as the polish car valeters) clearly fall the wrong side of integration.

  3. #3

    More time posting than coding


    Join Date
    Jul 2015
    Posts
    257

    Default

    I dunno why there can't be a very simple time based rule, if you are at one client for longer than X months - you are classed as a employee (temporary or otherwise), if you are there for less you are a freelancer.

    Highly simplistic, but gets around low end "outsourcing" done by large companies to drop their NI bill.

    If you are on a gig which is likely to last longer than X months, then you and client know that walking into it (or during extension talks) and make the relevant arrangements.

    Problem comes that some projects do last 2 years +, but then I would argue that in reality in that time, no matter how much you pretend otherwise you are part of the furniture and should swallow the implications. I know a lot of perm jobs that don't last longer than that.

  4. #4

    Default

    Quote Originally Posted by Jessica@WhiteFieldTax View Post
    Good set of questions, and analysis.

    It's struck me for a while the missing link is integration.

    A genuine freelancer/contractor/consultant won't be integrated into the client business.

    An interim manager might be, slightly separate discussion.

    But the integration question could well solve 80% of cases to a common sense conclusion.

    Years ago I remember a HMRC status inspector telling me about a case he had in where a cafe claimed the waitress was a freelancer, and another where the secretary in a building company was self employed. These cases, along with the low end mass transfers (which I refer to as the polish car valeters) clearly fall the wrong side of integration.
    What do you have in mind in terms of defining "integration"? One aspect is being "part-and-parcel". Another is delivering specialist services or services that are not the main business of the client or not being delivered by equivalent staff through a different mechanism (i.e. permies). The former could be relatively benign for the majority of contractors. The latter, particularly the presence of permies doing the same or a similar job, could be a rather difficult and divisive test. It depends whether you believe that temporary staff doing a similar job to other permies should be on payroll, regardless of whether the work they are doing is project based on not. My personal view is that some form of "project-based" criterion would also catch a lot of the egregious cases you refer to. In other words, if you're doing work for a defined project with a discrete scope and timeframe, that should be acceptable (although it doesn't address the issue of SDC).

  5. #5

    Default

    Quote Originally Posted by Danglekt View Post
    I dunno why there can't be a very simple time based rule, if you are at one client for longer than X months - you are classed as a employee (temporary or otherwise), if you are there for less you are a freelancer.
    Because it's silly and arbitrary and is established as having no bearing on employment status. Depending on the industry in which you're engaged, it's likely discriminatory too, because projects will have a defined scope and timeframe that defies any "simple time based rule", especially something on the order of months. Having something project-based seems reasonable, but something time-based is a non-starter, probably also from HMRC's perspective, as short-term "temps" will often be subject to a high degree of SDC.

  6. #6

    Contractor Among Contractors


    Join Date
    Sep 2012
    Posts
    1,230

    Default

    Quote Originally Posted by jamesbrown View Post
    What do you have in mind in terms of defining "integration"? One aspect is being "part-and-parcel". Another is delivering specialist services or services that are not the main business of the client or not being delivered by equivalent staff through a different mechanism (i.e. permies). The former could be relatively benign for the majority of contractors. The latter, particularly the presence of permies doing the same or a similar job, could be a rather difficult and divisive test. It depends whether you believe that temporary staff doing a similar job to other permies should be on payroll, regardless of whether the work they are doing is project based on not. My personal view is that some form of "project-based" criterion would also catch a lot of the egregious cases you refer to. In other words, if you're doing work for a defined project with a discrete scope and timeframe, that should be acceptable (although it doesn't address the issue of SDC).
    Project work points to non integration, being part and parcel points to integration.

    Problem is although "part and parcel" is often talked about it doesn't have the status of the big three - mutuality, personal service, control, and in many cases, not all, it provides a sensible answer. Of course those the wrong side of the answer won't always agree.

    The presence of a permie doing the same need not be an issue - enageagement terms, recruitment methods, what happens at end of project all differentiate.

    Agree with your thoughts on project work. Ideally ought to be a clear passport out of IR35 for both sides (HMRC and contractors), although doubtless there would be a new avoidance industry around "making your workers project conctractors" and "HMRC anti-project avoidance teams"

  7. #7

    Super poster


    Join Date
    Apr 2015
    Posts
    2,486

    Default

    Quote Originally Posted by eek View Post
    What do all the parties actually want from the issue / IR35 marketplace?

    HMRC - want as many people as possible paid by PAYE especially those who work for companies who force self employment or support staff to pretend to be self employed when clearly working like permanent staff... They also what as much money as possible (but that goes without saying)...
    This is a good approach. If you want to find a win/win, you always do well to identify what people want. You may not be able to find a win/win, especially with competing interests, but you won't do it if you don't identify interests.

    I would break HMRC down between HMG and HMRC.

    HMG
    a) They want to be seen to be protecting low-paid employees from rogue employers
    b) They want to be seen to be fair, including preventing anyone from "paying less than their fair share" ("fair share" being a rather nebulous, ill-defined, and logically offensive concept, but we're talking politics and the media here so that doesn't matter)
    c) They want to be seen to be a government that is on the side of small business
    d) They want to extract as much cash as they can without interfering with b) an c)

    HMRC
    a) They want to serve HMG's agenda as described above
    b) They want rules to be easy to enforce, and taxes easy to collect. That does not NECESSARILY require people to be PAYE, but that is a system that works well for them, so getting as many people possible under PAYE is preferable, but they would accept alternatives that are easy.

    One point of leverage that we have is that HMG's c) is in direct conflict with HMRC's preferred option for b) -- getting everyone under PAYE. And they've already damaged themselves with small business with the dividend tax.

  8. #8

    Super poster


    Join Date
    Apr 2015
    Posts
    2,486

    Default

    Quote Originally Posted by Jessica@WhiteFieldTax View Post
    But the integration question could well solve 80% of cases to a common sense conclusion.
    What if the guy who is part and parcel does a fixed cost job, though? If IR35 is on a contract-by-contract basis, then his other work for that client (as part and parcel) should legitimately be inside IR35, but shouldn't a fixed bid contract be outside? Employees don't do fixed bid contracts....

  9. #9

    Contractor Among Contractors


    Join Date
    Sep 2012
    Posts
    1,230

    Default

    Quote Originally Posted by WordIsBond View Post
    What if the guy who is part and parcel does a fixed cost job, though? If IR35 is on a contract-by-contract basis, then his other work for that client (as part and parcel) should legitimately be inside IR35, but shouldn't a fixed bid contract be outside? Employees don't do fixed bid contracts....
    If it's fixed cost, it really has to be a project, no? You can't do a fixed price on something that isn't defined.

    But I agree, fixed price ought to be a passport.

  10. #10

    bored now

    eek's Avatar
    Join Date
    Jun 2010
    Location
    😂
    Posts
    22,919

    Default

    Quote Originally Posted by WordIsBond View Post
    What if the guy who is part and parcel does a fixed cost job, though? If IR35 is on a contract-by-contract basis, then his other work for that client (as part and parcel) should legitimately be inside IR35, but shouldn't a fixed bid contract be outside? Employees don't do fixed bid contracts....
    I think that would probably fall apart under https://en.wikipedia.org/wiki/Autoclenz_Ltd_v_Belcher . If would be different if they weren't previously an employee but I'm not sure on that..

    Oops probably should be clearer... One off or very occasional fixed price jobs should be fine but you can imagine people claiming piece work (say car valeting) is fixed price rather time and materials.
    Last edited by eek; 22nd August 2015 at 19:40.
    merely at clientco for the entertainment

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •