Can anyone explain this?

Can anyone explain this?

Didn't find your answer?

http://www.bbc.co.uk/news/uk-politics-16709780

Pardon my ignorance, but is the chief exec in this case not the same as a director of a limited company?

Therefore, how can he invoice as a consultant? My understanding is that directors are only allowed to do this in very limited circumstances - i.e. circumstances in which the invoice does not either come under the responsibities of being a director or under the operations of the company (i.e. a director of an IT company invoicing the company for computer repair - ok, daft example, but you get the idea). Also, what about IR35? This applies to directors doesn't it and would therefore add additional protections against such a situation?

On what basis have HMRC allowed this to occur? I am genuinely interested.

Replies (14)

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By Chris Wise
01st Feb 2012 22:57

Just saw this on Newsnight. I'd like to know how and why Danny Alexander doesn't appear to know the difference between a contract for and a contract of Service. And what is the concession the tax counsel they had on talking about? Thought we only had statute these days?

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By edward33
01st Feb 2012 23:28

UTR

Just noticed on BBC website that they have shown his UTR. Some one has lapsed on data protection.

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By dstickl
02nd Feb 2012 00:15

IR35 - IF Ed Lester paid IR35 monies due THEN is there a story?

IR35 - IF Ed Lester paid IR35 monies due under S.I. 2000/727 section 7 (1) Step One etc, THEN is there a story?

Surely that is the key question [did Ed Lester declare that he etc was caught by IR35 as a "disguised employee" etc] that Margaret Hodge MP should ask at the HoC PAC, shouldn't she?

Otherwise, in my opinion, it would seem that IR35 is NOT being properly policed by HMRC when clear cases of employment income paid gross come to their attention, e.g. as in my opinion was clear for the clearance for "Our ref 29269 42328" of Date: 14 October 2010!

And if HMRC missed an IR35 opportunity on 14 October 2010, was there a case of "misconduct in public office" by HMRC?

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By geek_fromupnorth
02nd Feb 2012 00:16

Re: IR35

My thoughts exactly dstickl - but then in this case HMRC appear to have made a one off exception - presumably, if I am being pragmatic, based on governmental pressure? I can't think what else.

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By dstickl
02nd Feb 2012 08:03

SLC & IR35: [***]-Up OR Conspiracy by HMRC and/or Hartnett?

Agreed geek_fromupnorth, it may have been a so-called "one off exception" based on governmental pressure, possibly - in my opinion - with the involvement of Dave Harnett.

IF that's a possible scenario, THEN in my opinion, House of Commons (HoC) Public Accounts Committee (PAC 'Select Committee') Chairwoman Margaret Hodge MP should get Dave Hartnett called onto the witness stand again to divulge the IR35 etc tax affairs of Mr Ed P Lester - PENNA PLC - to determine:

Q1: Was there a [***]-Up by HMRC staff/HM Inspector of Taxes on 14 October 2010 (HMRC ref: 29269 42328) when s/he wrote QUOTE Against the background of the information supplied, I am happy to accept that the fees paid in respect of Mr Lester's duties may be paid gross. This treatment relates to him only, and fees paid in other circumstances or to other individuals will have to be reviewed in the light of circumstances of such cases ENDQUOTE as it appears to me - in my opinion - that the silence over a possible IR35 aspect of Ed Lester's activities may have been overlooked, possibly due to ignorance by the said HM Inspector of Taxes of that "fiscal horror" (CIOT's words) and the full possible impact of IR35 on Mr Ed Lester's tax affairs?

OR

Q2: Was there a conspiracy by - but possibly not restricted to - HMG, HMRC and/or Mr Dave Hartnett to cover up the possible impact on Mr Ed Lester's activities in connection with SLC (Student Loans Company) to ignore the "fiscal horror" (CIOT's words) of the full possible impact of IR35 on Mr Ed Lester's tax affairs?

 

IF the answer(s) to the above is/are YES, then I believe that the following should then be considered by PAC:

* Recommending to CPS etc that they investigate if there was a case of "misconduct in public office" by HMRC or any body else in HMG etc, AND

* Recommending to the Chancellor, Treasury, HMG, HMRC etc that IR35's implementing S.I. 2000/727 Section 7 (1) Step One should be modified to allow a "cost allowance" of the VAT Registration Threshold if the worker has had a break of at least 366 calendar days since leaving a contract for service, for clarity by restricting the impact of IR35 to such gross blatant cases as - in my opinion - apparently alleged by the BBC in the case of Mr Ed Lester and SLC.

* Recommending that such a modification of S.I. 2000/727 Section 7 (1) Step One should reduce the manpower etc resources required by HMRC to implement the "fiscal horror" (CIOT's words) of IR35.

* Recommending that such a modification of S.I. 2000/727 Section 7 (1) Step One should reduce the time and worry resources required by workers to cope with the "fiscal horror" (CIOT's words) of IR35, thus allowing workers to work productively AND to add to UK GDP growth!   [Phew].

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Replying to johnjenkins:
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By Alan Ferris
02nd Feb 2012 08:07

Surely as long as the service company is complying with IR35 rules then there is no tax loss in him being paid gross.  I admit I am not fully aware of all the rules surrounding IR35 and would appreciate a more expert opinion.

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By thomas34
02nd Feb 2012 08:33

Tax Barrister?

Was it just me or were all accountants waiting for the female Brummy tax barrister to clarify what are, to the layman, complicated rules?

She didn't explain that there is nothing to stop Government (or in this case a Government department) from awarding a contract to any limited company for any service they wish to purchase.

She didn't explain that there are rules in place (IR35) to prevent a loss to the Exchequer if the limited company concerned pays dividends to its shareholder/director and that the person concerned was for all intents and purposes an "employee" of the end user of the services.

In short, she contributed nothing of worth to the proceedings and merely kept 99.9% of the population (those who are unaware of IR35) in the dark.

We don't know whether HMRC or the service company concerned have applied IR35 but we can be sure that when the time comes (very shortly I expect) HMRC will follow Dave Hartnett's lead and hide behind the Data Protection Act.

Tom Egerton

 

 

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By Chris Wise
02nd Feb 2012 09:31

Wasn't there written correspondence referrring to "tax efficient" contract, Surely the implication from that is that IR35 isn't being applied.

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Replying to alan.falcondale:
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By geek_fromupnorth
02nd Feb 2012 09:39

Exactly

Chris Wise wrote:

Wasn't there written correspondence referrring to "tax efficient" contract, Surely the implication from that is that IR35 isn't being applied.

My assumption exactly. No smoke without fire etc.

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By Ian Bee
02nd Feb 2012 10:40

Mystified

Tom

That is exactly what I thought. There was the usual ignorance from Newsnight about how tax works. I can't think of any reason why you would not pay a corporate supplier gross, but no mention at all of IR35 which as the comments above have made clear, is at the heart of it.

What concession the barrister was referring to, I have no idea. The only one that comes close is when a partner in a firm of solictors, say, provides services as a director to a company and the directors fees are charged by the partnership. The income is treated as trading income of the partnership, even though strictly any fees from an office will be income from employment. Can't see how that could apply here though, and I don't even know if it still exists.

Hope someone else can clarify.

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By thomas34
02nd Feb 2012 11:57

Accounting Web Scores

Danny Alexander has just announced that the gentleman concerned will now be added to the payroll - hope HMRC checks the IR35 status of his monies to date. Mr Alexander obviously reads AW. 

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Replying to Tim Vane:
Red Leader
By Red Leader
02nd Feb 2012 14:18

ESC A37

Thanks to Nicola Ross Martin, I have found out that the concession is ESC A37.

www.rossmartin.co.uk/index.php/sme-tax-news/35-sme-tax-news/822-top-civi...

Small beer really, the main point is has IR35 been applied to his ltd co? As usual, our press have found an elephant's tail (A37) and called it a snake.

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By Ian Bee
02nd Feb 2012 14:47

Yes thanks to Nichola for digging that out.

That concession is there to provide a sensible way round having to apply PAYE in very specific circumstances. It is nothing to do with providing services through a personal company.

It makes you wonder who on earth was advising the SLC, and who in HMRC thought that the concession was appropriate.

In any event I am sure we have all advised that concessions can be disapplied where they are used for tax avoidance, so why does it apply here?

There is still no mention of IR35 in the press reports - too difficult for them I suppose. But what is to stop any employer insisting on only taking on staff who are employed by their own limited company. IR35 would apply but not the employer's problem and no need for employer to run a payroll department.

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By dstickl
02nd Feb 2012 21:39

IR35:IF HMRC got 'end client' to tribunal THEN worker can ...

In answer to Ian Bee's QUESTION: But what is to stop any employer insisting on only taking on staff who are employed by their own limited company?  [IR35 would apply but not the employer's problem and no need for employer to run a payroll department]:

May I suggest:

(A) that IF the HMRC got the alleged 'end client' [ and apparently HMRC are getting better at identifying the 'end client' according to the IR35 Lottery articles previously posted on AWEB] to show up at the IR35 tax tribunal THEN the worker - or the worker's representative(s) - can and should (1) cross examine the representative(s) of the alleged "end client" to a sufficient degree so as to establish whether there was a sufficient period of alleged continuous employment to qualify for employment rights at a subsequent Employment Tribunal, and (2) request that the tax tribunal ensures [as natural justice] that any Employment Tribunal subsequently chosen by the worker would be advised of the tax tribunal's conclusions as to the period of continuous employment service, if any, and

(B) that IF such alleged 'end clients' got the message THEN they'd be incentivised to tell the truth, and to be very careful of "insisting on only taking on staff who are employed by their own limited company"!

HOWEVER: For the above to happen requires some courage and nerve. It is essentially a pro-active action by the worker, requiring initiative of clued up representatives!

SUM UP: Any one for reactive/pro-active "anti-IR35 karate" (i.e. turning IR35 "hypothetical contract" measures to a worker's advantage at Tax Tribunal, and then using their advantageous result(s) to produce a worker's benefit at Employment etc Tribunal) ?

CONCLUSION: IR35 is a "fiscal horror" that inevitably tends to criminalise some workers - especially low paid workers and lower paid workers - and should be modified so that IR35's implementing S.I. 2000/727 Section 7 (1) Step One  would in future be revised to have a "cost allowance" of the VAT Registration Threshold in cases where the worker has had a break of at least 366 calendar days since leaving a contract for service.

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