Time to do something about IR35

I've been asked to get this ball rolling by a member, and am happy to do so as a sounding board for a longer term discussion group focused on IR35 reform.

Following David Gauke's vow in November to bring transparency to personal tax, but he would go no further than the already announced program to review the operation of IR35. To make matters worse, the merger of income tax and NICs, which would reduce some of the discrepancies HMRC appears to be targeting with IR35.

According to the PCG,  IR35 status enquiries fell to 23 in 2010/2011 and yeilded just  £219,180. For such paltry returns "the stress and damage done to the UK’s 1.4m genuine freelance businesses is completely unnecessary" argued PCG managing director John Brazier.

The furore surrounding civil servants using personal services companies (without apparently being caught by IR35) is hardly likely to work in favour of repeal, but it has certainly put the issue on the political agenda. What would you propose the Chancellor does about IR35 on 21 March, and if there is no movement at Budget time, how would those who want to see reform best advance their cause?

Comments

Any change to IR35 must make economic sense, or it'll fail! etc

dstickl | | Permalink

John, thanks for getting this thread started - it should take my increasing concerns about IR35 application practices on 'end clients of hypothetical contracts' & 'deemed payments' to or by HMRC, HMG and Local Government,etc, away from appearing as a personal campaign that may get in the way of quick/short discussions by some other AWEB members.

Basically I think IR35 as produced by Gordon Brown & Dawn Primorola is wrong; however, I also believe that IF I criticise something THEN I have a personal obligation to produce a better alternative. Here is a summary of my present position:

(1) Taxes (like any other tariff or scale of prices) have to be formulated so as to make economic sense, to be acceptable to the HMRC 'customer'. My thesis is that IR35 as set out in ITEPA 2003 just does not make economic sense, because its IR35 regime fails to recognise the levels of costs faced by small businesses - due to the "5%" of 'payments and benefits received' (pabr) being negligible at low levels of pabr.

(2) Unlike the OTS apparently, the need for economic sense in taxes was recognised 15 years ago:
The Tax Law Review Committee's "TAX AVOIDANCE" report November 1997 states [section 1.9 on page 2] "Avoidance, and the risk of avoidance, are at their greatest where there is a failure to base the tax on sound economic principle, where the tax creates unsustainable boundaries or where there are arbitrary rules. If governments wish to limit avoidance, they should avoid enacting legislation that positively invites it!" The problem of the 2003 legislation [ITEPA Section 54 (1) Step 1 etc] is "there is a failure to base the tax on sound economic principle, where the tax" fails to recognise the inevitable 'higher than 5%' inevitable running costs of small business.

(3) Here’s what could be done: Replace the words "by 5%" in ITEPA 2003 Part 2 Chapter 8 Section 54 (1) Step 1 with the following: "by a monetary amount that is the greater of either (a) the VAT registration threshold for a worker who did not work for a period of at least three hundred and sixty six calendar days after the date his or her previous contract for service ended or (b) five per cent for all other workers."

(4) This moderate revision to IR35 legislation of having an expenses allowance of the VAT registration threshold - surely even Vince Cable of BIS could now be able to implement that - is to narrow the scope of IR35 so that HMRC has to focus on only those "high risk" cases of gross abuse/loss of revenue to HMRC.

 

SO: Does anybody out there agree or not that:

* IR35 is a problem that should be modified?

* dstick's analysis is sensible, i.e. any change to IR35 has to make economic sense for acceptability by HMRC's 'customers'

* dstickl's proposal could be implemented so that HMRC can focus its lmited resources on the "high risk to HMRC's revenues" cases?

* they can and do make a better suggestion than that set out above by dstickl?

 

Over2u!

Old Greying Accountant's picture

The long and the short of it ...    1 thanks

Old Greying Acc... | | Permalink

... short (term) first - scrap NI, merge it with Tax, fix personal allowances to a 40 hour week on the minimum wage, the tax savings would then be minimal and IR35 largely redundant!

(as an aside, the higher rate threshold should be fixed to twice the average wage).

... long (term) - a complete rewrite of tax law into a simpler to use and fairer system.

 

Half a solution

Mike Carter | | Permalink

It's like the 25k tax credit fix - it misses the point. Ir35 deliberately mis-aligns tax, contract and employment law and dumps the consequences on the weakest link.

Does ir35 work as either a deterrent or as a tax?

Recent press suggest hmg ignore it totally or are ignorant of it which is bizarre.

If HMG ignore IR35 totally, then why not have the same for ...

dstickl | | Permalink

If HMG ignore IR35 totally, then why not have the same for hard grafting workers who wish to be self employed and who have revenues of < VAT registration threshold, which they think they and their families can survive on?

 

Surely such an immediate patch is desirable in the case of a flagging economy - rather than a very time consuming wholesale merging of National Insurance with Income Tax, that could merely defer the pressing problems.

 

IF the aim is to attack the National Insurance "scheme", THEN why not scrap employeRs' National iInsurance for workers > SPA (State Pension Age); this would defeat IR35 for the old and grey, i.e. with the ideal attributes for consultants!

 

 

Over2u!

Old Greying Accountant's picture

Why not ...    1 thanks

Old Greying Acc... | | Permalink

... scrap ER's NI full stop, to me a tax on employment, especially in a recession, is untenable.

Scrap NIC    1 thanks

Ken Howard | | Permalink

Scrap NIC and increase both income tax and corporation by, say, 5% and you've probably cracked it.  Just think of all the un-NIC'd income, such as pensions and investment income that is currently undertaxed because of no NICs.  The personal service company problem would disappear because the company would have paid 25% CT on the profits.  At the end of the day, NIC is blatantly unfair because it's just a tax on a "worker" so people living on "unearned" income never pay any but still get virtually the same benefits, especially when the new £140pw fixed pension is introduced.  Just what is the point of NIC anymore - it's just another tax, but unfairly targetted on the wrong people, i.e. the workers who are generating revenue!

CT won't recover lost -ER NI because they'd migrate ...

dstickl | | Permalink

CT won't recover lost -ER NI because they'd migrate ... to Ireland etc.

 

Is that what U want?

Old Greying Accountant's picture

Which gets to my long term goal ...

Old Greying Acc... | | Permalink

... complete re-write of tax system so that it cannot be avoided, if you trade here you are taxed here - regardless of where the head office is.

 

ShirleyM's picture

@OGA    1 thanks

ShirleyM | | Permalink

I agree wholeheartedly with your last comment. If any company makes their profits from trading in the UK, then they should pay UK tax, and should not expect to have their cake and eat it, too!

Back to topic ... IR35 was put in place to capture tax lost when large companies decided they would make more money by hiring freelancers rather than employees. We all know why the freelancers are being hammered, rather than the instigators, but thats another story. Cure the cause rather than the symptom and we won't need IR35, or it's descendant.

@ Mike Carter ... : Where R Ur detailed Tax Manifestos, please?

dstickl | | Permalink

Mike Carter wrote:
Does ir35 work as either a deterrent or as a tax?

ANSWER 1: According to HMRC, IR35 does work as a deterrent, because if it were removed then HMRC assert that loopholes like "Friday-to-Monday" would re-emerge. 

ANSWER 2: According to HMRC, IR35 does NOT work as a tax, because according to figures reported by the then Labour government, the tax revenue arising from IR35 is < GBP 2 million a year.

 

It is for the above reasons that I've suggested an evolutionary change to ITEPA 2003 section 54 (1) Step 1, etc, that

(1) works as a deterrent, because if it were keep the defences to HMRC's revenues, such as loopholes like the previous "Friday-to-Monday" fandango of sacking employees and then calling them in as contractors after the weekend, and 

(2) works as a tax, for gross abuses where the 'disguised employee' sells skills and effort for sums > VAT registration threshold a year, The reason that I've chosen the "VAT registration threshold" is that VAT registration is required above that figure and, if a member of the public sees a VAT reg number then they can alert HMRC to the possibility of being caught by IR35, thus keeping HMRC's costs of implementation down. And it gets better: the VAT No. could be used by HMRC as an "IR35 Reg No." for an "IR35 Tax Disc" if the psc etc is complying by paying "deemed payments"!

 

Q: Any support out there for such an "evolutionary change", as compared with the "Revolutionary Changes" of apparently the majority of posters on this thread?

Challenge to the Revolutionaries: At least I've set out my detailed Manifesto [i.e. to ITEPA 2003 section 54 (1) Step 1, etc], SO where is your detailed Tax Manifesto(s) please? 

ShirleyM's picture

IR35 is not a deterrent

ShirleyM | | Permalink

It has absolutely no effect upon the companies that cause the problem in the first place. It punished the victim, unless they are very careful to make sure they avoid IR35!

Big business rules/runs this country and the rest of us have to pay for their savings, ie. big business saves by hiring freelancers rather than employees, but the freelancers pay more to compensate for the revenue lost to HMRC from the big companies.

Old Greying Accountant's picture

If ....

Old Greying Acc... | | Permalink

... the dividend tax credit were re-instated, possibly capped in line with the PAYE reduction in code, this would offset much of the tax effect of combining paye and NI for those on unearned income, although a sensible personal allowance would be better for that, and certainly taking state pension out of tax for those under the personal allowance reduction threshold (e.g. for every £2 over £100,000, £1 of state pension becomes taxable).

At the end of the day, it doesn't matter what label you put on a tax, the government needs £x to operate, the issue is how to ensure everyone contributes fairly and proportionally.

I just wish the government would spend as much resource and energy tackling those who defraud the benefit system, whether through deliberate action or just plain bone idleness, as they do persecuting those who do their best to pay the correct tax. 

 

@ ShirleyM: Is Friday-to-Moday still happening, please?

dstickl | | Permalink

ShirleyM wrote:

It has absolutely no effect upon the companies that cause the problem in the first place.

QUESTION: Are you saying that we still have companies sacking/making redundant departments on the Friday and then these same workers come in as self employed etc on the Following Monday, please/

Do you have any specific documented evidence to hand confirming the Friday-to-Monday fandango that I could give wide publicity to, please?

@ O G A : Can you clarify your IR35 etc clear up manifesto ?

dstickl | | Permalink

Old Greying Accountant wrote:

... the dividend tax credit were re-instated, possibly capped in line with eh PAYE redction in code, this would offset much of the tax effect of combining paye and NI for those on unearned income, although a sensible personal allowance would be better for that, and certainly taking state pension out of tax for those under the personal allowance reduction threshold (e.g. for every £2 over £100,000, £1 of state pension becomes taxable).

At the end of the day, it doesn't matter what label you put on a tax, the government needs £x to operate, the issue is how to ensure everyone contributes fairly and proportionally.

I just wish the government would spend as much resource and energy tackling those who defraud the benefit system, whether through deliberate action or just plain bone idleness, as they do persecuting those who do their best to pay the correct tax. 

Hi OGA: I'm not yet clear what your specific proposal to tidy up IR35 is.  

Can you clarify it, please? e.g. My moderate suggestion is: Replace the words "by 5%" in ITEPA 2003 Part 2 Chapter 8 Section 54 (1) Step 1 with the following: "by a monetary amount that is the greater of either (a) the VAT registration threshold for a worker who did not work for a period of at least three hundred and sixty six calendar days after the date his or her previous contract for service ended or (b) five per cent for all other workers."

Old Greying Accountant's picture

Yes ...

Old Greying Acc... | | Permalink

... put it in the bin and merge NI and PAYE.

Clear enough?

Clearish BUT impractical to implement within the 2015 timescale

dstickl | | Permalink

Hi Old Greying Accountant! YES your skimpy Manifesto is Clearish, BUT it's impractical to implement within the 2015 timescale available to the Coalition, in my "ever so humble" - hope you like the reference to Dickens in this anniversary year - opinion.

Plus you unfortunately fail to provide me with any detailed word changes to any specific statutes, or any mathematical analysis of the effects of your skimpy changes, for example on "winners and/or losers" due to your very wide ranging changes! 

And for civil servants - such as those in HM Treasury or in HMRC, to whom [as known readers of AWEB] my very recent IR35 posts are increasingly directed so that they may be the better informed for the briefing of their political masters - who have to come up with something FAST to snuff out the ever-increasing IR35 scandal of tax ignorance and/or alleged tax EVASION, there only seems to me to be one sensible suggestion, which - as you've probably guessed already - is in my opinion one that has winners all round (as there'd be a negligible loss of IR35 tax revenues) of: Replace the words "by 5%" in ITEPA 2003 Part 2 Chapter 8 Section 54 (1) Step 1 with the following: "by a monetary amount that is the greater of either (a) the VAT registration threshold for a worker who did not work for a period of at least three hundred and sixty six calendar days after the date his or her previous contract for service ended or (b) five per cent for all other workers."

 

Clear enough?

AND can I count on your support, please, for taking immediate action on smothering the "Fiscal Horror" of IR35 in the March 2012 Budget, please?

ShirleyM's picture

@dstickl

ShirleyM | | Permalink

Sadly, but quite understandably, I don't keep news articles from many years ago, but if my failing memory serves me well, I believe the original targets of IR35 (in a different guise) were the companies who were dismissing employees and rehiring them as freelancers. That didn't get implemented and next in line were the freelancers themselves.

Indeed

ThornyIssues | | Permalink

ShirleyM wrote:

Sadly, but quite understandably, I don't keep news articles from many years ago, but if my failing memory serves me well, I believe the original targets of IR35 (in a different guise) were the companies who were dismissing employees and rehiring them as freelancers. That didn't get implemented and next in line were the freelancers themselves.

IR35 Mk1 did indeed attack the big bodyshoppers. This was knocked on the head coincidently because said bodyshoppers had moonlighting New Labour Ministers on their books and also said bodyshoppers were integrated deeply with Government and specifically Inland Revenue (as was). 'Nuff said.

 

Only one real solution

ThornyIssues | | Permalink

Amalgamate NICs with Income Tax and create a "right to be self-employed" status. Any annomalies would then fall very directly at the feet of the OTS. This would also remove the deeming powers of HMRC and their "disguised employee" weapon.

One is either and employee e.g. one has signed an "contract of employment" or one is in business, operating under a well defined business model of SE, LtdCo or LLP. 

@ ShirleyM: Yes, BUT why do Coalition have 2 save Labour's face?

dstickl | | Permalink

Hi ShirleyM! You're quite right not to keep old news cuttings!

 

BUT I do NOT understand why the Coalition - in 2012, especially as some Manifestos of both LibDems and Tories were against IR35 since 2000 - have to CONTINUE to save Labour's "face", by continuing to grossly abuse the "next in line ... the freelancers themselves"?

 

The whole IR35 "Fiscal Horror" seems to me to be tainted with attacking the hard grafting worker VICTIMS of "the companies who were dismissing employees and rehiring them as freelancers".

 

It's for this reason - that IR35 is founded on a face saving political fix that currently paradoxically diminishes the economic growth of UK GDP - that I'm making constructive suggestions to prune the cancer of IR35.

 

Good news:    < 1 month to go, maybe, to the end of the worst of the "Fiscal Horror" of IR35 !!

Friday to Monday    1 thanks

lpwcs | | Permalink

If we accept Osborne's assertion that IR35 is only retained to prevent avoidance via F2M, there is only one sensible way to apply IR35: it applies to a worker whose current client is demonstrably the same as his previous employer for the previous 12 months. You want to be a contractor, go get some real clients.

Also, as a refinement to stop the forced incorporation of the lower paid (any idea how many hotel chambermaids are company directors?)  and to make it less attractive for "clients" of the higher-paid, the liability for Employers NICs stays with the employer, not the worker.

And if anyone feels IR35 doesn't apply under the above scenario, there is always the tribunal process and existing case law.

 

"MOO 2" or "MOO 3" paradox means change needed to ITEPA'03 54(1)

dstickl | | Permalink

lpwcs wrote:

And if anyone feels IR35 doesn't apply under the above scenario, there is always the tribunal process and existing case law.

Unfortunately your last sentence seems to me to ignore the paradoxes that a TAX tribunal seems to me to look for "MOO 2" (see below) but an EMPLOYMENT tribunal seems to me to look for "MOO 3" (see below):

IR35 etc and HMRC’s apparent Tests for Mutuality Of Obligation (MOO)

Test 1: IF (There is an offer of work)+(Acceptance by worker)+(Consideration or remuneration for work)+(Certainty of essentials)+(Intention to create legal relations) => THEN (There is a contract of some sort on each day of offered work).

Test 2: IF (There is a contract of some sort on each day of offered work)+(Personal Service) => THEN (There is ‘the irreducible minimum of obligation’, e.g. that is necessary to claim Industrial Injuries Benefit should the worker suffer an accident on the day of offered work) => a form of Mutuality Of Obligation as “MOO 1”.

Test 3: IF (There is ‘the irreducible minimum of obligation’) +(Some right of control by the provider of work on a day etc basis)+(No other contractual features inconsistent with a contract of service [e.g. Worker’s significant financial risk, provision of major equipment, etc]) => THEN (There is a contract for service, perhaps subject to IR35, but not subject to Employment Rights) => a form of Mutuality Of Obligation as “MOO 2”.

Test 4: IF (There is a contract for service, perhaps subject to IR35, but not subject to Employment Rights)+(There is an ongoing obligation between the work provider and the worker to offer and to accept work over the period of time necessary to claim Employment Rights under the Acts) => THEN (There is a single continuing contract of service over the period needed to claim Employment Rights and IR35) => a form of Mutuality Of Obligation as “MOO 3”.

 

SUM UP: The above "MOO 2" or "MOO 3" paradox means change is needed to ITEPA' 2003 54(1) Step 1, etc, by replacing the words  of "by 5%" with the following: "by a monetary amount that is the greater of either (a) the VAT registration threshold for a worker who did not work for a period of at least three hundred and sixty six calendar days after the date his or her previous contract for service ended or (b) five per cent for all other workers." in order to prune the focus of the "Fiscal Horror" of IR35, as a first step in March 2012 Budget.

It's always been a paradox

lpwcs | | Permalink

It's always been a paradox that IR35 is a tax judged by employment tests, in the same way that it is a tax paid by a company that HMRC actually deems not to exist. It is not necessarily a paradox that different conditions are used to establish the level of Mutuality for Taxation and Employement purposes, they are intending to acheive different ends.Similarly I am not in favour of tinkering with the definitions of IR35, I am firmly in the camp that  says the only fix it to throw it away and write something that works.

Meanwhile the real point is not how to make IR35 work - I think that is beyond the wit of man - but to apply its provisions only to those who are not in business, as per Primarola's original statement to Parliament. And incidentally that includes employees (of industry or the State or Parliament) whose only reason for having a company is to avoid taxes on their supplementary earnings from activities that are not their primary employment.

As I believe in IR35 evolution, & U go 4 revolution, we have to

dstickl | | Permalink

lpwcs wrote:

(1) Meanwhile the real point is not how to make IR35 work -

(2) I think that is beyond the wit of man -

(3) whose only reason for having a company is to avoid taxes on their supplementary earnings from activities that are not their primary employment.

As I believe in IR35 evolution, and you apparently go for revolution, we have to:

(1) Disagree politely about "the real point" because, as a potential businessman, I believe that "The show must go on"; this being part of Risk Management and Business Continuity legislation and practices,

(2) Disagree politely about about your thought that it's "beyond the wit of man" to make IR35 work, in view of the evidence of my suggestion of: Replace the words "by 5%" in ITEPA 2003 Part 2 Chapter 8 Section 54 (1) Step 1 with the following: "by a monetary amount that is the greater of either (a) the VAT registration threshold for a worker who did not work for a period of at least three hundred and sixty six calendar days after the date his or her previous contract for service ended or (b) five per cent for all other workers.", and

(3) Disagree politely about about your assertion that the "only reason for having a company is to avoid taxes on their supplementary earnings from activities that are not their primary employment" because some workers have a limited company for one or more of the following - including and not restricted to - reasons:

3.1 Limitation of liability,

3.2 Marketing of activities,

3.3 Ownership of IPR (Intellectual Property Rights),

3.4 Business continuity,

3.5 Future sale of company. 

IR35 makes millions + what the forum should do    1 thanks

davechaplin | | Permalink

A recent FOI request by us at ContractorCalculator revealed that IR35 does infact make lots of money. The money gained from actual HMRC enquiries is few, but plenty of tax payers are paying - as evidenced by the P35 data. Then there is all the millions of extra tax collected via PAYE umbrella companies.

We've been immersed in IR35 issues since it all began in 1999. In our IR35 solutions whitepaper (Jan 2011) we pointed out that the only solution to IR35 is to make it irrelevant via a shake-up of the tax system, but in the meantime to enforce it better by focusing on "perm-tractors" - those contractors who are indistinguishable from employees.

After the IR35 review, the Coalition set up the IR35 Forum to look at ways to "better administer" IR35. Our second whitepaper (IR35: better adminstration or enforcement) recommended using the wealth of data HMRC capture to focus on the three high risk areas: "Perm-tractors", "Tail-end charlies", and "The Friday-Monday" mob.

The IR35 forum met last week, and new process measures will be being announced alongside the March Budget. We are likely to see much tougher and highly targeted enforcement, which should hopefully leave genuine contractors outside of HMRC's IR35 fishing net, and instead focus on the big fish (3 types listed above) who IR35 was originally designed to catch.

robertlovell's picture

New IR35 discussion group    1 thanks

robertlovell | | Permalink

Hi Dave,

Many thanks for sharing your views on IR35. I'd be very interested to hear what shape the new process measures will take alongside the Budget, as well as finding out more about the forum and their meetings.

As this thread and topic has proven to be so popular on AccountingWEB we will shortly be setting up a new discussion group dedicated to tracking the various different reform and repeal options concerning IR35.

It would be great to hear back from you on the new process measures and the ongoing debate around IR35 on a dedicated AccountingWEB group.

Regards, Rob

A small suggestion    1 thanks

lpwcs | | Permalink

Take careful note of what the PCG are saying and doing. They are eleven years into this battle and a lot of the changes being discussed with HMRC now are of their making.

There is also the problem of the "tax avoidance scandal" publicity being spread way beyond any rational target zone by an ill-informed (or perhaps merely disinterested) press and assorted political hangers-on, each with their own agenda.

IR35 is not going away any time soon, we must be resigned to that.  The focus has to be - as I'm sure will all agree - to move the typical working contractor out of the investigative firing line as far as possible, and focus HMRC on addressing genuine abusers of the corporate envelope

@ipwcs: Apply TLRC's advice re need 4 "economic sense" asap1

dstickl | | Permalink

lpwcs wrote:

RE: Take careful note of what the PCG are saying and doing. They are eleven years into this battle and a lot of the changes being discussed with HMRC now are of their making.  [dstickl Answer 1: Strange, has PCG changed their mind about TOTAL abolishment of IR35? Is PGC now accepting that "IR35 is not going away" whatever PCG does, and so are PCG now holding their nose? BTW: dstickl has taken IR35 seriously since Nov'99, when he changed from contractor to PAYE employee!  SO! Just fix ITEPA'03 s 54(1) Step 1 as indicated else where on AWEB please, and move on!]

RE: There is also the problem of the "tax avoidance scandal" publicity being spread way beyond any rational target zone by an ill-informed (or perhaps merely disinterested) press and assorted political hangers-on, each with their own agenda.  [dstickl Answer 2: This is a problem of HMRC's making, due to NOT applying IR35 at and from the top! To improve HMRC's focus: Just fix ITEPA'03 s 54(1) Step 1 as indicated above please, and move on!] and [dstickl Answer 3: The real scandal, of course, is that IR35's "5%" figure just does not make "economic sense" - a necessary tax attribute as described by the Tax Law Review Committee in its November 1997 report, at the start of the Labour Government!!]

RE: IR35 is not going away any time soon, we must be resigned to that.  The focus has to be - as I'm sure will all agree - to move the typical working contractor out of the investigative firing line as far as possible, and focus HMRC on addressing genuine abusers of the corporate envelope.  [dstickl Answer 4: YES, agreed! Just fix ITEPA'03 s 54(1) Step 1 as indicated above please, and move on!]

 

BTW: I'm looking forward to the new IR35 discussion group AWEB!! R U waiting for Budget Day for this launching?

dstickl - whilst repeatedly

adbanks | | Permalink

dstickl - whilst repeatedly repeating your mantra, you are overlooking the obvious - according to HMRC anyone within IR35 is not in business, and therefore has no need to incur any business costs.

Agreeing to your change would be tacitly agreeing that IR35 affects "proper" businesses.

 

 A simpler, and more clear cut change would be to appending "or via an incorporated body in which the worker has a material interest" to the end ITEPA s46(1)(a) (http://www.legislation.gov.uk/ukpga/2003/1/part/2/chapter/7) and repealing Chapter 8 (IR35) completely.

@adbanks: IR35 case law indicates we have a "Fiscal Horror" & ..

dstickl | | Permalink

Hi adbanks: In my opinion, IR35 case law developments & the alleged IR35 misbehaviour(s) at and from the top of HMG since 2000 indicates we have a "Fiscal Horror" & what I'm trying to do is to limit the excessive scope of the Primarola/Brown Horror, so that HMRC may have a chance to consistently implement IR35 with the resources that they have, in accordance with practices of good governance.

You are of course correct to suggest that " the obvious - according to HMRC" means that HMRC will be reluctant to: 

(1) admit that they/HMRC/IR35 is wrong in its present scope, and

(2) give up any chance of having MORE resources to charge IR35 tax - as that would attack their "inevitable HMRC empire building" where an enlarged team can mean greater civil service kudos/gongs/bonuses, and

(3) change their attitude! (And of course attitudes are as slow to change as other habits.)

Nevertheless, given the context of Ed Balls' parliamentary "flatlining handwaving" performances at PMQs (Prime Ministers Questions) as seen on TV - which recalls Silvia Plath's "Not waving but drowning" poetry but in this case the economy after Labour's incompetence - my country now seems to me to be in deep economic trouble over economic/GDP growth.

Hence as a concerned professional, I do believe that I have a civic duty to point out a way of stimulating economic growth - by dealing with the "forces of stagnation" such as the effects of the "Fiscal Horror" of IR35 - about which The Chancellor recently spoke at FSB.

SUM UP: Persuasive professional persistence probably pays!

 

BTW: I did look at Chapter 7 - headed Agency workers - but I feel that whilst your suggestion may remove the amount of toner in statutory legislation (and so be considered 'simpler' by some) I have the following problems with it:

(a) not all the workers I'm concerned about are necessarily provided through 'Agents' as such, and

(b) the word 'material' often is treated subjectively [e.g. Q: What is the materiality here?] and

hence more confusion for the 'worker' who is trying to get a life may follow! Sorry, but I'm not yet convinced ...

@adbanks:On reflection, IR35's "5%" figure does suggest that ...

dstickl | | Permalink

Hi adbanks:  I regret that I'm still not yet convinced by what you wrote earlier, particularly as I've had second thoughts overnight about your "according to HMRC anyone within IR35 is not in business, and therefore has no need to incur any business costs" claim.

Indeed, on reflection, I have to give an apology to any HMRC readers on AWEB, because IMHO, IR35's low but standard "5%" figure does suggest to me that HMRC did recognise that "anyone within IR35 ... has a need to incur any business costs"!

Accordingly, I am obliged to play the "economic sense" card of the 1997 Tax Law Review Committee, whatever other commentators may say on other threads because this one does have the "Voldemort" analogous name in its title!

And yes, I know you've guessed already (!) that, due to my ingrained professional cost and management accountancy practices, I'd have to repeat the wise words that an upgrade is needed now to ITEPA'03 s 54(1) Step 1, to resolve HMRC's problem - in an era of low GDP growth and The Chancellor expressing disquiet about the "forces of stagnation" to the FSB - of significant fixed costs not being covered by the inevitable insignificant "5%" of variable revenue, especially on business start up!

Surely HMT and HMRC are not anti-business?   IF not, THEN please just do it Mr Osborne!

Accountancy solutions    1 thanks

mikewhit | | Permalink

This is an accounting forum and hence and proposals here will mostly be accounting "solutions" but I would make the point that if the worker was found to be a disguised employee under IR35 ("caught") then there must be some quid pro quo back to the client organisation - if only that the worker is then de facto opted in to the Agency Regulations.

Only by doing this will there be any pressure to engage non-"employee-like" workers in appropriate contracts and relationships. The market place will not do this since the workers are not in a position to choose, despite what the judge at one of the IR35 judicial reviews thought.

It all depends on whether you think people are not working within the correct relationship, or whether you think they should be paying more tax, I tend towards the former.

John Stokdyk's picture

IR35 discussion group now open

John Stokdyk | | Permalink

@dstickl - we didn't intend to wait until the Budget was over, it just turned out that way...

You can find and join the IR35 reform discussion group here.

I hope everyone who participated in this thread will come join the new group and use it as a resource for gathering information about the different aspects of IR35, and potential ways to repeal or reform it.

Several different strands have erupted around the topic here - can I suggest that those taking part put a bit of effort into creating threads that pursue different angles? It might be a little easier to relate to the different elements of the overall discussion.

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Group: Budget discussion group
Find out all about the political compromises, technical background and taxation wishlists that surround the chancellor's Budget statement.