IR35 hangs on in

The Budget proved to be a disappointment for those lobbying to be rid of the IR35 legislation.

As AccountingWEB member Greenhays reported first, paragraph 2.203 of the Budget document explained that the potential loss of revenue is too large for the Chancellor to contemplate doing away with the measure. Instead a package of reforms is promised to make the tax easier to administer.

The Review of Small Business Taxation by the OTS looked specifically at IR35. The report indicated that many businesses which were potentially affected by the provisions had “managed round” the tax charge that might arise, albeit at some expense (para 5.2 Small Business Tax Review interim report 10 March 2011).

The report’s key conclusion (at para 5.8) is most enlightening: “The reality of the situation is that there is probably no clear cut legislative alternative that addresses the concerns of all parties. In some places, the existing legislation is an effective deterrent to the use of intermediaries for the purpose of reducing tax liability on employment income. However, it is clear that in many other instances IR35 as it stands is not effective, either for the individuals affected or for the Exchequer.”

The changes announced today show that the government has plumped for retaining the legislation but moderating the administration of the measure.

The PCG was moderate in its response to the announcements, and stated, “We intend to play a key part in this process and are determined as a result to exclude all legitimate freelancers from the ongoing threat of an IR35 investigation with all the uncertainty that brings.”

It would be a surprise indeed if the new IR35 Forum did not include representatives of the PCG, in addition to representatives from the accountancy and tax profession, but of course it remains to be seen whether the forum is allowed to have any real impact on the future application of the rules. Clearly the PCG believes that this will be so.

Continued...

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Comments
Southcoast accountant's picture

New 'improvements' in IR35 enforcement

Southcoast acco... | | Permalink

One of the proposed improvements is..

  • 'To restrict reviews to high risk cases carried out only by specialists teams'

Does anyone have any views or further information on what this might actually mean?

IR35 specialists

ameli1 | | Permalink

In my opinion its what the law says that counts, not HMRC "specialists". IR35 is such a thorny subject, even the OTS can’t decide what to do with this issue – more sticking plaster is not a remedy.

In my opinion IR35 is simple in concept, but those who rely on the written form of contracts (because its easier and/or cheaper) are mistaken. HMRC will go beyond the carefully crafted contract. Even though they may be incompetent at the litigation stage, because of poor fact-find evidence, it will at the very least end up in downtime costs, frustration, etc.  The law points to hypothetical contracts based on a reality check of the actual arrangements - not so called "IR35 bullet proof contracts".

Its a bit like golf, if it was easy everyone would be able to win at the Masters.

I provide advice and tend to be fully engaged when clients are in distress with HMRC.

 

 

Budeget and IR 35

indiajack | | Permalink

Given that the Budget has favoured clamping down of tax avoidance and that the Chancellor did not repeal or amed IR35 becuase of the amount of tax raised, probability appears skewed to more action being brought against IR35 issues.

nogammonsinanundoubledgame's picture

In the past, there has always been ...

nogammonsinanun... | | Permalink

... a mechanism for getting HMRC clearance on whether IR35 applies to a particular case.  In my experience there has, at least until now, been a substantial lack of trust on the part of the taxpayers that such a review would be conducted with the degree of objectivity that would be applied by an independent tribunal.  While HMRC put out the public face of supposedly assessing the "right" amount of tax the reality is perceived as somewhat different and in that regard I have a lot of sympathy with taxpayer perceptions.

I would hope that the changes to be implemented address this issue, otherwise they will remain flawed.

With kind regards

Clint Westwood

 

frustratedwithhmrc's picture

Put simply...

frustratedwithhmrc | | Permalink

Whenever anyone did a contract review or a Self Employment determination, in more than the majority of cases (and most borderline ones), the determination was the either IR35 or the taxpayer was in employment rather than self employment.

This shouldn't surprise us as it is HMRC's job to collect taxes and whilst the charter (or whatever its called nowadays) does go on about "taxpayers, paying the right amount of tax", the right amount always seems to be skewed towards the maximum amount possible.

It has been said before and it will be said again "Until there is equality of taxation between the Employed, Self Employed and Ltd Company Contractors, there will be attempts by one group (primarily employees) to be in the more favoured group". The only way to get rid of this inequality is to remove the various distinctions between them.

The problem here is that a lot of the flexibility of the UK labour force comes from being able to call on temporary workers for specialist activities. We don't want to be in a position where in trying to find equality, we effectively make Self Employment and the establishment of Limited Companies not worth the risk.

PCG has totally failed its membership

chEEK | | Permalink

I believe that the PCG has serially failed in regard to IR35. I would like to explain why I believe this to be so.

They have consistently touted abolition and refused to entertain the posibility that abolition may not be the right solution.

The Treasury said for many years that they were unhappy at the use of the perceived loophole of using dividends as remuneration. They see dividends as reward for risk - investment risk - and yet nearly all one man band Ltd Cos invest nothing at start-up and nothing throughout the life of the company.

The PCG try to spin this into a "risk" of unemployment but this is not persuasive - all working people are at risk from unemployment and contractors are paid (much) more money to cover their time out of work. Similarly training costs, pension costs etc are covered by the much higher rates of pay than those available to their permanent employee counterparts

Therefore the concern over the use of dividends to pay remuneration to workers seems to have much justification. This has never been acknowledged by the PCG.

However, in somewhat anomalous fashion, most of the PCG officials seem to believe/accept that repealing Section 44 and its predecessors such as s134 (see ** at the bottom if this needs further explanation) would solve the problem and would be acceptable to them. This is explicit acceptance that paying Sch D taxes (therefore 8% NI) is reasonable.

And it is certainly true that when you look at the animal closest to the average contractor it would be the 'sole trader' (self employed one man band) paying tax and NI under Schedule D... so why is it that the PCG feel that they should demand the right to use dividends so that they can return to the days when contractors paid no NI? I really strugge to understand this position - quite simply, it does not make sense.

They may well have got somewhere if they had instead concentrated on achieving the self-employed level of tax and on correcting the serious flaws in IR35, which are:

  • (1) The only two possible outcomes of an IR35 status assessment are (a) You're not an employee (so do what you like, pay no NI) or (b) you are an employee so you and your (largely enforced) Ltd Co now have to pay all employee taxes (income tax and EE NIC) and, critically, the ER NI throughout their income.

      The level of tax being paid by those in (b) is grossly unfair.

  • (2) There is no option to pay the' obvious' level of tax which would be that paid by the self-employed under Sch D.

 

The OTS report is worrying in this context, paras C25 and C27 in particular. C25 states that those caught by IR35 are in roughly the same position as employees. This is not the case and it shows that the PCG representative failed aven to get the concept of unfairness (as described in 1(b) above) across to the OTS.

When you also consider that the PCG's submission to the OTS suddenly lurched from the abolition stance to proposing some awful business tests solution - and they did this without so much as a by-your-leave to the membership - the record of that organisation is one of dismal failure as the inevitable result of a lack of clear understanding.

Following the Budget, the meek acceptance implicit in their press releases seems a somewhat feeble response, particularly for an orgnisation with their history. No criticism of government at all??? It seems the PCG have gone from angry pressure group to being something that is far too close to and far too cosy with those they are supposed to be lobbying for change.

And what they say they'll do now is to head into the consultations with HMRC (as to how HMRC will become more cuddly in future deailings with IR35)... touting their business tests yet again as their approach and yet...

The first thing their membership heard of this 'solution' was when the OTS report was published recently. The (flimsy) excuse was that there was an OTS embargo on communication, so they couldn't consult (note: are you not then constrained to go with your members' known position?) ... so how can they now justify continuing with this approach without seeking a mandate from their members? After all, there is nothing stopiping them from consulting now.

And how can they ignore the fact that those who fail to get through the magic-bullet style tests they are championing will still be in the same ridiculous position that the IR35-caught have always been - paying income tax, EE NI AND ER NI on their income?

All in all - a dismal performance over 12 years. I have done my best throughout that time to make them see the logic of what I have written above - they refuse to listen and are, in fact, dismissive and downright insulting in doing so.

GIven the PCG's history I don't see how they could take this forward in a credible fashion even if they were willing to do so. They seemed to lose their way at an early stage and never recovered. Therefore I think it's time for a new organisation to take over, based on clearer analysis leading to politically achievable objectives.

 

----------------------------------------------------------------------------------------

[** Note: Section 44 (aka S44) and its predecessor Section 134 (aka s134) are the terms commonly used to refer to the relevant sections of the various ICTA/Finance Acts which are the pieces of legislation designed to prevent agency abuses (largely to do with avoiding ER NI by actions such as declaring their employees to be self-employed). This had the knock-on effect of forcing contractors down the Ltd Co route, since agencies needed to be reassured that they were not going to be landed with the employer taxes/NI after they introduce a supposedly self-employed person to a client .]

frustratedwithhmrc's picture

Yes - In principle I agree.

frustratedwithhmrc | | Permalink

The problem here comes down to NIC payments. The contractors working through Limited Companies, call them what you will have for the most part avoided payment of both Employee's and Employer's NI. This is usually done through the payment of a small salary of about ₤5,000 - ₤6,00 and the remainder in dividends which attract no NI.

As you quite rightly say, the option of issuing dividends is not available to employers (except directors of non-contractor limited companies) and the self employed. So why should it be open to a contractor, just because he/she happens to be the owner manager of a limited company.

The difficulty here is without a clear definition of what is a genuine limited company and what is a a one-man band there is no way for the government to incintivize the type of companies the country needs (i.e. those that will employ people and bring in additional tax revenue) and those that will not. Equally, there is the question of what do you do with embyonic companies - as there is likely to be a stage where most companies were owner managed businesses, which may appear indistinguishable from limited company contractors during the early stage of their operations.

The difficulty with IR35 was that the original recommendations actually made sense - specifically that any company which employed someone on a non-employee basis would be liable for PAYE, Employers NI, Employees NI, Penalties and Interest if they were found to have made payments to 'disguised' employees. However, various large companies that used contract employees for major projects (and needed the flexibility to hire-and-fire at will), lobbied the government to change the basis of IR35 so that the contractor becomes liable rather than the company undertaking the work.

It is this aspect of IR35 which has made it completely unworkable.

Since the companies undertaking the contracts are getting the most benefit from employing contractors (easy to hire-and-fire, no holiday pay, no sickness pay, no HR issues, no PAYE, no Employers NI, no Employees NI), then it is the contracting company that should carry the risk. Equally, from a tax collection perspective, it is these companies that have the deepest pockets and therefore if there is any issue they can pay without being bankrupted (as is often the case with Limited Company contractors).

Taking the original IR35 approach, a lot more of those who were taken on a contract basis would have been taken on as employees, bringing additional employment benefits and more security to the employees, but also bringing in additional tax revenue.

Yes, it is true that contractors who operate through limited companies, especially using the Husband and Wife approach with 50% of the shares each would end up paying more tax, but it would only put them into an equivellent position to employees, which is what they almost certainly are.

To remove the other differences between employees and directors (regardless of the size of the company), we should charge PAYE and NI at the prevailing rate for any dividend payments to shareholders who are also employees or directors (including Shadow Directors). This would prevent a lot of the tax avoidance that goes on at the moment in companies of all sizes. There would be no advantage in a director taking a small salary and large dividends as it would be taxed the same as taking a large salary.

The above approach would have the advantage of reducing some of the gross income inequalities between employees,  directors and owner managers. It would also benefit companies as it would incentivize profits retention within companies, which is a good thing.

Before anyone starts screaming about me killing the entrepreneurial spirit, I would say that Entrepreneurs' Relief would be retained at the present level, although some clarification and expansion of the rules would be required to ensure that those who setup businesses and then sell them, sell their shares in them or retire, continue to benefit from their efforts.

Locutus's picture

I don't think we ever needed IR35 in the first place

Locutus | | Permalink

Freelancing (whether as a sole trader or limited company) should be actively encouraged.  Whilst I can perhaps see an argument for it where the terms / working arrangements of a freelancer are virtually indistinguishable from an employee, in the vast majority of cases it is of little value.

I have have worked as a freelancer in the accountancy profession for many years and to a lesser extent still do.  I have no holiday pay, sick pay, pension and can be fired in an instant.  But I have always been quite happy with those arrangements.

Freelancing is, in essence, the practice of offering personal service on a self employed basis to one or a small number of customers / clients concurrently.  As a previous poster mentioned, how can you distinguish between an embryonic micro-business that may ultimately grow into something much larger and something that stays the same?  Indeed, is it fair (as IR35 seeks to impose), that two self employed people, each with no traditional employment rights, pay different amounts of tax based upon the perception that one is perhaps an embryonic micro-business (to be encouraged) and the other is a disguised employee (to be punished)?  Is it also fair that if one freelancer chooses to work through a limited company and suffers the risk of IR35, whilst another works as sole trader, which pushes the risk onto the contractor via PAYE regulations?

Freelancing (in spite of the tax risks) is a commercial arrangement that benefits both contractor and freelancer.  It should be encouraged not opposed.

I sometimes wonder what it would be like if the public sector were to be opened up to freelancing much more than it currently is.  If my taxes were spent paying these public sector freelancers double the going rate of an equivalent public sector employee BUT with the understanding there are no employment rights, holiday pay, sick pay, final salary pensions, redundancy, etc. then I suspect it would be money well spent.  You would also find that a lot of the poorer quality workers that become institutionalised in the public sector are forced to "up their game".

 

 

 

 

 

Fundamental difference in tax between Employee and "IR35 Caught"

chEEK | | Permalink

To Frustratedbyhmrc:

I think you can only see the difference when you compare contractors sitting side by side doing the same work and being paid the same rate by the client - but using different structures etc.

It is worth noting at the outset that the client doesn't care what their structures are - they know there's a rate for the job and that is what they will pay. Let us say that that rate is £100 per day and let us also ignore personal allowances would only complicate the calculations to no benefit.

 

Person A is hired directly by the client. Since there is no agency to be concerned about S44, this person works though a sole trader arrangement and so pays 20% income tax and 8% NI. Therefore this person gets, after deductions, £72 per day.

Person B is hired through an agency and has to use a Ltd Co. They consider themselves to be outside of IR35 and use 100% dividends (or a small salary below the LEL). They pay 20% income tax and no NI. Therefore this person gets, after deductions, £80 per day.

Person C is similarly hired through an agency and has a Ltd Co but they are, for whatever reason, caught by IR35. They will pay 20% income tax plus 11 % EE NIC and the Ltd Co they were forced to use also has to pay 13% ER NI. therefore this person gets, after deductions, £56.

 

Note that Person C is very different in taxation terms to the employee that they are 'deemed' to be. If they were an employee they would only have had income tax and EE NIC deducted and would have taken home £69. And they may have had other benefits too (sick/maternity pay, pension, holiday pay, redundancy, employment rights etc).

What I am pointing out here is that the IR35 caught position is definitely not that of an employee.

Far from it in fact, when you consider that the insidious ER NI applies throughout their earnings. This is the true injustice - PAYE was never designed to have all of the costs paid by one person's personal remuneration.

 

In fact, ER NIC is the great white elephant of pour tax system. It is basically a tax on employing British-based workers - how can that be a good idea in a 'global village' world economy?

What your post highlighted rather well was that it is also not a good idea for government to provide support for embyonic businesses through general taxation measures. Saying that all sahreholders pay no NI is not the way to do it - specific targeted measures are (as pointed out recently by the IMF in criticisubg the 10p taxr ate as a way of tackiling poverty - why give the benefit to all income tax payers, rich and poor alike?).

Removing ER NI is the only way to sort out these anomalies in the long term, but in the meantime the problem with IR35 for the genuine contractor, who does not necessarily want to grow their business (and nor should they be expected to want to do that) is that the tax being levied is totally the wrong amount. In the example above, I am firmly of the opinion that all 3 of those people shoud be paying tax at the rate being paid by Person A. By allowing IR35 to permit this as a possible outcome of an asessment it woud alleviate (most of) the current injustice.

The remainder of that injustice is, as I said previously, the fact that anyone can be effectively asked to pay income tax, EE NIC and ER NIC on what is in reality their personal income - which is exactly what it is when you look past all the complexities of structures and statuses. And  contractor who is effectively forced to use a Ltd Co because the law makes it almost iimpossible to do anything else should still be seen as a genuinely self-employed person and be able to pay that amount of tax.

What you have suggested above worries me in that you would apply PAYE to some people and have them pay employee taxes plus ER NIC. That should never happen. Possibly another party (the end-user of their services or an agency) may be deemed to be an employer, but it is nonsensical for the worker also to be the employer for tax purposes - and saying that the Ltd Co is the employer and the worker is the employee is an exercise in semantics when the Ltd Co is forced upon the worker and is simply the conduit by which their personal income first comes under their control.

Why IR35 was needed

chEEK | | Permalink

I certainly agree that self-employed people should pay self-employed taxes, but as I said in my first post above IR35 was needed because a lot of people were incorporating and using dividends to avoid NI altogether. And that was not right in a tax system that expects that working people should be doing so.

It will always be the case when you have different tax regimes that some people will try to be in the ones that pay less tax. So then you need to have statuses and status tests... and that leads to endless court cases, tribunals etc.

Having a flat rate of tax is the answer to this and that is where we may end up if the consultation on merging tax/NI comes to fruition (although it seems to be talking in terms that suggest only EE NI is under the microscope). As I noted above, they also need to get rid or ER NI  which is the underlying cause of injustice in all of this - and also to allow British workers to play on a level global playing field. Is it any wonder that companies outsource to India etc when using the same type of British-based worker costs 13% more for no obvious reason?

I won't go over everything I said above but basically IR35 would be fine if it allowed for an outcome of 'self-employed' and also did not have the ludicrous situation whereby someone gets lumbered with income tax and both forms of NI on their personal income.

My preference is to get rid of NI since EE NI is now a form of income tax in all but name. When it  was introduced it was a levy and gave entitlement to definite benefits (use of the NHS, a decent state pension and unemployment benefits). This has been eroded to the point where the NHS is free for all, the state pensions is all but useless and if you don't qualify for unemployment benefits then you get benefits from a tax-based fund instead.

 

nogammonsinanundoubledgame's picture

I think in a nutshell there are two main problems with IR35

nogammonsinanun... | | Permalink

The first is that there is a vast population of owner-managed companies who come no-where close to falling within the definition of IR35 but who pay no NIC on their dividends which are effectively a reward for work, so the fact that IR35 focuses only on a small subset of companies is seen as discriminatory, but was legislation by convenience simply because that subset could be (supposedly) more readily identified and targeted.

The second is that when IR35 was originally mooted, the administrative obligations were to be placed at the door of the end client rather than the intermediary.  This was easily the fairest and most sensible approach, and the only reason why it was not implemented was because the spineless government caved into lobbying pressure from the big corporations, just as they did with the construction industry scheme.  All it requires is for the government to stand its ground and shift the obligations back to the end client and much of the problem associated with IR35 disappears.

With kind regards

Clint Westwood

PCG rant

ThornyIssues | | Permalink

@ chEEK

Mr Duck, is that you?

Person C

ThornyIssues | | Permalink

@ chEEK

You are wrong. As Person C is IR35 caught to he/she is persoanall y taxed (PAYE + NIC) on 95% of the turnover of their LtdCo. This will "usually" place them in higher rate tax so, the marginal rate of tax is substantially more ( 62.5% IIRC) than the 44% that you suggest. Also, IIRC, should a freelancer be caught under IR35 then HMRC still performs the "calculation" on 95% of turnover of the LtdCo but will NOT refund Corp Tax paid by the LtdCo, before calculating the PAYE + NIC due under IR35.

   

Person C (the example was £100 per day)

chEEK | | Permalink

@ThornyIssues

I chose £100/day and ignored personal allowances (since they will be common to all scenarios) in order to simplify the figures - none of them would be in higher trate tax bands (assuming about 241 days a year worked that would equate to about £24k).

What you have said is undoubtedly correct in other scenarios where there are higher rate taxes to be paid - and it reinforces what I said, in that things get progressively worse as more is being earned.

This is exacerbated since ER NI applies at full tilt throughout the deemed/PAYE salary which is why it is such a massive hit for those affected.

Despite your post starting with "You are wrong", what you actually said simply reinforces what I said.

And - in what way was what I said a "rant"? Are you one of the PCG's Board of Directors or Consultative Council?

Wrong comparison ?

mikewhit | | Permalink

"all working people are at risk from unemployment and contractors are paid (much) more money to cover their time out of work"

You are making the mistake of comparing the contractors brought in for their experience (ie. consultants), with employees who often work alongside them.

The contractor, if he had remained within the corporate regime, would probably be at the level of section manager, due to savvy and experience, rather than one of the "workers on the bench".

The remuneration is to cover that experience and professionalism (not to mention NI, sick, maternity and training costs saved by the client !) as well as the job security aspect.

Not much of a disagreement here?

chEEK | | Permalink

To mikewhit:

You quoted me saying this:

"all working people are at risk from unemployment and contractors are paid (much) more money to cover their time out of work"

And your final paragraph said this:

The remuneration is to cover that experience and professionalism (not to mention NI, sick, maternity and training costs saved by the client !) as well as the job security aspect.

 

However, the sentence you quoted from my original post was followed immediately by this:

Similarly training costs, pension costs etc are covered by the much higher rates of pay than those available to their permanent employee counterparts.

 

This is essentially saying the same thing isn't it? The contractor is handed a higher rate that says basically "There's your total package - you sort it out". And you did say "as well as the job security aspect", so... it seems we are in agreement then. So I'm not sure why you felt the need to post in a manner that suggested otherwise by saying this:.

You are making the mistake of comparing the contractors brought in for their experience (ie. consultants), with employees who often work alongside them.

I would say that contractors and permanent employees often have similar experience and in some cases the permies are at least as good as the contractors. By far the major driving force for the use of contractors is the fact that they are needed for a relatively short period of time (which can be as long as 2 to 3 years) while you do something like development work, migration work etc and then you want the ability to shed the excess workforce when that's done.

While it's true that there are other reasons, the ability to have 'disposable' workers (who can be brought from far and wide at the drop of a hat) is by far the greatest reason for the use of contractors.

I realise that there will be many people who are uncomfortable with the idea that the no-NI route is unjustifiable, but I hope that they can see that, now that that route is closed off, it's good to have an alternative strategy - and one that makes more sense and is therefore a 'winnable' position.

For many people who pay themselves a salary, paying Sch D NI would be cost-neutral or even a saving.

Too much or enough

mikewhit | | Permalink

I think I was taking issue with the (to me) implied "paid too much to compensate ..." sense of your sentence.

In my experience at least in the software sector, contractors have been more experienced people brought in to start productive project work in their first week, sometimes injecting a needed skill or technology that was missing in the project.

Locutus's picture

Here's a stab at answering the original question

Locutus | | Permalink

 

"One of the proposed improvements is..

  • 'To restrict reviews to high risk cases carried out only by specialists teams'

Does anyone have any views or further information on what this might actually mean?"

I guess a specialist IR35 unit will be set up at one of the offices within Revenue & Customs (along the lines of the specialist medical unit in Edinburgh that I have come across), which will have IR35 cases referred to it by other parts of the country.

 

HMRC have an terrible success record with IR35 with many cases dragging on for years and then HMRC finally losing when it goes to the Tax Tribunal.  A specialist unit should be better placed to decide whether to "throw in the towel" early and will be able to put up a more robust fight where they think they can win.

"High risk cases" would evidently be cases where there is a high risk of tax loss ... particularly blatant abuses of the regulations where there is a lot of tax at stake.

I fear that one consequence of having a specialist unit could be that they will actively select a number of recruitment agencies for review every year.  They will serve them with a notice to demand details of everyone on their books for whom PAYE is not deducted (which would largely consist of freelancing companies) then trawl through the affairs of those freelancing companies that are paid relatively high amounts, looking for signs of IR35 risk.

The easiest pickings (high amounts of tax, blatantly inside IR35, low taxpayer/agent knowledge of IR35) will then be the cases they pursue further.

No such meaning implied or explicit

chEEK | | Permalink

To mikewhit:

I think I was taking issue with the (to me) implied "paid too much to compensate ..." sense of your sentence.

There was no such meaning intended nor, I believe, implied by my words. And I have to say that your response doesn't read to me as though you thought that was my meaning. But anyway...

In my experience at least in the software sector, contractors have been more experienced people brought in to start productive project work in their first week, sometimes injecting a needed skill or technology that was missing in the project.

Contractors fall into three basic reasons for hiring:

1. Disposable - no need for any greater degree of skill that being able to do the job.

2. Vital expertise that cannot be obtained any other way.

3. Temporarily filling a permanent role (sometimes this can overlap with 2).

Based on my extensive experience in recruiting programme and project teams in the software sector, as I said before,  the main reason is number 1 (short-term nature of the work) by a very long distance. Often these people can be junior-ish with a couple of years experience in the permanent world and then off to fill a seat somewhere as a contractor.

The first question is unanswerable at the moment

chEEK | | Permalink

To Southcoast:

I doubt that anyone knows since the OTS report was vague on the subject. To know what it means, we would need to have been told exactly what the perceived risk is... a risk of what, exactly?

The risk of a tax loss doesn't really help IMO since that is inherent in any HMRC investigation. If it means only when there is a risk of a a loss of a "high" amount of tax... that would be rather subjective unless guidelines were issued (say, no less than 30% of profit to be taken as salary).

So we'll have to wait and see. As usual. All that "consulting" and nothing changes.

MSC legislation effects?

mikewhit | | Permalink

As a (parallel) matter of interest, does anyone know how much tax was gained (or lost ...) by the introduction of the MSC legislation ?

I seem to remember that when asked, the Treasury (Dawn MylastRolo) could not answer that question as applied to IR35.

IR35 & the OTS

thomas34 | | Permalink

The alternative policy approaches recommended were to "suspend the legislation with a view to abolishing it" or to "retain the legislation". I think suspending, abolishing or retaining covers everything doesn't it?

Other than the settlements legislation (now clearer after Arctic Systems) the most problematic and uncertain area for practitioners is likely to be IR35. The best the OTS can do is to state the blindingly obvious - it's not a recommendation, it's a statement of fact with a few frothy bits attached.

 

 

Rebecca's simplest

mikewhit | | Permalink

National Minimum Wage on directors' working hours, and call it a day !