"IR35 should have been challenged right from the outset"
Absolutely! and I did my bit to challenge it, despite fierce opposition from some quarters and a lack of support from representative organisations. I did benefit personally, but I was attempting to bring an element of clarity to the issues for others also.
I still maintain that an "inside" judgement in the FTT should then be used in the ET (and I acknowledge the timing issues), where I contend that the ET would be unlikely to come to a different conclusion, if it were only for political reasons.
Considering the timing issues, it's interesting that it appears that none of the high profile TV presenters who have fallen foul of IR35 and who are still contracted to their clients, have taken their cases to the ET. Being my usual suspicious self, I guess that politics are in play here. We haven't even heard if or how the tax bills have been paid either. More political suppression of the details I guess!
" if parties to a contract were satisfied that the agreed Ts & Cs were sufficient to protect their arrangement from attack by HMRC"
Until the advent of IR35 all contracts were so. They were constructed so as to avoid any contractual nexus between the contractor and the client. This then prevented any successful claim in the ET, irrespective of the reality of the engagement.
The iniquity of IR35 is that it allows the FTT to ignore that legal structure and look directly at the relationship, whereas this isn't allowed in the ET. IR35 talks about constructing an "imaginary" contract which may take into account other aspects of the real contract, but removing any provisions which prevent any contractual nexus between the contractor and the client.
I raised an interesting point recently with major players in the IR35 field. IR35 is the law of the land and the FTT uses it. So why shouldn't it be used in the ET? How can the legal system tolerate a law which can be used in one court and not another? Are there circumstances where criminal law isn't allowed in civil law? Just a thought!
If IR35 were to be allowed in the ET, I guess we'd see many more successful employment claims there. Generally, I've not seen much attempt by representative organisations to use any "unusual" approaches against IR35, and maybe, just maybe, if they had approached the issues more aggressively, then perhaps we might not have found ourselves in this position now.
yes, it's often cheaper for them to settle than the costs of defending a case. However, in relation to the "off payroll" regulations, there are political and financial implications and these might colour how any such claims resulting in those regulations might be handled.
For those of you who might have followed my old case, the compensation that was offered was less than half a year's potential annual increase in tax under IR35, so it was imperative that I obtained a legal judgement regarding my position. That judgement was that the engagement was one for services, i.e. not employed, and HMRC abandoned their proposed challenge to me under IR35.
I guess the introduction of the "Off Payroll" rules in April 2021 will also generate some claims. It wouldn't surprise me if those cases were given priority!
"we are not told if any evidence was offered concerning other clients the appellant had"
This is the iniquity that IR35 creates. It would seem that it is possible for an individual to have multiple clients/contracts and in an extreme case, all could be subject to IR35 as a hypothetical contract of employment could exist for each engagement. This is clearly an absurdity, as for IR35 the FTT looks at each contract in isolation from any other factors.
I still firmly believe, as I have done now since the inception of IR35, that this absurdity will not be killed off until a judgement in the FTT is taken to the ET.
Yes, I am aware that the contract needs to reflect the actual working arrangements, but there should be additional factors present to strengthen the position. These may not necessarily be contractual or related to the working arrangements, e.g. the presence of insurances etc.
For the record, all monies from MyCo are paid into our joint bank account and always have been.
However, what is iniquitous about IR35 is that an individual can have multiple concurrent clients and one or more of the engagements could be subject to IR35.
"A very simple example is "putting the spouse (or indeed any body) on the books". If you pay them and the money goes into their account any challenge can be met. If you don't pay them but put them through the books then you're wide open for a challenge."
I don't quite understand what you are saying here. However, for my part, MyCo pays myself and my wife the minimum wage rate based on the hours that we work, and the relevant tax and EERS NI are paid. We are both pensioners, so EES aren't payable. We are also joint equal owners of MyCo, and so dividends are paid equally and are registered on our self assessment forms.
I'm not sure what other arrangements anyone could or want to get away with, but I've always conducted my business in such a way as to be able to defend against any HMRC challenge, i.e. I don't engage in "creative accounting". Clearly with respect to IR35, I have tax investigation insurance.
However, given my track record with brushes with HMRC, I guess they'd want to leave me alone, which they appear to have done for the best part of 20 years.
Yes, I am fully aware of the legal niceties, as I've represented myself at the EAT. But IR35 seeks to circumvent the legality of a "for services" contract, by ignoring all the contractual provisions and looking only at the actual working relationship. In my opinion, the ET is more likely to come to the correct judgement for any engagement than the FTT would. Some commentators here seem to reflect that opinion also.
It would be interesting to see some statistics regarding the proportion of all FTT and previous Commissioners cases which HMRC won and where the tax payer won. At least we'd have an idea how un-biased this court structure is then.
My answers
yes, and outlaw the term Personal Service Company also! They don't exist in law.
"IR35 should have been challenged right from the outset"
Absolutely! and I did my bit to challenge it, despite fierce opposition from some quarters and a lack of support from representative organisations. I did benefit personally, but I was attempting to bring an element of clarity to the issues for others also.
I still maintain that an "inside" judgement in the FTT should then be used in the ET (and I acknowledge the timing issues), where I contend that the ET would be unlikely to come to a different conclusion, if it were only for political reasons.
Considering the timing issues, it's interesting that it appears that none of the high profile TV presenters who have fallen foul of IR35 and who are still contracted to their clients, have taken their cases to the ET. Being my usual suspicious self, I guess that politics are in play here. We haven't even heard if or how the tax bills have been paid either. More political suppression of the details I guess!
" if parties to a contract were satisfied that the agreed Ts & Cs were sufficient to protect their arrangement from attack by HMRC"
Until the advent of IR35 all contracts were so. They were constructed so as to avoid any contractual nexus between the contractor and the client. This then prevented any successful claim in the ET, irrespective of the reality of the engagement.
The iniquity of IR35 is that it allows the FTT to ignore that legal structure and look directly at the relationship, whereas this isn't allowed in the ET. IR35 talks about constructing an "imaginary" contract which may take into account other aspects of the real contract, but removing any provisions which prevent any contractual nexus between the contractor and the client.
I raised an interesting point recently with major players in the IR35 field. IR35 is the law of the land and the FTT uses it. So why shouldn't it be used in the ET? How can the legal system tolerate a law which can be used in one court and not another? Are there circumstances where criminal law isn't allowed in civil law? Just a thought!
If IR35 were to be allowed in the ET, I guess we'd see many more successful employment claims there. Generally, I've not seen much attempt by representative organisations to use any "unusual" approaches against IR35, and maybe, just maybe, if they had approached the issues more aggressively, then perhaps we might not have found ourselves in this position now.
"his ex employers decided to settle"
yes, it's often cheaper for them to settle than the costs of defending a case. However, in relation to the "off payroll" regulations, there are political and financial implications and these might colour how any such claims resulting in those regulations might be handled.
For those of you who might have followed my old case, the compensation that was offered was less than half a year's potential annual increase in tax under IR35, so it was imperative that I obtained a legal judgement regarding my position. That judgement was that the engagement was one for services, i.e. not employed, and HMRC abandoned their proposed challenge to me under IR35.
I guess the introduction of the "Off Payroll" rules in April 2021 will also generate some claims. It wouldn't surprise me if those cases were given priority!
"we are not told if any evidence was offered concerning other clients the appellant had"
This is the iniquity that IR35 creates. It would seem that it is possible for an individual to have multiple clients/contracts and in an extreme case, all could be subject to IR35 as a hypothetical contract of employment could exist for each engagement. This is clearly an absurdity, as for IR35 the FTT looks at each contract in isolation from any other factors.
I still firmly believe, as I have done now since the inception of IR35, that this absurdity will not be killed off until a judgement in the FTT is taken to the ET.
Yes, I am aware that the contract needs to reflect the actual working arrangements, but there should be additional factors present to strengthen the position. These may not necessarily be contractual or related to the working arrangements, e.g. the presence of insurances etc.
For the record, all monies from MyCo are paid into our joint bank account and always have been.
However, what is iniquitous about IR35 is that an individual can have multiple concurrent clients and one or more of the engagements could be subject to IR35.
"A very simple example is "putting the spouse (or indeed any body) on the books". If you pay them and the money goes into their account any challenge can be met. If you don't pay them but put them through the books then you're wide open for a challenge."
I don't quite understand what you are saying here. However, for my part, MyCo pays myself and my wife the minimum wage rate based on the hours that we work, and the relevant tax and EERS NI are paid. We are both pensioners, so EES aren't payable. We are also joint equal owners of MyCo, and so dividends are paid equally and are registered on our self assessment forms.
I'm not sure what other arrangements anyone could or want to get away with, but I've always conducted my business in such a way as to be able to defend against any HMRC challenge, i.e. I don't engage in "creative accounting". Clearly with respect to IR35, I have tax investigation insurance.
However, given my track record with brushes with HMRC, I guess they'd want to leave me alone, which they appear to have done for the best part of 20 years.
Yes, I am fully aware of the legal niceties, as I've represented myself at the EAT. But IR35 seeks to circumvent the legality of a "for services" contract, by ignoring all the contractual provisions and looking only at the actual working relationship. In my opinion, the ET is more likely to come to the correct judgement for any engagement than the FTT would. Some commentators here seem to reflect that opinion also.
It would be interesting to see some statistics regarding the proportion of all FTT and previous Commissioners cases which HMRC won and where the tax payer won. At least we'd have an idea how un-biased this court structure is then.