the ins and outs
the ins and outs
Member Since: 13th Jul 2010
3rd Jun 2014
The ethical question is probably with the referrer
being on the the receiving end of a referral - clearly it makes financial sense to pay a referral fee and receive substantially more income than no fee and no income.
The question becomes more tricky for the person making the referral
does the potential client they are referring know they are being rewarded for this? If not would this impact their decision? Would it be ethical not to tell this client that you are being paid for the referral? What do they think of you if they know that you are getting paid for referring them?does the fee impact on whether you would refer somebody or not and/or who you refer the potential client onto ? If just referring based on who pays the most money then isn't that referral suspect?
My motivation for referring is wanting to match a need to a skill and help people out. There is the potential for it to get clouded by financial rewards.
7th Apr 2014
A big challenge here comes from the disparity in power between the employer and a potential employee/contractor. If the employer tells the employee/contractor they need to operate through a Ltd company then the employee has to do this if they want the job. For most people this is not a choice.
The advantages to an employer are not small - they remove all obligations wrt holidays, sick pay, pensions, training, stable working hours, employer's NI as well as reduce risks of being sued by employees for unfair dismissal, redundancy pay etc.
If I remember correctly HMRC treats the amount invoiced as being Net Pay and grosses this up to calculate the gross pay for tax and NI purposes. In other words the employee becomes liable for the employers NI and a higher burden of PAYE which they need to cover from what they have been paid - net pay.
Finally it is far easier for an employing organisation to have the resources to assess whether something falls inside IR35 or not (and to challenge HRMC in court if necessary) than an employee.
So given that the advantages predominantly lie with the employer, doesn't it make sense for the employer to be the one HMRC goes after?