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IR35: A question of control

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Two recent upper tribunal cases have highlighted the importance of ‘control’ in the decision to treat a worker either as caught by, or outside, of the IR35 rules.

25th Jun 2021
Tax Writer Taxwriter Ltd
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In all IR35 cases, the court must examine the hypothetical contract between the worker and the engager (end-client) to determine whether the relationship ignoring the personal service company and any other intermediaries would be one of employee and employer (caught by IR35) or independent contractor and customer (outside IR35). 

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Replies (10)

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By Justin Bryant
25th Jun 2021 16:07

If control is now so important then contracts will be drafted accordingly (like how substitution clauses used to be a big deal) and working practices will be adopted so that the engager has little if any control (within commercial boundaries).

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By Beef curtains
25th Jun 2021 19:48

Just how much time and money has been wasted on this nonsense since Brown started meddling in 1999? Having a flexible and independent contractor body is a great help to the economy, unlike NIC, the NMW, TUPE all the other socialist rubbish we are saddled with.....and the entire tribunal structure supporting it.

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blue sheep
By Nigel Henshaw
28th Jun 2021 07:57

I dont have many contractor clients thank goodness but for all my clients whether or not they pass or fail the IR35 test is irrelevant now because all the agencies have taken a blanket approach - if you want to work through us you use this umbrella.

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By sawebs
28th Jun 2021 09:47

Doesn't matter any more Rebecca. Companies are all either blanket assessing all contracts as inside IR35 (with or without a sham assessment process) or insisting on working via umbrella or only offering fixed term contracts. It's a disgrace that a conservative government has allowed HMRC to get away with this and de facto abolished this legal way of working.

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By rbw
28th Jun 2021 09:59

A marginal, tiny (or possibly medium) point on your:

"Remember that the IR35 tests are still important for contractors who work for small or medium-sized private sector organisations, as off-payroll working only applies to large engagers and to public sector contracts."

Shirley thinks that medium-sized go with large (s.61M ITEPA as amended).

Thanks (2)
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By Kemu
28th Jun 2021 10:21

Thanks Rebecca. The balance of importance seems to be shifting, but it is very helpful to see where different decisions point.

It's still very frustrating that the guidance on status determination is about the specific circumstances of each contract - though (happily) the FTT and UT both seem to agree that the bigger picture of overall career has a weight.

I regret to take issue with your last para. My reading is that large and medium entities are categorised together, and the off-payroll regulations apply equally in the private and the public sectors. Contractors dealing with small entities still have to determine the status of their contracts - there just isn't a legal obligation to document it. Of course it will really help if you have documented your determination. My apologies if I'm wrong.

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Replying to Kemu:
rebecca cave
By Rebecca Cave
28th Jun 2021 10:35

You are correct the defintion for being within the off-payroll is not "small" as set out in ss381-384 Companies Act 2006. I'll change the text to make that clear.

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By johnjenkins
28th Jun 2021 13:43

What is very encouraging is that the Tribunal are looking at the structure of the business, which they didn't seem to have done previously. They are not now just looking at the particular contract. I'm wondering if there is a tipping point, say 75% of work done.
Whatever the outcome IR35 needs to be Hancocked.

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By Roy Price
29th Jun 2021 11:24

I once had a client in the same position as Lee and we were having constant discussions about whether IR35 should be applied. In the end the client did not like my advice that he should be applying IR35 on the basis as outlined in the case and found a Consultancy that took his money and concluded on the basis of MOO producing several pages of gumph 2 of which involved them not taking responsibility for their advice; his contracts did not go over 24 months (it is my belief if they do then MOO would be difficult to argue).
Personally I think IR35 should be scrapped and instead director / shareholders should be required to pay themselves at least minimum wage through payroll and then a suitable dividend tax for dividends (on the first £50k) paid out of Closely Controlled companies as at present. This should neutralise the decision whether to be employed or go self employed from a tax point of view.

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Replying to Roy Price:
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By johnjenkins
29th Jun 2021 12:06

Roy, I'm somewhat surprised about you're thought process. If you think that IR35 should be scrapped, why bring in something else? Why should we be told how much to pay ourselves?
HMRC shouldn't even be involved in employment status. It is a commercial decision. Just have a look at the UK employment status. It's a total mess. Why? Simply because HMRC want to control our working population.

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