HMRC to create new compliance team focused on 'gig economy' workers

A new compliance team which will address the "risks" associated with the changing nature of employment is to be established within HM Revenue and Customs (HMRC). Financial secretary to the Treasury Jane Ellison confirmed the measure in a letter to Frank Field, the Labour MP who chairs the House of Commons Work and Pensions …

[Sir Runcible Spoon]

IR35, is currently costing the taxpayer around £440m a year

And are they making a profit as they originally promised it would, or is this all just another exercise in regulating our economy into the ground?

What I don't know is if I am somehow deemed to be an 'employee' and wotnot, does the company/agency I am working with have to pay their side of things too? (Such as pension contributions and holiday/sick pay etc.).

[Kevin Johnston]

Re: IR35, is currently costing the taxpayer around £440m a year

Like most HMRC activity, the original claims for IR35 and the current costs/usage are not even in the same Galaxy, never mind the same hymn-sheet. The biggest issue has to be that HMRC have decided they can ignore any contracts in place and how the relationship actually works to create their own 'deemed contract' based on how they think things are happening and prosecute on that basis.

This was always spun as a method of catching disguised employment and especially the cases where people were employees on Friday and self-employed at the same desk on the following Monday. There is a huge number of people who could fall into this category but mostly how it has been used is to punish the 'one man band' support companies who only had to become a Limited Company because of other law/rule changes on liability which made that the only way businesses would take the risk of using them.

The big money is always going to get away with this simply because there is enough gain to pay for a lawyer to find the cracks to funnel the cash through so the very few who fall into the clutches of HMRC will never cover the cost of tracking them down.

[Brewster's Angle Grinder]

Re: IR35, is currently costing the taxpayer around £440m a year

"The biggest issue has to be that HMRC have decided they can ignore any contracts in place and how the relationship actually works to create their own 'deemed contract' based on how they think things are happening and prosecute on that basis."

That's the situation in the UK. You can't just sign a bit of paper saying "I'm self employed" and make it so. But if HMRC really have ignored how the contract "actually works", you'll be able to convince a judge and he'll chuck it out. Been there; done that. Although I only won on appeal.

[Dr. Mouse]

Re: IR35, is currently costing the taxpayer around £440m a year

But if HMRC really have ignored how the contract "actually works", you'll be able to convince a judge and he'll chuck it out.

Yep. I have seen several reports which say that HMRC lose the vast majority of IR35 cases which go to tribunal. This is why they are trying to change the rules, to force (unnecessary) tax and NI to be taken at source, and force PSC consultants to take them to tribunal to get it back. They think (hope) that most won't bother.

That said, if I was consulting for the public sector, I would be upping my rates in April to cover any extra tax which will be imposed, as well as considering a move to the private sector. It's ridiculous to think that agencies or government departments will be willing to take the risk under these rules: Most will just blindly force consultants to work on payroll, obviously without giving them any of the rights of an employee.

[Doctor Syntax]

Re: IR35, is currently costing the taxpayer around £440m a year

"But if HMRC really have ignored how the contract "actually works", you'll be able to convince a judge and he'll chuck it out. Been there; done that. Although I only won on appeal."

You may have been lucky. Back in the day when i had to take an interest in such things there were some perverse decisions reported.

[Anonymous Coward]

Re: IR35, is currently costing the taxpayer around £440m a year

" they can ignore any contracts in place and how the relationship actually works to create their own 'deemed contract' based on how they think things are happening and prosecute on that basis"

for that to be fair, of course, the taxpayer has to have the same right to assume the tax inspector in question is not, in fact, actually an employee of HMRC .....

[Roland6]

public sector employers will become responsible for ensuring that any 'off-payroll' workers including those engaged through personal services companies (PSCs) pay the correct tax.

My Ltd is registered in the UK and I am VAT registered, I therefore operate wholly under UK law and hence have to fully comply with HMRC's tax rules. As only HMRC can confirm whether or not my submitted tax return is correct or not, all I can see an employer doing is confirming Company and VAT registration and getting me to sign a waiver saying that to the best of my knowledge I fully comply with UK tax law.

[Dr. Mouse]

all I can see an employer doing is confirming Company and VAT registration and getting me to sign a waiver saying that to the best of my knowledge I fully comply with UK tax law

Nope. They have to check, using a pathetic, inaccurate and not-yet-finished online tool (which obviously will use HMRC's viewpoint, not that which has been written into law or that which has been shown as correct in the courts) to determine whether you are in disguised employment. If the tool says you are, they must charge income tax and NI at source. See http://www.contractoruk.com/ir35/inside_ir35_contractors_guide_april_2017_and_beyond.html for a quick guide.

If it is later found that you should have been inside IR35, they will be liable for the unpaid tax. Do you know of any company or agency who would be willing to take that risk on your behalf? No, most will just deem everyone to be inside (several have said so up front) instead of facing the liability themselves.

[Kubla Cant]

We know it when we see it

They have to check, using a pathetic, inaccurate and not-yet-finished online tool (which obviously will use HMRC's viewpoint, not that which has been written into law or that which has been shown as correct in the courts) to determine whether you are in disguised employment.

There's a reason why it's inaccurate and unfinished, and it's not just another public-sector IT cock-up. Ever since the early days of IR35, HMRC have been shifty about providing a clear definition of disguised employment. They prefer to say "we know it when we see it".

The reason is obvious. If they provide a clear set of rules then contractors, clients, and their accountants and lawyers, will be able to establish relationships that are definitively not employment. Everybody will be happy except HMRC.

[Roland6]

@Dr Mouse - Being pedantic, that tool simply helps (or hinders?) to determine if the assignment is within or outside of IR35. Not whether you (the contractor) is paying the "correct tax". But then given IR35, HMRC's definition of the "correct tax" is more about which tax collecting arrangement you are taxed under than the actual taxes you pay.

[Dr. Mouse]

Being pedantic, that tool simply helps (or hinders?) to determine if the assignment is within or outside of IR35. Not whether you (the contractor) is paying the "correct tax".

Being pedantic, I never said that it was assessing whether you were paying the correct tax, but to "determine whether you are in disguised employment".

And it is well known that;

a) HMRC get it wrong a lot when they investigate, as shown by the number of successful appeals, and

b) the rules are complex, to a level which no simple online tool will give a satisfactory answer.

[Anonymous Coward]

I am not a contractor

however I too fail to grasp how IR35 can be "costing" anything.

This confirms a fundamental misunderstanding of the discussion at hand.

[Kubla Cant]

Re: I am not a contractor

I too fail to grasp how IR35 can be "costing" anything

It's not difficult. When the costs incurred in collecting a tax exceed the revenue collected, the tax costs something.

[Dr Who]

As ever this is being framed as the government ensuring that rapcious employers are not exploiting the workers - whereas of course it's about squeezing more tax from the same tax base.

Even if it were about workers rights however, there's always an assumption that self-employment is inferior to being employed from the worker's perspective. What about the rights of those workers who want to be self-employed? Exploited by a rapcious government intent on squeezing the lifeblood, both literally and figuratively, out of the UK's workers.

[dervheid]

Do remind us...

just how much the Duke of Westminster avoided in inheritance recently?

And how much tax corporations are avoiding?

Time HMRC sorted out the big fish first.

[Old Englishman]

Excellent news ... for Vodafone, and other large-scale tax dodgers. Yes, HMRC is GOING AFTER THE LITTLE GUYS WHO DON'T EARN MUCH BUT CAN'T AFFORD LAWYERS!!! You couldn't make it up.

This is the kind of activity that really gives HMRC a bad name.

[Anonymous Coward]

I can understand going after delivery companies whose drivers have been been forced into self employment or owner/driver status where they lease the delivery van off the company, but I fail to see how this works for "IT Consultants" . Few if any of them have been forced into this choice. All of the one's I know are employed by their own limited company, and are not 'self employed'. No one in their right mind works for a personal services company.

[Kubla Cant]

@AC All of the [IT Consultants] I know are employed by their own limited company, and are not 'self employed'. No one in their right mind works for a personal services company.

"Personal services company" is the term used to describe the kind of limited company that an IT consultant works for. It's a company whose sole business consists of selling somebody's personal services.

[Sir Runcible Spoon]

" It's a company whose sole business consists of selling somebody's personal services."

So we're techno-whores? Cool.

[Anonymous Coward]

I was thinking of umbrella companies...

[Doctor Syntax]

"It's a company whose sole business consists of selling somebody's personal services."

Which, of course, is exactly what the big consultancies do. The difference is scale and hence the ability to fund lawyers against HMRC.

[Buzzword]

Nationalise the lot of 'em

> "undermine policies such as the National Living Wage, automatic enrolment, parental leave, sickness and holiday pay"

There's a simple solution to this. Shift the burden from the company to the state. Instead of the company taking 1% of your wage and putting it in a pension, the state takes 1% of your PAYE and puts it into a pension. Instead of the company paying you parental leave, the state takes 0.1% from everyone's PAYE and pays it to people on parental leave. Same for sick pay and holiday pay, if needed.

That massively reduces the paperwork burden on companies, and eliminates all concerns about unfairness.

Whether the state would actually get it right is another matter entirely.

[Doctor Syntax]

Re: Nationalise the lot of 'em

You have to extend that to redundancy etc as well. Depending on the party ruling at the time the state might be very keen on handling all the pensions (not that they've been brilliant at that), parental leave of course. But they're not going to handle the costs of companies adjusting the size of the workforce to changing requirements.

[s. pam]

Uh, more delusional HMRC "thinking"

How about going after Google, Dell, Apple, Amazon, Vodafone and others you moppets? There's bound to be £15-30B in unpaid taxes.

[Doctor Syntax]

If services are being provided on a business footing the business should, if being well-run, aim to build up a buffer to continue paying the staff, be it one worker or many, for a period when there's no custom. It should also be able to cover NI, pensions and other costs - including transport, phones etc where appropriate. It should be paying at least the statutory minimum levels. In order to make this a viable business the rate paid by the client should be larger than the statutory minimum level by some factor.

That factor might depend on the additional facilities required, such as a cycle and phone for a courier, but in principle that factor could be determined for a particular type of service. There's then a very simple test to apply: you pay less than that, you've got an employee and you handle PAYE, NI, accept that you are responsible for employment rights etc.

There's no reason why the gig economy terms shouldn't be available for businesses that require that flexibility of labour but it should be clearly recognised that the gig worker is taking on the business risk that the engager wants to avoid but should be paid accordingly and taxed as a business.

[Anonymous Coward]

May be worth looking at the advantages of switching to a Limited Liability Partnership - the arrangement of choice for lawyers, management consultants, and also of international crooks & fraudsters.

[Adrian Tawse]

Is this not a pathetic justification for IR35.

Even the lowest paid and lowest skilled person working for HMRC would have enough clout to not put up with what is being alleged. If your boss is taking the piss walk. You have the skills to get a better job. His loss not yours. I just do not believe that HMRC or any subcontractor or sub-sub-contractor is running a sweat shop.

[Anonymous Coward]

Errrr what about the billions lost to so-called Non-Doms

Reclaiming £440m from hundreds of thousands of contractors seems wasteful as compared to reclaiming billions from a handful of Ex-Doms. I guess they had a "good round of golf" with the minister concerned.

[tinynan]

Hey guys!

I'm a student in the University of Leeds and I am now working on my dissertation about employees in gig economy. I would like to ask you guys a little favour and take three minutes to fill in this survey. If you are working on one (or some) platform(s) in gig economy, please tell me about your experiences at this (these) work.

Many thanks!

https://docs.google.com/forms/d/e/1FAIpQLScnwqD1b73guqm1b1UhqKtxb2o3KFa39zJhH6pHU7sQEtZ29Q/viewform?usp=sf_link