back to article Contractor association blasts UK.gov guidance on hated IR35 tax law's arrival in private sector

The Association of Independent Professionals and the Self-Employed has said UK government guidance on private sector changes to off-payroll working falls "woefully short". From 6 April 2020, it will be the responsibility of all medium and large-sized private sector bodies to determine whether contractors fall within the IR35 …

  1. Anonymous Coward
    Anonymous Coward

    Conflict withe GDPR?

    "Make sure you keep detailed records of your employment status determinations, including the reasons for the determination and fees paid"

    So, the engagement switches from being a company to company one, to an "employee" to a company. Once that relationship finishes, under GDPR that personal information the company "employing" the individual holds would need to be deleted surely?

    I do hope that Mr Hector isnt suggesting its kept on a just in case basis?!

    (Ignored the futility of the rest of whats going on with this daft ruling)

    1. Bronek Kozicki Silver badge

      Re: Conflict withe GDPR?

      I think GDPR has a loophole for accounts keeping.

    2. A Non e-mouse Silver badge

      Re: Conflict withe GDPR?

      All the data protection laws have said that you can keep information, but the information & the duration you keep it for has to be appropriate. If a government department is saying you need to keep some financial records for X years, then your keeping of those records is lawful under GDPR (and its predecessors)

    3. katrinab Silver badge

      Re: Conflict withe GDPR?

      No, tax records have to be held for 6 years following the relevant tax return deadline (or submission of the return if submitted late). Records held for tax purposes are not covered by GDPR, but GDPR does prevent you from using them for other purposes.

    4. Lee D Silver badge

      Re: Conflict withe GDPR?

      Hell, some school and medical information has to be held for 25-30 years. I'm not kidding you.

      GDPR does not impose a time limit. It imposes a control of information and a reasonableness for your retention. If you must retain it for tax purposes, then you must retain it. If you must retain it for legal purposes, then you must retain it.

      GDPR does not contain, nor has any case law yet fully established, an upper time limit on data retention. It just says to do so for a reasonable time to fulfil a reasonable aim.

      It's not unreasonable to retain business determinations of taxation status for at least the period of tax information retention. It would be unreasonable to retain it for 100 years. Similarly, it's not within your rights to use that information to spam your suppliers or to keep everything else around for the taxation period "just because" you don't want to have to deal with different dates for different information.

    5. CommanderGalaxian

      Re: Conflict withe GDPR?

      There's no conflict with GDPR. It says that information that can personally identify somebody should be kept for no longer than absolutely necessary - it acknowledges that what is necessary may be defined by statutory requirments within a countries legal framework - e.g. keeping company records for 6 years, personal tax records for 22 months, etc.

  2. matthewdjb

    'it's not difficult at all. If they're inside the scope of ir35, then they pay. If not they don't'

    To paraphrase one Dawn Primarolo circa 1999.

    1. genghis_uk Bronze badge

      But given to bloody awful definition of 'in scope' and a Government department that does not understand its own rules, it was daft when Dawn said it 20years ago and they have not made it any less daft in the meantime

    2. Anonymous Coward
      Anonymous Coward

      You refer to Dawn "contender #1 for Labour's worst minister" or Dawn "we fired her 10 times, each time Gordon Brown insisted we put her back" or even Dawn "she wasn't right for government"?

      1. matthewdjb

        I usually went for "Dim Prawn".

  3. Slarti Bartfast
    Joke

    Impossibly complicated

    Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), whined: "The government's insistence that our members pay their fair share of tax is really confusing. The lack of guidance about whether the moral imperative to pay for schools and hospitals applies to IT consultants makes an accurate determination difficult. Public sector consultants got so confused that they were forced to take private sector positions with lower taxes. I mean less confusion. We urge the government to delay these reforms until all this pesky confusion has gone away."

    1. Zippy´s Sausage Factory

      Re: Impossibly complicated

      Contractors do pay tax - IR35 or not. Contrary to popular belief, working through a limited company isn't some kind of "lifestyle choice", but often the only way you can actually get public liability insurance for your work - which if it all goes wrong, you're going to need when your employer sues you.

      Plus, of course, we pay corporation tax before we ever get hold of the money. And income tax and national insurance. And tax on any dividends as well, by the way. So yeah, we do actually pay quite a bit already thanks.

      But the difference in salary? Permanent people get it in the form of paid holidays, paid sick leave, training courses paid for by work, employers pension contributions (we have to sort out our own pensions, if we want one)... so yeah, realistically as a contractor I wasn't much better off then I was as a permanent employee. Although my accountant was happy...

      1. Cederic Silver badge

        Re: Impossibly complicated

        re: "Plus, of course, we pay corporation tax before we ever get hold of the money."

        That's utter bullshit. Your salary is a cost to the business, reducing its profit and thus any corporate tax that you pay. Your salary is also paid at the time, not in arrears (as corporation tax is).

        What's that? You're not paying yourself a salary? It's all coming in dividends? Well done, you're the very reason HMRC need IR35, to crack down on people trying to game the system.

        1. NeilPost Bronze badge

          Re: Impossibly complicated

          A contractor at ours is quite blatant about spending the tax/NI money on himself. Whenever HMRC come close, he winds up the company and starts the cycle again.

      2. NeilPost Bronze badge

        Re: Impossibly complicated

        So put some money aside in a slush fund for holidays. Take out some sickness insurance, or again simple put money aside on a sickness pot.

        You generally get paid far more than permies for doing the same work - you know equivalence like bin men/dinner ladies or supermarket workers and warehouse) so can afford to do that.

        ... What do you mean you have blown it on a Porsche Macan or a disproportionally grandiose (to an equivalent permies income) house ??

        1. Nial

          Re: Impossibly complicated

          Neil, if it's all so easy and well paid why don't you go contracting?

    2. Andy 73

      Re: Impossibly complicated

      As a contractor, I can pretty much guarantee I have paid more tax than any permanently employed person of similar grade that I have sat next to at any time in the last twenty years. I offer utility to companies that need (a) workers at short notice or to bridge a change in work load, (b) workers to bring in knowledge about external systems and practises that the company itself does not have, (c) workers that can be let go with little or no notice if a project has to be stopped (d) workers that self-train where there is a company culture of expensive external accreditation and so on and so forth.

      And as a consequence, I pay more tax than the permanent employees who take full advantage of sick days and holidays, training and wellbeing days, maternity/paternity leave, company pensions, health plans, car pools, car parking, mentorship and counselling, fitness clubs, company retreats and the financial stability that long term permanent employment offers.

      On the whole, this is a fair deal, and I try to deliver the value the client needs, to integrate with their team and help implement change and improvement in practices. Only very occasionally do I meet sanctimonious, angry, self harming idiots who think that companies are special social clubs run for their sole benefit, and who get mightily offended that someone might be seen as more valuable to the company than they personally deem reasonable.

      You can pretty much guarantee that one of those moral guardians will crop up on each of these news items, clearly misunderstanding how taxation and employment work.

      1. Anonymous Coward
        Anonymous Coward

        Re: Impossibly complicated

        >>>As a contractor, I can pretty much guarantee I have paid more tax than any permanently employed person of similar grade that I have sat next to at any time in the last twenty years

        No you can't. I bet you have not.

        1. Anonymous Coward
          Anonymous Coward

          Re: Impossibly complicated

          That's a losing bet. Contractors charge higher rates for their work to cover the lack of benefits etc.

          Higher earnings is higher tax.

          Since you've decided to go with the stereotype of self employed people. I'm going to stereotype you.

          I bet you go to the pub once a week with your other weak chinned and thin skinned permie "friends" and whinge about how much of a dick your boss is and how everyone deserves a pay rise. I'll bet you've moaned about your bosses pay on at least a dozen occasions and how you suspect his wife is on the payroll etc etc.

          You probably actively steal pens and notebooks and you smuggle bog rolls home from the gents.

          Fucking Permies. You really are cancerous.

          You're the same dumbfuck people that would turn up to watch a hanging in the town square, or invite a witch hunter into town.

          1. Anonymous Coward
            Anonymous Coward

            Re: Impossibly complicated

            You sound really bitter AC. Not having fun at work?

            You should switch to something else before that ulcer or aneurysm gets you. Life is way too short to not be enjoying work. :-)

      2. katrinab Silver badge

        Re: Impossibly complicated

        Sick days, holidays, training and wellbeing days, health plans, car pools, car parking, mentorship and counselling, fitness clubs, and company retreats are either not relevant for tax purposes, or taxable benefits.

        Your limited company could have its own company pension if it wanted to. Employees can opt-out of the company pension scheme if they don't want it.

        While an employee might pay less tax, depending on how the numbers work out, they, and particularly their employer will pay a lot more in National Insurance. That is where the real saving is.

        As a contractor, you can get all the benefits of a full contribution record by paying yourself £1 over the NI threshold, and paying a few pennies in NI.

        1. Dr. Mouse Silver badge

          Re: Impossibly complicated

          particularly their employer will pay a lot more in National Insurance. That is where the real saving is.

          In that case, it would be the client/employer avoiding tax, not the contractor/employee.

      3. NeilPost Bronze badge

        Re: Impossibly complicated

        As a contractor, can you guarantee you have been paid for more than the equivalent permie too ???

    3. Yet Another Anonymous coward Silver badge

      Re: Impossibly complicated

      Obviously all teachers, nurses and doctors will also become self employed 'consultants', then even with nobody paying any tax we will still be able to afford all the public services

      1. martinusher Silver badge

        Re: Impossibly complicated

        >then even with nobody paying any tax we will still be able to afford all the public services....

        Heard of VAT? Back when it was first introduced the rate was about 8% and it generated far more revenue than the purchase tax that it replaced. How much is it now?

    4. R69

      Re: Impossibly complicated

      You are I'll informed - the vast majority of us are significant net contributors.

      On 750 a day I will CONTRIBUTE around 80 - 90k in a year to HMRC when VAT is factored in and about 50 - 60k without it.

      Believe me the government already get more than they should given the risk we have to shoulder.

      1. Anonymous Coward
        Anonymous Coward

        Re: Impossibly complicated

        >the vast majority of us are significant net contributors.

        Who isn't?

        Boo hoo. - <=== That's the world's smallest violin.

      2. Cederic Silver badge

        Re: Impossibly complicated

        Meanwhile someone in a permanent job earning that amount would be paying over £80k/year to HMRC not including VAT.

        So you're around £20-30k/year post-tax better off. In other words, you're getting the UK national average salary tax free on top of a normal salary.

        I think that's probably enough to cover the level of risk you're incurring, professional liability insurance, sickness cover and a few weeks' holiday. You're certainly not being hard done by, especially since someone permanent in the same role will be earning less gross than you're taking home.

        1. Gordan

          Re: Impossibly complicated

          It just about covers it (look up how much it costs to have professional indemnity insurance if you are working on development of medical, process control, or oil and gas industry components). Then there is the cost of certifications that have to be renewed every three years, and cost thousands and require taking a week off billable time work to attend the update certification course, which if you are permanent you would get paid for at no cost to you if particularly relevant to your work.

          In addition to having none of those cost overheads, permanent staff get paid holidays, sick pay, and employer's pension contributions, all of which add up to about 20% - which roughly covers the difference. So yes, contractors are being scapegoated with what is purely a tax on competence.

          If contracting was such a win-win, everybody would be doing it. And before somebody suggests that they do permanent work because they like to "contribute more to society" through higher taxes, there is nothing stopping you from going contracting and then writing a cheque for the difference in tax to your preferred charity. But I have yet to see anybody partaking in such a whinge actually doing that.

          Therefore, the bitching can only be a result of the politics of jealousy.

  4. Anonymous Coward
    Anonymous Coward

    I'd love to know what HMRC really want. Will there come a day when I have to pay employment taxes when I hire my usual painter and decorator for a week? After all, I might tell them which paint to use, which hours they can work in my house and insist that only this (very trusted) person does the work.

    1. Old Cynic

      It's obvious - they want more money without the hassle of chasing big players who can defend by throwing money and lawyers at it.

      And, the people who told them to do it want less competition for their mates running Indian body shops and the likes of Capita. The result - more bodies brought in from offshore and the ability to charge a grand a day for recent graduates without pesky local contractors getting in the way.

      How many companies have you worked at that are full of work visas, where local talent can't get a look in? It will just get worse, now BAs, PMs, Architects flown in will become the norm.

      1. Anonymous Coward
        Anonymous Coward

        I've just been told that a well-known bank is now only hiring contractors willing to operate via an umbrella company. Paying employee NI without the benefits of employment is one thing but having to effectively pay the end-client's *employer* NI contributions as well is beyond parody.

        1. Dr. Mouse Silver badge

          but having to effectively pay the end-client's *employer* NI contributions as well is beyond parody

          This is why, for myself, I've told agents:

          - I'm unlikely to accept a contract with an "inside" status

          - If I do, it will only be as a temporary employee, on the company payroll and with all the rights etc which come with that.

          "Inside" roles are employee roles. There should be no such thing as an "inside IR35 contact".

          1. Eurotard

            Except this "temporary employee" idea seems to be an oxymoron - once you've employed someone you're stuck with them. I've never seen a UK tech role advertised offering fixed-term employment and I don't really understand why. All businesses experience peaks and troughs and without some flexibility in the workforce they will struggle during the peaks and may not survive the troughs.

            1. e^iπ+1=0

              once you've employed someone you're stuck with them

              Zero hours contract, anyone?

            2. Anonymous Coward
              Anonymous Coward

              "I've never seen a UK tech role advertised offering fixed-term employment"

              At the local authority I work for we offer technical fixed term appointments quite a lot, we need specialist developers to help us and work with the permies to get their skills up. Anything from 6 months to 22 months at a range of levels :)

            3. Anonymous Coward
              Anonymous Coward

              You obviously haven’t looked very hard. They’re rare, but they do exist. I’ve just finished up on such a role although I’d been there so long on fixed term contracts that got renewed every 6 months that I would have been classed as permie any way.

              1. Anonymous Coward
                Anonymous Coward

                A keyword search for "fixed term" against all 12,861 opportunities on Jobserve returns 177 results. That's 1.4%. My favourite result was "Sludge Treatment Team Lead".

    2. katrinab Silver badge

      For a week, no. If however you ask them to paint all the houses on your building sites, then possibly yes.

      1. Eurotard

        My understanding is that there is no minimum and a one-day contract could still fall inside IR35. I'm sure a lot of this uncertainty could disappear if IR35 only ever applied after (for example) 6 months.

        1. Brewster's Angle Grinder Silver badge

          HMRC will be sent out of court with a flea in the ear if they try and claim a contract for a single day is covered by IR35. Six months exclusively working for one employer is probably a good rule of thumb and what I plan to use.

    3. Lee D Silver badge

      Does the painter and decorator have other customers, or in that time are they solely working for you and have no other customers on their books?

      IR35 isn't about what you tell them to do. It's about whether they are just working only for you by proxy and thus not getting the benefits of employment and paying the taxes of employment.

      A painter and decorator isn't going to be considered a "proxy employee" if they have other customers, go to other sites, book other work, and do other things.

      They will if, for example, you just hired the guy to paint for you for a year but he didn't at any point ever work for anyone else but you.

      The scope is much more about "what ELSE does he do" rather than "what's he actually doing".

      The determination really is "Should you have just made him an employee and put him on the books?"

      1. Anonymous Coward
        Anonymous Coward

        I just ran this scenario through the CEST tool a few different ways and was told in most cases that "the intermediaries legislation applies to this engagement".

        1. Cederic Silver badge

          That confuses me. "The intermediaries legislation" is..?

          1. Gordan

            It's what they call the latest chapter of IR35.

            1. Anonymous Coward
              Anonymous Coward

              ...which has been turned into a movie called "It: Chapter 2"

              Permie: Go on. Go on the books.

              Contractor: Wait? What?

              Permie: We all float down here.

      2. Gordan

        Quite true - and this is why it is unlawful to pre-emptively or blanket assess the role as inside IR35 without assessing what else somebody is doing, since it cannot be determined without assessing the individual contractor.

        The problem is that HMRC have publicly on many occasions given advice that this blanket assessing is OK despite the fact that it is outright unlawful by the letter of the legislation that HMRC are expected to not only understand but actually enforce.

        1. Anonymous Coward
          Anonymous Coward

          A cynic might say that HMRC are intentionally breaking the current flexible workforce model to force government to investigate and legislate for a sensible "third-way" solution.

      3. Velv
        Boffin

        Having many clients makes no difference to IR35 status, HMRC have made it clear that it is the working practices of each engagement that determine the IR35 status.

    4. Anonymous Coward
      Anonymous Coward

      Will there come a day when I have to pay employment taxes when I hire my usual painter and decorator for a week?

      That's how it works in France. I have a cleaning lady, comes in for half a day a week. I am legally required to treat her as an employee, give her holidays, pay the equivalent of employers NI contributions (which I can claim back off my own tax). If I want to dispense with her services I have to formally lay her off.

      No wonder most such people want to be paid under the table, cash in hand.

      1. katrinab Silver badge

        Sounds like the French equivalent of The Categorisation of Earners Regulations. Now repealed and replaced with other rules, but cleaners are always employees in the UK, unless working for a non-business customer

    5. Anonymous Coward
      Anonymous Coward

      No. Your decorator will continue putting your jack dash in his sky rocket...know what I mean?

  5. alain williams Silver badge

    It is the contractors' own fault ...

    we should have made much more contributions to Tory party coffers.

    1. Addanc

      Re: It is the contractors' own fault ...

      I;m still waiting for IPSE to publish an up to date list of Tory MPs who could lose their seat due to contractor vote, I would get it published PDQ and make sure it waved under Johnson's node.

  6. Daedalus Silver badge

    The real reasons

    This mess might not exist were it not such a royal pain to employ people directly. It's like fly-tipping: if you could get easy pickup of your old stuff and rubbish, why would you resort to using cowboys, or to driving yourself out into the sticks to tip it into a ditch?

    One thing is certain: once IR35 takes over, there will be some new shenanigans to reduce the cost and bother of hiring people. And the Revenoo will plot new depredations.

  7. katrinab Silver badge

    "The rules only apply to companies with a turnover of £10m and more than 50 employees."

    Does this 50 employee limit include subcontractors? Otherwise, I can spot a very obvious loophole.

  8. J.G.Harston Silver badge

    gov.uk. We are not (yet) a department of the US government.

  9. Charles Smith

    The new world for Gov't projects

    Ah Mr Client you wish to engage my skills on your big new project? Okay, you do realise I’ll be working from my home office. I’ll be working on other client projects at the same time, so if you need optional expedited services, that will be an additional fee.

    When necessary I’ll schedule meetings with your representatives to discuss their requirements, of course any change in timescale or requirements will generate a variation docket and will need to be signed off prior to variations work commencing.

    When it comes to testing, if you prefer on-site testing, you will need to make test facilities available to our engineers, but our fees already include rental of services to test on our own site.

  10. Dan 55 Silver badge

    Snort

    The Treasury estimates the move will boost its coffers by £3.1bn between 2020 and 2024.

    So, yet another wildly inaccurate estimation like every other IR35 change that's been announced over the past two decades?

    1. Addanc

      Re: Snort

      I thought IPSE sponsored research indicated that the self employed are worth 130 billion/year to the UK economy.

  11. Electronics'R'Us
    FAIL

    A better way to boost the coffers

    "The Treasury estimates the move will boost its coffers by £3.1bn between 2020 and 2024."

    They could boost their coffers by the best part of £100 billion over the next ten years if they scrapped the white elephant that is HS2.

    1. Anonymous Coward
      Anonymous Coward

      Scrap the white elephant that is HS2.

      While the idea of a high-speed backbone is sound and essential for an ambitious country seeking to rebalance and grow the economy away from an overheated London, HS2 will take too long to deliver any tangible benefits.

      It must therefore be paused to first deliver an upgrade to the existing intercity network (140mph using in-cab signalling and 16 car platforms) plus deliver on HS3 to cement the Northern Powerhouse in place.

      This upgrade would yield a much needed capacity and performance boost across the whole of the UK far more quickly and for far less money than HS2.

      Once the economic map of the UK has been redrawn then additional high-speed services can be added.

      Just building HS2 on its own today will do nothing more than add Birmingham to the London commuter belt, to the detriment of everyone else.

  12. e^iπ+1=0

    How old is IR35 now

    I remember hearing about IR35 'coming soon' in the late 90s, was concerned about the consequences, and decided to take a contract in mainland Europe at the time to sidestep that problem.

    Roll forward 20+ years, is it only now coming to bite? Was I worried a couple of decades too early?

    1. matthewdjb

      Re: How old is IR35 now

      It came in in 2000, but the onus for deciding in or out, and liability for getting it wrong, was on the contractor. Since it became too easy to construct contract and working practices that were outside, it quickly became an irrelevance to savvy contractors with cooperative clients and agencies. Other contractors went into the arms of umbrella companies to avoid the issue altogether, considering the extra tax to be worth the lack of risk. Yet others went into dodgy schemes - that's coming home to roost with the Loan Charge.

      A year or so ago, for the public sector the liability was changed to be with the client. Now the government wants to role it out to the private sector.

    2. matthewdjb

      Re: How old is IR35 now

      2000 the onus for deciding in or out, and liabilities for getting it wrong, were with the contractor. A year or so ago, the government shifted the decision to the client for the public sector. Now they want to roll it out to the private sector.

    3. Anonymous Coward
      Anonymous Coward

      Re: How old is IR35 now

      The auzzies tried it in the late 90s but binned it off as a bloody stupid idea.

  13. Richocet

    Fail

    The government failed to enforce and audit the existing rules. Some people blatantly cheated and abused them in ways they would clearly have been found to be non-compliant if anyone checked.

    So the solution is to dramatically tighten the rules. This penalises the contractors who weren't abusing the system a lot more than those who were.

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