CEST la vie: HMRC admits controversial IR35 status checker returns undecided verdict in nearly 20% of cases UK.gov's controversial tool used by contractors to determine their tax liability under IR35 legislation is still proving less than reliable just months before tax reforms are introduced to the private sector. According to Her Maj's Revenue and Customs (HMRC) latest usage data, the Check Employment Status for Tax (CEST) was …
"To reach a conclusive result in a greater proportion of cases we would need to add in more complex questions, which would add difficulty for the majority of users"
So why not ask the simpler questions that it already does, and only ask the more complex ones if if you STILL can't make a decision? It's not f***ing rocket science, jeeez!!!
"HMRC reckons that only one in 10 contractors in the private sector who should be paying tax under the current rules are doing so correctly"
So this completely contradicts the results they have from theon-line tool that shows 52% are considered (by HMRC!!) to be outside of IR35
"It's WHY IR35 was introduced!"
It absolutely, categorically IS NOT. IR35 was introduced to stop COMPANIES punting people off payroll and in to contracts to save themselves on NIC costs etc, exactly as the BBC has been doing for years.
Some contractors take the piss, some companies take the piss, but assuming that everyone takes the piss under the guise of "if you have nothing to hide then you have nothing to fear" is beyond heavy handed.
IR35's claimed purpose is to stop people from evading tax by passing their income through a limited company, pretending to be a "contractor", while remaining effectively an employee of a single company.
Outside IR35 means that they're a legitimate contractor.
Managing your tax liability to avoid paying tax that you don't owe isn't "exploiting the system", and it's not evasion either.
Of course there will be people who take the piss, but they tend to get caught eventually. What you're claiming is that everyone outside IR35 is some sort of tax-evading criminal, when they're actually running a legitimate business and managing their tax affairs accordingly.
I know a lot of contractors who claim they are outside IR35, I don’t know any who actually are. It’s obvious if someone is running a real business or just doing a semi permanent role for someone. I’ve been there, done that and adapted when the rules changed. Many stuck their heads in the sand and hang out in forums complaining that times changed
"HMRC reckons that only one in 10 contractors in the private sector who should be paying tax under the current rules are doing so correctly"
"So this completely contradicts the results they have from theon-line tool that shows 52% are considered (by HMRC!!) to be outside of IR35"
You are wrong, sorry. You need to read it more carefully.
Suppose there are 100 people, 3 of which are paying like they are inside IR35. If it's really 30 that should be, HMRC are right, and still 70% of people should not be inside IR35.
They are making a claim about the ratio of people who say they are inside IR35 to those who should be there. There is no claim about the ratio of should be inside to should be outside.
Correct, a drop in the ocean compared to the governments "friendly" contract during CovID, the sweetheart deals given to the large US online companies, the special deals given to the likes of Vodafone etc. etc.
Also not a contractor!
It's also a nail in the coffin of worker's rights and I say that as a conservative! [small 'c']
Inside IR35 [as a person/Ltd Co]. = pay the same tax as an employee, with no holiday or sick pay
Inside IR35 [employer] = No NI
Once again the Gov., no matter the party, is in the pocket of big business.
"Inside IR35 you actually pay more than an employee. You have to pay Employer's NI in addition to Employee's NI."
Employees pay employers NI. Just because it doesn't appear in your headline salary, doesn't mean it isn't paid by you. Otherwise, riddle me this: what is the difference between ER NI and EE NI, really?
If salaries were advertised net of standard income tax, you would still be paying it.
Yes, but contractors are (largely) a soft target. This thread, like every one on contractors, will attract "you are all tax dodgers" trolls, a popular argument outside these pages too. HMRC knows this and knows they haven't got the legal muscle to fight Amazon, Google, Apple et al, so they do this so they can say "look, we're doing something" although they often pick TV presenters who DO have the legal muscle to fight back.
Neither have they a leg to stand on constitutionally (and yes, we do have a constitution in the UK, it's just not written down formally).
Whatever the argument about tax dodging, to be an "employee for tax purposes" but not for employment rights is entirely unconstitutional. If a company took on an employee under a conventional contract of service but refused to pay for pension, sickness and holiday they'd soon finish up in court. But if HMRC and your client say you're an IR35 contractor it's supposed to be perfectly legal and OK to do the same to you. You get paid and taxed as if on a contract of service (minus the benefits) but you still need commercial insurances and can be responsible for collecting VAT and passing it on the HMRC. No real employee is in this position.
However the ludicrous twists and turns HMRC are prepared to argue (see for example paragraphs 112, 126, 127(7), 135, 138, 140) seem to go down will with the tribunals, so reality is not high on the agenda.
I have no objection to paying tax as if under a contract of service if I get the rights and avoid the liabilities that accrue thereto, or to operating as an independent without employment rights and with the liabilities of an independent. But to be stuffed both ways is not to be tolerated. This needs to be rectified, but the problem is the inordinate cost of taking HMRC to court over it - it would cost millions, and HMRC could use many more millions of our dosh to fight back, so they could win by default, merely by exhausting the resources of the appellant. So much for justice.
I've been arguing that here all along against all the trolls who assume contracting = tax dodging. HMRC's argument about getting more pay for the same job cuts both ways, if you are truly deeming people inside IR35 because they are doing an employees job then they have to get the same rights as an employee as well.
There is so much nuance to IR35 law that it's almost impossible to get right all the time, even the case law handed down from some of the tribunals against broadcasters have stated that and slapped HMRC for the way they apply their own rules
Neither have they a leg to stand on constitutionally (and yes, we do have a constitution in the UK, it's just not written down formally).
We don't have a constitution in the UK.
It is one of those comfortable establishment myths like the one that every conscript killed in the two world wars freely and willingly elected to take a bullet or a dose of mustard gas for their country.
A country's constitution is a set of immutable (or nearly so) metarules about the laws that the legislature can make. Since Parliament can pass any law it damn well likes, there is no legal constraint on its powers = no constitution.
All we have is conventions that can be broken at will. Parliament has done all sorts of things that a constitution would limit - gerrymandered the law on parliamentary elections, voted not to sit, excluded members, it has even abolished the monarchy (and some years later re-instated it).
It would only take a Commons majority of one for it to abolish itself and pass all its power to a dictator. The House of Lords could make the Commons vote twice on that, but could not prevent it.
So HMRC is perfectly fine with a tool that tells 1 out of 5 people to go fudge themselves. How's that for service ?
Of course, when the time comes to pay taxes, HMRC will be the first to blame the contractor for not doing things right (obviously, not the same department).
"Maley said that "to make matters worse", contractors that received an unclear determination of their IR35 liability are then forced to check HMRC's "complex employment status manual" or contact the department "whose tool couldn't help them in the first place.""
Or, in other words, it's really hard to make a simple web-based workflow cater for all of the variations in the complex tax rules but can judge the majority of cases?
Think the headline should read: "What a useless tool, say folk with vested interest in receiving an outside IR35 ruling"
"Maley said that "to make matters worse", contractors that received an unclear determination of their IR35 liability are then forced to check HMRC's "complex employment status manual" or contact the department "whose tool couldn't help them in the first place."
I'm surprised he said this seeing that it is now the end client that needs to make the actual IR35 determination based on both the contract wording AND the actual ways of working on the ground - not the contractor themselves. I guess I'm lucky in that my end client, CEST and an individual expert legal review on behalf of my end client has quite rightly put me outside; but I guess that doesn't stop the jealous ill informed bitter brigade from putting their oars in does it.
It's interesting that non-contractors instantly think that contractors are on some form of tax dodge, when I'm pretty sure that all-told I paid more tax overall than most of you permies last year.
"It's interesting that non-contractors instantly think that contractors are on some form of tax dodge, when I'm pretty sure that all-told I paid more tax overall than most of you permies last year."
To be fair, I've never met a contractor who believes he falls inside IR35 either. But equally I've met one or two who were very much on a tax dodge (knew of two who were very happy to brag about being on one of those contractor loan schemes).
Also you seem annoyed by Maley - he's on your side by the reading of the article (critical of IR35 and its interpretations), not one of the "jealous ill informed bitter brigade".
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