back to article No help for IT contractors on IR35 tax errors

UK IT contractors have been given no guidance on how to claw back tax erroneously taken by employers under IR35 rules, which already cost central government bodies £263m when they failed to correctly adhere to the guidelines. According to a report from public spending watchdog the National Audit Office (NAO), the UK's tax …

  1. nematoad Silver badge
    Joke

    Duh!

    "This means that HMRC collects more tax in total than is due."

    A feature and not a bug?

    Seriously, HMRC should be dragged to the bar of the House of Commons and made to explain itself. Or is it true that HMRC is above the law?

    Or at least thinks it is.

    1. Franco Silver badge

      Re: Duh!

      Parliament has shown precisely zero interest in debating IR35 reform, they take the same view as HMRC which is we got it right, la la la, not listening.

      The House of Lords on the other hand has been extremely critical of IR35 reform and has asked for further investigations and has also issued recommendations, which have met with the same response as above.

      1. Anonymous Coward
        Anonymous Coward

        Re: Duh!

        Parliament has shown precisely zero interest in debating IR35 reform

        Well yeah. Contractors are an easy target, and while they may moan they can be easily dismissed as rich workers trying to tax-dodge. That's an easy sell to the old voters that matter. The alternative is to look to other areas to tax -- wealth for example. Now there is loads of money in wealth (houses, pensions, dividends, etc) that if taxed properly would mean a government could offer decent public services. But the instant you try to take any of this money you are waking up the daemons that will rouse the old voters and kick you out.

        Over time this is getting more tricky as we are an ageing society, with the dependency ratio falling year on year as there are fewer workers compared to the growing number of old, sponging (sorry, claiming their right to draw a pension[1]) off the state. Why do you think they recently said NI was to be increased, rather than look at taxing property at death?

        You dare touch the wealth of the old and you will soon be out of office. That money is for the kids, not for somebody else. Politicians are not stupid.

        [1] Drawing a pension is acceptable, being given benefits (spit) is not. Guess who encourages that message.

  2. Pascal Monett Silver badge
    Mushroom

    Okay

    Is it time to finally declare IR35 a clusterfuck yet ?

    1. DJV Silver badge

      Re: Is it time to finally declare IR35 a clusterfuck yet?

      I did that back around 2017/8 when I first tried out CEST to see how would class the way I work*.

      * Which I found couldn't actually be entered or handled properly by CEST so, as expected, it got the result completely wrong.

    2. Martin-73 Silver badge

      Re: Okay

      The question is, is the clusterfuck claimable as a business expense? If there was wine, maybe?

  3. Anonymous Coward
    Anonymous Coward

    Don't worry, they can all afford accountants to sort it out for them

    1. F. Frederick Skitty

      I assume you're being sarcastic, but if not then I suggest you speak to some accountants. The ones I've spoken to are unable to give assurances that a contract is within IR35 or not. This is for a fixed term contract where it may he renewed depending on how long the legacy system I'm maintaing is still needed (it's replacement is expected soon...ish).

      I know of quite a few employers taking the mickey with contractors as "hidden employees", but this is not the solution as no one can be sure how to apply it. Answer all the CEST questions accurately, get a decision you're outside of IR35 and you can still get whacked with a massive bill and fined by HMRC. They always seemed to make it up as they went along on the finer points, but not in this scale.

      1. Anonymous Coward
        Anonymous Coward

        Tsk tsk... you know (as a *real* contractor) that the contract is only one facet of a determination, right?

        You'll also know from following the case law, that tribunals can and do ignore chunks of the written contract if the actual, day to day workings, do not represent it.

        Its hardly surprising your accountant cannot give a guarantee... they are not qualified to.

        /anon

        Employee of both a PSC and an umbrella.

        1. Anonymous Coward
          Anonymous Coward

          Tsk tsk... you know (as a *real* contractor) that there is no such thing as a PSC, it is a figment of HMRCs imagination.

  4. Anonymous Coward
    Anonymous Coward

    How much revenue will IR35 bring in? (Factoring all thise that went permie or quit IT altogether)

    How much lost to COVID fraud?

    Which would be the best uses of HMRC resources to give the tax payer value for money?

    1. AMBxx Silver badge
      FAIL

      How much tax has been lost due to contractors giving up and going into lower paid employment?

      How much tax has been lost due to contractors retiring early.

      How much tax has been lost due to companies outsourcing overseas?

      1. Kane Silver badge
        Alert

        Oh well, it could be worse, at least there's some money coming back into the HM Treasury coffers anytime soon, now.

        oh, wait...

  5. Herring`

    One of Johnson's big -repeated - lies to parliament is that there are more people in work than before the pandemic. There are more people on PAYE than there were pre-Covid, but the number of self-employed has plummeted and there are fewer people in work when you include them. This week's More or Less is worth a listen. They even mention IR35 as a factor.

    1. Natalie Gritpants Jr Silver badge

      One of the depressing conclusions of that podcast is that nothing can be done to correct those lies to parliament. Lots of nationally respected statistical bodies have written to the PM and parliament pointing out the lies and nothing happens and nothing more can be done.

      1. Richard 12 Silver badge
        Unhappy

        Parliament relies on the Members

        As roughly 340 of them don't want to enforce the rules of the House, there's nothing anyone can legally do until at least 37 more Tory MPs realise they're probably going to lose their job in 2024.

        I'm still confused as to why my MP isn't bricking himself. Unless he's decided that he's out next time no matter what?

      2. RegGuy1 Silver badge
        Facepalm

        More or Less link: The prime minister in statistical bother

        Our parliament is the best in the world -- that's what parliamentarians in our parliament tell us. And if you were one of them you couldn't disagree.

        Now it's official: our Prime Minister is a lying twat who still lies even when he's been told to stop. Cunt.

        1. Kane Silver badge
          Thumb Up

          "Now it's official: our Prime Minister is a lying twat who still lies even when he's been told to stop. Cunt."

          Hmm?

  6. innominatus
    Big Brother

    I fought the law

    ... and it was a score draw.

    In the very early days of IR35 I got agreement from my employer that I could subcontract a bit of network design to an expert I knew. I gave him a day's money for a simple report. When I subsequently had an IR35 audit I could show Right of Substitution. (They did spot a problem with my mobile phone being in my name not the company's so I had to pay about £50 in NI.)

    Two auditors on a day trip to my accountant's without the big bucks return they hoped for. Two decades on and it is even more of a Charlie Foxtrot...

  7. Anonymous Coward
    Anonymous Coward

    Employers NI

    I get the disguised employment bit, and don't think Inside IR35 is inherently unfair just because you're paying income tax instead of corp tax and dividend tax. In my current contract I'm effectively an employee so I'm not going to have a tantrum about it.

    What I object to is that agencies and umbrellas have pushed Employers NI and an apprenticeship levy on to me. So they both avoid any employment costs by design. The agency say it's not their responsibility as I'm not their employee, the umbrella would say it's part of the terms I 'agree' to when I joined. The agency required I use their vetted list of approved umbrellas as part of the contract. They take a hefty 100% profit fee from the client and sidestep any tax. The umbrella pretends that I'm their employee in exchange for things like getting paid statutory sick pay or holiday pay, which they steal out of my day rate, alongisde Employers NI, pension and the apprenticeship levy. So for sure the day rate is bumped up to compensate but the whole set up is a sham and bizarre.

    1. Cederic Silver badge

      Re: Employers NI

      When you say 'my day rate' you are in fact referring to the fee your employer charges to their client. You do not work for the end-client, you work for the umbrella company, who give you a very high wage based on the amount that you earn from them.

      They also provide you with holiday pay and sick pay, as required by law, and as an employer that pays over £3m/year to its employees (including you) they must also pay the Apprentice Levy.

      If you don't like it, choose another umbrella company or set up one of your own. You choose who you work for.

      1. Anonymous Coward
        Anonymous Coward

        Re: Employers NI

        I have no particular skin in this game, not being in the UK and all (nor being an independent contractor), but I think that's the whole point of all the upset - people with PSCs have, in fact, "set up one of their own", precisely because they didn't want to work for a much larger company (either directly or through a subcontracting umbrella company) as a conventional employee.

        Based on the comments I've read so far, the legislation seems destined to just convert many small 1-man-band PSCs into nameless cogs in Yet Another Giant Subcontractor, and result in a net loss of jobs (see "offfshoring") - regardless of what it was intended to do.

        The underlying jobs involved don't seem to be changing, but for the life of me I can't make any sense (aside from the Politics As Usual BS) of why a small PSC is effectively being barred from taking a contract that a much larger company can. If it's legal for company A to outsource a task, then it should be legal for **ANY** contracting entity capable of the job to take it, irrespective of size. If the resulting collective income/business tax revenues are not to HMRC's taste, then maybe the balance between the personal and business tax rates isn't what it should be.

        1. Azamino
          Mushroom

          Re: Employers NI

          You hit the nail on the head.

          What hurts is that so many members of the establishment made their own money using Ltd companies for their newspaper columns, consultancy gigs etc but once they're rich it's suddenly time to pull up the ladders and deny the rest of us the chance!

          It happens again and again, be it free university education, tax relief on buy-to-let mortgages, NS&I bonds that tracked inflation [1), those in power take full advantage on the way up and then slam the doors shut.

          1 - https://www.nsandi.com/help/manage-your-savings/maturing-investments/index-linked-savings-certificates

  8. Anonymous Coward
    Anonymous Coward

    Yet again targeting income not wealth.

    Taxation in the UK is almost entirely aimed at income, not wealth. This means those who are working hard to do something like, I dunno, buy a home for their family, are taxed to the hilt. Are placed in situations where they compromise their income or work with insecure umbrella companies who are being hacked and leaking data left right and centre. Or, in the case of Brookson, hacked so badly that they don't pay anymore.

    Meanwhile, the old voters, and old money, seem not to be able to lose. They don't pay tax. And they are wealthy enough to launder money in large shell game trusts and companies so they can give multimillion-pound assets to their kids without paying any inheritance or CG tax.

    Tax it seems is for the poor and middle class. Those who already have wealth are untouchable. Says the banker of England that we "should not ask for pay rises", while being a fat cat himself earning more in a week than I would in a year (assuming Brookson ever actually pay me). Perhaps that role should come with a median wage only. Perhaps any role of that level of responsibility should have at best a median wage - so you only screw yourself over by trying to screw people over...

    Raging!

  9. This post has been deleted by its author

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