4 ms·

I don't like it, and it's clearly not within the spirit of the rules (I'd rather the agency/end-client just paid Qdos for their own fee-payer insurance) but if

• Silhouette 4y ago
  I'm not a lawyer but from my understanding the attack would be on general principles: contractual provisions can't override statute law in our system, any contract has to meet certain basic standards to be enforceable, and if a contract isn't genuinely negotiated but rather dictated by the more powerful party (aka contracts of adhesion or standard form contracts) any later decisions about interpretation are likely to favour the little guy. In the case of employment there are lots of specific statutory provisions to protect employees but contractors don't enjoy the same protections automatically so again we're back to unfortunate levels of ambiguity until precedents from real cases start to clarify the situation.
  • varispeed 4y ago
    This is not against the spirit of the law. The deemed employer is suppose to pay tax at source _on_behalf_ of deemed employee. So, if someone has been found to be in fact in scope of IR35 and now the Fee Payer has to pay the tax - this is the tax _on_behalf_ of the deemed employee. They can legally and ethically claim it back from the resource, because this is _their_ personal tax. The grey area could be the fine itself. Then you have the mess when resource's company already paid Corporation Tax, Dividend Tax and other taxes. Good luck for any accountant to do the reconciliation. This legislation is completely botched and cares only about the happy path, where everyone works in scope of IR35. That's why it had a huge chilling effect across industry, as companies don't want to take the risk and simply write contracts in a way that they will be firmly in scope or just tell the resource to abandon their company and join unregulated umbrella and become their employee.
    • Silhouette 4y ago
      Every one of those clauses that I've seen or heard about also tried to make the contractor liable for all of the employer obligations: Employer NI, Apprenticeship Levy if applicable, and usually some blanket term that covers any other expenses they incur dealing with it. That is most definitely not in the spirit of the law. Paying the personal taxes is obviously a different matter. Even then it's usually the client side who are establishing the working arrangements and responsible for making the determination so I'm still not sure about the ethics of retrospectively hitting the contractor with a huge extra tax bill later if that determination is found to be wrong. In many cases the contractor presumably wouldn't have taken the role in the first place if the client had got their side right so I feel like it should probably be the client's responsibility to insure against any later adverse decisions if they want to in this situation. You'll certainly find that when it's the other way around with a small business client any intermediaries will be quick to include an indemnity clause in their standard contract that leaves the contractor on the hook for all costs on both sides if they make the wrong determination.
      • varispeed 4y ago
        You are assuming that HMRC and Treasury act in a good faith. The purpose of these changes is to stop small business from operating without explicitly saying so (as that could bring a bad PR, so they use their Behavioural Science Unit to frame it as anti-tax avoidance law and their messaging is designed to ensure population sees these businesses as cheaters etc.) - a nudge technique. Reality is that it is always the weakest entity in the chain that pays - see Loan Charge scandal for instance, where HMRC claims advisers, accountants, promoters of schemes and scheme operators did nothing wrong and the victims are on the hook to pay. Personal example I have is with my friend who is a freelance care worker. She got a gig from an agency under a condition that she has to sign up for an umbrella from their Preferred Supplier List, as they deem it inside IR35. She was desperate to get the gig, so she agreed. Turns out the umbrella didn't pay tax on her behalf to HMRC but simply pocketed it. She was getting payslips showing correct deductions, but HMRC never got the money. The umbrella closed before she could find out. Then HMRC sent threatening letter that she is using a tax avoidance scheme. Guess what happened? HMRC decided to recover the missing tax through the tax code, so she barely can make ends meet from her current gig. She has no money to go after that umbrella (when I looked up, the owners are living in Asia) so there is that. If what you saying is true, then HMRC would have gone after the umbrella, but they didn't - it's easier to make the worker pay. So the Fee Payer trying to recover money would have done nothing different than HMRC is doing themselves.