4 ms·

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, Apprenticesh

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.
- Silhouette 4y ago
  I'm sorry about your friend's situation. That whole deal looks really dodgy, which happens far too often with umbrella companies it seems. I'm surprised the agency seem to be walking away untouched though if they set up the deal and actively pushed your friend towards a dodgy umbrella employer. HMRC have some pretty screwed up policies at times but surely it can't be normal for them to go after someone who honestly believed they'd been properly employed and had all of the deductions properly collected just because someone completely different has ripped off HMRC? This isn't really a problem with IR35 in principle though. It was apparently just plain old criminal fraud and your friend was the unlucky victim of that crime. Edit: Also I hope your friend is disputing this with HMRC and if necessary getting their MP involved. Assuming everything you've described is a fair reflection of what really happened it clearly wasn't a tax avoidance scheme. HMRC do make mistakes but do also want to get the right money from the right people so if something has gone wrong here it's worth following up.
  - varispeed 4y ago
    > This isn't really a problem with IR35 in principle though. It is, because the situation would have not happened before the changes. Basically now, thanks to the legislation, the client has the power to force a legitimate business into employment. If you are not a skilled worker you don't have any position to bargain, so it's umbrella or nothing. > it can't be normal for them to go after someone who honestly believed they'd been properly employed and had all of the deductions properly collected just because someone completely different has ripped off HMRC? It is their default behaviour unfortunately. It is cheaper to go after the worker, as ultimately it is their personal tax and they have no money to defend themselves in court. "You should have chosen the umbrella more wisely or you should have taken the work elsewhere". This is even on their official guidance pages, that the worker is responsible for their tax even if someone up the chain pulls a scam. > I'm surprised the agency seem to be walking away untouched though if they set up the deal and actively pushed your friend towards a dodgy umbrella employer. You would have to prove that they knew the umbrella is going to pull the scam and that they acted in bad faith, which is probably not possible. Having a PSL is also legal and the worker could always have walked away. They could also ask if she has logged in to the HMRC portal to see if her tax was being paid etc. and that is her fault for not taking due dilligence. > HMRC do make mistakes but do also want to get the right money from the right people so if something has gone wrong here it's worth following up. That's not true. For instance, read about the Loan Charge scandal. HMRC is pretending they are doing anything about it - https://www.gov.uk/guidance/mini-umbrella-company-fraud https://www.gov.uk/guidance/mini-umbrella-company-fraud - they post some examples there. > HMRC has deregistered tens of thousands of mini umbrella companies who they believed were involved in one or both of the following: >exploiting the VAT Flat Rate scheme >exploiting Employment Allowance That's just two things out of many they should be focusing on and imagine they have already "deregistered" _tens_of_thousands_ of mini umbrellas. Add to that the government is not interested in any regulation of umbrellas and any concerns about IR35 are dismissed by both government and HMRC.

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.

Silhouette 4y ago
I'm sorry about your friend's situation. That whole deal looks really dodgy, which happens far too often with umbrella companies it seems. I'm surprised the agency seem to be walking away untouched though if they set up the deal and actively pushed your friend towards a dodgy umbrella employer. HMRC have some pretty screwed up policies at times but surely it can't be normal for them to go after someone who honestly believed they'd been properly employed and had all of the deductions properly collected just because someone completely different has ripped off HMRC? This isn't really a problem with IR35 in principle though. It was apparently just plain old criminal fraud and your friend was the unlucky victim of that crime. Edit: Also I hope your friend is disputing this with HMRC and if necessary getting their MP involved. Assuming everything you've described is a fair reflection of what really happened it clearly wasn't a tax avoidance scheme. HMRC do make mistakes but do also want to get the right money from the right people so if something has gone wrong here it's worth following up.
- varispeed 4y ago
  > This isn't really a problem with IR35 in principle though. It is, because the situation would have not happened before the changes. Basically now, thanks to the legislation, the client has the power to force a legitimate business into employment. If you are not a skilled worker you don't have any position to bargain, so it's umbrella or nothing. > it can't be normal for them to go after someone who honestly believed they'd been properly employed and had all of the deductions properly collected just because someone completely different has ripped off HMRC? It is their default behaviour unfortunately. It is cheaper to go after the worker, as ultimately it is their personal tax and they have no money to defend themselves in court. "You should have chosen the umbrella more wisely or you should have taken the work elsewhere". This is even on their official guidance pages, that the worker is responsible for their tax even if someone up the chain pulls a scam. > I'm surprised the agency seem to be walking away untouched though if they set up the deal and actively pushed your friend towards a dodgy umbrella employer. You would have to prove that they knew the umbrella is going to pull the scam and that they acted in bad faith, which is probably not possible. Having a PSL is also legal and the worker could always have walked away. They could also ask if she has logged in to the HMRC portal to see if her tax was being paid etc. and that is her fault for not taking due dilligence. > HMRC do make mistakes but do also want to get the right money from the right people so if something has gone wrong here it's worth following up. That's not true. For instance, read about the Loan Charge scandal. HMRC is pretending they are doing anything about it - https://www.gov.uk/guidance/mini-umbrella-company-fraud https://www.gov.uk/guidance/mini-umbrella-company-fraud - they post some examples there. > HMRC has deregistered tens of thousands of mini umbrella companies who they believed were involved in one or both of the following: >exploiting the VAT Flat Rate scheme >exploiting Employment Allowance That's just two things out of many they should be focusing on and imagine they have already "deregistered" _tens_of_thousands_ of mini umbrellas. Add to that the government is not interested in any regulation of umbrellas and any concerns about IR35 are dismissed by both government and HMRC.