4 ms·

> There are now a list of standard tests to determine if a supposed contractor is actually an employee. Not in the UK there's not. HMRC refuse to provide a de

by Lio 3y ago

> There are now a list of standard tests to determine if a supposed contractor is actually an employee. Not in the UK there's not. HMRC refuse to provide a definitive list or say how they determine if a contractor is "acting as a disguised employee" (BTW you're still not an "employee" even if you're working Inside the IR35 regulations). Instead they provide a vague tool that gives you some suggestions but reserve the right to arbitrarily decided later who is and isn't an independent contractor. They can, and have, retrospectively change the rules even for accepted tax returns. That puts a lot of risk on anyone doing contract work. When the government changed the rules to shift some of that risk the customer, many customers just decided to drop small external contractors all together rather than work to a vague set of suggestions that they can't definitively say if they're complying with. For small contractors it's difficult to get insurance for IR35 risks because of this. You can get it but it's not cheap or easy compared to other liabilities. The contract market in the UK has been slowly dying since the tabloids first decided that contractors where another group they could demonise and the Tories gleefully went along with it.

Nursie 3y ago
IR35 is an absolute clusterfuck and I'm glad I left the UK and contract in Australia now. It's a huge financial risk being held over your head at every turn. If HMRC decide to investigate that can cost you and you're likely to be on the hook for all sorts of legal fees to fight them. If the courts side with them and decide that you are, in fact, caught by the legislation, they don't seem to work out liabilities based on what you paid in corporation tax, dividend tax etc, and what would have been owed under PAYE and NI, no, you get sicced with the whole lot again AFAICT. Neither does your determination as an employee entitle you to the employment benefits you would have had - pension contributions, paid time off etc - under that status. The whole thing is a big "fuck you" to the contractor. IMHO it only exists because of the imbalance in taxes in the UK between earned and invested income. The system is broken and in response, instead of fixing it, they decided to fuck over small players by putting them in jeopardy.
- benjaminwootton 3y ago
  It really is a disaster for innovation. If a startup wants to launch or a company want to start a new product then they need a flexible workforce. They are going to end up with system integrators or nothing.
  - tonyedgecombe 3y ago
    Yes, contracting was an easy step towards building a product business for me. I doubt I could do the same thing now.
- madsbuch 3y ago
  forgive me if I am wrong. what I can see from rudimentary search on IR35 is that it is meant to make people pay the same tax whether. employed or working as a contractor. personally I find that reasonable. the government should subsidize contractors. so if a contractor just sets aside the same amount as they would have had to pay in a salaried job (including employers contribution) then all should be good? obviously this should be factored into the cost of doing business, but if a person deems themselves fit for contracting, then they are also fit for this administrative overhead.
  - Lio 3y ago
    > forgive me if I am wrong. what I can see from rudimentary search on IR35 is that it is meant to make people pay the same tax whether. employed or working as a contractor. It's not that you're wrong, it's that what you're suggesting is naive. There is no "equivalent" tax rate when working through a limited company and when IR35 applies per contract and not per worker. That's just not how tax works here. Instead you pay an accountant to estimate your accounts, hand them to HMRC and they either accept them as correct or hold a tax investigation. HMRC can't and won't tell you what you should pay, they just say yes or no to the estimate you provide them. There is no way to know what a potential future fine might be because they could reopen all previous year's tax returns. If they can't tell you then how can anyone else know what they should set aside?
retrac98 3y ago
Sounds obvious, but broadly speaking the trick is to operate like a business, not an employee. A good accountant/tax advisor can help here. They do know how HMRC categorise disguised employees and can help you not get burned.
- Lio 3y ago
  They don't know that at all. A good accountant will make suggestions about things like control over work and deliverables but they can't tell you for sure if a contract is Inside or Outside. They don't know that because HMRC don't publish that information and their online tool only makes suggestions that you maybe inside or you maybe outside. You might think "just operate like a business not an individual" but that's not as easy as you might think. IR35 applies per contract not per worker. So having multiple concurrent customers doesn't protect you. If, say, you set up deliverables for a piece of software, deliver it to schedule and provide support during a testing period. Is that Inside or Outside IR35? The work has deliverables so that sounds like you're operating Outside. Hang on though, it also has a time-base component where you're providing support. I'm afraid time-base is probably Inside. Your accountant does not know for sure and they won't provide you with any real form of indemnity for their advice because of that. Only HMRC could say for sure but they don't.
  - mcv 3y ago
    Netherland also still doesn't have clear rules about that. A couple of years ago they tried several things, and people and companies rebelled against some of those, and now they're mostly ignoring the whole issue again, I think. At least in my field, where contractors are paid far better than employees. There are also obvious, blatant cases where companies do use this as a loophole to reduce costs. And sometimes they do that with permission from the tax service, even! PostNL, the Dutch postal service fired all their mail deliverers and hired them back as contractors, but they still had to follow the schedules set by PostNL, wear their uniform, etc. Yet the tax service approved that. I don't get it. I think that's a blatant case of the abuse they're supposed to fight. But at least they're leaving me alone for now. I think the unspoken rule is that if you're paid well, it's probably fine, and they're focusing on cases where people are underpaid and unable to save up for retirement. Because those are the cases where this is going to cause problems.
flir 3y ago
They can't provide a definitive list because case law can always overturn it. I guess the best they can offer is "if you do this, we will choose not to go after you". But even that can change, as you point out. They don't have the resouces to chase even close to everyone, so they have to rely on media messaging to do a lot of the policing for them (hence going after high-profile targets like TV presenters).
Johnythree 3y ago
You have it backwards: Scam Contacting is just another way of extending the Gig Economy. Some professional people may be better off as contractors, but huge numbers of young people are being ripped off by being forced into irregular hours and trying to juggle multiple jobs. It's not the left wing or the Unions who are behind the recent explosion of insecure work. https://www.australianunions.org.au/2022/04/29/what-you-need-to-know-about-insecure-work/ https://www.australianunions.org.au/2022/04/29/what-you-need... https://theconversation.com/why-insecure-work-is-finally-being-recognised-as-a-health-hazard-for-some-australians-177153 https://theconversation.com/why-insecure-work-is-finally-bei...

by Lio 3y ago

Nursie 3y ago

IR35 is an absolute clusterfuck and I'm glad I left the UK and contract in Australia now. It's a huge financial risk being held over your head at every turn. If HMRC decide to investigate that can cost you and you're likely to be on the hook for all sorts of legal fees to fight them. If the courts side with them and decide that you are, in fact, caught by the legislation, they don't seem to work out liabilities based on what you paid in corporation tax, dividend tax etc, and what would have been owed under PAYE and NI, no, you get sicced with the whole lot again AFAICT. Neither does your determination as an employee entitle you to the employment benefits you would have had - pension contributions, paid time off etc - under that status. The whole thing is a big "fuck you" to the contractor. IMHO it only exists because of the imbalance in taxes in the UK between earned and invested income. The system is broken and in response, instead of fixing it, they decided to fuck over small players by putting them in jeopardy.

benjaminwootton 3y ago
It really is a disaster for innovation. If a startup wants to launch or a company want to start a new product then they need a flexible workforce. They are going to end up with system integrators or nothing.
- tonyedgecombe 3y ago
  Yes, contracting was an easy step towards building a product business for me. I doubt I could do the same thing now.
madsbuch 3y ago
forgive me if I am wrong. what I can see from rudimentary search on IR35 is that it is meant to make people pay the same tax whether. employed or working as a contractor. personally I find that reasonable. the government should subsidize contractors. so if a contractor just sets aside the same amount as they would have had to pay in a salaried job (including employers contribution) then all should be good? obviously this should be factored into the cost of doing business, but if a person deems themselves fit for contracting, then they are also fit for this administrative overhead.
- Lio 3y ago
  > forgive me if I am wrong. what I can see from rudimentary search on IR35 is that it is meant to make people pay the same tax whether. employed or working as a contractor. It's not that you're wrong, it's that what you're suggesting is naive. There is no "equivalent" tax rate when working through a limited company and when IR35 applies per contract and not per worker. That's just not how tax works here. Instead you pay an accountant to estimate your accounts, hand them to HMRC and they either accept them as correct or hold a tax investigation. HMRC can't and won't tell you what you should pay, they just say yes or no to the estimate you provide them. There is no way to know what a potential future fine might be because they could reopen all previous year's tax returns. If they can't tell you then how can anyone else know what they should set aside?

retrac98 3y ago

Sounds obvious, but broadly speaking the trick is to operate like a business, not an employee. A good accountant/tax advisor can help here. They do know how HMRC categorise disguised employees and can help you not get burned.

Lio 3y ago
They don't know that at all. A good accountant will make suggestions about things like control over work and deliverables but they can't tell you for sure if a contract is Inside or Outside. They don't know that because HMRC don't publish that information and their online tool only makes suggestions that you maybe inside or you maybe outside. You might think "just operate like a business not an individual" but that's not as easy as you might think. IR35 applies per contract not per worker. So having multiple concurrent customers doesn't protect you. If, say, you set up deliverables for a piece of software, deliver it to schedule and provide support during a testing period. Is that Inside or Outside IR35? The work has deliverables so that sounds like you're operating Outside. Hang on though, it also has a time-base component where you're providing support. I'm afraid time-base is probably Inside. Your accountant does not know for sure and they won't provide you with any real form of indemnity for their advice because of that. Only HMRC could say for sure but they don't.
- mcv 3y ago
  Netherland also still doesn't have clear rules about that. A couple of years ago they tried several things, and people and companies rebelled against some of those, and now they're mostly ignoring the whole issue again, I think. At least in my field, where contractors are paid far better than employees. There are also obvious, blatant cases where companies do use this as a loophole to reduce costs. And sometimes they do that with permission from the tax service, even! PostNL, the Dutch postal service fired all their mail deliverers and hired them back as contractors, but they still had to follow the schedules set by PostNL, wear their uniform, etc. Yet the tax service approved that. I don't get it. I think that's a blatant case of the abuse they're supposed to fight. But at least they're leaving me alone for now. I think the unspoken rule is that if you're paid well, it's probably fine, and they're focusing on cases where people are underpaid and unable to save up for retirement. Because those are the cases where this is going to cause problems.

flir 3y ago

They can't provide a definitive list because case law can always overturn it. I guess the best they can offer is "if you do this, we will choose not to go after you". But even that can change, as you point out. They don't have the resouces to chase even close to everyone, so they have to rely on media messaging to do a lot of the policing for them (hence going after high-profile targets like TV presenters).

Johnythree 3y ago

You have it backwards: Scam Contacting is just another way of extending the Gig Economy. Some professional people may be better off as contractors, but huge numbers of young people are being ripped off by being forced into irregular hours and trying to juggle multiple jobs. It's not the left wing or the Unions who are behind the recent explosion of insecure work. https://www.australianunions.org.au/2022/04/29/what-you-need-to-know-about-insecure-work/ https://www.australianunions.org.au/2022/04/29/what-you-need... https://theconversation.com/why-insecure-work-is-finally-being-recognised-as-a-health-hazard-for-some-australians-177153 https://theconversation.com/why-insecure-work-is-finally-bei...