APSCo chip in with a variation on a theme
The two newspapers reported that government ministers are considering forcing those contractors who work for a client for more than one month, onto the books and that the plans could be announced in the Autumn Statement later this month. In some circles however it is believed that the government are guilty of ‘kite-flying’, ie briefing the media to gauge the public reaction to a proposal.
Others have suggested that whilst the idea has merit, a period of one month is unlikely and that 12 months is more probable.
APSCo however have commented that the Treasury leak suggests that a decision has already been taken whereby contractors will only be able to work for 1 – 2 months before the end client has to apply the supervision, direction or control (SDC) test. This is fundamentally different to what the Guardian and the Mail were reporting unless APSCo are implying that after 1-2 months a contractor will be deemed to be automatically subjected to SDC by the engager, thereby becoming an employee.
Samantha Hurley, Head of External Relations & Compliance at APSCo, and also a member of the IR35 Forum, has accused HMRC of not liaising with the forum in the way they that they assured the House of Lords Select Committee on PSC’s that they would. She claims that APSCo has seen a letter from David Gauke, the Financial Secretary to the Treasury, suggesting that HMRC is devising an online checklist to ‘help IR35 customers work out whether the rules apply to them’. In other quarters this online facility has been described as a tool to aid employers in deciding if a contractor should be reclassified as an employee.
Hurley’s gripe about the online test is that there has been no real discussion or consultation and she has a point. The IR35 discussion document promised us a full consultation if the government decides to proceed with reforming the rules. It yet maybe that any changes announced in next week’s Autumn Statement will be followed up by such a consultation but HMRC have form for simply paying lip service to such consultations, knowing full well that they have taken premeditated decisions.
In a recent consultation document published by the Department for Business Innovation & Skills and affecting the recruitment sector, Nick Boles MP and Minister for Skils, stated, “The Government is committed to a labour market that is flexible, effective and fair. The flexibility of the UK’s labour market allows people to move between jobs and allows businesses to respond quickly to changing demands.” If that were true then we wouldn’t be hearing some of the nightmare scenarios doing the rumour mills at present. Should they come to pass, then freelancing would become dead in the water.
The writing is on the wall in any case, irrespective of this.
The requirement for agencies to report VAT paid will lead, in time, to a ramp up in tax demands (and potentially disallowed expenses) as the government will, for the first time, actually know for certain what a contractor has been paid.
One can call this fairness but the burden is being forced more onto the contractor without any recognition of the precarious nature of contracts. Forcing all the costs of employment without any of the benefits seems unjust.
If freelancers are ‘forced on to the books’ they should then be entitled to fill employee benefits incl. sick pay etc.
How would employers ensure that people employed via this route have been employed fairly through a competitive process .. presumably they will have secured the work via procurement .. and then find themselves an employee .. but people looking for employed work would not have had an opportunity to apply
How would the owners of the limited company reconcile the fact that their employee (could be owner employee) is also now an employee of the client for the same project ..
If working for more than one client .. would this result in multiple overlapping employment contracts for the same contractor in the same tax year
Has anybody thought of turning it into a rental agreement?
The criteria in the beginning for IR35 was that if a contractor was working in a clients office, using the clients work stations, utilities, etc then he/she would be deemed an employee of the company.
Surely if it was set up,(a simple contract) that for a nominal fee, the contractor paid rent on the workspace, to the client, this would solve all the problems. The client could charge the contractor, say £5 / month.
The client wins in that he/she doesn’t have to employ the personnel, involving pension plans etc and other employment costs.
There is no legislation to say how much somebody rents their office space for.
Whatever occurs, the chancellor would have heard all the arguments and had the benefit of panels of experts as well as lobbying from contractor groups and accountants. Anything he does is ideaolgy based and very little to do with being the best solution. (Take Chinese nuclear plants in the UK as an example). The Madness of Ming George! To ‘reduce the deficit’ (his main goal) he wants to kill off contracting in its current form and get everyone into ’employment’ where tax is more controlled. He only seems to like big business, he doesn’t feel he has so much control over small business. The fact that small businesses often grow into medium and large ones is lost on him at this time.
I would imagine, if it happens, it will turn into a 1 year term or possibly 2 years, 1 or 2 months is completely unworkable and he will have been advised that. There will have to be proper identification of ‘contractor’ vs ‘3rd party business’ and that, as usual is the nub of the thing. A way round it would be for a number of contractors to work for one company (properly – not like an synthetic umbrella company). There is very little that current law can do with that arrangement. The 1 person PSC may be dead, but other forms or providing resource to business isn’t.
These are all IMHO! Of course I could be completely wrong.
I think big business and government have the most to lose from this. Most of my contracts have been with large corporations who provide I.T. services, ironically, to government departments.
Companies like mine are ideal for these Corporations as they can procure our services for a limited period of time (e.g. to deliver a government I.T. project), and then get rid of us when the work is done. If they had to take me on as a permanent employee, with all that entails, their costs would increase massively (especially over the longer term). These costs would then obviously be passed on to the customer (i.e. the government!) and in turn to the taxpayer.
And then there’s all the accountancy firms, insurance firms and agencies that would go out of business virtually overnight if contracting was effectively killed off.
There are far too many people who stand to lose out if this happens. I’m hoping that will be incentive enough for us all to find a way to either stop or work around George’s machinations….
I’ve been following this latest foray and I can’t believe what’s been said. The latest post in the Guardian, from a treasury source made this statement: “The tax system has to be fair for everyone and it’s not fair that some people are employed and pay their taxes when the person sitting next to them does the same job for their own company and pays less tax.”
No mention of the risks, flexibility to end assignments, no employee benefits etc.
Then I remembered a recent meeting about HMRC’s plans to remove tax relief for T&S. Someone said surely it would be unfair to allow employees working at the same site to have tax relief and contractors, working alongside them and doing the same job, wouldn’t get it. The HMRC person said fairness wasn’t there concern!
So now we now that fairness only applies when it suits their views and plans.
I’ve had enough and moved to the US. No such draconian nonsense over here. How is it fair to treat us as employees when we get no unemployment benefits between contracts and are constantly looking for work? It’s nanny-state insanity. The other benefits here are complete freedom of speech and the ability to defend yourself.
Easy answer – migrate. I’m now in the Netherlands using my UK company. I work for a payroll company, but my client is someone else. If the HMRC Gestapo tries to play tricks here it simply will not work.
Alternative – Become an Indian National and go work in England. You get great terms for two years – no tax on pay, no tax on allowances, accommodation, travel (bring your entire family), and not only that, you can become a British National after that!
Three months ago I went for a Government contract and was told I had to be subject to IR35. No surprise, I turned the contract down. Ever since I keep getting calls for the same role spec in the same place but not subject to IR35.
Racial discrimination, well the government want to try considering what they do. It’s all a load of oliebollen.