There was no need to imply a direct contract between an agency worker and an employer just because the worker's conditions did not exactly match those described in the agency agreement, the Court of Appeal has said. The fact that the worker was fully integrated into the employer's business and asked permission to take holidays …
Reap what ye shall sow...
All this because he probably wanted to pay less tax...
What would have been his tax break as a contractor?
The contract between Tilson and...
the agency read like a standard 'avoid IR35 at all costs' draft. However, we all know that alot of contracts read like this but in reality the customer wants to treat each and every contractor just like all the other permies in their organisation (be in by 09:00am, request for leave etcetera).
However, with IR35 in mind, the HMRC could argue that such an individual could be classed as an employee and proceed accordingly.
Couple of things
He would have been able to route some of the profits from the contract to himself at corp tax rates as dividends, reduce his payment of national insurance, claim expenses against his earnings.
Apart from the decision being that he isn't an employee therefore this should be a small boost for contractors. Hence HMRC should probably just STFU and move on.
Final paragraph on the article...
"...This argument repeats the error of asserting that because someone looks and acts like an employee, it follows that in law he must be an employee," he said.
And this is one of the reasons that IR35 is a pile of wank.
From what I have read of IR35 'prosecutions', this Tilson would be very close to being considered an employee on the basis of work control, scheduling, leave requests etcetera.
And yet the Inland revenue will wave IR35 at you SO FAST claiming that you really are an employee and please, pay more tax, you bludger.
I bet this would have gone the other way...
...If it was HMRC hounding him over IR35
So many other posters...
All saying exactly what I was about to. So I won't bother.
Funny would be.....
.... if following such a legal ruling he used it to claim back all the tax etc from the IR, because I'd lay a small wager he *was* consdiered a de-facto employee for IR35 tax purposes. Probably more than he'd get for unfair dismissal...
I hate to do a 'me too' but have I read it all correctly? Because it certainly seems to contradict the HMRC stance on contractors (IR35)... How can they have it both ways? <sigh> This contract stuff is firkin nightmare innit.
Funny old lot judges, aren't they.
This sounds like a great way to foil HMRC hounds if you should ever get pulled for IR35 status. Simply leave your position and sue for unfair/constructive dismissal. If they decide you can't sue because you're not a permie - then Bob's your uncle.
Should have bought a squirrel
The guy refused to become a permanent employee when invited to be. I don't blme him, but having this in black-and-white was rather a land-mine in his own back-yard
And well and truly hoisted by it as well.
This story has nothing to do with tax...
But everything to do with his pursuing a case for unfair dismissal - just as it states in the story.
Funny thing would be...
having contracted 7 years at HMRC (ok 5 HMRC and 2 HMCE for the pedantic ones) I'd wonder how that works in an IR35 investigation so HMRC goes after me, I go after my 'employer' which is HMRC :-)
Just as double standard as their external expense policies compared to their internal ones.
AC for a good reason
@Aristotles slow and dimwitted horse
We all agree with you. That doesn't change the fact it's inconsistent: when you're being dismissed, it's OK because you're not really an employee; while when it comes to paying your taxes, you need to pay more because you're really like an employee. Or in other words, you don't get the protection of being a real employee but you get taxed like one. Sounds like double standards to me.
did the judge
Referr to his tax status? By the sounds of it he was probably paying tax as if he was self employed. In which case I'd have to agree with the judge, he can't have it both ways.
If the decision had gone the other way, I'd have hoped that HMRC were waiting outside the court room to slap him with a large tax bill.
@Aristotles Horse - on the contrary, his tax status would have been determined by his employment status, and by the sounds of it he engineered that status to reduce his tax. Then it came back and bit him. He's only got himself to blame.
"Simply leave your position and sue for unfair/constructive dismissal".
I've been contracting in the past and almost all the contracts DO HAVE CLAUSES preventing any contractor's complain (take it or leave it this is the essence).
It is simply unfair to be fired because some w***r decided so without any ground, just "perceptions" in his/her empty skull: in the end it damages both the business and people.
Probably it is what happened to this guy: he's using the most damaging tool at his hand to punish the company (eg. trying to prove he's working as employee).
To be effective the law must declare void any of such clauses on all contracts and punishing appropriately these abuses.
Happened to me it did1
I was once fired for getting on the wrong side of a self-proclaimed project manager who objected to the food I was eating one day. Being a contractor, what recourse did I have? It's the risk contractors take, but on the other hand it really does sting when you can be relieved of your income without recourse merely because someone is having a bad day.
I lost a contract once because my wife was cleverer than the bosses wife.
I didn't care. I could not have worked with a moron like that. And we didn't have to meet his wife ever again.
One rule for one
I think you'll find that the judge can find he is not an employee for benefits purposes, but HMRC can rule he is an employee for tax purposes.
Theres nothing fair about the system.
He was under investigation for IR35 and used this case to refute HMRC's case. If he won this case, then he would have lost the IR35 case and used the payout for the tax bill..
Long chain of command
Reminds me of the time I was...
employed by an agency
to work for an IT services company (G.....)
that was working for another IT services company (C****a)
that was supplying services to the local council.
I saw a lot of desktops in the months I was working there.
Seems to me that are two issues that are being confused...
Seems to me that are two issues that are being confused...
Firstly he was a contractor. He WANTED to be a contractor and as such he has no rights as a perminant employee. End of story , you down thumbing contractors can sob your heart out as much as you like.
The second issue is that of IR35 which is about tax law not employment law looks at things differently. I agree that tax law and employment law dont really match up but frankly we could set the tax man on him to make his life even more hell as he appears to be working for a single employer and as such he may have got some tax breaks as a contractor (expensing this and that or whatever other schemes) which means not only is he out of work, he owes the tax man some money at he was really working for a single employer under stealth.
Brings to mind one of the Boulting Brothers
He was a director of the film company and he claimed he wasn't an employee (for tax purposes you know).
The learned Beak held he was. Pay the tax!
P.S. Where's Hailey Mills these days?
Hayley Mills is alive ....
and living in NYC. She's 64!
The older of her two sons is Crispian Mills, who achieved recognition as the lead singer and guitarist for the psychedelic rock band Kula Shaker.
So if, as an American, I look and act confused as to WTF this means, that really means ...
Oh I see, Tax Man Logic. Never mind. Just answered my own question.
"Tilson had a payment agreement with Silversun Solutions, which received and passed on his pay for a 3 per cent charge. It provided his services to agency Morson Human Resources, which in turn provided them to Alstom."
I doubt if he went this was for tax purposes then, presumably he was effectively an employee of this umbrella/payroll company.
We're all doomed
The only conclusion to draw from this is that the little guy always gets screwed.
Either you are deemed to be an employee and get screwed by IR35.
Or you are deemed not to be an employee and get screwed by losing your rights.
The only positive thing to draw from this is that the mass importation of very cheap Indians via ICTs will close the contract market anyway.
Become a lawyer instead.
(Paris does not mind ... etc.)
He turned down the offer to go perm.
And contractors have to accept the risk that this sort of thing can happen when you do.
It's the price you pay when trying to eat your cake and still have it.
Re: We're all doomed
Not really, if he explicitly declined the offer of permanent employment, it's a bit rich to turn around and claim that he was really a permy all along. Also contractors are service providers and like any vendor need to be aware that there's as much of a PR angle to keeping your clients as just getting the work done (i.e. you're not an employee, you cost a lot more so work at persuading your client that they really need to keep paying you said extra money). IR35 is there to (quite rightly) make sure that you're paying the tax that you're meant to be if you're just using the term "contractor" as a tax dodge and not in it's proper sense, so hasn't really got anything to do with this.
Anybody that contracts really needs to prepare themselves for random dismissal, it's the nature of the thing and if you think otherwise you're deluding yourself (hint: one of the reason you're there as a contractor is that it makes the company's life a lot easier when they want rid of you, it just sounds better than "temp").
Nonsense. IR35 is a tax law that tries to treat contractors as the same as employees for tax purposes, when they are clearly different.
Employment law treats contractors differently from employees, so that they lose employment rights.
The laws that determine whether someone is a contractor or employee should be the same for tax and for employment rights.
Either you are a contractor, in which case you lose the employment rights but gain the corporation tax regime, or you are an employee in which case you gain the employment rights and are treated as an employee for tax purposes.
Currently, contractors get screwed both ways.
(This is a general point, not aimed at this specific case - but if contractors can be subject to IR35 then it is reasonable that they should be seeking to gain equality through employment law)
Maybe It's This Simple
I know it's possibly a gross over-simplification. But surely the answer to those who work as contractors then moan about how they can't win is, don't work as contactors. Find jobs as employees. Then you can moan about how unfair it is being an employee.
I know that may not be easy. But when was life ever easy?
We all are allowed to choose. Yes really, there is a choice.
Question about umbrella companies
Genuine question - If you are in fact an deemed to be an employee of an umbrella company, does that put them in breach if they refuse to pay paternity or maternity allowance?
IR35: Employment law != tax law
My understanding is that you can be considered to "not an employee" for contract purposes and simultaneously be considered to be an employee for IR35 purposes.
They can get still get you both ways.
Thank-you to Labour, for that lawyer's solution to pleasing your large-corporate friends and slanting the playing-field against the little guy while raising tax revenues.
We'll keep the Red Flag flying here!