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back to article Tax tribunal finds contractor wasn't employee

The Tax Tribunal has found that a contractor was not an employee in a case involving controversial tax avoidance law IR35. Whether or not a worker is an employee of a company or not can only be decided by looking at a wide range of facts related to their working life. It said a designer in the aircraft industry was not an Airbus …

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Sir

""Each contracted worker was fundamentally insecure, having neither a specified role in the company nor a particular line of duty beyond what was for time being allocated by the permanent staff."

It's about time this piece of shit legislation was binned. With the above statement, so many people that hmrc deem to earn enough to go after are now pretty much in the clear as far as IR35 goes. The people that the legislation was originally targetted at don't earn enough as individuals to make it worth their while to chase.

How much money does HMRC lose by trying to enforce IR35 again? I thought it was supposed to make a profit and pay for itself.

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Totally agree

Like much tax legislation, IR35 is much too vague, ill thought out, vindictive, and (for the most part) just downright illogical. Goodness knows how much money has been wasted on it - I'd love to see some figures.

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Office of Tax Simplification

Crikey; the Office of Tax Simplification is a government office!

What's happening? The is it a trick?

http://www.hm-treasury.gov.uk/ots.htm

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Coat

Re: Office of Tax Simplification

Yes, it's complicated.........

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Sucky decision

Wow. "...all these could be interpreted either way," No, the preceding list couldn't be interpreted either way - they point squarely to the worker being an employee. So this tribunal has basically completely ignored all the criteria laid out, HMRC guidance documents, and previous decisions used to judge employee status, and decided "being able to dismiss with no notice equals contractor"? Bullshit. He was an employee, who just happened to have a legally unenforcable term in his employment contract. Can't imagine HMRC is happy with this decision at all. And as a taxpayer, nor am I. Pay your tax and NI like everyone else has to, you cheating disguised employees.

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@AC

Did you choke on your humble pie, sat on your soap box as you ranted away whilst reading the daily mail?

Given the recent financial crisis you should be glad contractors exist as most would have got the bullet first saving your unambitious arse from landing on the street. Why don't you go and explain to them where their redundancy payments went to seeing as you're so sure they're employees?

Where's a fuckwit icon when you need one?

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wow..

.. that certainly counters all the points raised!

Nice to have a debate that doesn't just degrade into name calling.

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Alert

Jealousy?

As a contractor, who works an average 58 hour week by the way, your attitude is very typical. Well it's pretty typical of most civil servants actually.

I would speculate that the vast majority of contractors pay more in tax and NI that you do. Last year, my corporation tax bill was just over £20k.

You also clearly fail to comprehend the difference between tax evasion and tax avoidance - here's a clue for you: one is legal and is why we pay a considerable amount to accountants whereas the other is not.

When you have taken the time to find out what you are talking about, then perhaps you will be in a position to make an educated post but for now you are clearly a small minded, jealous individual with absolutely no clue.

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Substitution

I was involved in the early days in the campaign to fight IR35, and helped fund (along with many other contractors) the judicial review of the law.

This was 10 years ago and even from the day the law was created, the Inland Revenue (as it then was) were taking all sorts of factors into consideration, including subsitution.

It's long been known that substitution is an entirely valid concept which helps demonstrate a 'strong pointer' to self employment, of not an employeer-employee relationship.

Why is HMRC now 10 years later deliberately ignoring this?

There's clearly something wrong with the law (and we all knew, we said at the time it would be unworkable) when 10 years later, the government and other parties involved are still trying to clarify points of that law!

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Sir Runcible Spoon

You say you thought HMRC are supposed to make a profit. Unfortunately, no.

HMRC's job is to enforce tax law. A\nd they do this extremely vigorously.

They don't care what it costs to enforce something, they'll spend the money and pursue something. We're talking government employees here, that don't give two hoots about budgets and costs.

If the law is badly drawn up, HMRC seem not to care.

In a smart organisation, in private industry, if the costs exceed how much revenue will be gleamed, then private industry wouldn't pursue it, as private industry is focussed on making a profit. HMRC are not focussed on making a profit, they're focussed on enforcing the law.

Gordon Brown, Tony Blair and Dawn Primarolo are to blame for the IR35 fiasco, and none of these, in my opinion, understood business, understood how companies make a profit.

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Sir

Hang on a minute. I take your point about public sector chasing something down because 'it is written' (probably in the book of Cyril) but the *entire* point of IR35 was to claw back taxes that HMRC thought they were owed.

As a taxpayer myself (yes I do pay a lot of taxes as a contractor, probably more than that fuckwit AC above earns in a year) I would expect a scheme whos focus is on recovering money to not only fund itself, but to actually show a return - that is why it was set up wasn't it?

I'm not talking about spending 10 million pounds to catch a murderer, I'm talking about spending £100 000 to claw back £20 000 from some contractor - what is the point?

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@AC

AC, you seem to be jealous. I've been both an employee and a contractor (for 5 years).

The real issue behind IR35 was that people could avoid paying the full amount of tax due by paying a low salary and high dividends, the dividends are still subject to tax (corporation tax because they're profit of the company, and the person pays has to declare the dividends as income and pay income tax on them), so the tax not being paid was simply the National Insurance contributions on the money which was taken out of the limited company in the form of dividends.

So, I'm in favour of people paying a reasonable salary and paying the NI on that, but for HMRC to force the director of a company in to how they should run that company and dictate to that company how they should allocate their money is entirely wrong. But this is in effect, what HMRC are doing with IR35, forcing the limited company to pay the entire income it receives as a salary.

It's not the job of HMRC (it shouldn't be) to dicate to company directors how they run their companies.

Your statements seem to be borne out of jealousy rather than real understanding of the issues.

I say to you, if you want to earn good money, then why don't YOU become a contractor?

Or perhaps you can't..perhaps you're not good enough.

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Megaphone

Sir

"Or perhaps you can't..perhaps you're not good enough."

I doubt that is his problem, after all, we've all met really shite contractors who somehow manage to hang on for 3 months.

No, I think his problem is a complete lack of BOLLOCKS. Simply because there *is* no security, which is why we are *contractors* and NOT *employees*.

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Your Sir-ship-ness

You're absolutely right there but...

I've also been fortunate enough to meet some seriously shit-hot contractors who are well worth their rate, too.

The crap ones don't get asked back and you can bin them off quickly enough cos they're NOT employees ;o)

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Flame

Fair point

Go get the industry experience, the required know-how, solid respected references, a killer CV to distill it all for a client to browse through and put your income where your mouth is and go contract independantly.

If you have the ability.

Of course, this assumes you're in a career path that has any progression. 'Shop Assistant' really doesn't come up very often in the job boards and tender lists, so you may need to retrain as something useful/skilled, also.

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@AC, practical level

AC, you're concerned that contractors aren't paying their full taxes, right?

The fact is, that the IR35 legislation has been proven to reclaim a very little amount of tax and it costs a lot of money to administer the legislation. ( As we told the government it would 11 years ago, as the accountants told the government 11 years ago too)

The overal 'profit' to the HMRC is tiny, truely tiny. So on a practical level, IR35 is almost not even worth bothering with as it's not effective at raising tax, which you think contractors aren't paying.

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FAIL

Get rid.

IR35 has been a complete waste of time and resources. When HMRC compliance inspectors have to keep retrospectively changing the goalposts to try and catch people out in order to justify doing the investigations in the first place it's obviously not a workable guideline. I wonder how much money all these worthless audits have cost the taxpayer over the years compared to how much IR35 has actually raked in.

Honestly, I know this is HMRC and HM Government we're talking about, but is a bit of common sense and clarity a bit too much to ask for?

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IR35 dross

I wouldn't mind IR35 if it were just truly targeted at disguised employees but it's a far too wide catch-all.

I'm currently project managing a one-off project using very narrow niche skills that the client does not have and would be utterly redundant in a company employee beyond this one project. Once the project finishes, I'll be surplus to requirements and be out of the door as they have no other work that suits my skills and experience. A perfect scenario for hiring a specialist contractor. Yet, according to the legal review I had, my contract is 75% likely to be classified as "IR35 caught" if it were reviewed today by HMRC.

The three tests might be relevant for testing whether a cleaner is a disguised employee or not with the employer getting away with treating them poorly, they're far too narrow and defined for dealing with specialist contractors.

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@AC

What do *you* think is the clearest definition of a contractor? I assure you that in the eyes of companies, contractors, and mortgage/finance companies who deal with contractors, the fact that you could be out on your ear next week with no notice is *THE* biggest factor. Thankfully this decision recognises that fact, unlike some previous bullshit decisions taken unilaterally by HMRC.

You might also think about things like paid sick leave, paid holiday, pension contributions, death in service benefits, health insurance, etc, etc. All of which are commonly provided for employees, and none of which you get as a contractor.

"Legally unenforceable"?! I think not. Back in October 2008, this is precisely what happened to me. The company I was working for lost a couple of contracts, so they had permies who needed something to do. Result: all the contractors were slung out at the end of that week. The following 4 months without a contract (remember that the economy was in the crapper and no-one was hiring) were a bit of a worry, but as a contractor I knew this was just how things were, and I didn't (still don't) consider it unreasonable. Unlike permies who think they're in a job for life, and then scream blue murder when an unprofitable department gets closed down.

Yes, there's the NI loophole. But would *you* volunteer to pay tax you weren't obliged to? Have you ever reclaimed PAYE when HMRC got it wrong? In that case you can take your hypocrisy elsewhere, thanks.

HMRC have spent hundreds of millions of pounds chasing this, and got (at most) tens of millions back. It would have been much cheaper to make better tax law, but that's not how we roll at HRMC, oh no.

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FAIL

IR35 - legislation of Beelzebub

"Whether or not a worker is an employee of a company or not can only be decided by looking at a wide range of facts related to their working life"

Rubbish - everyone knows who is a contractor and who is not, it's only the dodgey laws passed in haste by an incompetent and malicious government that cause the problem.

The only times this is debatable is when someone is trying to screw someone else.

Either HMRC trying to screw the contractor for extra taxes he or she does not actually owe, or a contractor trying to screw their client for employee benefits they are not entitled to.

Mainly it's HMRC acting badly.

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Anonymous Coward

We need more taxes like this...

Sabroni (13:35 GMT), it's par for the course here, even if you agree with one of the regular all knowing giants of the IT industry that seem to be squatting here they're just as likely to charmingly label you a 'fuckwit' as they would someone with whom they disagreed.

Not being one to buck-the-trend I offer the following in response to R Spoons comment at 13.04 GMT...

'yes I do pay a lot of taxes as a contractor, probably more than that fuckwit AC above earns in a year' - that may be true but I bet he has a bigger dick than you.

See, it's that easy.

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Sir

"that may be true but I bet he has a bigger dick than you."

I wouldn't count on it, although I will admit to having bigger balls. Fuckwit :P

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Ac 15th 2031 GMT

Ahhh, you know most civil servants do you?

Well, I know a lot of contractors (but not 'most' obviously) and some are stand-up guys doing their job right and doing the right thing and some are thieves, both from the person/company they are working for and the taxpayers in the way they conduct their business.

Bit of balance next time perhaps?

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FAIL

Well lets see...civil servants

I've worked in most areas of both private and public sectors over the last 20 years, including health, local and national government, pensions, weapons and aerospace, and defence in general.

WIth the exception of two individuals, I am yet to meet a civil servant that isn't a scrounging, self-interested, small-minded waste of skin who takes no interest in learning new techniques and/or technology and complains that it's being "forced" onto them.

They sit on their lazy arses stealing tax payers money and counting the days until their useless careers are over and they can enjoy their big fat, udeserved pensions.

Case in point - I've personally witnessed one whip out a notebook to write down the symptoms a co-worker of mine was describing after returning to work from an illness...the following week said civil servant was off with...identical, word-for-word symptoms.

Oh and then there's the ones that follow this little routine:

Turn up at 9.30.

Turn PC on.

Go to canteen for coffee.

Return at 10.30.

Log into computer.

Lock computer.

Go for meeting.

Return at 11.30.

Read emails.

Go to lunch.

Return at 2.30.

Send a reply or two to earlier emails.

Go to cofee and meeting.

Return at 4.45.

Shut down computer.

Sit on hands.

Go home.

Repeat. Every "working" day until retirement.

As mentioned above. Grow a pair and give it a try.

Or not.

Either way, fuck off accusing contractors of being thieves and take a good, long, hard look at civil servants.

Personally, I prefer to work for a living and enjoy my legal earnings. I pay plenty of tax and that tax keeps you in a job. In fact, the tax I personally pay keeps two civil servants in a job...come to think of it, there's a reason to become a tax avoider if ever there was one.

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