back to article Brit IT contractor wins appeal against HMRC to pay £26k in back taxes

A public sector IT contractor has won his appeal against Her Majesty's Revenue and Customs to pay £26,000 in back taxes under IR35 legislation. Ian Wells won the case against the UK taxman over his working arrangement on the Department for Work and Pensions' Universal Credit project between 28 May 2012 and 4 April 2013. Wells …

Facepalm

So confusing.

"I am satisfied that the relationship is consistent with a contract for services, not a contract of service"

I was led to believe (by HMRC of course) that IR35 is all about if you look like a permie (fixed hours, no other clients, no freedom not to work etc) regardless of your contract. This seems to confirm its definately about whats in the contract.

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Re: So confusing.

A bad contract will almost certainly doom you. A good contract won't provide you with a get-out-of-jail-free card if the reality of your working situation differs significantly from what is in the contract.

The three main tests are (for self-employment):

Direction & Control [you don't want to be under much]

Mutuality of Obligation [you don't want to have any]

The right to send a Substitute [you want to have one]

HMRC are typically ignoring the 2nd and 3rd tests; while not knowing the details of this case - the courts would appear not to be.

A good starting point for more info on IR35 and how HMRC are trying to apply it is here:

http://www.contractorweekly.com/tax-a-ir35-news/identify-yourself/

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IT Angle

Re: So confusing.

The Court has set what is called a 'precedent', so HMRC is almost certain to go to further appeal. They will need exact criteria for deciding what's genuine in each and any future case, worded to exclude the obvious abuses that will arise from expert jiggery-pokery with the core intentions.

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Re: So confusing.

So, if he had lost, would he have been able to claim back sick days, and statutory annual leave etc.?

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Re: So confusing.

"So, if he had lost, would he have been able to claim back sick days..."

No. And that is what is so unfair.

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Re: So confusing.

No, because the criteria used to judge taxation status is subtly different from those used to asses employment status.

This can often lead to the unenviable outcome where one can be deemed to be an employee from the point of view of the tax man, and an independent contractor from the point of view of the potential employer.

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Re: So confusing.

Decisions of the First-Tier Tribunal do not create a binding precedent. The decision may be persuasive in other FTT cases but it's not binding. And it certainly doesn't set a precedent in any senior Tribunal or court.

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Anonymous Coward

Hopefully they can make fairer rules and less of a crap-shoot

There are some key facts about contractors:

a) A contractor does not receive any employment protections, unlike an employee

b) A contract does not receive sick pay (even statutory amounts), unlike an employee

c) A contract has to file annual tax returns, unlike an employee

d) If earnings are above a threshold they have to be VAT registered, unlike an employee

e) A contractor does not generally expect an annual bonus, unlike an employee

f) A contractor is less likely to expect to be considered for promotion

g) If there are some economic headwinds, a contractor is more likely to accept a pay cut

h) When there are cuts, a contractor expects to be in the firing line and gets on with doing their job while the employees try to ensure alternatives are considered, etc

i) When a role is cut, a contractor expects to work until their last day where an employee may expect to be paid in lieu as well as redundancy

j) A contractor does not receive paid holiday time

k) A contractor generally pays for their own training

I could go on. However, the point is that HMRC should recognise that the contracts themselves are worded in a way to ensure the contractor does not receive the various statutory protections of employment. Businesses benefit from the flexibility of having access to skills that they can retain or release at will. Employees benefit from having a layer of more disposable workers as employees would have first claim on any alternative roles within the company and the company would be expected to cut contract workers first as they're not employees. Contractors benefit from favourable taxation in return for this. Since dividend taxes were introduced in recent years there's a much reduced benefit to being a contractor over being an employee, so it's about time HMRC accepted the remaining different as the perk of accepting the complete lack of job security and has expenses that an employee doesn't. It's a situation that has worked for many years for workers and businesses.

Since the business has benefited from the flexibility of the arrangement while the contractor has not received any of the statutory perks of employment like holiday pay, surely it's reasonable HMRC should be targeting the business not the contractor about any additional tax payments anyway?

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Re: Hopefully they can make fairer rules and less of a crap-shoot

Don't forget to setup a 'workplace pension' for your company employees i.e. You.

That will reduce any corporation tax your company might be liable for but it is an expected expense for boy you (pre Income Tax) and for your company to show that you are operating your business properly.

IANAL not IANAA ( I am not an accountant)

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Anonymous Coward

Re: e) A contractor does not generally expect an annual bonus, unlike an employee

Um, are you really so sure that the majority of ordinary employees get annual bonuses?

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Anonymous Coward

Re: Hopefully they can make fairer rules and less of a crap-shoot

"Hopefully they can make fairer rules and less of a crap-shoot" your comment makes way too much sense for this government.

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Re: Hopefully they can make fairer rules and less of a crap-shoot

"That will reduce any corporation tax your company might be liable for but it is an expected expense for boy you (pre Income Tax) and for your company to show that you are operating your business properly."

If your contract is within IR35 your pension contribution will still be after tax. Just one of the many issues with IR35.

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Anonymous Coward

Re: Hopefully they can make fairer rules and less of a crap-shoot

You’re talking utter shite. The vast majority of those scenarios are down to you failing to run a business properly.

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FAIL

Re: Hopefully they can make fairer rules and less of a crap-shoot

if i use the services of a company, lets say crapita, i expect them to employ people to do the work and in doing so do all the things required as an employer employing people like sick pay, holiday, pension etc out of the fee i pay them. if i use the services of a contractor set up as a company they should do the same stuff out of the fee i pay them.

Your getting a great rate and its your decision to take it all as pay or keep some back to pay for sickness, pension etc, or pay yourself the minimum and claim the rest as dividends. Just because your a 1 person vat registered business doesn't mean you can moan you don't get stuff a permie does, its up to you to provide that for yourself out of the rate you charge. Put your charges up if you need to, companies may decide its cheaper to higher permies instead, but the higher rate should mean you then get the sick pay, holidays, pensions etc you think your missing out of, or maybe your higher than permie rates and tax efficiencies already compensate you for that already.

your choice, but i suspect that is the narrative hmrc is heading for. maybe if you acted more like a separate company with those employee related risks and expenses rather than a more tax efficient permie hmrc wouldn't bother looking at you?

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Re: Hopefully they can make fairer rules and less of a crap-shoot

What do you mean "this government" - it was Labour that brought IR35 in...

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Anonymous Coward

Re: e) A contractor does not generally expect an annual bonus, unlike an employee

I have heard of bonuses (never actually received one) but they cannot be 'expected' unless you are a director; they seem to get one whatever happens.

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Re: e) A contractor does not generally expect an annual bonus, unlike an employee

I was about to make a similar comment, BUT on reflection the core point is valid, even if the wording is a bit squirrely: a contractor cannot expect to exceed his contracted earnings, while an employee at least has the possibility of exceeding the agreed income by means of a bonus. Or put another way: if/when the bonuses do get handed out, the contractor won't be getting one!

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Anonymous Coward

Beware what you wish for

HMRC ? Simplification ?

ROFL. and more ROFL.

Seriously, in this country, HMRC exists to make life hard for one and all. They hope that my you (or your accountant) not fully understanding what Part 3, Section 10, Subsection 23, Paragaph 6a of the Tax Law passed in 1910 means.

Then they can come after you with all guns blazing.

Rather sad really when there are mega corps pissing all over them and paying a mere pittance in Tax.

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Anonymous Coward

So one part of government takes to court someone who works on an IT project for another part of government and people wonder why it constantly fails with IT projects.

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Silver badge

Hearing this has made me warm and fuzzy

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Warm & Fuzzy,

You wet yourself laughing?

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Facepalm

You really couldn't make it up...

So HMRC wants £26k from a legitmate 3rd party supplier who was working for the SAME government on another project under its own contract terms, and then probably spends considerably more than that £26k on lawyers and internal time in taking the actual contractor through the courts??? But despite being responsible for drafting the legislation and spending taxpayers money on that litigation, it still doesn't have its own house in order to provide a winning outcome???

To quote Malcolm Tucker... what a fucking omnishambles. Meanwhile, we have hundreds of millions of tax unpaid by large corporates that HMRC are too scared to go after for political and incompetence issues???

I'm a contractor myself, so kudos to QDos and Ian for fighting back. You do us all a great service, even if that service is to get HMRC to actually fucking define once and for all what the IR35 criteria is rather than just the mess it is at present.

As per the title... you really couldn't make it up.

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Anonymous Coward

Re: You really couldn't make it up...

"you do us all a favour"

no, they don't, you are every other contractor confirm HMRC's stupid rulings by failing to stand up.

When HMRC started on me as a contractor, i simply said no, i'm going to work for a non UK company (7 years ago).

Now i get modern salaries (not the 10 year old BS offerings from the UK) and i avoid HMRC totally.... oh and i work in that place called the rest of world (you can identify it because every salary statement is not followed by "we haven't increased our salaried because of austerity").... I have watched UK folk sit and take so much shit for so long... you love you stupid english... you do nothing about it and the rest of the world looks on and laughs!!!

Honestly, england thinks it looks good but... crap salaries compared to almost anywhere, crap terms (take the rubbish train to work). It's cute how the UK still thinks its something special!!

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grist to the mill

IR35 was brought in to address the less sensible who listened to the accuntants in trying to scheme something that was not going to last very long. The legacy is now silliness that hurts us all.

As a sole trader former employers are interpreting their tax office liability reduction to insisting that I use a service company or they cannot use me. I have already made clear the legal problems having talked to the taxman, If they want investigating that is a flag, In the meantime I `m stuck with much less work due to some venal fool`s history now screwing us all.

One of my oldest friends who was a developer implementer had tne taxman going punitive and then given a clean bill of health in the early days of this . He said don`t start a company, don`t get vat registered unless you have to, because they will ask why you have no or low turnover and you are assumed guilty. Only perfect record keeping will save you It took 3 years in employment and company confirmed shut down proven for the vatman to not keep tickling.

Selfish bastards screw us all.

I do want to find them and get east endian. They will just run away as far they can and do from being decent too.

Sorry

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Re: grist to the mill

Apologies for a missing O that speaks words, That just spotted lets just call them chanutes and remove letters.

For anyone in confusion, talk to the taxman, be honest and go for it , pressurise You do pay for them, so don`t forget that ever, they are your paid servants, literally.

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Silver badge

Bah!

All this fuss for a paltry 185 Megaquids per year.

More pathetic given that the govt is swimming in cash thanks to the 350 megaquids per week Brexit earned.

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Re: Bah!

"More pathetic given that the govt is swimming in cash thanks to the 350 megaquids per week Brexit earned."

We have not left yet. And the net figure is £160 million a week. And that will be offset for a while by the Brexit bill from the EU. It still can't happen soon enough though.

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So, HMRC, how's that windfall coming along?

@HMRC - still struggling to find people to work on your IT projects, or have you bitten the bullet and increased your costs by paying the contractors more so they can cover the additional risks you dumped on them?

Not exactly stellar thinking, and it's not as if they weren't warned. Roll this out to the private sector without some cast-iron directions and it won't be contractors taking you to court. Businesses take a very dim view of loading costs on to them (such as finding people at short notice to fix all the stuff that permies struggle with because they have to adhere to office politics).

Here's a suggestion for a possible test of in/out of IR35 - if the contractor can talk to a senior manager in the business and tell them straight (no need to be rude) that their ideas/decisions are the root cause of some major issue and that contractor is still wanted to work on the project the next day, they aren't an employee.

One of the main reasons I went contracting was to get away from office politics. You don't escape entirely as you can often be used as the lightning rod and expendable flare for managers, but it's nothing personal and they pay you a shit-load for the risk.

Doesn't bother me, because I work hard to have a cast-iron reputation, so loss of contract due to 'unforeseen circumstances' is usually interpreted correctly as having taken a fall for some dick-head in a major corp who can't be sacked (maybe they get moved on somewhere where they can do less harm) - but someone has to take the fall - it happens (not very often fortunately, because as a *real* independent consultant I get to tell the clients' senior staff what they're doing wrong before it comes to a heads-rolling scenario).

You'd be amazed at how few senior company managers hear the *actual* truth from someone at the coal-face that can't just be dismissed as whinging. Some of them actually value it (just keep it civil and constructive).

With regards to this judgement - if it had gone the other way, does the client get back all the VAT that the 'employee' charged them during their tenure? Permie's don't charge their employers VAT after all. I can see companies suing HMRC to recover all that VAT they paid out, they can't have it every which way and not expect some kind of push-back.

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Anonymous Coward

I’d be interested to know if he received an APN over this business. You know, the thing where HMRC can demand the money they think you owe them while you wait to go to court.

Also, no doubt the govt will now change the law to close this “loophole” and make sure more contractors are forced to pay out because HMRC says so.

Lastly, I wonder if the amount demanded accounted for the corporate tax already paid?

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Cake time.

How is it HMRC can have its cake and eat it? If it won the case above - would HMRC have handed back all the VAT it collected under false pretences? The reality is contractors working under a personal services company raise more tax than they would have done as a permie doing the same job, so BOTH parties win - what's the problem? How much tax will the average £40K per year permie pay, in the same job as a contractor, the VAT raised alone will be more than permie pays in income tax, then on top of that there will be corporation tax, dividend tax as well the usual (admittedly limited) income tax and NI.

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Re: Cake time.

If your vat registered the employing company will claim the vat back from hmrc. How much total income related taxes do you pay on how much contract related turnover?

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Anonymous Coward

No VAT is raised, the contractor charges it and the client reclaims it. Only when the client can not reclaim VAT due to non registration is VAT raised.

I'm hoping someone will indeed reclaim the VAT back though as presumably the invoice is null and void in these cases.

Then refund that VAT to the client nett of the NI/PAYE paid plus pay for sick/holidays due.

I thought it was up to the employer to ensure compliance so why is the HMRC not therefore going after the employer rather than the employee. As an employee you are not licable to pay NI and PAYE as the employer deducts it at source.

I really don't understand how they are getting away with this one.

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In this case HMRC are challenging the arrangement as they believe it’s disguised employment and not a contract and tax payments are likely missing.

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"I thought it was up to the employer to ensure compliance so why is the HMRC not therefore going after the employer rather than the employee. As an employee you are not licable to pay NI and PAYE as the employer deducts it at source."

That's true as of April 2017. According to the article this case was about work done in 2012/2013.

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"Seb Maley, Qdos Contractor CEO, said: "Despite HMRC implementing and enforcing the rules, this verdict shows they can't accurately assess a contractor's IR35 status.

"The government is serious about clamping down on what they believe to be non-compliance, but worryingly can't recognise whether a contractor belongs inside or outside IR35. That the individual was working on a government project simply adds to the irony."

To be fair, this ruling only shows that either HMRC or this particular judge can't accurately assess a contractor's IR35 status. If this were any other walk of life, we would assume that it was the judge that was wrong about the assessment. What we are really saying is "HMRC wrote the guidelines, but the judge knows better than HMRC what they say." I'm not convinced by this argument, to be honest. I'm not saying that HMRC is right, I'm saying that a single person saying that they are not, judge or no, doesn't prove they are wrong.

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"we would assume that it was the judge that was wrong about the assessment. "

Errr... no we wouldn't. The judge is there to balance the facts of both sides of the argument and provide a ruling in the event of conflict between those two sides; and I'd like to think that the judge in this case was qualified to do exactly that considering that HMRC failed to assert a case that satisfies their OWN legislation. What you appear to be suggesting is that no-one should ever challenge HMRC because everything they do is right and proper. Sorry, but allowing HMRC to mark their own homework without challenge simply isn't tenable in these times considering the ineptitude they show in most complex cases, and as shown by the outcome of this one.

I can only imagine how much joy and happiness the HMRC staffers took when they realised they were being challenged. I mean, how DARE someone do that right? How much pleasure in that they had an opportunity to take someone to court; and to be able to threaten and harass as they do. They love it.

It's a crying shame then that the complete fuckwits totally failed to make their own case then isn't it? No? Right.

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"and I'd like to think that the judge in this case was qualified to do exactly that considering that HMRC failed to assert a case that satisfies their OWN legislation."

HMRC failed to win the case because this judge decided it was a failure, so you cannot use that as an argument proving that the judge was right. If judges were infallible, appeals would not be successful that often. And worse, sometimes multiple appeals change the verdict more than once.

My question is: why do you think that the judge's opinion is more correct than HMRC's? Because you prefer her answer? They have both read the legislation (one wrote it) and came to different opinions about the answer.

Let's see what the appeal court has to say about it. If they back HMRC, then the balance shifts to them being right. If they back the judge, the balance shifts to her being right. At the moment all we know is that one person disagrees with HMRC.

"What you appear to be suggesting is that no-one should ever challenge HMRC because everything they do is right and proper."

No. This is what happens when someone reads something, and then decides to ignore some bits of it. I distinctly said "I'm not saying that HMRC is right, I'm saying that a single person saying that they are not, judge or no, doesn't prove they are wrong." This is a single judgment, wait until more cases have been through the system.

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The driver for using Contractors

Most Government departments have restrictions on their expenditure for employees/workforce. This is managed by accountants who draw this from OPEX (Operating Expenditure).

Thus to employ people without affecting OPEX you must use CAPEX (Capital Expenditure). This is usually defined as project cost.

Thus using CAPEX instead of OPEX you separate Contractor from Employee. Therefore, Contractors are not employees. No IR35.

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Re: The driver for using Contractors

I don't disagree, but IR35 is not just red-tape applied to Government works. It also applies to all private sector companies also. I'm assuming the reason why the OPEX/CAPEX marker is not used as an assessment is that that would mean HMRC defining how all private sector companies arrange their finance structures, which is not what they are there to do.

And let's be honest, if it was that easy it would also remove a grey area that HMRC seem to revel in creating.

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Re: The driver for using Contractors

"Thus using CAPEX instead of OPEX you separate Contractor from Employee. Therefore, Contractors are not employees. No IR35."

Basically, you have said 'I pay you using a different wallet to my other staff, so you are different'. That's not a reasonable argument.

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The article omits an important detail of the case: this is the second time the guy has been targeted by HMRC, and ALSO the second time he beat them. That stinks of a punitive agenda which is against the principles of impartiality HMRC are supposed to be have. Even worse, the cost of prosecuting the case would have been higher than the paltry sum of tax they could have claimed if they'd won and so this would have been a symbolic victory. As it stands, us taxpayers have to foot the bill for the lawyers.

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Boffin

“the cost of prosecuting the case would have been higher than the paltry sum of tax they could have claimed if they'd won”

You cannot use the cash value as criteria for prosecution, sometimes it is necessary to enforce the principle of law. Would you consider it OK not to prosecute a shoplifter because they only stole something worth £100?

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Well it seems that in many cases the police do.

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It tends to go the opposite way - we don't prosecute the guy who stole 10 million, but we do the guy who stole 10 quid...

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"Thus to employ people without affecting OPEX you must use CAPEX (Capital Expenditure). This is usually defined as project cost.

Thus using CAPEX instead of OPEX you separate Contractor from Employee. Therefore, Contractors are not employees. No IR35."

CAPEX is the purchase of assets that must amortised over their lifetime as they deliver value beyond the financial year in which they were purchased. For tax purposes they cannot be claimed as business expenses. OPEX is everything that's more or less an ephemeral operating cost (and therefore a 100% deduction from revenue) for tax calculations.

The costs of retaining employees and the services of contractors to keep your business operational both fall under the latter. Which internal 'budget' a client uses to fund this is wholly irrelevant as far as HMRC's view of the client's, and contractor's tax situations is concerned.

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Anonymous Coward

IR35's Silver Bullet is...

There is 1 silver bullet that kills the IR35 "disguised employee" argument, and that is the Substitution Clause. Here's how to do it in practice:

Just to be clear, being able to substitute yourself in a role is a cast iron "I am not an employee" card, because no employee can choose to send someone else in their stead; case law: Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance (1968).

However the substitution clause itself isn't enough, it can't be a "sham" clause; case law: Autoclenz v Belcher (2011)

Here's how you prove your substitution clause isn't a sham, when working for a company that requires ID, and logins and passes etc to turn up on-site and work; it all revolves around "working from your home office":

1) First decide to work from home office one day. Of course a courteous contractor would inform the client's Project Manager (PM) about this beforehand, and accommodate any reasonable client requests about when this would be most convenient, but in 15 years as a contractor, I never had a contract where this wasn't possible to arrange, even if for just one day.

2) Agree with the client's PM that you'll be working on documentation whilst working off-site. Ensure that said documentation isn't anything excessively sensitive to the client's IP or security.

3) Agree with the client's PM that in order to get the most effective work done by the most able people, and to help meet the next deadline, you'll get in additional documentation support, in the form of a mate or spouse say (your substitute), doing some graphs, tables, spell checking, formatting etc, of said documentation. All at no extra cost to the client. Allowing you to focus on the core technical work. (It's possible to skip the agreeing with the PM bit if you don't get on with them, they're unlikely to notice.)

4) Ensure that the documentation version history accurately reflects that the document was changed by said substitute, including their name and company (you do make sure you put your own name and company on all document version histories, right?).

5) When billing for this month, submit your invoice as normal, but add an extra line showing the work down by your substitute. Ensure as you've agreed with the PM in (3) that there's no extra cost for this, so you'll likely have an invoice that instead of saying "20x days for me", it says: "19x days for me, 1x day for subbie". The total is the same. Submit this in the usual way.

6) You may need to explain to the client's finance team that the odd extra line was cleared by the client's PM already. Most likely, they won't even notice. If they're an agency that operates "self billing" then they likely won't even look at your invoices anyway, but as a real business, you should always create your own invoices and file them accordingly. Arguably this is even better as there's no one to query what you put on your invoices.

Now you have a cast iron paper trail of actual substitution, with your subbie doing real work, documented in the version history, and their time being invoiced independently. Your arrangement is now incontrovertibly incompatible with one of being an employee. And yes, I have done this, several times. Copies of the invoice and documentation are kept in my "IR35 defence file", you have got one, right?

Tada: one IR35 silver bullet! :D

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Re: IR35's Silver Bullet is...

Nice. Clean, simple, open, bullet-proof.

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Anonymous Coward

Re: IR35's Silver Bullet is...

Surely you've just demonstrated to El Reg readership that your "substitution" is a sham.

If you have to ask permission for the substitution then it is not true substitution.

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Anonymous Coward

Re: IR35's Silver Bullet is...

> "If you have to ask permission for the substitution then it is not true substitution."

Whilst I see your point, you'll note that at no point did I say "ask permission", I said "agree... if you get on with the PM". Just like you'd agree to take a day off / not supply services for a day. I'm talking about common courtesy of discussing with your client, as all good service providers would do.

However at no point is permission actually sought or needed for this to work. In most cases the client's PM probably wouldn't even notice, besides it's always better to ask forgiveness, than permission.

Either way, even if you feel that "permission" is needed, it doesn't take away the fundamental fact that you've supplied a substitute. No employee could ever do that, with or without permission.

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And another thing ...

After years of fighting it I finally succumbed and paid £41k in taxes and NI and completed their stupid forms last year. I hated doing it. Being told that it was my choice BUT if I didn't do it I would be heavily fined always annoyed me. The whole idea of retrospective taxing has always annoyed me. But I did it and drew a sigh of relief that it was finally over. Then early this year I received a letter stating that because I hadn't met all of their demands I had to pay a penalty, apparently I hadn't completed the forms correctly, I had written "I don't want to do this, I am doing it because I have to", they didn't like that, however when I'd previously called HMRC and asked for advice on how to complete the forms they stated "we cannot advise you how"! I complained and two months later received a letter stating that my forms were ok but the issue was I hadn't withdrawn the appeal ... I didn't withdraw the appeal because they'd already rejected it, so I thought it was irrelevant. I finally received a penalty for £12,767, a third of which was for meeting their demands after the deadline, which I only did because their initial letter didn't mention the appeal! I appealed against the penalty but they rejected that. I have re-appealed and am awaiting the outcome but am not hopeful.

Yesterday I received a letter which stated that the National Insurance I'd paid for 2003 and 2005 was no longer due so I had been issued a credit, great, but attached was a Self-Assessment statement showing that I'd been charged interest of nearly £12k on the tax for 2003 and 2005 (until I purchased a tax credit in 2009 ... which I did as soon as I was told by HMRC that interest would be due on the tax) so I in fact owe them another £8k+.

The whole idea of retrospective taxation is outrageous and I still can't believe they've got away with it.

This whole saga will have cost me £62k (which is more than 50% more than the tax I initially saved) for using a system which was legal in 2003 and 2005 but subsequently deemed not to be. I had the foresight to purchase a tax credit to cover the taxes and save money rather than enjoying it, but how many people are going to be bankrupted by these incessant demands from HMRC? The tax won't be the end of it, there's the interest and penalties which could (more than) double the taxes which (HMRC have decided) are due.

I would like to add that (contrary to HMRC's assertions) I was not an employee. Employees receive paid holidays, paid sick days, end-of-year (and other) bonuses, training, career progression, pension, etc, the list goes on an on. I received none of these. So how exactly was I an employee?

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