Some legal experts are not convinced that IR35 reforms set to be repealed in April 2023 will be set in stone or even come to fruition.
And if they do? According to these same experts, there will be new risks and HMRC enforcement powers contractors hiring companies, umbrellas, accountancy servicing firms and recruitment agencies must be aware of.
Anyone working in the contracting sector could argue that the policy uncertainty over self-employed and Off-Payroll working status is seriously impacting people's lives, careers, businesses and livelihoods. But it would seem uncertainty is likely to prevail.
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7 comments
John Charity Spring · 16 Oct 2022
Let's not get too carried away about this potential repeal.
Prior to change in responsibility for determination, there had been a series of anti-contractor steps made. Expenses was one but far less impactful overall than the changes to dividends or flat rate VAT. These were all negative for contractors running into many thousands at least per annum for small businesses. HMRC has been on the warpath for the best part of a decade. And the contractor community on the back foot. It's long time the tide turned and HMRC outed for the damaging and ineffective policies they've been inflicting with such zeal. HMRC claim off payroll reform has netted over a billion pounds with no downside but we only have their word on that. No conflict of interest. No way. Definitely not. Time there was an independent audit or better still, a public inquiry.
John Charity Spring · 16 Oct 2022
> As a contractor I worry
If the financials of VAT were so, then why would such companies have structured their resourcing outside IR35 in the first place? i.e. pre-2021. It would make no sense. So I don't concur this is a major risk. There are also intangible benefits too for organisations using outside arrangements that are risk reducing. I don't believe the previous situation arose merely de facto.
XY · 14 Oct 2022
Just to add/clarify - an umbrella company is not the only way to operate inside IR35 contracts. Many people simply ran a Ltd Co and paid the taxes associated with being inside - so the client only sees a Ltd Co as an entity it pays, not what taxes that Ltd Co pays.
To avoid constantly chopping and changing of status, many (most?) would simply declare themselves to be outside but pay the taxes due inside for any contracts where that was appropriate. Such companies would not offer much of a target for HMRC since they were paying the inside-IR35 level of taxes anyway.
XY · 14 Oct 2022
The CFA issue would apply only at one point in time (April 2023) and only to contractors who continued in a contract which was inside up to April, then the contractor continues in the role but they deem it to be outside.
Furthermore, this statement shows scant understanding of how it works in the old rules. The end client would be unaware of the contractor's status since the monies are always paid to a Ltd Co, it's then up to the contractor to declare their status and pay the taxes accordingly. The end client knows nothing about what happens to the monies after the Ltd Co receives them and has no way to do so, even if they wanted to (which they don't - why should they do HMRC's work for them?). There's nothing illegal in that.
I'm constantly amazed by the amount of absolute twaddle written about IR35 by so-called "experts" (many of whom have a vested interest in IR35 continuing - usually because their business sells services related to IR35).
Adam · 13 Oct 2022
IR35 is a drag on workforce participation, umbrella companies cannot fit the self employment mould, I refused to use them until this month when the experiment provided an opportunity for useful experience. I will never entertain an inside IR35 contract again, financially uninteresting, inflexible low budget accounting software sucks, nothing works, communication is hindered the umbrella has no idea about the intricacies of the contract, criminal pensions culture just headaches every week. Its a tax collection device for the government, very definition of a parasite... disavow umbrellas, accept weaker control over individuals cut government spending build a better more productive society.
Andrea · 12 Oct 2022
The biggest issue I have with IR35 is that it will not allow expenses to be removed before tax is calculated, or allow for tax to be reclaimed on expenses incurred.
I'm currently spending in excess of 1500 a month in travel and accommodation as I travel to different sites.
I have a choice; work outside IR35 or only take local roles. Part of my business is the willingness to travel to places where other contractors won't - but since IR35 that excludes any government roles.
The knock on effect of IR35 on the government is more than a tax calculation, they need to consider worker supply.
Andrea · 12 Oct 2022
I'd be very interested to see an article on how banks (and possibly insurance companies) have benefited from not having to payout VAT to contractors working inside IR35. Given they cannot claim that VAT from the government, how much has the government VAT revenue gone down under IR35 and does this offset tax gains elsewhere?
As a contractor I worry that the banks might throw weight (and money) behind keeping the IR35 format, because that would be in their best interest.
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