IR35 Contractors are no more than a temporary employee? This is history little known.

Another expression was “bums on seats”.

“Seats” are a term used by Microsoft (and others now) to price the sale of licences for software. These required people to sit on those seats, so to speak. It was probably completely natural to be operating pretty much just like the temp agencies.

Temp secs were called in to replace existing permanent staff

not present for some reason, whether illness or holiday or whatever. The Point is the temp was standing in the shoes, or indeed sitting on the seat of a permanent member of staff, replicating exactly what that staff member would do day in day out. At least that was the hope, experience varied.

Our temp secs provided highly valued services and were happy enough with their lot,

being able to dip in and out of the employment market. There was little or no need for ongoing training in typing, shorthand and audio typing. Some were in it for the “pin money” others single parents making ends meet and so on.

It should here be noted that we have had decades of “status” experience with decades of case law.

That means the tax industry (so both HMRC and the accounting professions) had vast experience at determining who was in reality an employee and who was in reality self-employed. Whether via a legal entity (i.e., usually a limited company) or simply as themselves (which means actually “self-employed”). Both these in today’s parlance can be seen as “being in business on their own account”. Each case was considered on its merits with recourse to appeals where agreement could not be reached. These were the times of the “Friday Monday” problem, when an employee resigned on Friday and came back as a contract worker on Monday. However, the agency worker problem is in a different section of the tax paying community.

Now then, HMRC (The Inland Revenue) came along and asserted that both types of “temp” are for tax purposes identical and both had to be paid via paye.

This is the source of all the IR35/OPW problems.

HMRC totally believe contractors are like temp secretaries for tax purposes.

Section 203 of whichever act it was, was the first incarnation.

That is where all the trouble started.

All those who had been operating as self-employed were indirectly forced to use limited companies so as not to be forced on to p.a.y.e. Doing this did not dodge the risk of a status enquiry (which they then tried to encapsulate in law as IR35, again trying to shortcut the process), but it did avoid the immediate p.a.y.e. This then lead to an actual loss of tax revenue because money could be taken by means of low salary and high dividends upon which there was no national insurance (NICs). Whereas the self-employed pay both class 2 and class 4 NICs, as well as tax. I am glossing over details to demonstrate the failure of the attempt to wholesale capture vast numbers of very tech-savvy workers who were doing no more than follow the tax rules of the time. No surprise then that such changes to tax law resulted in equal and opposite changes in worker operational methods. No one at HMRC saw this coming? So it would seem.

HMRC has never given up trying to short circuit what was perfectly good law.

The complaint was it was complicated; it still is and will always be complicated and attempting to over simplify a complex matter appears destined to fail. As a result, the legal profession has made a killing with schemes designed to circumnavigate every attempt by HMRC to capture the same target group. This has been going on now for decades, but the history is lost in time. All HMRC ever seems to achieve in its attempts to make life easier for itself, is to lose the support of sections of society, upset vast numbers of people and even cause loss of life which is still going on today. All this to the extent there is an all party parliamentary group involved and the Lords have castigated HMRC’s methods.

One solution

would be to allow these workers to be self-employed again when acquiring work via an agency. Indeed, the relevant law actually does seem to allow for this at Part 2, Chapter 7 Income Tax (Earnings and Pensions) Act 2003, section 44(2)(a)

Of course there are many workers via agencies who should be classified as employees.

Often they are barely even aware they are not an employee. These folk are not the thrust of this piece. However, if they were to exit the self-employed market then matters for those who belong there, might improve significantly.

I have for years being saying “employers” should be responsible for IR35,

just like they were always under the status enquiry “rules” (when IR35 did not exist). I was not ready for their total ignorance of how it all works. That is an unpleasant surprise. Once educated those in authority (usually at Director level) tend to come “onside” pretty quickly as they understand all that is required is the necessary will. This being to negotiate in businesslike ways and to avoid any hint of employment, such as being sent via the HR department. That “will” manifests as directors giving appropriate instructions to their line managers. The problem is the corporate personal seem scared witless of the risks, which seem to have been presented to them by guess who? HMRC. However, directions from board level allow staff feel able to engage instead of to block.

Your preferred search engine is your friend.

Happy days.

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