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

16/3 16:00

Back in the day “temps” would get work through agencies. Specifically temporary secretaries would be supplied by temp agencies. No one ever doubted these ladies (predominantly, back then) would be paid via p.a.y.e.

Somewhere back there in time, say the 70s, maybe 80s, there rose the “body shops”. This deprecatory term was used to describe the provision of staff to meet work demands of information technology in companies. To give context the IBM PC arrived only in 1980 I think it was. I guess it was probably sudden, the demand for programming people. However, these were not permanent positions and had finite terms based on the systems being created.

Another expression was “bums on seats”.

However. But. And. Here is the rub. The perceived skill levels and the amounts of money (pay) were vastly different as between the temp sec and the temp programmer. I can’t recall the rates of pay but say the sec was on £3 an hour, £24 a day and the Cobol programmer was on £85 an hour or £600 a day.

Temp secs were called in to replace existing permanent staff

Temp programmers (a loose term for computer specialists) were not called in to replace similarly skilled permanent members of staff. They were quite literally surplus to requirements except to achieve some set objective. Indeed, despite set assignment end dates, necessarily arbitrary as I have described above, engagers would send these “temps” off site when the work was done regardless of the official contract end date.

Arguing with a large corporate was not the done thing, not least because the parties wanted repeat business, both the worker and the agency. The worker from the agency (and the client) and the agency from the client.

In those days the agencies paid the workers regardless of themselves having been paid. “Invoice discounting” (borrowing based on sales invoices) was common if not a necessity. Nowadays, margins have been cut and extensive delays in payment as compared to the old days is now normal and the younger ones don’t even know it was not always this way. That rapid payment did indeed look like employees being paid.

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

Our temp workers (merely lacking a better differentiating description) were high earners having to keep up with quickly changing and developing skills that required constant work to stay up to date and to be able to offer in demand skills. Indeed, failure to do so would see a person’s prospects of finding assignments slowly fall away. Back then the way in to this world was via first line support on help desks, odd as that has always seemed. That type of job of course probably was employment whether temporary or permanent, but aside from that it had all the hallmarks of self-employment, not employment.

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

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.

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

I need to find this again. It said anyone obtaining work from and working via and agency must by law have p.a.y.e. operated by the agent. In short, they sought to shortcut the status determination processes and wholesale draft the entire “professional knowledge worker” into employment, whether they liked it or not. Without any consideration of status. It was a simple blanket and completely arbitrary decision. With hindsight, it looks naive, and I offer the idea that the current legislation evidences this, by emphasising the manner of control.

That is where all the trouble started.

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

One solution

Seems to me that all that is required, in common with being determined outside IR35 is the will to work together in the ways seen as appropriate to self-employment (being in business on one’s own account).

Of course that willingness also requires a proper understanding of all these matters by all parties involved. Currently the “corporates” in the form of their HR departments are playing “catch up” or even make wholesale decisions where they make a “blanket” decision, which itself is illegal under HMRC guidance. Not that HMRC are doing much enforcement since it suits them to have workers forced into paying more tax.

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

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

Of course HMRC is made up of 100% employees, who see “contractors” making far more money than they do, without any recognition there is far more to it than that net pay number — not least corporation tax. Shouting “it’s not fair” is best reserved to five year olds, a reference to our current Chancellor of the Exchequer, both within and without HMRC.

My personal opinions are based on watching for 40 years.

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Hello World 40 Years a public accountant.

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