Agency Workers Directive

[Pistachio]

You still have failed to see my point.

The person quoted seemed to make out that we already had problems differentiating between an umbrella worker and limited company contractor, and this causes issues:

Representatives of client organisations expressed their concerns about implementation. One of the clients who spoke is responsible for managing a substantial workforce of agency workers, limited company contractors and umbrella company contractors.

He highlighted the difficulty that already existed, as to how they could differentiate one worker from another; even as things stand now, it was explained, a limited company contractor can’t use the gym, but the contractor sitting next to that person can, because they’re working through an umbrella company.

I'm still failing to see why not being able to go to the gym has been cited as an issue. Why does that differentiating cause a problem? I'm more than happy not to use a ****ing gym as I'm aware the problems that it causes.

THAT'S my point, and my point of view is exactly what you countered with at 11.29am this morning. I just think it's a pointless example that's been raised.

[Bel]

Originally Posted by Light_Box

Speaking from our own agency point on view, I'm afraid to say that the clients we work with have already expressed their desire to terminate contractors assignments just short of the 12 week qualifying period, if the Directive is passed in its current form.

This would represent a fundamental change to our business model and one which could have potentially disastrous consequences. Although a freelance agency at heart, our strategy has always been to seek out and place longer term assignments (6 months +). With such a high turnover of work, many smaller agencies like ours would simply fail to cope with the extra administration that this will undoubtedly result in. Combine this with an overall reduction in the use of temps (post AWD) and you'll see a very recruitment different market. Perhaps one that is dominated by a few select agencies with everyone else scrapping around trying to balance the books.

LB

I think you're right, that's what will happen - hirers will shed flexible workers before they reach the 12 week qualifying period for AWD. That was add to the burdens already placed on recruiters (and flexible workers) that are seeing clients' being far more choosy and selective about the flexible workers they do hire than they did in the past. Some hiring procedures, nowadays, are tantamount to hiring permanent staff - they takes week not days, perfect fit, good cultural match, a whole range of skills that probably won't be utilised. Effectively, they are interviewed with a longer term engagement in mind, not the the initial contract term in mind - but with no guarantee that the extension will happen. This is completely wrong in my view.

If the work is only going to be for 12 weeks anyway, this could have the following repucussions:

(a) flexible workers won't be hired at all. It's not worth hirers undergoing protracted hiring procedures that they aren't prepared to compromise for flexible workers that now can't stay beyond 12 weeks without it impacting on them - due to the AWD

(b) they will revert to 'see and start' hiring procedures, just as they used to.

(a) would be disasterous and b would be welcome for those that usually take on short backfill roles anyway, with or without the AWD. But not much use to flexible workers that usually take on longer engagements.

The AWD won't help hirers that rely on the same flexible workers for long, complex projects. Their added value only become worth their high fees by accumulating compounded knowledge of the project over time. Twelve week churns will be disasterous.

These whole set of aWD proposals are unworkable. They will be disasterous for recruitment and disasterous for hirers and disasterous for flexible workers too. It's difficult to see how anyone could have come up with these proposals in the first place.

It is also clear that boundaries need to be drawn between the types of work that umbrella service users do and the work offered to owner managers.

I am tempted to suggest that the AWD should apply to brollie users - but from day 1 of an assignment not week 12 - but not at all for owner managers, no matter how long they are engaged for. That way hirers can hire the different types of flexible worker for many months, with few consequences. They know what they are getting into But that doesn't resolve the issue of how brollies would apply these permanent benefits to their employees when they rely exclusively on the gross fee from each assignment. What, for example, would happen if:

(a) the hirer or recruiter didn't pay? Would the brollie still be compelled to give the same AWD protections on their clients? Where from? Their own profits? Unworkable.

(b) what happens if umbrella users are forced to use a limited company? Ex and potential contractors (not ready to run a limited) would have to consider IR35 again and battle with business administration they don't want. Again, this would totally undermine the purpose of running a limited company - to run a business - not be seen as a convenient, but inappropriate payment vehicle.

[Greasy Chip Butty]

I'm cross posting this, so I do apologise, but I think it's a valid thought.....

Is anyone else beginning to get the feeling that New Labour just get kicks from screwing things up?

[Bel]

Originally Posted by Pistachio

You still have failed to see my point.

The person quoted seemed to make out that we already had problems differentiating between an umbrella worker and limited company contractor, and this causes issues:

I'm still failing to see why not being able to go to the gym has been cited as an issue. Why does that differentiating cause a problem? I'm more than happy not to use a ****ing gym as I'm aware the problems that it causes.

THAT'S my point, and my point of view is exactly what you countered with at 11.29am this morning. I just think it's a pointless example that's been raised.

Don't worry I've already dealt with that issue in my guidebook, soon to be released.

[Bel]

Originally Posted by Malvolio

Come on, these are basics....

The umbrella worker is essentially a PAYE temp, with no reposnibilities for his own taxation or employment status and is treated as just another member of the workforce. The LtdCo contactor is a discrete business and is not part and parcel of the client organsiation. Ergo the former is entitled to all the social and other facilties of the client, whereas the LtdCo guy isn't. By the same reasoning, it extends to working hours, taking time off and all the other employee-related trivia.

(which, incidentally, is the point that Bel continues to make).

In principle, I agree, the umbrella service user is not in business - that goes without saying. But to say that limited company owners aren't part and parcel of the organisation is simply not true. Otherwise, HMRC wouldn't have won any Ir35 cases because so many are under the direction and control of the client. The sad reality is this: hirers treat the brollie users and owner manager the same way. But they shouldn't do. Have you read the case study on Qdos Freelance website about the Global Transport Company?

Sorry...what was that point I continued to make?

[Malvolio]

Originally Posted by Bel

In principle, I agree, the umbrella service user is not in business - that goes without saying. But to say that limited company owners aren't part and parcel of the organisation is simply not true. Otherwise, HMRC wouldn't have won any Ir35 cases because so many are under the direction and control of the client. The sad reality is this: hirers treat the brollie users and owner manager the same way. But they shouldn't do. Have you read the case study on Qdos Freelance website about the Global Transport Company?

To be fair, of the 1500-odd contested cases I know about, just six have been won by HMRC, and one of those has been sent back to the beginning following an appeal. Also, at least four of them did not use professional representation from the outset and made some fatal mistakes as a result. One other was stiched up by a gross mismatch between his contract, the upper one and the client's HR wonk. Even so, that's 99.6% of cases where the contractor was clearly demonstrated to be outside IR35.

Sorry...what was that point I continued to make?

The very correct one about working practices being properly considered and aligned to the contract schedule.

[Bel]

Originally Posted by Malvolio

To be fair, of the 1500-odd contested cases I know about, just six have been won by HMRC, and one of those has been sent back to the beginning following an appeal. Also, at least four of them did not use professional representation from the outset and made some fatal mistakes as a result. One other was stiched up by a gross mismatch between his contract, the upper one and the client's HR wonk. Even so, that's 99.6% of cases where the contractor was clearly demonstrated to be outside IR35.

The very correct one about working practices being properly considered and aligned to the contract schedule.

That stat' ratio could now change now that Q6 has arrived, on the P35. IR35 investigations were very randomly selected across the entire SME community before. Hardly surprising that many businesses weren't caught. But now that owner managers have to admit to be PSCs on the P35, if they've worked with an end-client, that may alter the figs over time.

My guess is that over 80% of owner managers that fit the PSC description are probably inside IR35, not outside. Unfair, though it is that they are put in that position in the first place.

[Malvolio]

Well there we must agree to differ.

You either work on the basis that 99% of current freelancers are people that would have been Sch D self employed before S44-7 but had to incorporate, or that they have always been employees of whoever they are working for at the moment.

IR35 is a politically motivated tax, dreamt up by Dim Prawn in a frenzy of left-wing righteousness. It is nothing to do with employment status and never has been. If she hadn't chosen to use employment characteristics as the measure of liability but gone with something more proerly defined, we wouldn't be having this discussion.

I'm afraid I will not accept that because of the badly flawed tenets of IR35 that I should assume I am a employee, disguised or otherwise. At worst I am a self employed worker with an unnecessary trading vehicle. And I can find roughly 18,000 other people (at least!) who would agree with me.

As for the P35 questions - where is this flood of skilled tax inspectors going to come from to try and recover the comparatively tiny amount of money IR35 represents? They haven't got enough to meet their current workload...

[Bel]

Originally Posted by Malvolio

Well there we must agree to differ.

You either work on the basis that 99% of current freelancers are people that would have been Sch D self employed before S44-7 but had to incorporate, or that they have always been employees of whoever they are working for at the moment.

IR35 is a politically motivated tax, dreamt up by Dim Prawn in a frenzy of left-wing righteousness. It is nothing to do with employment status and never has been. If she hadn't chosen to use employment characteristics as the measure of liability but gone with something more proerly defined, we wouldn't be having this discussion.

I'm afraid I will not accept that because of the badly flawed tenets of IR35 that I should assume I am a employee, disguised or otherwise. At worst I am a self employed worker with an unnecessary trading vehicle. And I can find roughly 18,000 other people (at least!) who would agree with me.

As for the P35 questions - where is this flood of skilled tax inspectors going to come from to try and recover the comparatively tiny amount of money IR35 represents? They haven't got enough to meet their current workload...

Your first paragraph is a combination of idealism mixed with distorted fact. Unfortunately, the law doesn't work that way.

On your second point: again it is based on idealism that implies that shoulds + oughts = therefore I am. Again, the law doesn't work that way. I can very well guess where that 18,000 comes from.

On your third point: it's not about bringing in a greater volume of inspectors, it's about HMRC using existing resources more carefully to target contractors with greater precision. That's why they incorporated Q6 in the first place. If it was about increased volumes of inspectors, they wouldn't have bothered including it.

I think it's also important to point out that duty of care is essential when assessing your IR35 status. Without it, an IR35 ruling could cost you a denied insurance claim as well as extra tax and NICs that could mount up if the underpayment of tax is left undetected for six years. Contractors sometimes think that insurance is all they need to think about. It's not. Far from it.

My approach to answering queries like this is based on the facts and to express caution - not about presenting ideals as facts and resorting to denial. That's what these BN66 petitioners did when they took on offshore schemes - and now, it seems, they will be paying the price. No doubt they heard lots of testimonials from peers claiming that they were silly, or foolish not to take advantage of these schemes. After all they were legal - tax avoidance is legal ...blah blah...

Whether I agree with your idealistic stance is neither here or there. I do, as it happens. But that's not the point. Telling contractors what they want to hear and not what they need to know is not, in my opinion going to help them! That over-optimisic approach won't carry any weight with a tax tribunal either. Although, I try not to be too pessimistic (which is the downside to my approach) I try not to be - hence my latest substitution article that adds an unusual twist on the reasonabe unfettered right of substitution issue. If that's not written with a note of optimism, I'd like to know what is.

My approach is to encourage contractors to think and act responsibly and to think ahead, based on the wider evidence as I see it and how this government tends to operate (the PCG stats on wins and losses, which I think are largely irrelevant, even if they are encouraging is narrow and distorted). Not to encourage them to not worry over nothing by criticising the government's absurd reasons for bringing in and applying IR35 based on woolly self employment tests that aren't defined in law. That kind of approach is not going to be a lot of use to anyone undergoing an IR35 investigation when Hector does come and back to bite them on the bum later on.

I'm don't think we fundamentally disagree about that many issues. It's clear to me that you have your head screwed on when it comes to understanding business-like practices. That's a good thing. I think we just clash on approach and emphasis more than anything else.

[Malvolio]

The fundamental difference is between an observer and a campaigner...