Freelancers Suffer Mental Health Problems Because of IR35 Changes

As per The Telegraph:

"Freelancers are close to having nervous breakdowns and some are considering suicide over tax rule changes that have inadvertently left them struggling to make ends meet. 

Almost a third of self-employed contractors are experiencing anxiety or suicidal thoughts due to the impact of the impending reforms coming into force in April, according to a study by tax firm InniAccounts.

Tax rules for off-payroll workers, also known as “IR35”, have been in place since 2000. Currently, contractors assess their own tax status, but April's reforms will shift this responsibility to businesses.

The regime change is designed to stop “disguised employees” gaming the system, working in a permanent position in a company without paying the same income tax or National Insurance as normal workers.

However, scores of innocent freelancers have been caught out, as large businesses have decided to stop working with contractors altogether, for fear of getting into a dispute with the tax authority. 

It means many have been left out of work for months, or told they can only continue working if they are paid the same as everyone else, meaning higher taxes, less take-home pay and all without the benefits like sick pay and annual leave permanent staff enjoy. 

Telegraph Money spoke to some of those struggling to cope. They asked for their full names to be withheld. 

Ronald, 53, has been contracting for nine years as a software developer, working for banks, insurers and other financial institutions, but suddenly found himself out of work for five months after taking a two-week holiday last summer. 

He said he was heading for a “mental breakdown” and was prescribed antidepressants by his GP to help him cope with his anxiety.

“I was crawling the walls at home. I feel useless if I’m not doing anything and I have never been out of work that long in my life,” he said. 

He took on a new contract in November with a smaller firm, which does not have to comply with the new rules, although he has accepted a significant pay cut and now faces a two-hour commute. 

“The bigger firms just aren’t hiring anymore. Being out of work has depleted my savings and now I am living pay cheque to pay cheque. If I can’t get back to earning close to what I was before, I will end up defaulting on my mortgage. I feel like my career is coming to an end,” he said. 

Mark, aged 41, has worked freelance in cyber security for banks, insurers and in the public sector for six years, but has not been able to find any new work since December. 

He said his doctor had prescribed him beta blockers for his stress, anxiety and panic attacks. He uses the text messaging charity service Shout for support when he feels lowest.

“I still cry a lot and have two young children to provide for. Unless businesses start changing their approach, I will have to go back to full-time employment,” he added. 

Elise, 49, who has Asperger's syndrome, is also having to face the prospect of returning to working in an office full-time. 

“Because of my condition, this would be impossible for me. I’d inevitably have to commute to London, where all the jobs are. This means big crowds, more social interaction and office politics, which I cannot deal with, and it’s a cause of huge anxiety.

“I’ve been a freelancer working in IT since 1999 and have been able to work from home and make a living in spite of the disorder,” she said. 

She added that she has no work lined up for the new tax year and, with the only other option to return to full-time employment, she would either downsize and live off working smaller jobs or move to France to continue working there. 

A spokesman for HM Revenue & Customs (HMRC) said it had policies in place to provide extra help with people finding dealing with their tax affairs stressful. 

“The off-payroll reforms don’t stop people working through their own companies; they help ensure the right tax is paid. They ensure consistency in the administration of the off-payroll working rules across all sectors. We don’t want to penalise anyone, just help them get the tax right,” they said.  

It follows HMRC’s controversial “loan charge”, which sought to recover back taxes for tax avoidance schemes once considered legal and promoted by respectable firms. Campaigners say as many as seven affected individuals facing thousands in disputed tax bills have taken their own lives over the policy.

The April IR35 changes are now the subject of a review by HM Treasury, looking at how to smooth the transition to the new system, which is expected to conclude at the end of the month.  "

Tax does have to be taxing.

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Freelance Market Fucked By IR35

The government's and HMRC's botched handling of the rules relating to off-payroll workers (IR35) is likely to completely fuck up the freelance contracting industry.

The FT reports that leading recruitment companies have demanded a delay and rethink to forthcoming UK tax changes that they warn will damage the industry’s growth and increase tax avoidance.

Companies including Adecco, Harvey Nash, Hays, Reed and ManpowerGroup wrote to Chancellor Sajid Javid on Monday urging him to think twice on changes to the rules for off-payroll workers, known as IR35.

Freelancers who bill for their services via a limited company currently assess whether they are employed or self-employed for tax purposes. But from April, all large and medium-sized UK companies will be required to assess the employment status of contractors they use, to tackle what HMRC calls “disguised employment”, where workers and companies avoid paying income tax and national insurance.

HMRC estimates that only one in 10 people in the private sector who should be paying tax under the current IR35 rules are doing so correctly. The reforms are projected to bring in £3bn over the next four years.

The changes will mean hiring companies, and anyone involved in the labour supply chain such as recruitment agencies, will be liable for unpaid tax if HMRC finds a worker has been wrongly classified. Hirers will need to prove they have taken “reasonable care” assessing their contractors, or risk being liable for any shortfall in tax and national insurance.

People, who are not freelancers, may well say "does this matter?".

It will mean that companies and organisations looking for contractors (eg IT specialists etc) will find that the supply dries up.

Ironically organisations such as HMRC rely heavily on such contractors!

Tax does have to be taxing.


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IT Contractor Wins £240K Appeal Against HMRC

The Register reports that IT contractor Richard Alcock has won an appeal against HMRC after HMRC said he owed more than £200,000 in national insurance contributions (NICs) and income tax under off-payroll rules.

The IR35 legislation states that individuals who work alongside PAYE staff in similar roles should pay the same amount in income tax and national insurance contributions as employees. However, as contractors, they are not entitled to the same holiday and sick pay benefits.

Alcock contracted with Accenture and the Department for Work and Pensions as a consultant via his company, RALC Consulting, between April 2010 and April 2015, working on the Universal Credit IT project.

In March 2017, HMRC determined that Alcock owed income tax and NICs of £164,482 and £78,842 respectively for that period. However, it is unlikely he would have had to pay the entire sum because of offsets for tax already paid.

In its ruling, the tribunal stated that it was "satisfied on balance that the hypothetical contracts between Mr Alcock and his end clients, DWP and Accenture, would be contracts for services (self-employment)".

It concluded:

"All HMRC's Determinations, decisions and notices are cancelled. The Appellant is not liable to pay the Income tax and NICs assessed by HMRC. The appeal is allowed in full."

However, this may not be over as HMRC are considering appealing.

Tax does have to be taxing.

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Contractors Guilty Until Proven Innocent

The FT reports that GlaxoSmithKline has found itself at the centre of a tax crackdown after HMRC accused nearly 1,500 of its self-employed contractors of being “disguised employees”.

HMRC sent identical letters last week to contractors working in various GSK departments including IT and biomedical sciences.

“We’re writing to you because you told us you were self-employed when you worked for and received payments through, your own company.

Whether a worker is employed or self-employed for tax purposes is not a matter of choice. Instead, you need to look at the facts of the working relationship between you and GSK.” 

The letters told the contractors that, if they accepted their GSK contract was caught by “IR35” rules on self-employment, they should calculate their employee payroll tax and national insurance contributions for the 2018/19 tax year and make payments by September 22.

If they disputed this, HMRC told them to reply with evidence by September 19.

Seb Maley, chief executive of Qdos, an IR35 tax specialist, said the letters were “aggressive” and that HMRC was trying to “terrify” contractors.

“HMRC is working off the basis that these contractors are guilty until proven innocent.”

Rebecca Seeley Harris, head of off-payroll at employment law specialist Re Legal Consulting, said contractors need not be afraid.

“Although it sounds very threatening, the letter has no legal basis.”

Tax does have to be taxing.

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Where Squatteth The Toad of Truth in HMRC?

ContractorCalculator reports that HMRC has conceded it is unable to substantiate claims that the contractor press has misrepresented comments by HMRC officials concerning ‘blanket rulings’ in response to the public sector Off-Payroll rules.

Documented in the minutes to the 21 November 2018 IR35 Forum meeting, HMRC alluded to ‘articles posted online in the contractor press’, which it claimed had made ‘allegations against a named HMRC individual’, adding: ‘HMRC was clear that it is inappropriate for an official to be named, and that the articles had misrepresented what had been said.’

However, in responding to a Freedom of Information (FOI) request from ContractorCalculator, HMRC acknowledged that it had no supporting evidence to support its claims.

This comes just a week after tax barrister Keith Gordon published a letter written to the Financial Secretary to the Treasury, in which he expressed concern about HMRC’s integrity, noting:

‘It is my view that no-one can safely rely on the veracity or accuracy of any statement uttered by HMRC on the mere basis that the statement is being made by a public servant.’ 

Quite!

This may well be applicable to other matters pertaining to HMRC, various in house "problems"/screw ups and the behaviour of some of its staff.

Therefore I ask:

Where squatteth the Toad of Truth in HMRC?

Tax does have to be taxing.

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HMRC Goes To War Against Its Own Contractors

As HMRC continues to claim retrospective tax on loans, it is sweeping ever more people up in its retrospective tax net.

One group now under siege are HMRC's very own contractors.

The Telegraph reports that HMRC is “ruthlessly” hounding its own employees for potential six-figure bills as part of a crackdown on tax avoidance schemes.

Around 50,000 contractors are being targeted by the tax office for using so-called disguised remuneration schemes, which involved receiving income in the form of tax-free loans from an offshore trust, throughout the Noughties and more recently.


It has now emerged that HMRC engaged contractors who were being paid in loans and is now pursuing them for the unpaid tax.

One contractor, who worked for HMRC over two spells, anonymously told the Telegraph that, based on the bills received by her peers, she expects she could be asked for almost £140,000.

“It feels like the Government has gone to war against you. This is all about wearing people down and getting them to give up.”

Sir Ed Davey, a former Government minister, said:

“This is astonishing considering HMRC’s ruthless and unreasonable pursuit of people in this situation, when they didn’t break the law and followed professional advice.

What’s more, the evidence we’ve received also shows that these people declared all their arrangements in their annual tax return, so contrary to their claims not to know, HMRC were indeed aware contractors working for them were using these schemes.”

In December, the House of Lords Economics Committee criticised HMRC’s approach to recouping the tax owed, describing it as “retrospective” and saying it was failing to distinguish between "contrived tax avoidance by sophisticated, high income individuals" and relatively low earners who made "naive decisions".

A spokesman for HMRC said:

“HMRC has never endorsed or participated in disguised remuneration tax avoidance schemes. It is possible for contractors to use disguised remuneration without the participation or knowledge of their engager.”

Yet, HMRC were told by their contractors that they were using these schemes?

Tax does have to be taxing.

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CEST Tool Is Shite!

Contractors and the self-employed are being routinely misled by an official Government tool which is meant to give clarity over employment status.

According to a 14-month investigation by advice website Contractor Calculator, HMRC's “check employment status for tax” (CEST) tool comes to the wrong conclusion in almost half of cases.

• CEST only returned a properly correct outcome in 14 out of 24 cases – just 58%.
• 7 cases (29%) resulted in CEST giving the wrong answer.
• 3 cases gave the right answer, but for the wrong reasons – called “false positives”
• 3 of the cases which passed (of the 14) demonstrated an over-reliance on substitution, which otherwise would not have produced the correct result, contrary to the courts direction.

The government and HMRC have yet to admit that it is shite.

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

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What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



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HMRC's Immoral Retrospective Taxation

Stephen Lloyd, the Liberal Democrat MP for Eastbourne, is taking aim at HMRC for “retrospectively taxing” thousands of contractors who used so-called "avoidance" schemes in the past 20 years.

The arrangements, usually involving loans and offshore trusts, were widely accepted as legal in the early Noughties and even briefly promoted by respected accountancy firms. However, since the introduction of a series of tough anti-avoidance measures, HMRC has cracked down on the users.

Many now face six-figure tax bills and a charge on any loans outstanding in April 2019. The scheme users, many of whom could be locum doctors or nurses, or IT contractors, say they were led into the arrangements by accountants they trusted.

Lloyd said it was “immoral” that HMRC is pursuing the ordinary people involved, while those who promoted schemes can continue to operate. He has introduced a motion calling on Parliament not to apply the loan charge to those who entered schemes before the recent rule changes.

Lloyd is quoted by the Telegraph:

“Not only do I think HMRC should be going after the promoters but I think it’s immoral that they aren’t. I find it astonishing.”

His motion calls on the house to agree that “retrospectively taxing something that was technically allowed at the time, is unfair”. It states that the loan charge should not apply to those who entered into schemes before the Finance Bill gained royal assent last year.

HMRC, ignoring the point, said:

“These schemes are tax avoidance and simply do not work. Don’t be seduced. If it sounds too good to be true, that’s because it is. HMRC will challenge them and you will be much worse off in the long run. We are cracking down hard on the promoters of avoidance schemes.”

There is nothing "moral" about tax, it is a charge/series of charges levied by the state the size and targets of which are dependent on what the state thinks it can get away with.

However, up until now, the state has shied away from retrospective taxation knowing full well that would be the straw that breaks the camel's back. In this particular case, the state once it knows it can't get away with this, will blame HMRC for "over zealously misinterpreting" the legislation.

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

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Something Stinks at The BBC

That’s all very well but they are using taxpayers money to protect a selected few whilst tens of thousands of other contractors are abandoned and left to go bankrupt & the government are aware of it. https://t.co/bizBEn26OV

— Gordon Berry (@wealthagent) April 26, 2018

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



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IR35 Reform Delays Tube

My thanks to a loyal reader who sent me the following press release from Qdos Contractor wrt HMRC's claims that IR35 reform is not impacting public sector contracting:

"IR35: TfL project delays contradict HMRC who deny reform has impacted sector.

Delays to critical TfL London Underground repair work due to the exodus of public sector contractors further contradicts HMRC’s claim that IR35 reform is not impacting contracting and the public sector, highlighted Qdos Contractor of The Qdos Group.

TfL recently revealed a ‘significant number’ of contractors stopped working on projects as a result of IR35 changes – a move which has led to skills shortages and the significant delay to critical repairs.

HMRC has previously denied IR35 reform has led to contractors exiting the public sector, with HMRC Tax Assurance Commissioner Jim Harra stating:

“This has not happened. HMRC has been monitoring this. Contractors come and go, and the market is naturally fluid, but it would be wrong to suggest that the public sector has significant recruitment gaps because of this reform.”

Prior to IR35 reform, 85% of contractors surveyed by Qdos Contractor were prepared to leave the public sector should they be found inside IR35.

Qdos Contractor CEO, Seb Maley commented:

“That a vital TfL project faces delays is obviously a concern. It also further contradicts HMRC’s claim that IR35 reform has not affected contracting and the public sector itself. When will HMRC admit the mistakes they’ve made with regards to IR35 reform?

“Blanket and inaccurate IR35 determinations will continue to force contractors from the public sector. That HMRC adamantly denies any public sector skills shortages because of reform is hugely worrying, particularly when public sector organisations are beginning to speak out too.

“The success of vital public sector projects rest heavily on contractors. It’s therefore essential that accurate IR35 decisions are made. This will become all the more important should reform be extended to the private sector.”

HMRC Rigs IR35 Minutes

As I have noted before, HMRC is perfectly happy to rig things in order to present itself in the most favourable light eg

HMRC Rigs Staff Surveys - Latest Update https://t.co/tgSYcAJkdI #Solar #fees #Please #Service #Tax #Insurance pic.twitter.com/qICwPHe5gd

— Ken Frost (@ken_frost) October 4, 2017

Therefore it should come as no surprise top learn that it also rigged the minutes of July's IR35 Forum.

Contractor UK reports that two advisers to contractors have raised serious concerns about July’s IR35 Forum after a member broke cover with ContractorUK to exclusively criticise the meeting’s minutes.

Status expert Kate Cottrell, who attended, was first to reveal that rather than being a straight record of the meeting, the minutes were “just a one-sided view” -- HMRC’s, of how IR35 reforms it made in April have bedded in.

Since publication of her article last Wednesday, similar concerns have now been raised by both the Association of Independent Professionals and the Self-Employed -- another IR35 Forum member, and Qdos, a non-member who specialises in IR35 contract reviews.

“The recent minutes do not accurately reflect the frank discussions at the July meeting and I have today expressed my concern about this to HMRC,” the association’s James Collings said on Thursday.

He added:

“In the meeting, myself and other stakeholders raised serious concerns about the significant failings of, and damage created by, the rollout of IR35 changes in the public sector.

However, these conversations were not captured in the official minutes, which were published without forum members being informed.”  

He who writes the minutes controls history!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

WTT Big Group

If you are bullied by #HMRC over imagined tax "due", join forces with thousands others in Big Group https://t.co/y86cSHVUiZ#APN #FightBack

— DotasScandalDotOrg (@dotasscandal) October 17, 2016

I have just come across the above tweet about the WTT Big Group, and popped over to look at the website:

"WTT BIG GROUP is an action group of current and ex-contractors directly affected by the existing and proposed legislative changes granting HMRC wide ranging powers. Our focus is on mobilising a collaborative voice to develop a strategy for resolution of the existing enquiry in a fair and appropriate way ensuring the future sustainability of the contractor profession. 

The primary objective of the group is to arrive at a tax analysis and consequent settlement with HMRC, which can be regarded as fair and reasonable for both parties. This is not limited to the tax position whilst engaged in the scheme but will extend to agreement in respect of any obligations or rights that still exist, such as loans from trusts. This will be essential in order to reach overall finality following recent budgetary announcements indicating that all outstanding loans received via an EBT will be taxed as income on 05 April 2019."

Other than that I know nothing about the group.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Petition Demands Open Enquiry Before HMRC Issues APN

The BIG GROUP (an action group of contractors directly affected by the existing and proposed legislative tax changes) has launched a petition asking that HMRC evidence the existence of an open enquiry before issuing an APN.

As per the petition website:

"This petition is organised by WTTBig Group (http://goo.gl/RK7xXp). This action group represents Contractors who are being pursued by HMRC for alleged retrospective tax liabilities arising from working in a manner that was and remains perfectly legal and was disclosed to HMRC between 2006 and 2010.

Legislation introduced by Finance Act 2014 allows HMRC to issue a demand (Accelerated Payment Notice) for an amount they, unilaterally, consider to be in dispute but which has not yet been held in a Court to be payable.

These demands are being made five to ten years after the legal arrangements were made. They create significant personal distress, send carefully considered financial plans into disarray and will cause many to declare bankruptcy, leading to loss of family homes, careers and credit rating.

As a minimum, HMRC's obligation is to ensure the demand meets the conditions of, and is compliant with the spirit and letter of, the legislation.

Unfortunately experience shows that HMRC's error rate is unacceptably high.

The first condition for issuing an APN is valid open enquiry into the year in question. Big Group is able to evidence many examples of HMRC issuing these terrifying demands without meeting this first requirement. This event leads to one of two outcomes:

1) The recipient does not know their rights and therefore either makes the payment or is forced into bankruptcy by HMRC's Debt, Management and Banking operation for their inability to pay an amount which is not due.

2) The recipient challenges HMRC's APN following which HMRC fail to respond for as long as six months, leaving months of uncertainty and worry. Again, Big Group is able to evidence this outcome occurring.

This petition is to demand that HMRC qualify any APN's issued by attaching evidence that the year in question is validly opened, with a copy of the S.9A notice sent to the taxpayer for the year in question."

Those who are affected should sign the petition.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"