Discussion
Eric Mc said:
Part of the problem was the government themselves relaxing the set-up criteria for limited companies. As part of the Thatcherite "deregulation" criteria and to encourage entrepreneurship, the requirements for setting up limited companies and the reporting and disclosure requirements for small limited companies were massively relaxed in the early 1990s. Once upon a time you needed a minimum of three people to set up a company and each and every company in the land had to undergo a formal audit by a recognised professional auditor.
These requirements were all abolished by the mid 1990s and since 2008 you can have a bona-fide single person company with only one director and one shareholder who can be one and the same person - a weird concept for a "company" when you think about it. After all, the dictionary definition of "company" is a "group of people".
It looks like some of the relaxations of rules we have seen over the past 30 plus years are set to be reversed. For instance, the government is currently looking into the ability of small limited companies to submist reduced disclosure "abridged" accounts to Companies House. It has stated that it wants small companies to file much more revealing accounts than they currently can.
It's funny that you posted this Eric. I toiled for 5 years or so in the Corporate team of a large London law firm in the 1990's, breaking free at some point to make my fame and fortune elsewhere. The Partner was a great character who lifted the gloom of the job and I remember him saying that the obscene pace of Thatcher's drive to deregulate and privatise would have massive consequences, some undoubtedly positive, but many negative for years to come. The green light to dubious operators and the loss of decent, affordable housing in return for a quick buck, were at the top of his list. He made a big impression on me at the time and I often look at the problems of today and reflect on his words, I always felt he was a bit of a misfit in that environment, which is probably why I could relate to him! These requirements were all abolished by the mid 1990s and since 2008 you can have a bona-fide single person company with only one director and one shareholder who can be one and the same person - a weird concept for a "company" when you think about it. After all, the dictionary definition of "company" is a "group of people".
It looks like some of the relaxations of rules we have seen over the past 30 plus years are set to be reversed. For instance, the government is currently looking into the ability of small limited companies to submist reduced disclosure "abridged" accounts to Companies House. It has stated that it wants small companies to file much more revealing accounts than they currently can.
Back on topic... Linekerism is catching.
Reasonable result this time.
https://www.bbc.co.uk/news/uk-england-gloucestersh...
Reasonable result this time.
https://www.bbc.co.uk/news/uk-england-gloucestersh...
Abdul Abulbul Amir said:
OK cool, you'd be better off writing to HMRC and tell them the IR35 legislation and subsequent court cases aren't needed.
It wasn't needed in this case (speaking as a chartered accountant). Whilst I can't stand Gary Lineker for unrelated reasons, this was an absolute s
tfest by HMRC. He was trading as a partnership and therefore going after him under IR35 was top class stupidity by HMRC.People are confusing trading via a partnership vs a limited company.
MaxFromage said:
It wasn't needed in this case (speaking as a chartered accountant). Whilst I can't stand Gary Lineker for unrelated reasons, this was an absolute stfest by HMRC. He was trading as a partnership and therefore going after him under IR35 was top class stupidity by HMRC.
People are confusing trading via a partnership vs a limited company.
Partnerships are just as vulnerable to IR35 attacks from HMRC as are limited companies. In fact, the IR35 legislation doesn't specifically mention limited companies at all. It talks about "intermediaries". HMRC looks on an "intermediary" is any "vehicle" set up by an individual or a group of individuals to allow them to bill for their services and keep outside the PAYE rules.tfest by HMRC. He was trading as a partnership and therefore going after him under IR35 was top class stupidity by HMRC.People are confusing trading via a partnership vs a limited company.
It just so happens that limited companies were/are the most common form of "intermediary", Ordinary Partnerships, Limited Liability Partnerships, Trusts etc can all be "intermediaries".
Eric Mc said:
MaxFromage said:
It wasn't needed in this case (speaking as a chartered accountant). Whilst I can't stand Gary Lineker for unrelated reasons, this was an absolute stfest by HMRC. He was trading as a partnership and therefore going after him under IR35 was top class stupidity by HMRC.
People are confusing trading via a partnership vs a limited company.
Partnerships are just as vulnerable to IR35 attacks from HMRC as are limited companies. In fact, the IR35 legislation doesn't specifically mention limited companies at all. It talks about "intermediaries". HMRC looks on an "intermediary" is any "vehicle" set up by an individual or a group of individuals to allow them to bill for their services and keep outside the PAYE rules.tfest by HMRC. He was trading as a partnership and therefore going after him under IR35 was top class stupidity by HMRC.People are confusing trading via a partnership vs a limited company.
It just so happens that limited companies were/are the most common form of "intermediary", Ordinary Partnerships, Limited Liability Partnerships, Trusts etc can all be "intermediaries".
Blue62 said:
nickfrog said:
You do realise that it also means that other tax payers have lost? It's important that HMRC lose if their case is not valid but conversely I want them to win as often as possible when it is.
I think the underlying point is that IR35 has been a poorly conceived and overly complex tax to impose, to the point where the cost to HMRC and burden on individuals and companies has outweighed any gain. There are far more deserving targets for avoidance but contractors were viewed as a soft bet, so they went after them with a very blunt sledgehammer! The main beneficiaries seem to be umbrella companies and accountants from what I can see.
It's basically created two entirely parasitic industries, PSC-in-a-box accountants for people pretending to be a company, and umbrella firms who you pay to pretend to be your employer. The whole setup must be a non-trivial drag on real productivity. It's hard to imagine there isn't a fundamentally better solution.
Eric Mc said:
Partnerships are just as vulnerable to IR35 attacks from HMRC as are limited companies. In fact, the IR35 legislation doesn't specifically mention limited companies at all. It talks about "intermediaries". HMRC looks on an "intermediary" is any "vehicle" set up by an individual or a group of individuals to allow them to bill for their services and keep outside the PAYE rules.
It just so happens that limited companies were/are the most common form of "intermediary", Ordinary Partnerships, Limited Liability Partnerships, Trusts etc can all be "intermediaries".
Whilst much of what you say is correct in principle, suggesting partnerships (not LLPs etc) are just as vulnerable really isn't reality:It just so happens that limited companies were/are the most common form of "intermediary", Ordinary Partnerships, Limited Liability Partnerships, Trusts etc can all be "intermediaries".
'Judge John Brooks, who released the decision on 28th March 2023, said: “The effect of my conclusions is that because there were direct contracts between the BBC and Mr. Lineker and BT Sport and Mr. Lineker, the intermediaries legislation (IR35) does not, and cannot as a matter of law, apply.” '
https://www.accountingweb.co.uk/tax/hmrc-policy/ir...
Plenty of tax specialists have commented on this previously and whilst complicated, was always going to end with this judgement.
Edited by MaxFromage on Wednesday 29th March 20:04
You are correct. HMRC have not launched too many IR35 attacks in individuals operating through partnerships. The legislation is so vague and sloppy that partners in partnerships COULD be vulnerable. In reality , HMRC has shied away from partnerships. The Lineker case is unusual - and the outcome shows that perhaps HMRC should not have bothered.
Eric Mc said:
Partnerships are just as vulnerable to IR35 attacks from HMRC as are limited companies. In fact, the IR35 legislation doesn't specifically mention limited companies at all. It talks about "intermediaries". HMRC looks on an "intermediary" is any "vehicle" set up by an individual or a group of individuals to allow them to bill for their services and keep outside the PAYE rules.
It just so happens that limited companies were/are the most common form of "intermediary", Ordinary Partnerships, Limited Liability Partnerships, Trusts etc can all be "intermediaries".
Eric on the last sentence it should say Trustee because a Trust could never be an intermediary since it has no legal personality. It just so happens that limited companies were/are the most common form of "intermediary", Ordinary Partnerships, Limited Liability Partnerships, Trusts etc can all be "intermediaries".
It's not the trust that would be challenged, it's the nature of the relationship of the individual and the organisation they are working for.
Say you had a trustee seconded to an organisation to do some work for them. The trust bills the organisation for the services the individual provides. The trustee receives his/her own income from the trust.
HMRC might say that the engagement the trustee has with the organisation he/she is working for falls under IR35 and insists that PAYE and NI should be calculated on the income the organisation is paying the trust.
The fact that the trust is not a "legal person" is not relevant. Simple partnerships are not "legal persons" either.
However, as the Lineker case shows, trying to atribute IR35 to what is actually partnership (or trust) income is more difficult than (say) a simple limited company.
Say you had a trustee seconded to an organisation to do some work for them. The trust bills the organisation for the services the individual provides. The trustee receives his/her own income from the trust.
HMRC might say that the engagement the trustee has with the organisation he/she is working for falls under IR35 and insists that PAYE and NI should be calculated on the income the organisation is paying the trust.
The fact that the trust is not a "legal person" is not relevant. Simple partnerships are not "legal persons" either.
However, as the Lineker case shows, trying to atribute IR35 to what is actually partnership (or trust) income is more difficult than (say) a simple limited company.
Sheepshanks said:
Did HMRC just go about this in the wrong way?
It seems a significant reason the action failed was because Gary signed the contracts with the BBC himself. Couldn't HMRC just say the payment arrangements are irrelvant and declare Gary to be an employee of the BBC?
As Eric has noted above, the legislation is very poor. On top of that, HMRC are an incompetent mess. Incompetence runs through the organisation, with administration, retention and dissemination of knowledge, decision making and IT systems all beyond inadequate. Some of the staff are good and try their best to help, but unfortunately there are far too many who will simply cut you off if your question is too 'taxing'.It seems a significant reason the action failed was because Gary signed the contracts with the BBC himself. Couldn't HMRC just say the payment arrangements are irrelvant and declare Gary to be an employee of the BBC?
MaxFromage said:
Sheepshanks said:
Did HMRC just go about this in the wrong way?
It seems a significant reason the action failed was because Gary signed the contracts with the BBC himself. Couldn't HMRC just say the payment arrangements are irrelvant and declare Gary to be an employee of the BBC?
As Eric has noted above, the legislation is very poor. On top of that, HMRC are an incompetent mess. Incompetence runs through the organisation, with administration, retention and dissemination of knowledge, decision making and IT systems all beyond inadequate. Some of the staff are good and try their best to help, but unfortunately there are far too many who will simply cut you off if your question is too 'taxing'.It seems a significant reason the action failed was because Gary signed the contracts with the BBC himself. Couldn't HMRC just say the payment arrangements are irrelvant and declare Gary to be an employee of the BBC?
He's made it clear to me over time how, being realistic, my expectations as a taxpayer needed to change...because the staffing situation, both quality and quantity, is dire overall, with the stalwart competent and efficient folks working within an absolute mess.
sugerbear said:
Wouldn't it be a simpler world for everyone if the government just taxed everyone's income in the same way, no if's no but's no get out clauses no IR35. Everyone treated the same.
Not possible when you have all sorts of complex arrangements and differing business and remuneration vehicles.How would you tax limited companies?
Eric Mc said:
sugerbear said:
Wouldn't it be a simpler world for everyone if the government just taxed everyone's income in the same way, no if's no but's no get out clauses no IR35. Everyone treated the same.
Not possible when you have all sorts of complex arrangements and differing business and remuneration vehicles.How would you tax limited companies?
turbobloke said:
Eric Mc said:
sugerbear said:
Wouldn't it be a simpler world for everyone if the government just taxed everyone's income in the same way, no if's no but's no get out clauses no IR35. Everyone treated the same.
Not possible when you have all sorts of complex arrangements and differing business and remuneration vehicles.How would you tax limited companies?
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