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17th May, 2001 - PCG Strategy, TLC/35
Message from PCG's Chairman, Jane Akshar:
In the past two years, the PCG has grown from a single issue
campaign group to a strong multi-interest group of nearly 14,000.
While IR35 and the methods of defeating it remain the top priority
for contractors - and remain PCG's top priority in helping contractors
in this area - the climate has changed. The PCG is developing
its future strategy, as outlined by the following paper.
The first year of the PCG was relatively straight-forward -
although those involved at the time might not have felt so -
there was a single issue; a common enemy; a political agenda.
The second year, the political battle moved to the legal arena,
the only authority which could overturn domestic legislation
was the courts by way of a challenge to its validity under European
law.
As it happened, the recent outcome of the judicial review was
not a clear cut 'win or lose'. While the judgement failed to
deliver the knock-out blow many hoped it would and remove IR35
from the Statute Books, the judge went several steps further
than many others thought. He issued 88 pages of guidance which
attempted to bring some sense to the chaos which had previously
characterised the implementation of IR35.
In footballing parlance, previously it wasn't a case of the
Inland Revenue moving the goal-posts, it was more like the goal-posts
had not been built! What Mr Justice Burton did was give contractors
the goal to aim for.
PCG's first and last role is to represent contractors' interests
in all issues, including IR35. To date, PCG and its members
have provided effective opposition to IR35 politically and legally.
Members should be heartened to know that we have it on good
authority from 'sources close to.....' that what the Government
thought was a relatively technical issue turned into the biggest
fiscal problem 'since the Poll Tax'.
However, the options and the 'opposition' are now not so clear
cut. PCG and its members can go down several roads and it is
important to realise that these are not mutually exclusive -
but should be differently weighted at different times.
The PCG Board has consulted members and advisers and has formulated
this year's strategy - while not so straight-forward as a political
lobbying campaign or a legal battle will, we believe, give contractors
the best chances of building their businesses outside the restrictions
of IR35.
The PCG strategy:
Empowerment by information
Getting our members out of IR35 remains a priority, we have
to provide contractors with the wherewithal to move their businesses
and contracts to a B2B arrangement which will clear the IR35
hurdle by a mile. PCG already has a number of documents available
and we are updating the IR35 Guide to bring them all into one
place. Significantly - and taking into account Mr Justice Burton's
binding guidance - the PCG will be providing a step-by-step
fact-pack which will help contractors demonstrate that they
fulfill the criteria for being outside IR35. The two main documents
currently being prepared by PCG's Kevin Miller and will cover
- indicators for a real business; and
- how to demonstrate you have carried out due diligence in
assessing your status.
Additionally, the fact-pack will be updated regularly to keep
contractors completely up to date with new information and relevant
case law.
Education of clients and agents
Contractors need not only to operate outside the restrictions
of IR35 but to be seen to be doing so. To this end, clients
and agents are important participants in the 'big picture'.
Although we hope that individual contractors will help in the
process of educating and informing clients and agents, the PCG
will provide support on how to achieve this. The PCG will also
be liaising with clients and agents representative bodies to
inform them about the reality and mutual benefits of B2B contracts
for their contractors.
Case Law
We will use case law to win specific points that increase the
size of the target for PCG members and move tranches of contractors
out of IR35. By selecting typical examples and winning those
in the courts we can make the goal bigger. However, this strategy
does take time and money.
Continued Revenue Meetings
Having a new person in at the Revenue and the judge's criticism
of their guideline gives us an opportunity to clarify the guidelines
and to stop some of the errors and misjudgements which have
resulted in two differing opinions of one contract. The efforts
of PCG members for the past two years have 'got us a seat' at
the Revenue table. We want to work constructively for the benefit
of our members and we want to see results - and are prepared
to use this opportunity to try to achieve this.
Submitting Contracts to Revenue
There is no requirement to submit a contract to either the Revenue
or to a professional adviser. This is obviously a personal decision
- but contractors should be advised that
- professional advisers are likely to err on the side of
caution (by their own admission!) and
- armed with the correct information, you are the best person
to decide whether or not you are running a business and
- if you intend to submit it to the Revenue, be advised that
there might be some time before the impact of the judge's
ruling filters down to the 'coal-face'.
The JR Appeal
The issues raised by the judicial review are wider-reaching
than IR35 - it enters as yet uncharted waters relating to the
impact of European law on domestic fiscal policy. However, the
wheels of justice move slowly and, PCG is preparing for a lengthy
legal encounter, it should be realised that this will not bring
any quick fixes - and if and when justice is 'done' there will
be no turning the clock back for the many thousands of businesses
which have closed down, moved overseas or decided to adapt to
the new environment. PCG has now presented papers at the first
stage of the appeal process - that of seeking the permission
of the Court of Appeal to appeal.
The Nuclear Option
IR35 is a bad piece of legislation. Nothing anyone does or say
will change that. However, it is now a fact of life, that it
is a bad piece of legislation that is here to stay - at least
in the short term - and in the meantime, the commercial world
in which contractors operate does not stand still.
Nevertheless, it is invidious that any individual charged
with paying tax and NI as an employee, who is forced into a
financial position that neither he nor his clients wants, should
then be doubly penalised and not 'benefit' from statutory and
discretionary employee benefits.
Conclusion
So, we've reached a cross-roads where contractors have to decide
if they want to adapt and survive. For PCG's part it will ensure
that its members are the best-informed contractors to make that
decision and 'put the ball in the back of the net'. In the meantime,
we will continue to increase that target through negotiation
and case law. We will progress the judicial review appeal through
the legal channels. And we will endeavour to ensure that those
taxed unfairly because of IR35 are not treated unfairly in relation
to their rights and benefits.
Tax Liability Cover (TLC35)
PCG suppliers Qdos has launched a discounted insurance policy
for members providing cover against tax liability relating to
IR35
The Tax Liability Cover - TLC/35 insurance will provide an
indemnity providing cover for up to �50,000 aggregate in respect
of �
- The professional fees of one of the insurers consultants
to act on your behalf in defence of the investigation, and/or
- Compensation in respect of any additional tax, NIC, interest
and penalties relating to IR35 if an appeal against the dispute
is unsuccessful.
The professional fees cover will include representation by
the insurers at all appeals up to and including Commissioners
Hearings (General or Special). This is the first fully underwritten
service of this kind and PCG members will be offered the scheme
at a discount - equivalent to the �100 subscription fee for
PCG.
Additionally, members who receive an indication from the Revenue
that they will be the subject of a tax investigation should
remember that the PCG provides, as part of the members benefits
package, tax investigation insurance at no additional cost.
Main site (framed);
http://www.qdosconsulting.com
TLC35 section;
http://www.qdosconsulting.com/content/tlc35.html
REGIONAL
While the 'virtual world' of PCG has been an unparalleled
success in terms of organising a campaign, you still can't beat
' the real thing'. Increasingly individual members of the PCG
are organising local meetings to get-together with other members.
The format vary considerably from structured local meetings
with agendas, speakers and an objective of co-ordinating local
campaigning, to opportunities to make new business contacts
and share information about the local contracting market; to
nothing more than a pint (or two) and a late curry.
This is driven by members at grass roots level and we would
like to help this develop. Any local PCG members who are organising
get-togethers, should send details to [email protected]
for inclusion in this section of the newsletter. Please include
an email contact point and at least one week's notice.
Central London
A group is meeting at the Cheshire Cheese, off Fleet St - the
JR war room. >From 6.30pm on Weds 23rd May.
Manchester
Meeting at Waldorf, Gore St on Fri 18th May at 7pm Venue is
close to the tram interchange at Piccardily Gardens
Chelt/Glos/Ciren
Weds 23rd May - 7:30pm Golden Heart pub, Nettleton on A417 leaving
Gloucester for Cirencester.
Thames Valley
Date: Thursday 24th May Time: 7:00 til late Place: The Ship,
Wokingham
Bristol
Date: 15th June Venue : The Brewery Tap, Colston Street, Bristol
Time : 8pm
For the latest information and to start a local group
see
Forum Link
(having problems?? have
you read this...)
Susie Hughes
(Head of Executive Services)
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