Finance (No.2) Bill

Written evidence submitted by a person who wishes to remain anonymous (FB21)

Dear Committee members

1. Summary – I am an IT contractor who is adversely affected by the retrospective nature of the "2019 Charge" in the proposed Finance Bill.

2. Context – Five years ago I was made redundant from my permanent job. The first job that I was subsequently offered was a contract, and having no prior experience of how to operate as a contractor I consulted my former colleagues. I was advised to use a specialist company that would handle all the administration and provide certainty of my position under the 1999 IR35 legislation. The company explained to me that a QC specialising in tax law had advised them that their contractor arrangement was legal so I signed up, pleased to have found a legally sound basis under which to operate as a contractor. Subsequent events have shown my confidence to have been misplaced.

3. I realise that members of the Committee will receive many submissions from varying perspectives. From my own perspective, I can only say that it seems that I have fallen into a three-pronged trap set by HMRC:

4. First, the IR35 legislation is vague and woolly. A series of unsuccessful legal challenges by HMRC against contractors has demonstrated that even HMRC themselves have difficulty in applying this legislation correctly. The main reason that I joined the arrangement was, ironically, because I believed that I would thereby avoid becoming one of the contractors pursued by HMRC for unpaid tax due to the incorrect application of IR35.

5. Second, HMRC appear to have been remarkably relaxed about the existence of these arrangements over a period of many years. They must have been aware that, by HMRC’s interpretation of the law, contractors were avoiding tax en masse, and yet they appear to have done surprisingly little to warn taxpayers of their precarious position. I myself only received any communication from HMRC after I had already left the arrangement and formed a limited company.

6. Finally, having implemented the murky IR35 legislation and then allowing HMRC to sit on its hands for well over a decade while contractors retreated to the supposed "safety" of these arrangements, the government is now proposing to resolve the situation by stuffing the Finance Bill with legislation that retrospectively declares the arrangements to be illegal. This seems profoundly unjust.

7. I am fortunate to have used an arrangement for a relatively short period of time. The 2019 Charge, if implemented, will cause me financial difficulties but will probably not bankrupt me. There are many contractors in a much worse position, who will suffer enormously because of HMRC’s inaction and the retrospective effect of this proposed legislation.

8. Recommendation – remove the 2019 Charge from the Finance Bill, or amend it to remove the retrospective effect.

I would like to thank the Committee members for their time in reading this submission.

January 2018