To support our evidence we are happy to supply
the following two case studies from some of our members. These
are their personal testimonies.
1. e-Commerce/Internet Company under threat
I run what I believe is a legitimate business.
There are three employees, and we have multiple revenue streams.
I work under a standard agency contract subcontracted to a client.
Employee No 2 (also my wife) runs the accounts for the business,
but also runs the accounts for an Internet site we have which
is starting to generate income and requires management of around
5,000 consumer accounts, cheque processing etc. Employee No 3
is unconnected and is the Content Manager for this and another
four sites under construction, copywriting, writing or sourcing
articles and managing the day-to-day running of the site. We also
have a handful of other clients who require development on an
ad hoc basis.
The tax helpline has just confirmed that if
a contract is deemed IR35able then the full amount less any allowable
expenses must be paid to the individual concerned, and cannot
be used to offset other business expenses. My concern was that
this had to be accounted for from April 2000, but he said that
so long as the salary and the Tax/NICs were paid by April 2001
all would be okay.
If the business is subsequently judged as passing
the SE tests, then all should be fine, and we can continue as
So, we have two options:
1. Assume we will pass the SE tests and continue
on as before. If we are caught by IR35 then the business would
be immediately insolvent, and salaries to myself would need to
be back paid from monies which don't exist.
2. Assume IR35 on the contract, and therefore
must pay me the money, so must sack the staff and close down the
other business interests.
If we take 2 (the least risky route) we must
close down all business interests which prove SE status until
the business is proved to pass the SE tests (which it can no longer
All in all, a very black day.
As an additional note, we approached the bank
to help us fund cashflow for our Internet business. The bank manager
was helpful but was obviously aware of IR35 and the possible impacts
on a business like ours. Although not mentioned explicitly, he
did have "reservations" which we believed were unfounded.
They were probably due to us being an IR35 target and hence a
much higher risk.
Verdant UK Limited
2. Leaving the UK
My career experience has been very broad; I
left school with no qualifications and joined the Army as a Junior
Leader. I served with HM Forces in a Tank Regiment during the
late sixties and early seventies. After a long period of police
actions in various theatres I left to make a new life as civilian.
After a number of different jobs and self-training
I became a fabrication engineer. During this period I took, at
my own expense, several computing courses and invested in self
build computing systems. This led to a City & Guilds in basic
programming in 1983, of which I was the only person to pass in
A number of self-employment assignments and
a small computer dealership followed, which led to myself and
my wife forming a family-owned business in 1985. This business
required considerable guarantees from both of us to our local
bank. Since that time we have been self-supporting; there have
been many times when the economy has dealt some very sharp blows
to our business, equally there have been times when one of us
has not been able to work through illness. At all times the state
has declared me self-employed and refused any financial aid.
Over the years I have gained a considerable
amount of experience in Networking, IT Infrastructure and Project
Management delivering many tens of successful projects both large
and small. At no time has the client ever considered me an employee
Now, another sea change in political thinking
has occurred and the Revenue has been given licence to attack
small business practice and small-incorporated business owners.
I have no intention of working long hours over the next six years
as I have over the last 15, to have the Revenue destroy our business
over a future technicality, or have to fight through the courts
to prove my current status as a Small Limited Liability Business.
I am employed by my business; my clients do not employ me, and
neither should I have to pay the clients' liabilities.
Many in the Netherlands are welcoming IR35 PSC
contractor refugees; I am one of them. I now intend building as
a Project Manager the Internet infrastructure required by this
country in the Netherlands, as will many of my colleagues in other
Subject to contract, I should have deregistered
from the UK tax system and will have joined the Netherlands tax
system on 5 April 2000. That is a direct loss of £45,000
per year in Corporation Tax, Personal Tax, Employees NI, Employers
NI and VAT to the economy. The latter is significant as the majority
of my business over the last three years has been for local government
and financial business.
The Revenue has estimated that only 5,000 people
will leave. That is more than enough to remove the entire Internet
contract development community from the UK twice over, but more
importantly the faster you train the replacements the quicker
the experienced will slip through your fingers.
Cannock Data Systems Ltd