Simon H., Essex
“For context, I worked very happily and without issue as a mainframe IT freelancer using the ‘prescribed’ and accepted method of running a Limited Company, from 1989 pretty much continuously until ‘New Labour’ took power after which the ‘enforced’ sabbaticals began, months at first, followed by years – a trend that continues. Until then I paid a good amount of tax and contributed to the economy as I spent some surplus cash ‘living’ and invested the rest. This has all changed.
I endured some ‘months long’ breaks as IR35 was introduced and off-shoring became popular. Then the ‘extended breaks’ began. A contract that ended late 2001, time off, another 3 month contract in 2003 that was punctuated with 1 year of temporary factory work paying little more than the minimum wage, left me desperate until another contract was miraculously offered in January 2006.
Being out of touch but aware of HMRC’s increasingly complex rules that made it very difficult for contactors to work as we had previously and with no problems, a scheme that promised trouble free contracting was presented and recommended by those around me and at the time, knowing no better, I used this scheme for all of 2006 and some of 2007, when my contract ended. Soon after I withdrew from the scheme as I learned HMRC had issues with them. I chose the scheme as it offered accountancy simplicity thus allowing me to concentrate on re-skilling as I’d been away for many years.
I didn’t work again until 2013 (and returned to using a Limited Company, avoiding all schemes I must add) having suffered the indignity of claiming benefit for 2 years prior to this as much as anything in an effort to find alternative employment as off-shoring continued – and the Government whines that there is a skills shortage. Despite the best efforts of myself and the job centre that resulted in over 100 job applications, I wasn’t offered a single interview.
In-spite the above, Gauke sees me as an ‘ultra-rich tax avoider’ and wants to retrospectively maximise my tax bill that will immediately result in the tripling of my tax liability compared with what I would have paid had I used the traditional Limited Company that had always been the accepted method but suddenly isn’t.
Added to my tax bill will be Inheritance Tax and this will equate to one percent of my gross salary whilst I used the scheme, each and every year for the rest of my life. I had absolutely no knowledge or control of how I would ultimately end of being liable for this tax – it was created by the scheme provider who has conveniently disappeared. I have been the victim of a scam but HMRC does not care about this fact and as far as they are concerned, I am liable for everything – the providers have got off scot free. Sick too to think that unbeknownst to me I was accruing this tax, also known as a tax on ‘wealth’, whilst I was claiming benefits. How can this be reasonable? If I live to a good age, I estimate I will have paid about 80 percent tax for those sixteen months of work. Thank you scheme provider, thank you HMRC. I would have been better off had I never worked and just claimed benefits for the last 10 years.
Once the Financial component of the 2016 Budget has been approved, HMRC will be able to charge these sums without having to investigate. I will be guilty without any trial – even the most heinous of crimes are at least investigated.
HMRC claim ‘we want to make sure you pay the right amount of tax, not too little, not too much’ and their Code of Practise says they will ‘handle your affairs promptly and accurately’ and ‘keep your costs to the minimum necessary’. HMRC contacted me in January 2008, having waited until the last possible moment before opening their enquiry, saying they would ‘let me know if they find anything wrong’. I heard nothing more from them until June of 2015. They even attempted to use their own Code of Practise against me by telling me it was my responsibility to ask them to close their enquiry.
I am still between contracts and have not worked for 10 out of the last 16 years. With the continuing and relentless off-shoring of much IT work and The Tories ‘improvements’ to IR35, I will almost certainly be forced out of IT freelancing but as I have not managed to secure work outside IT for over ten years and being in my fifties now, I will struggle to find any work that will pay enough to cover my bills let alone pay HMRC’s extortionate demands.
I am clearly distraught as too are my parents both of whom should be settled in their twilight years.
Had HMRC responded in a timely manner, instead of waiting nearly 10 years, none of this would be happening but I guess they needed to wait for their extortionate interest and Inheritance Tax to accumulate sufficiently.
I feel I am not welcome in my own country and when I do mange to find work, I live in fear of the next retrospective action. The rules are not clear but are interpreted in whichever way maximises the amount of tax contractors will have to pay.
These schemes still exist and are still being used by the privileged few I’m sure to supplement their expenses whilst the rest of us pay their (and those of the scheme providers most of whom have disappeared and those who remain, fail to represent us) taxes on their behalf and all this while I have spent, and still spend, most of my time searching for some work, any work.
And I’m supposed to be the immoral ultra-rich tax-avoider.
The punishment does not fit the crime, but as no crime has been committed (these schemes are not and never have been illegal), the equation is even more unbalanced.
With Labour’s ‘embryonic’ IR35 and relentless off-shoring and immigration, and The Tories ‘improved’ IR35 and now, the destruction of the contractor market, Labour stabbed us in the back and the Conservative have not just twisted that knife, they have reached for a bigger one.
How can any of this be good for our once great country?
The Government and HMRC need to think again”.