back to article How important are tech and other contractors to UK? PM candidate promises tax review if elected

The leading candidate to replace Boris Johnson as the UK's prime minister has said she would review changes to the IR35 tax rules so often criticized by IT contractors. Liz Truss, who is currently foreign secretary and down to the last two in the race to be the ruling Conservative Party's leader, gave an interview over the …

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  1. The Vociferous Time Waster

    This is about risk and cost.

    This is not something that will help contractors. The main disadvantage of the current rules is that the risk sits with the client, not the contractor as it used to. This means that previously companies could pay someone a rate and offer a contract that suggested outside IR35 but then if HMRC disagreed it was the contractor on the hook. Now the client is on the hook if they haven't done the assessment correctly. Their only way to mitigate this risk is to move away from PSCs and go umbrella but that has proven to be expensive - I don't pay more tax in an umbrella, the client does because my rate went up to reflect their choice so I take home the same amount each month.

    Gov.uk has already started to erode this a bit by discretely changing the rules so the risk can be shoved back onto the contractor if it is found that they misled the client on the IR35 assessment. Any review will be a further erosion of the responsibility of the client as those risks are shifted back onto the contractor. As for how HMRC interprets things, they have proven to be a law unto themselves when it comes to how the rules are interpreted. I can imagine they would be happiest if the contractor paid taxes like an employee and had all the risk while the clients would like to pay rates that are more in line with permies.

    1. elsergiovolador Silver badge

      Re: This is about risk and cost.

      The main disadvantage of the current rules is that the risk sits with the client, not the contractor as it used to.

      This is only partially true. The risk is both with the contractor and the client. This is something HMRC avoids giving straight answers to, but if client is found to have inappropriately determined the status and required to pay the PAYE tax, they can claw that money back from the contractor. Usually it will be in the actual contract terms, so any liability is shifted back to the contractor. But the client still will lose money on the legal costs etc and will have to waste who knows how much time, depending how aggressively HMRC is going to pursue.

      It's also not clear how the process of reconciliation would look like as the contractor business would have paid all appropriate taxes. Will their company get the Corporation Tax and any other taxes paid returned? Etc. There is so many things and edge cases that legislation does not cover you would think that this is not actually about tax, but to prevent people from starting their own businesses and making competition against big established consultancies that do essentially the same thing.

  2. JimmyPage
    Stop

    Central government are facing a bill of at least £263M for doing exactly this.

    Except the asymmetry is that central government can pass a law saying it doesn't face a bill of £236M.

    You try that and see what happens.

    1. Anonymous Coward
      Anonymous Coward

      Re: Central government are facing a bill of at least £263M for doing exactly this.

      No wonder the UK is going down the shitter with more effort to trawling forums than running the fucking country.

  3. R Soul Silver badge

    blessed are the cheesemakers

    Anyone who thinks dimwit Truss will fix IR35 should think again. She did fuck all to help our cheesemakers.

    https://www.youtube.com/watch?v=o3JTR6T1eEA

    1. JimmyPage

      Re: blessed are the cheesemakers

      Well, obviously, this is not meant to be taken literally. It refers to any manufacturers of dairy products.

      1. Bheleu

        Re: blessed are the cheesemakers

        It seem that Truss had done something about IR35

  4. Steve Davies 3 Silver badge
    Big Brother

    See those pigs flying over parliament?

    What? you can't? Well, the scrapping of IR35 is about as likely as pigs taking to the air under their own power.

    If they do then it is only 20 years too late. IR35 should never have been implemented in the first place.

  5. Irony Deficient

    Over in the US, there are two main types of contractors:

    those who fall under 1099 (Form 1099-Misc),

    For reporting non-employee compensation, IRS Form 1099-MISC was replaced by IRS Form 1099-NEC in 2020.

  6. Fruit and Nutcase Silver badge
  7. Ian Johnston Silver badge

    "But the fact is, if you're self-employed, you don't get the same benefits as being in a big company. You don't get paid holidays, you didn't get those benefits. So the tax system should reflect that more,"

    What a peculiar notion. Teaching assistants get longer holidays than refuse collectors - should they be taxed more as a result? This sound suspiciously like the traditional Tory dog whistle of lower taxes for those who use private schools or private healthcare.

  8. CommanderGalaxian

    "IR35 is a reform unveiled in 1999 by the UK tax authorities..."

    Not really. This was a punative tax regime brought in by Labour's Gordon Brown and his side-kick Dawn Primarolo in order to try and kill off self-employment and freelance working in the IT sector. Ironic that it is was under the existing Tory government that that task has now all but been completed.

  9. amanfromMars 1 Silver badge

    On a Holiday from Reality with a Phantom Virulent Illness

    Liz Truss to go over IR35 off payroll tax as ruling party voters gear up to pick their leader

    If anyone believes Parliament harbours any potential leadership cluster within its political party memberships, I suggest psychiatric help/non-invasive mental health therapy sessions for the affliction ...... Advanced Critical Delusional Onset. Don’t you recognise a Parade of Puppets whenever you see them in the flesh and vying for the Harry Limelight?

    And please, take care if one wishes to register an opinion on such a matter, for much more than you can/may imagine may/can be made from it, for both good and bad purposes.

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