Tech contractors begin mass UK.gov exodus in wake of HMRC's IR35 income tax clampdown

Public sector contractors in the UK are starting to down tools across a range of projects ahead of the new tax regime in April, leaving numerous projects hanging in the balance. Multiple sources have been in touch with The Register to report that professionals are leaving in droves rather than face the IR35 tax changes. From …

[djstardust]

Yet again

Gov UK shooting itself in the foot.

No long term strategy and half thought out legislation put in place for a "quick hit"

Will serve them right. Same thing about to happen when the Oil Industry picks up again later this year. Operators will want bodies in on 6 to 12 months contracts and no-one will touch them with a shitty stick. Oops!

[AndrueC]

Re: Yet again

No long term strategy and half thought out legislation put in place for a "quick hit"

Good to see government processes carrying on as normal then.

[Chris Parsons]

Re: Yet again

That's odd, you normally expect Treeza to have her finger on the pulse and react quickly with a well-researched plan, don't you?

[HollyHopDrive]

Re: Yet again

Next they will claim there is an IT skills shortage, bring in a load of shit but cheap Indian resource. All justified because of their own policy and their inability to see their own stupidness.

The real irony is the fact they will (have to) use the large consultancies that pay little or no corporation tax in britain who use truly dubious tax schemes and will pay a much higher overall cost for the same resource level but actually collect less overall tax than if they had just left well alone.

[Anonymous Coward]

Re: Yet again

Next they will claim there is an IT skills shortage, bring in a load of shit but cheap Indian resource. All justified because of their own policy and their inability to see their own stupidness.

Yeah, but my experience with cheaper resources is that they create substantial quality issues. In other words, there will be plenty of contacting jobs available later on to fix the problems. The political challenge is to find another budget so it will not be that visible that once heralded saving have resulted in doubling the price long term - as long as that can be kept out of sight until they're re-elected no politician will actually care.

It's dejá vu all over again.

[g e]

Re: Yet again

Except now those opportunities are toxic due to the IR35 stuff that created them in the first place ;o)

[Aitor 1]

Re: Yet again

But that is precisely the idea, to give the deals to the usual big consulting companies for kickbacks. They dont care about taxes.

[rgb1]

Re: Yet again

Follow the money; it's the lobbying powers of the the big consultancies and off-shorers that have set this agenda over many years, along with the ignorance/incompetence/corruption of government. I've been contracting for 30 years and had to work with my fair share of cheap but not good value off-shorers. I've also contributed ~ national average earnings in tax take each year, assuming I've been in work and my job hasn't been filled by an off-shorer in the downturns. This continuous onslaught, the last few years of tax grab and the uncertainty have made me decide, even though I am at the top of my game, having a good number years of earnings and tax payment potential before official retirement, to pack it all in. So they'll be no more ~ national earnings tax take from me each year; hopefully the big off-shorers and consultancies will be able to fill the tax gap that is left by me and I'm sure many others who have had enough of this nonsense.

[Homosapien]

Re: Yet again

Totally agree, the writing has been on the wall for a while now. I made the exact same decision some 4 years ago. We now live on a small island with a business on the sea, we live life on our own terms. Do what you gotta do, and do it quick! Good luck.

[gnarlymarley]

Re: Yet again

cheap but not good value off-shorers

Yep. You get what you pay for.

[Vic]

Re: Yet again

You get what you pay for.

Much of the time, you really don't...

Vic.

[Anonymous Coward]

Re: Yet again

I don't think it is shooting itself in the foot - it's getting what it wants:

- no people working for themselves

- replace all UK technical resource with big boys contracts (and their ON SHORE indian slave labour)

I don't think this was ever about HMRC or tax.

[Anonymous Coward]

Re: Yet again

Irrespective of what the Cabinet Office says, Government Departments like big firms and big IT companies and don't really want to encourage growth of innovative and good value SMEs. They'd rather pay someone big "to do all the work" then manage some of the work themselves. And we tax payers pay for this!

[Anonymous Coward]

Re: Yet again

Gov UK shooting itself in the foot.

...

Will serve them right.

Sadly that isn't true. It is a problem of misplaced incentives. The public will be screwed as usual, and the people who screwed them will ride off into the sunset with fat pensions, non-executive directorships and peerages as usual.

[g e]

Re: Yet again

This outcome is all far too obvious which makes me think the gov't have an ulterior motive/agenda for shoving the small individuals out which they surely knew would happen.

The first thing that comes to mind is lining their pockets via various kickbacks from large co's like Capita, etc. Maybe it's actually something more subtle which will be played out in a year's time when a fictitious 'skills shortage' is being moaned about. Well. Not fictitious to the Public Sector but no-one will be reminding Joe Public why that shortage is there due their DIY toxic status.

Also the general lack of awareness/action in Public sector and the Agencies is astonishing.

Binning my Public Sector contract before end March, one week's notice plus making sure the last payment falls before April. Fuck 'em. They brought in on themselves.

[F0rdPrefect]

Re: Yet again

@ g e

Me to.

Though I do feel for the people who I will be dropping in the claggy as I've known some of them for over 20 years and its not their fault.

[Stayley]

Re: Yet again

Makes you wonder which of the big five accounting companies has been whispering in the ear of government? - probably all of them.

The trouble is that they, themselves don't have the expertise and experience of an average freelancer and are too willing to be a 'yes'-guy for the client.

Fully agree with your comment about toxic DIY. Seen too much of it in the last few years, so unlikely to return to public sector as believe it to be a waste of my resource.

[HmmmYes]

Re: Yet again

I think you are kidding yourself about O+G esp. the North Sea and Deep Sea.

[JackSmith789]

Re: Yet again

How much do you want to bet, that once HMRC works with government departments to work out how to classify contractors within IR35 or not, they will go after the private sector? IMHO this is a test run with other government departments before UK wide roll out.

[The Mighty Spang]

this is an old paul daniels trick...

called 'Dissapearing Income' or 'Shooting yourself in the foot'

bring in ir35 rules to claw back a little money.

contractors leave

no choice but to hire in the big vultures, I mean consultants,

pay 40-50% more per body for mostly low-middling staff who are more engaged in showing what they are doing rather than doing.

each body takes home 30-40% less than standard IT contractor.

and - poof! your overall tax take from the employees goes down, amount of money being spent in the economy goes does and the profits then magically go overseas!

and whats this up my sleeve? the project then goes on 50% longer partly due to middling 'consultants' not being up to the job, and UKGOV being unable to properly manage the project!

now that's magic!

(rip)

[Voland's right hand]

Re: this is an old paul daniels trick...

No magic here. It is the same as with crackdown during the Blair government.

Big guns pay bribes the standard British way - over the table and fully legitimate. It is called DONATIONS. Your average freelance IT contractor bod does not.

This is how corruption works in nowdays UK. If you are not familiar with the methodology, I suggest you familiarize yourself.

[Doctor Syntax]

Re: this is an old paul daniels trick...

"Big guns pay bribes the standard British way - over the table and fully legitimate. It is called DONATIONS. Your average freelance IT contractor bod does not."

Right back when it started I reckoned that we should have got together via the PCG and made a donation to Labour. Maybe half a Bernie would have done it - and if it had been worked in true Bernie style we'd have got our donation back a little later.

[We're with Steve]

Re: this is an old paul daniels trick...

It's easier to milk one cow than a thousand mice.

[BebopWeBop]

Re: this is an old paul daniels trick...

BUT in terms of milking - you first have to catch an unsympathetic cow (the Accentures and PWCs of this world)

[Anonymous Coward]

Re: this is an old paul daniels trick...

I don't think it's 40 - 50% more. Typically contractors earn something in the region of £500 / day. Consultants charge £1,500+ and still pay the actual consultant less than a contractor. You are right about where to money goes though.

Poof! overseas.

[Anonymous Coward]

Re: this is an old paul daniels trick...

Senior consultants charge £1,500+ for short-term, proper consulting work.

For delivery the rates are more at the £1,000 level, but only for very short-term work. Go beyond 4-8 weeks, and the volume discounts begin piling up. For a 6 month opportunity, the actual rates are more in the neighbourhood of £675 to £750.

[Anonymous Coward]

Re: this is an old paul daniels trick...

Yeah but thats £700 a day for wet behind the ears idiots who have either just come out of uni and dont know their arse from their elbow, or have just got off a plane from the far east having recently completed their 'my first java/.NET project' course.

Decent contractors in my experience are generally more committed to getting organisations to doing what is genuinely the right thing for them, than their own permanent employees and certainly more committed than the 'big boys' are.

I hope some day the big boys rot in hell along with the corrupt shitbags who keep shovelling work their way so that they can turn up with a nice little NED to go along with the fat pension after they step down for 'personal reasons'

[Anonymous Coward]

Re: this is an old paul daniels trick...

No, that's £700 a day for an intermediate level person with 4-8 years of experience. The rates for juniors and recent graduates are lower.

[Andy 73]

Darwinian selection in Government IT

..those that haven't got the drive or skillset to get up and leave keep working on projects that desperately need people with drive and skills.

IR35 isn't fixed by creating some hideous online tool to manage its complexities. It's fixed by ending this obfuscation and witch-hunt mentality.

Someone in Government needs to remember that the job of Government is to support the people, not tax the people. In this case, we desperately need a mobile, highly skilled workforce - both in public and private sector. Enabling people to switch jobs and apply their skills where they generate the most value is a key to building a healthy, competitive economy. Things like IR-35 are the complete antithesis of that, though I'll bet that all those large corporate advisors will be whispering the complete opposite in the ear of any MP that'll listen.

[Anonymous Coward]

"the job of Government is to support the people, not tax the people"

Unluckily, for many depends on which side of the tax pipeline they are. Those who gets money from other people taxes truly believe the job of government is exactly that. And many politicians are promising more of that - it's the best way to look for votes, and have a stranglehold on them. Of course someone has to pay for that...

[Anonymous Coward]

Re: "the job of Government is to support the people, not tax the people"

"Those who gets money from other people taxes truly believe the job of government is exactly that."

And the public will not be sympathetic to contractors seen to be "trying to avoid tax" when they are against big corporations doing the same.

Calls to "scrap IR35" are seen as an attempt by an elite to gain special rights to avoid tax. Leaving to join companies who "will not enforce the rules" only confirms that. Insisting it will cost more if the government does not allow tax breaks feels like "blackmail" - a demand to be treated in a privileged manner through an "exploitation" they are denied.

Contractors are going to have to come up with a better argument than one which appears to the public to only be about avoiding tax.

[Anonymous Coward]

Re: "the job of Government is to support the people, not tax the people"

"And the public will not be sympathetic to contractors seen to be "trying to avoid tax" when they are against big corporations doing the same."

Following the rules as they are written is not "trying to avoid tax", it's following the rules as they are written.

[Steven Jones]

Re: "the job of Government is to support the people, not tax the people"

Nope, it is "trying to avoid tax" or, tax avoidance as it's officially called. Tax evasion is the other, elicit version. However, just because something is legal doesn't necessarily make it ethical. There are many grey areas in all this.

[evilhippo]

Re: "the job of Government is to support the people, not tax the people"

As there is nothing 'ethical' about government itself... various aspects of government may or may not be desirable, but supporting government (via tax or whatever) is not a matter of 'ethics'.

[David 164]

Re: "the job of Government is to support the people, not tax the people"

everything on contractor calculator is about how to avoid having to pay tax.

It pathetic really. Corporations and individuals should stop trying to use laws and procedures to avoid taxes. Especially NI which seem to be one everyone is trying to avoid paying nowadays.

[Doctor Syntax]

Re: "the job of Government is to support the people, not tax the people"

"Corporations and individuals should stop trying to use laws and procedures to avoid taxes."

Please learn the difference between avoidance and evasion.

Do you have a pension plan, either on your own account or via your employer? You're avoiding tax on the pension contributions.

Do you have any ISAs? You're avoiding tax on dividends and capital gains.

[James 47]

Re: "the job of Government is to support the people, not tax the people"

ISA dividends are not tax free.

[JamesPond]

Re: "the job of Government is to support the people, not tax the people"

"everything on contractor calculator is about how to avoid having to pay tax."

I assume from this statement that you are a permanent employee somewhere and have no real idea how contractors work? I'm sure you are quite happy doing the daily 9-5 in the same job for years and years and commuting to and from the same place every day, and have reasonable job security. I have no problem with this, I did it myself for several years.

As a contractor, I see myself as filling the void when your business has a short-term requirement to deliver change. This could be for any number of reasons such as a sudden increase in sales requires extra staff to cover short-term extra workload; winning new business means delivering a new piece of software quickly and the existing staff don't have the bandwidth or perhaps the necessary skills to complete the work in time.

By the very nature of this work, it is transient and there is always a risk I won't be employed for several weeks or months between contracts. Unless you live in London, it is also likely that the contractor will have to work from different locations around the country in order to fine work. I usually don't have the luxury of being able to go home on a weeknight.

I'm not saying this is better or worse than being a permanent employee, only that it is different. However you and HMRC seem to fail to recognise that whilst I fill a requirement within the economy, especially in providing flexibility of employment and location, I also have extra costs to cover. Your company won't pay into my pension, won't pay for holiday's or time off sick, I don't get paid bank-holidays; and many contracts now are heavily weighted in favour of the hiring company or agency, such that I can be terminated with 0 days notice, but I have to give 6 months notice and potentially cover their costs for hiring a replacement.

How can I and why should I be classed as a permanent employee and paid and taxed as such, when by any reasonable measure, I'm clearly not a permanent employee?

[evilhippo]

Re: "the job of Government is to support the people, not tax the people"

"Corporations and individuals should stop trying to use laws and procedures to avoid taxes."

Why? Only an idiot allows more of their money to be appropriated by the state than they have to. The state uses laws to tax people, people use laws to minimise that tax. Nature of the issue.

[Doctor Syntax]

Re: "the job of Government is to support the people, not tax the people"

"Contractors are going to have to come up with a better argument than one which appears to the public to only be about avoiding tax."

OK, here's one. Everyone has the same tax rules but permanency of job is seen as a benefit in kind and is taxed accordingly. The extra tax brought in this way is used to lower income tax rates. Nobody's avoiding tax but HMRC employees get to pay more tax for the benefit of having safe jobs. MPs should like this - their jobs are only safe until the next election - and ministers even more so - their jobs are only safe until the next reshuffle.

[kmac499]

Re: "the job of Government is to support the people, not tax the people"

"MPs should like this - their jobs are only safe until the next election - and ministers even more so - their jobs are only safe until the next reshuffle."

Aren't MPs in some sort of self created Tweedle Dee-Dum style employment status, That is, when it suits them, they are self employed and, when it suits them, they are also employed. This Schrodingers Cat style superposition allows them all sorts of deductions.

Let alone some of the stunts the great and the good pull with management comapnies and foundations which can handle their after dinner speaking fees.

And don't even start me on their platinum plated pensions....

[Anonymous Coward]

Re: "the job of Government is to support the people, not tax the people"

"OK, here's one. Everyone has the same tax rules but permanency of job is seen as a benefit in kind and is taxed accordingly."

OK, here's another, in order to put everyone on a more equal basis.

Rotate HMRC employees around the country at regular intervals and tell them they have to personally bear the costs of accommodation and travel while away from home, without a decent enough pay rise to cover that.

It's only fair™. :-)

[Andy 73]

Re: "the job of Government is to support the people, not tax the people"

@AC

Personally, I'm not trying to come up with a "better argument". I'm saying that it's only worth the hassle and risk of contracting if you're paid appropriately. If HMRC want to increase the hassle and risk whilst decreasing the pay, then many more will do what I've done and get out.

I'm not trying to convince anyone that complex tax arrangements are a good idea. I'm not even trying to convince anyone that "i'm worth it". I am saying that a flexible, mobile workforce is a good thing, and this is running absolutely contrary to this. If you try to level the field between permanent and contract staff, then who in their right mind would want to take on the added burden of being a contractor? On a personal level, it doesn't matter to me - I have and always will follow the rules. However, I'm quite happy to have withdrawn my labour from companies that otherwise would quite like it (judging by the regular recruitment calls).

As an aside, the same applies to travel subsides and housing costs. If you make it difficult to travel to work, and expensive to move house, then you have a less mobile workforce which causes poor population distribution and strangles companies needing workers. It's easier to bring in overseas workers than help someone relocate in this country - and let's not even talk about the pleasures of commuting.

[Anonymous Coward]

Re: Darwinian selection in Government IT

"IR35 isn't fixed by creating some hideous online tool to manage its complexities. It's fixed by ending this obfuscation and witch-hunt mentality." If they were serious about this being to "help" and not just being a tax grab, an effective online tool would have been available six months ago and open to everyone, and the same tax & IR35 rules would apply to everyone - including MPs and those who work in their offices. Same expenses rules, same NI and so on - if your MP can claim it, so can you. Never going to happen.

[Anonymous Coward]

Re: Darwinian selection in Government IT - OH PULEASE STOP YOUR MOANING

Nope, governments' prime responsibility is safety and security of their people, law and order andpublic services - ALL OF WHICH HAVE TO BE PAID FOR, so, you can argue GOV's top responsibility is to collect the tax to pay for the above.

Maybe am missing something, but most contractors work for the same employer in the public sector for a year or year(s). Hardly any PSCs seem to be for people working for multiple different clients and not working in their clients' offices full time. IE they aren't running a proper business .. they are freenlancers or part or full time workers masquerading as not, as often to suit the employer as to suit them.

So, either they should be registered as sole traders / self employed freelancers or they should be employed properly full time or on 6 or 12 months contracts or whatever.

Given how tiny the financial advantage is to contractors of being IR35 or full time employed, maybe the industry should be agitating to BE EMPLOYED PROPERLY ... seems to me the whole thing has been a scam to let well paid IT people avoid tax and to let the public sector get away without paying national insurance, handling paye and paying pension contributions.

[Lotaresco]

Re: Darwinian selection in Government IT - OH PULEASE STOP YOUR MOANING

"Maybe am missing something, "

Yes, you am missing something. Back around the year 1996 I used to work as a contractor to government programmes as a self employed sole trader. It suited me and it suited my clients. Accounting is easy, tax is easy, determining one's tax status is easy. Then the government stepped in and said that no government department should use self employed sole traders (This is why your idea won't work) so, around 2004 I had to stop being self employed and become a Ltd Co. This was later reinforced when the government decided that they only people who could get security clearances must be sponsored by a Ltd Co and when CESG decided that the only people who could get accredited as security consultants must be sponsored by a Ltd Co. So far, so straightforward and legal.

Now let's deal with your claim that "seems to me the whole thing has been a scam to let well paid IT people avoid tax and to let the public sector get away without paying national insurance, handling paye and paying pension contributions."

No one gets away without paying NI, PAYE, pensions contributions. Nor do "well paid IT people" avoid tax. We pay all taxes due or we get reamed by HMRC. There are no tax loopholes, no shady deals, no bizarre tax backdoors. That is all in your and the politicians' imagination.

We have the following choices:

1) Pay a salary which is subject to PAYE, pension and NI (employees and employers).

2) Leave money in the company, in which case it is profit and is subject to Corporation Tax at the current rate.

3) Take some money in dividends, in which case it is subject to dividend tax.

The rates of tax are about the same in all cases, around 30-38% for all tax payers earning more than a few thousand pounds a year.

You are quite frankly talking in such a manner that when you sit down your voice will be muffled.

[Doctor Syntax]

Re: Darwinian selection in Government IT - OH PULEASE STOP YOUR MOANING

"You are quite frankly talking in such a manner that when you sit down your voice will be muffled."

Nice one. To be recycled as required.

[Jatt]

Re: Darwinian selection in Government IT - OH PULEASE STOP YOUR MOANING

I think you are missing the point. Before tax is even considered what needs to assessed is the limited company's legal status and whether it is inside or outside of IR35. The reason why this legislation is being brought in is because the vast majority of contractors actually work like their inside IR35 but then arrange their tax affairs exactly like their outside IR35 (cake and eat it springs to mind) but HMRC do not have the resources to investigate all the cases. The vast majority of contractors are evading tax but only when HMRC investigate and win a case.

[kmac499]

Re: Darwinian selection in Government IT - OH PULEASE STOP YOUR MOANING

"Nope, governments' prime responsibility is safety and security of their people, law and order andpublic services"

Yes that it what most Gov'ts or more precisely the party currently in Gov't claim, usually whilst following policies that antagonise our friends and opponents. Personally I think if Gov't had the primary responsibility of keeping the lights on and the toilets empty we'd all be much better off. If you think this is a trivial statement, try turning your water and leccy off for a week and see what life could be like.

[Doctor Syntax]

Re: Darwinian selection in Government IT - OH PULEASE STOP YOUR MOANING

"contractors work for the same employer in the public sector for a year or year(s)."

So does Crapita.

"not working in their clients' offices full time"

Proper businesses work where needed. If you hire a proper business electrician to rewire your house he works in your house. He can't do the wiring in his workshop & then email it in.

All these sorts of argument fail as soon as you look at relevant comparisons with real businesses.

[TheVogon]

Re: Darwinian selection in Government IT - OH PULEASE STOP YOUR MOANING

"If you hire a proper business electrician to rewire your house he works in your house. He can't do the wiring in his workshop & then email it in."

But he can do the design work, the ordering, the certification paperwork, etc in his workshop. And he can send someone else on his behalf to your house to actually do the work there...

[Anonymous Coward]

Re: Darwinian selection in Government IT - OH PULEASE STOP YOUR MOANING

maybe the industry should be agitating to BE EMPLOYED PROPERLY

That's ignoring the plain simple fact that any company using contractors has chosen that route because THEY DON'T WANT THE OVERHEAD OF EMPLOYEES.

seems to me the whole thing has been a scam to let ... the public sector get away without paying national insurance, handling paye and paying pension contributions.

You've hit the nail on the head. This whole thing is about preparing the ground to shift more and more public sector employees into the private sector.

[JamesPond]

Darwinian selection in Government IT

"we desperately need a mobile, highly skilled workforce "

Completely agree. Yet the government for some unknown reason seems to think that the SME's and contractors are fleecing HMRC out of money and are doing their best to put them out of business. HMRC/the government simply refuse to see the bigger picture.

As a contractor, I spend the majority of my limited company earnings on the following: corporation tax, wages, dividends, expenses, savings for a rainy day.

Corporation tax goes to the government; wages covers normal livings expenses (mortgage etc.) and includes VAT, dividends (taxed), expenses such as petrol (taxed) and purchasing other goods and services such as living accommodation when working away from home (hotel or landlord is taxed on their earnings)....etc. etc. Savings will be taxed at the point when I am between contracts and need to live. So the majority of my companies earnings and expenditure is taxed in one form or another.

Instead of this, they are forcing government departments into the hands of multinational companies. Where do they pay corporation tax, probably not in Britain. These corporations won't have in-house resources standing idle to take up the slack, so they will have 3 choices, pay e.g. Indian third party IT companies to do the work, hire UK contractors to do the work, hire new permanent employees to do the work. Guess which one costs the least and gives them most profit and where the money won't be spent in Britain and won't gather any taxes in Britain?

[Wayland]

Re: Darwinian selection in Government IT - Wold Gov

If you want to build a World Gov then you need World corporations operating in all countries. You then need a World tax collection system so these corporations don't get it tax free. The milking a cow rather than 1000 mice is the principle I read here. To have a World dictatorship you have to lump everything together.

The attack on small businesses is happening with the business rates changes. It's also happening with high street parking. Pedestrianize the high street so you can't park there and the shops shut. The slack is then taken up by the out of town supermarkets with their massive car parks.

Another attack on small businesses is quarterly online filing of PAYE and accounts.

These policies are pitched in terms of money but it's actually about taking away control from the individual and placing it in the hands of the gov and corporations. A sort of fascist communist system.

[Vic]

Re: Darwinian selection in Government IT

Guess which one costs the least

Hiring new permies, I should imagine. But maybe hiring UK contractors.

Certainly not hiring overseas "expertise". That means the lowest rate of outgoing cash, but it inevitably costs the most...

Vic.

[Mark 65]

Re: Darwinian selection in Government IT

Regarding

"In response to this, HMRC are developing an online tool that will help public sector bodies to determine whether or not the rules apply.”

bool doesRuleApply(object doesntFuckingMatterItWontBeConsidered) {

return true;

}

[Lotaresco]

Re: Darwinian selection in Government IT

"IR35 isn't fixed by creating some hideous online tool to manage its complexities. "

I have no idea why this on-line tool is so late. I could write it in a few minutes.

"Please upload all your financial information. We accept any file format." [Upload]

"Calculating, please wait.."

"Your contract is subject to IR35, please report to your local tax office to pay all the taxes outstanding."

[Anonymous Coward]

IR35

Isn't the whole problem with this tax the fact that it is very difficult to know if you are liable or not and then for how much.

When i was contracting (not for gov) I had an accountant who dealt with all that stuff (like most contractors do). His job was to calculate the legal amount of tax i needed to pay. I paid it. Why does every government think that everyone wants to break the law.

How much do i earn, how much will it cost me to get to work, eat etc, how much tax do i have to pay = is it worthwhile to do the job.

I wonder if HMRC are thinking to themselves "damn these business minded people with their thoughts of fiscal responsibility".

[Anonymous Coward]

Re: IR35

"Why does every government think that everyone wants to break the law."

People in government who themselves would bend a law - then believe everyone else would do the same unless draconian controls are placed on them.

[David 164]

Re: IR35

Because there to many companies and individuals and accountant who spend far to much time trying to find loopholes in the tax laws that allowed them not pay tax.

[Anonymous Coward]

Re: IR35

to many companies and individuals and accountant who spend far to much time trying to find loopholes in the tax laws

If politicians don't want people using loopholes, then they should stop drafting obscenely complex legislation full of the things. The funny thing is that this isn't really about loopholes, or about their use, it is about who is benefiting. MPs and really big companies apparently aren't a problem, Joe Public and SMEs very much are.

[Doctor Syntax]

Re: IR35

@ David 164

Is it some moral sense that's stopping you joining what you clearly see as some sort of untaxed gravy train? Or is it that, for what I wouldn't question are perfectly valid personal reasons, you're not prepared to take the risks involved in going freelance? If it's the latter do you not think that the risks might have something to do with the different tax regimes that exist outside IR35 contracts?

[fnusnu]

Re: IR35

Your tax return is your responsibility, not your accountant's

[Anonymous Coward]

Re: IR35

"Your tax return is your responsibility, not your accountant's"

and I'm sure there's not an accountant in the land that doesn't give a full refund if they make a mistake, and that HMRC staff also take responsibility for their own decisions / actions, just as I'm sure the tax code is written in clear, plain English with no loopholes and no bias in favour of some jobs or types of job.

[gnasher729]

The supposed savings of £440,000,000 are coming out of someone's pocket - the contractor's pocket.

Contractors don't care how much they are paid, they care how much is left in their pockets. If you change regulations so that there is £440,000,000 less in their pockets, what does the government think they will be doing? They will quit, and the government can then re-hire them for money so that they have the same amount left in their pockets.

[Anonymous Coward]

So they need another £37K p.a. to tread water

"The supposed savings of £440,000,000 are coming out of someone's pocket - the contractor's pocket."

£440 meellion divided by 20,000 contractors is £22,000 per contractor.

A back of a beermat calculation says that at 40% tax, they need to increase their annual turnover by £36,667 to stay at the same take home pay level.

[Third Man]

1 April for 'tool' deadline...

As long as the contractors don't walk...

[Velv]

Simple Answer

How to make it fair for everyone - get rid of employee National Insurance

I know some people believe contractors don't pay tax, however contractors pay tax on everything they earn, but can structure it to minimise their liability. Dividends can only be paid on Company profits so are already taxed as Corporation tax. Only NI is where savings can really be made.

So

• Remove employee NI (which is 12%)
• Increase basic rate tax to 30% and higher rate to 50%
• Increase employer NI to 15% to cover the difference.

This means:

• lower paid employees will pay less tax as NI kicks in before the basic rate, and when it does it kick in its at 30% not 32% (20%+12%)
• middle paid employees will pay about the same
• higher paid employees will pay more as employee NI currently reduces to 2% above £42k

And when the playing field is level for everyone there's no need for "schemes" like IR35.

[DavCrav]

Re: Simple Answer

You need to simplify it even more. Eliminate EE and ER NI, roll it all into income tax. (You can pass a law saying that the full ER NI is passed on to employees at the time of elimination, and fiddle with the bands so this doesn't alter things.) Then you treat earned and unearned income the same, by bringing CGT into income tax.

Then you forbid all companies without a banking licence form lending money to individuals. That closes the unofficial lending loophole. And so on. But merging IT, CGT and NI is obvious.

[AndyD 8-)₹]

Re: Simple Answer

*merging IT, CGT and NI is obvious*

I largely agree - but I suspect that you have never lived under high inflation - CGT without indexation can be punitive and grossly unfair.

[DavCrav]

Re: Simple Answer

"*merging IT, CGT and NI is obvious*

I largely agree - but I suspect that you have never lived under high inflation - CGT without indexation can be punitive and grossly unfair."

Why can that not be taken into account when calculating the capital gain? Like it currently is.

[Velv]

Re: Simple Answer

Velv. Why does your scheme keep employers NI?

I see both sides of keeping / removing Employers NI. You can move all the liability onto the employee, but does the employee feel better paying 30% or 40% even though the gross at the start is different. Stealth :)

Also, under the current scheme the Employer contribution is only 2% above ~£42k. If you make ER NI 15% on all earnings (i.e. no higher NI cap) then you get stealthy "extra" tax via the company for those who are paid more.

[Roland6]

Re: Simple Answer

@velv - your "simple answer" is based on a fallacy that IR35 only impacts people who are earning significantly more than "lower paid employees". I suggest a fundamental part of the problem is that large numbers of employees don't actually know jus how much it costs a business to employ them.

[Vicdavery]

Re: Simple Answer

Unfortunately a simple solution is not the goal.

Treasury/Chancellor always want many leavers to push and pull so that it is impossible to work out what they've done.

If it was simple then they couldn't hide tax rises.

[Korev]

Re: Simple Answer

Merging NI and income tax seems like a mostly good idea; however...

Increase employer NI to 15% to cover the difference.

Employer NI is effectively a tax on employing people so it might actually lower employment, make offshoring seem more attractive and/or make the UK a less attractive place for multinationals.

[TheVogon]

Re: Simple Answer

"The reason why this legislation is being brought in is because the vast majority of contractors actually work like their inside IR35 but then arrange their tax affairs exactly like their outside IR35 "

IR35 is about disguised employees. The vast majority of contractors are not disguised employees, but are self employed and work with additional risks and across multiple employers over time. The fact that IR35 isn't very good at catching those who really are disguised employees is another issue, but don't tar all legitimate contractors with the same brush...

"And when the playing field is level for everyone there's no need for "schemes" like IR35."

There are good reasons for self employed contractors to pay less tax so there is unlikely to ever be a level playing field. They have much higher employment risks and fewer benefits. If they got the same money, everyone would want a permanent job instead.

[simon_c]

After reading around the subject, I can totally see why people are leaving. It's about the potential to have an investigation opened for the previous 7 years, rather than the future earnings. Once HMRC said they would not rule that out, it was almost guaranteed.

6 months time, others will be back in as contractors, inside IR35, but with a firewall between pre and post April 5th 2017 earnings.

[Dwarf]

I wouldn't rely on that "firewall" you mention as its got any government common criteria evaluation status and its not like the tax office has a record of retrospectively changing the legislation to suit.

[Anonymous Coward]

There's an easy fix to that. Make individual HMRC inspectors personally liable for their errors or oversights, including those that are "caught" by retroactive changes.

[Steven Jones]

Retrospective audit

Changing your employment status now will not mean that HMRC might not choose to audit you retrospectively. Note that it's retrospective audit, not retrospective taxation as it would be an interpretation of the rules are they were believed to operate at the time. However, there may be hop for those who escape abroad.

[Franco]

Like others here, I am off on 31st march. Seeing as every petition, sitdown with Professional bodies and recruiters and engagers or survey that HMRC have had says this is a terrible and unworkable solution, we are now effectively at the point where exiting the public sector until such time as rates increase or this ridiculous law is repealed is the only power we have.

This benefits no one but large outsourcing companies like Crapita, who will take double or more the rate a contractor would take and pay the person doing the work very little

[Aristotles slow and dimwitted horse]

Whilst I don't disagree...

What did you expect the outcome to be? This is the same situation as when IR35 was introduced. I remember the terms "terrible" and "unworkable" being bandied around by the same old professional bodies back then; but look where we are 10-15 years later... IR35 has not been repealed, although neither has it really been effective in filling the HMRC coffers with the rediculous figures that Primarolo was quoting at the time.

Unfortunately, neither will this be repealed because HMRC doesn't listen to anyone but itself. The shame is that I can see in a year or so this being in the budget to be rolled out to private sector contractors also.

[Sir Runcible Spoon]

Re: Whilst I don't disagree...

"The shame is that I can see in a year or so this being in the budget to be rolled out to private sector contractors also."

At which point my rates go up or I work in another country that isn't quite so suicidally stupid.

[Franco]

Re: Whilst I don't disagree...

I didn't expect any outcome other than what we got, as every bit of feedback that HMRC has asked for but hasn't given the answer they want has been met with "la la, not listening" which included a petition that reached enough signatures for a Parliamentary Debate that they also chose to ignore.

My choices are to take the tax hit, or move to the private sector

[Anonymous Coward]

Re: Whilst I don't disagree...

"Unfortunately, neither will this be repealed because HMRC doesn't listen to anyone but itself."

At times, not even that :)

As for the commentators alleging IR35 is a tax avoidance / evasion scheme (some are implying there's no difference, when there obviously is), if it was such a scheme, HMG would not have hired staff under it once it had been designated as that. It has.

My biggest issues - most of which have been raised by others - are that the rules are (a) being applied inconsistently and at times stupidly, (b) allow for preferential treatment (just look at the exemptions from the new rules if you have even the slightest question there), and (c) half the people weighing in on the "debate" have never had to deal with HMRC and it's mood swings, so don't know just how much effort is involved (in what should be a very very simple process but that is far more complicated than it needs to be because of the way in which the rules have been written).

[Anonymous Coward]

@ Franco

Would you mind telling me why you're off? I'm not a contractor, never have been, so I don't know the situation at all and my view of it is completely naive.

But, I assume you are a Ltd company, and pay yourself a salary + dividends? And you pay full employer's and individual NI on your salary? So what's changing?

Or are you saying that you break the rules in order to lower your rates as otherwise you'll be undercut by all the other contractors also breaking the rules?

[Franco]

What's changing is double taxation. If you fall within IR35 post April 6th you get taxed at source (Income Tax and NI) before it goes into your Limited Company, but still have to pay 20% Corporation Tax on retained profit. Further more, there used to be a 5% tax free allowance to cover the costs of running a company (E.g. Indemnity Insurance) which has been removed, and dividend tax increased this year as well and so has the rate for those on the flat rate VAT scheme.

The major shift this year is that if I am investigated now and ruled to be inside IR35, then I am liable for the shortfall in tax that I have not paid. Under the new rules the engager is liable, and many will either rule all contractors inside IR35 to be on the safe side or will use HMRC's new digital tool, which is also likely to rule inside IR35

[Anonymous Coward]

@Franco,

> What's changing is double taxation.

Thanks for taking the time to reply - it was the double taxation bit that wasn't clear to me.

All I can suggest is to put your rates up 100% for Govt clients. If you don't get any work with them - well you're not planning to anyway. And if you do... :-)

[Anonymous Coward]

All very well but...

... These rules also apply to ALL PUBLIC SECTOR CONTRACTORS - This includes anyone contracted to the NHS as well, and they don't have the money to be able to increase rates by that much (if at all).

Because of this, many NHS IT departments who rely on contractors (because they don't have enough full time employees and they're currently blocked from recruiting from outside the NHS) are going to become seriously under staffed which will before long start to impact on patient care.

[TheVogon]

"If you fall within IR35 post April 6th you get taxed at source (Income Tax and NI) before it goes into your Limited Company"

Presumably only if there is provision for this in your current contract. Contract rates / limited company invoices are generally enforceable via the courts fairly easily.

[Anonymous Coward]

Big outsoucing companies

The UK Government will regret this, in my experience the big boys were there in the first place, I did 3-4 government contracts through the big boys, and yes they all fill up on cheap Indian staff, but for the really tricky technical stuff (and even some of the not so technical stuff) they have to find people locally, and hopefully that source will dry up too.

I have a crazy tin foil hat feeling that the UK Government is broke, I mean really end of the line broke, I know the Tories are fond of cutting stuff but when care for the elderly and disability benefit is being cut by billions it really does make me wonder, neither are vote winners, and all I hear on the news is more and more public services being cut and the Government muttering vaguely about the huge deficit.

I contracted for around 16 years but gave it up about 7 years ago for a permie job in Europe after the offshore providers took away the reasonable expectation of earning money regularly, and funnily enough I have more disposable income than I had contracting, what with not having to pay accommodation, accountants, travel, and tax to the extent I used too (permanent staff frequently complain about how much contractors earn, they seldom consider what you have to pay out of that), and now with the government trying to strong arm pretty much everyone into IR35 it's just not worth it, unless you have some rare unicorn skill which is in demand.

[Anonymous Coward]

Re: Big outsoucing companies

"the UK Government is broke, I mean really end of the line broke"

What did you think would happen when the previous lot emptied the Treasury and then sold off the gold reserves that could be used to guarantee any loans? I'm no fan of the Tories but surely anyone can understand the difference between being able to say "if we default you can have the gold we keep locked away" and "lend us money even though we don't have anything to give you if it all goes wrong", and why public borrowing costs so much more.

Once again we have to reap the "benefits" of a socialist government who spent money with no thought of what would happen once they had emptied the coffers - other than the knowledge that the Tories would get voted in, somehow managing to turn the situation around again but p*** everyone off enough for the socialists to get back in and spend it all again.

Unfortunately, the Tories cannot pull off their usual chicanery this time so the robber barons of the labour party will find the country in the same state they left it in - up Sh*t Creek without a canoe, let alone a paddle.

Still, what else can you expect from a group that opens the prisons and lets out convicted murderers then turns around and locks up the soldiers doing what Tory Blur sent them off to do in the first place...

[Anonymous Coward]

Re: Big outsoucing companies

To be fair to Labour, most of the increase in public debt/borrowing was to pay off the banks. Since 2010, public debt has increased massively and the deficit still isn't down to anywhere near what they want it to be. We've also got at least a £25-30billion increase in pensions over the next five years, and something similar for the five years after that.

Looking at those numbers it probably explains why successive governments have let immigration get up to the levels it has been at. £25 billion is the tax from roughly 200,000 additional workers *per year* earning the national average wage and doesn't even cover the increase in supplementary costs that would come from the increasing older population and the workers to pay for it.

[Steven Jones]

Re: Big outsoucing companies

No, most of the increase in public debt/borrowing was NOT used to pay off (I think you mean) rescue the banks.. All the money used to rescue the banks was either on a secured loan basis or by buying the equity. As such, any debt incurred was balanced in the books by assets (the value of the loans and/or equity) and it was never counted towards the national debt. The Lloyds bail-out is a particular example as it's almost all been sold back into private ownership and a modest (paper) profit has been made (and Lloyds wouldn't have been anything like as parlous state if not prevailed upon by Gordon Brown to bail-out HBOS; a disaster for the shareholders.. RBS is a rather different thing as it's performance has been abysmal and the share price is way below what the government paid. It will be a longer haul back.

But the point remains, this was never counted against the National debt. The credit options offered (mostly not taken up) were of the same sort. They were offered as a sort of over-draft facility to be drawn on as a lender of last resort.

Where the huge deficit did come in was the collapse in government tax revenues after 2008 due to the recession that followed and the cutting off of tax revenues from the financial sector (previously a huge source of income). Add to that the reduced economic activity and the the efforts that Alistair Darling made to stop the economy tanking, mainly by being fiscally very loose, and you got those huge deficits following on from 2009. That was on top of a 3-4% deficit at the height of the economic cycles to which we can add Gordon Brown had been rather loose with his fiscal approach and had generated a lot of off-book liabilities through such things as the massive increase in PPP projects which had the short term effect of not dumping debt on the public accounts by direct investment, but at the huge cost of future, unbooked, current account liabilities for some very expensive contracts.

So yes, the banks reckless actions triggered it, but they had politicians on the sidelines (in many countries) cheering on this financial castle built on sand as, for years, it poured forth money into public coffers. This wasn't helped when some countries also dipped heavily into the pot of easy money willingly lent by (often state-backed banks) in Europe. Hence the crisis of sovereign debt, a mess that Greece is still floundering in followed by a few others (like Italy, Spain and Portugal). The exposure of those commercial banks (even if state owned) to sovereign debt is still hanging there as a threat.

[Steven Jones]

Re: Big outsoucing companies

Incidentally, how on Earth to you get to £25bn extra a year from 200,000 workers? That's £125,000 a year each. Just what sort of national average wage do you think they are on? Even the accumulated numbers over a decade is not going to get anywhere near £12,500 per year per person, and that's before you even consider the expenditure side of the equation and that very many of those immigrants aren't on the national average, but doing menial jobs at minimum wage.

[Anonymous Coward]

Re: Big outsoucing companies

Now, there is no need to down vote a fact.

I might genuinely dislike Mrs. May and her government - she is trying to throw me under a bus despite being resident here for 17 years, paying tax and having half-British kids. If you understand what I mean.

However that doesn't change the fact Tories screw people due to fiscal discipline and Labour screwing people by spending the inheritance and then crying foul when they are not in power.

Unless you keep printing money somehow that debt needs to be sorted and paid off.

[TheVogon]

Re: Big outsoucing companies

"The problem with socialism is that eventually you run out of other people's money [to spend]"

As always....

[scott 30]

UK Govt already planning on more overseas workers

http://www.telegraph.co.uk/technology/2017/02/26/technology-visas-granted-fears-worker-shortage/

Here in Belgium, bPost is ditching 200-300 local contractors and off to India - citing they can't find locals to fill the needs. That's utter BS of course, but the combined effect of higher/more aggressive taxation + diminishing pool of decent contracts isn't a problem just in the UK.

I've genuinely given up. Our Govts are too stupid, too broke (financially and morally), too short-sighted and lacking even a modest amount of strategic thinking.

British Army Brigade 77 doesn't have enough recruits. I wonder why.

Instead of encouraging and promoting a sector that desperately needs protection - or at least a break - our Govts are hell bent on running IT contracting even further into the ground.

I sometimes have young, talented locals asking me if they should go into contracting - me being a gnarly old hand with over 15 years in the game. I strongly encourage them not to. I'm just biding my time until certain heavy purchases have depreciated then I'm back to being a reluctant and demotivated lunch-box.

[Missing Semicolon]

Re: UK Govt already planning on more overseas workers

The IT-contractor hate started around 2000 when the massive rates for 2KBug fixing and on-call came to be known. Thereafter, the "rich IT contractor who pays sod-all tax" has become a fixed part of HMRC's thinking.

[Anonymous Coward]

the smart contractor...

...will offer to stay but for triple the rates.

[Anonymous Coward]

Re: the smart contractor...

Undoubtedly rates will rise in natural reaction to there being fewer contractors available, what really shocked me is the idiots are applying this to the NHS as well where similar shifts to the private sector are expected (no doubt part of their evil plan) :

https://www.theguardian.com/society/2017/feb/27/tax-changes-uk-public-sector-workers-salary-exodus-nhs

[Doctor Syntax]

What regular employees fail to realise is that employment and freelance are very different creatures. The opening shot that any freelancer hears from an agent is "Are you available?". Effectively that means "Are you currently out of contract?". The Agent has a need for someone who can start immediately where "immediate" might even be "today", possibly "tomorrow" and almost certainly no later than "next Monday" because that's what the client is asking for. Almost invariably* that means someone who is currently out of contract and whoever is currently out of contract will have been out of contract for some time; in slack periods that might run into several months. Providing the immediate availability that the client needs is a cost the freelancer's company has to cover.

Now you might argue that the clients should manage their staffing levels better than to have such short notice requirements. But a typical IT department will have a fairly predictable BAU workload mixed with project work that gets dumped on it at short notice. A manager will have to meet this demand with a permanent staff which isn't entirely predictable: people leave, take holidays, get sick, get pregnant and even die. If the business aims to cover the average situation it will risk having to defer some work to slack periods and thus lose opportunities that might have otherwise have been taken. If it aims to cover the worst case it will risk ending up with people being under-employed for most of the time.

In fact an optimum staffing strategy is one that allows them to maintain a staff level somewhere around or maybe below the average level and top up with a flexible element when that's needed. In addition they may also need a flexible element to provide scarce skills for which they have an occasional need. The timescales for acquiring and disposing of directly employed staff don't provide for this flexibility. It needs to be able to off-load the risks involved in trying to accomplish its requirements with only permanent employees.

Whoever makes up the difference is taking on the risk and it's this risk, taken by whoever does the outsourcing, which is the difference between employment and business. If the outsourcing is done by the likes of IBM or Capita nobody even thinks of denying that they're businesses and that they should be treated as such. But if the outsourcing is done by one or several freelancers what, apart from scale, is the difference between them and the IBMs and Capitas? Nothing. They're operating as businesses and not as employees. As such their tax regime should be that of businesses.

*Only once in 10 years I was called on the last Thursday of a contract to be available to meet the client the following Monday with a view to the contract's starting on the Tuesday. That was to enable a less than 2 week hand-over from a permanent sysadmin/DBA who was leaving.

[Anonymous Coward]

I agree: two points though?

"Now you might argue that the clients should manage their staffing levels better than to have such short notice requirements." Yes - they should, but they don't. Sometimes it is not their fault as you said - but sometimes it is, such as for example where you have a public sector organisation that has a mandatory headcount reduction and simply hires contractor to fill the gaps left by imposing the cull, rather than saying "this is too stupid to do, Minister"

secondly - the thing about availability, slack, and so on: there is a large public sector body (and it can't be the only one) that wrote to staff in January, telling everyone their contracts were ending in Feb. It then said, err, no, we aren't ready for that, then "err, no, still not decided what we're going to do", and left a lot of contract staff not knowing if they had work the following week. The IR35 discussion never seems to take into account the massive benefit of job security or what contractors are supposed to do during slack periods - or illness, or if they want paid holiday (what's that), or how to handle a client that doesn't know it's SaaS from it's ... (there must be an acronym that fits, surely)

[Doctor Syntax]

a client that doesn't know it's SaaS from it's ... (there must be an acronym that fits, surely)

NALGO was Sir Humphrey's choice.

[Robert Grant]

Moar tinfoil please

1) Government makes it illegal to not supply employees (or even people that look a bit like employees) with a pension (DONE)

2) Government drives contractors back to permanent employment by making freelancing pointless (DONE)

3) Government removes state pension for the richest 95% ?

[Anonymous Coward]

Re: Moar tinfoil please

4). Ever seen Logan's Run?

[BebopWeBop]

Re: Moar tinfoil please

Ahh - Jenny Agguter as gorgeous as always - is that what you mean?

[dazberito]

Cant see any other option but to walk...

I'm off on 25th march. I think that is the last day I can work and be paid before the 6th April.

It may be that in a month or two a solution will be found with some rework or higher rates but why would we risk getting paid inside IR35 on the same contract making a investigation into affairs likely. It would be easier to stay if HMRC would say there wouldn't be retrospective investigations but they're remaining tight lipped over such things.

The other problem is the trust eroded between public sector and the contracting world. Hard to commit to a contract when the rules change on a regular basis.

Its a line up of own goals when there are so many projects underway and Brexit round the corner....

[Anonymous Coward]

Re: Cant see any other option but to walk...

"The other problem is the trust eroded between public sector and the contracting world. Hard to commit to a contract when the rules change on a regular basis"

The normal way to address that would be to have a contract clause that says if the rules change, rates can go up. However, in my experience most public sector contracts are a standard form and the client staff you deal with are not allowed to change them or show any common sense.

[Anonymous Coward]

Online Tool

The online tool being developed is open source it seems: https://github.com/hmrc/off-payroll-frontend

[Buzzword]

Re: Online Tool

The README file is empty; and none of the code contains any comments. This doesn't bode well.

Scrolling through the code itself, I can see that the IR35 tests themselves are the usual grab-bag of questions:

- Do you provide your own equipment & materials?

- Are you paid a daily rate or a piece rate?

- Do you still get paid if you deliver substandard work?

- Is there an obligation to fix substandard work in your own time?

- Is there a right of substitution? Has it actually been exercised?

No doubt someone could reverse-engineer the code and turn it into a simple flowchart.

[Anonymous Coward]

Big off-shore boys will win

IR35 is and always has been a piece of legislation to appease the larger consultancies. This time however the crapita, wipro et al of the world will be rubbing their hands with glee.

... then when they've agreed a day rate for their "consultants" the work will either end up with off-shore bodyshops or they'll hire grads.....

Either way the consultancies win more work and their taxes will be paid overseas. The off-shore workers will never pay tax in this country and grads won't be paying such swathes of tax. So not sure where the tax win is here for gov.

HMRC seem to hate the freelance/contractors of the world, permies have no sympathy, but they all seem to forget that tax is paid when you take money out of a company as salary or dividends. Then there is training, holiday and god forbid sick pay.

With the IR35 model how on earth can you be responsible and retain funds to cover the above? The fact is you can't. Stupid situation.

[TheVogon]

Re: Big off-shore boys will win

"IR35 is and always has been a piece of legislation to appease the larger consultancies. This time however the crapita, wipro et al of the world will be rubbing their hands with glee."

Not really. It's about disguised employees. Real self employed contractors are not usually caught....

[Al Pha]

Hang on... a lot of the contractors who are responsible for massive cost overruns are doing one? RESULT!

[Lotaresco]

"the contractors who are responsible for massive cost overruns"

Are a figment of your imagination.

What causes massive cost over runs? Firstly poor requirements being expressed by the government departments. I haven't seen a well written set of requirements originating from government, ever. It seems that a backgrounds in classics, modern languages, history and politics is not at all conducive to being able to specify technical requirements. Secondly, dithering. Civil servants are great at vacillation, in fact it's about the only thing they do well. They agree to something, work starts, they change their minds or their minds are changed for them from on high. This can, in the worst case, result in complete scrap and rework of the project. Thirdly penny pinching. Most government departments want the proverbial silk purse from a sow's ear but they aren't even willing to pay for the sow's ear. They get delivered what they paid for, don't like and then ask for the project to be reworked to actually do the job it's supposed to. Finally lack of project management talent. Civil servants seem to be unable to grasp that some jobs must be done in a particular sequence, hence it's not unusual to get on site and find that people are sitting around twiddling their thumbs waiting for delivery of the kit that should have been ordered and in place six months ago.

[Lotaresco]

I had enough of this nonsense when it started.

For the past several years I have been turning down government work. The end result is that my day rates have increased significantly, I can legitimately work from my own premises rather than having to drive to whichever government office needs my services and there's no question of IR35 because I don't have to sign up to exclusive deals demanded by government. Soon I think I shall follow the example of a fellow contractor and leave the UK, because there's no good reason to stay.

An unexpected bonus is that I no longer have to deal with Civil Service Tarquins with a degree in PPE who don't even know which way up to hold an iPad.

Welcome to the 21st Century brain drain.

[ForthIsNotDead]

I'm off.

Leaving the UK and taking my family with me.

[Pascal Monett]

"whether or not the rules apply"

That is not the question. Obviously, the rules should apply.

The real issue is why haven't the rules been applied properly up to now ? Why is it that suddenly there is a flurry of activity around actually applying rules ?

If these rules had been applied from the start with proper oversight, then this situation would simply never have happened. One more case of government failure causing more pain than usefulness.

I think that laws should have the same shelf life as stuff you keep around the house : if you haven't used it in the past three years, you never will and you should throw it out.

[Missing Semicolon]

And yet, "Personal Service Companies"

Are allowed to charge out the Person concerned at an hourly rate, yet claim to be a Company. What's that? Only Luvvies and Civil Servants use them? Oh, that's all right then!

[Doctor Syntax]

Re: And yet, "Personal Service Companies"

"Are allowed to charge out the Person concerned at an hourly rate, yet claim to be a Company."

Rates can be hourly, daily, weekly, whatever. Just like Crapita, IBM, whatever. You know, the big outsourcing companies who'll take over and charge much larger day rates. The only differences are the scale of the company, the overheads charged to the client and the residence in which the profits are taken and the corporate taxes paid.

As I wrote in another comment, as soon as you make the relevant comparisons all these arguments fail.

[Bob Vistakin]

Backhanders

So lemme get this right - for whatever asshat reason, contractors leave and the likes of IBM, Accenture and Capita come in at 10x the cost? And HMRC consulted with who to draw this up?

I suppose the real test is if any of those self same contractors who left are hired by these parasites at the same rate they were on before and sent back to their old desks, leaving a fat 9x fee to them for doing nothing and as usual handed over from the taxpayer.

[Doctor Syntax]

Re: Backhanders

"I suppose the real test is if any of those self same contractors who left are hired by these parasites at the same rate they were on before"

No, they may be hired back at a lower rate so the mark-up will be more.

[JMiles]

Wait until next year..

They won't get the expected tax take from this measure and will determine that the 'only' explanation is that those who aren't paying the right taxes moved into the private sector. Therefore, expect Her Majesty's Arse to announce that the rules will be expanding to the whole economy, not just the public sector.

[rototype]

Re: Wait until next year..

"Therefore, expect Her Majesty's Arse to announce that the rules will be expanding to the whole economy, not just the public sector."

As far as I was aware that was always going to be on the cards, hit the public sector this year and the private sector next year.

Funny how the amount they hope to raise (£440M) seems to be about the same as they expected to raise from stopping Umbrella companies allowing contractors to claim expenses. I sense that they'll probably just about make as much from this as they did from the umbrella 'clampdown' so will want to somehow make even more the following year with another hair brained scheme.

[Anonymous Coward]

Door....horse....bolted

It's not as if the politicians are accountable. It's only tax payer's money they're wasting.

:(((

[Anonymous Coward]

Giving up

Personally, I'm giving up. Reasons?

- The government department I'm with is offering a pretty good (for a permie position) package for me to continue. I get paid leave, personal and sickie, and I think the sheer novelty should be fun for at least a few days.

- I get HMRC and its hostility to all PSC contractors to now concentrate on my career's past rather than the present and future.

Sure, I get a 25%-30% drop in income -- but I'm going to suck it up. At least for a while: with Brexit coming I can see decent contracts starting to dry up, and with this scary-as-f**k HMRC hostility, I seriously need to take stock and see what's going to happen, to the country, economy and to me personally.

I have a foreboding that it's not going to be good, so perhaps the stability of a guaranteed income is not something to be sniffed at. (Besides, I have a family member about to shuffle off this mortal coil way before his time, so I'm kind-of morally tied here in Blighty until that happens anyway.)

But then, friends, I'm off; it breaks my heart, but this country is getting eaten, and at least I have dual citizenship and a place I can go...

[hoola]

Stupid Questions

So all these contractors are dumping their existing contracts early. Is there such a shortage of contractors in the private sector that they are all going to get work?

Is everyone paying paid so much that they can afford the uncertainty of no work as there is now a glut of people looking for contracts?

One assumes that rates will drop as there is a now a glut of people looking for contracts. It is not just the Government or HMRC shooting themselves in the foot. It is the contractors who often go round leaving a trail of barely completed, badly executed and poorly document work.

Prepare for the down votes but I se the other side. We are forced to use contractors whom we pay stupid amounts of money to because we supposedly don't have the resources internally (we do!).

Very occasionally we get one who is good but most have a very over rated opinion of themselves and are not worth the money.

[Ramjet]

Re: Stupid Questions

I humbly suggest rather than venting your ire on the contractor/consultants (there is a difference!), you instead take up your perceived grievance with your hiring management.

A point I would make with your assumption - you seem to forget many of us working in the contract market are away from home, some like me for extended periods, and only by working for ourselves can we make the finances pay with hotels, B&B's, travel etc. Staying with a client and ending up with less than you paid out to work there is not good business sense, is it?

[Lotaresco]

Re: Stupid Questions

"most have a very over rated opinion of themselves and are not worth the money."

But enough about permies...

Seriously though, I question most of your claims. Contractors can only exist if there's some value to a business in using them. Part of the attraction is flexibility. Some skills are only needed briefly for a particular phase of a project and it makes no sense to employ someone who will later have to be laid off. Some skills are so niche that very few people have them - try finding an Arcsight engineer, for example. Also it's easier to get rid of a contractor, most contracts specify a contract cancellation cause.

I've heard the rhetoric you spout before from permies, and the response is "If you think you are that good, and you are envious of the contractor day rate why don't you quit your job and get access to all the Free! Money!! that you imagine exists?"

I'll also point out that you may have the skills internally (I doubt it, most permies are hopelessly out of date) but what you won't have is the resource because the skilled people are employed to do a specific job and can't be released to do something else. If they are skilled and have lots of time on their hands then their employer should either be looking to fully utilise them or dismiss them as a drain on the company.

[gnasher729]

Re: Stupid Questions

"So all these contractors are dumping their existing contracts early. Is there such a shortage of contractors in the private sector that they are all going to get work?"

There will be such a shortage of contractors in the public sector that they are all going to get work at higher rates, compensating for the tax disadvantages. Said before, contractors don't care about their daily rates, they care about what's left in their pocket. If there are more taxes to be paid, the daily rate must go up.

[TheVogon]

Re: Stupid Questions

"So all these contractors are dumping their existing contracts early"

That probably depends on if their existing contract has provision for their employer to deduct such tax at source. Otherwise unless I missed some legislation, Limited company invoices created as part of a valid contractual agreement are fully enforceable....

[Ramjet]

Hmmm Tasty!

Lets hope that recipe of goose and golden egg tastes real good!

[scopesoft]

No problem paying tax. Not happy the Government fritter it away on pet projects like foreign aid

[scopesoft]

Zero hours contracts

A recent TUC survey stated that zero hours contracts lose the Exchequer around £2 billion of lost tax. Not seeing much being done to fix this. Makes £400 million small fry

[EnviableOne]

The problem is Agency agrees Rate A, with client (GOV.UK,) Client pays agency A+VAT,

Agency Pays Contractor's PSC 0.8A + VAT

PSC must produce paperwork along with hassle as well as Accountants and lawyers to pay, offset some of the VAT, Pay insurance, pay mileage, pay accommodation, pay part of the remainder in Pay, on this, pay Employers and Employees' NI, PAY compulsory Workplace Pension contributions (Employee and Employer) and Income tax and Student loans.

On the remainder, pay corporation tax then Dividend tax.

final take home is approximately 0.48A if you are lucky, probably closer to 0.4A

[alanjpraha]

Then do something significant . . .

. . . Leave the bloody country! Fourteen years ago I got so sick and depressed with all the IR35 nonsense I asked myself 'do I want to continue working my arse off here, to be called a cheat?' The answer was obvious - I left. And with Brexit, and people like Miss May and Oaf Johnson running the country, there's no way I'm coming back. Europe is a much better place to live and work, and so are many other places - look around!

[TheVogon]

Re: Then do something significant . . .

"Miss May and Oaf Johnson"

Come on, that was a great 2 fingers up to the EU! If they can make someone that we have all never heard of with "the charisma of a damp rag" president, I think we can send them a very intelligent and well educated "Oaf" that says it how it is in return....

Whatever you might not like about Boris, he is clearly not stupid as tends to be implied by "oaf", so I think you need a more appropriate insult....

See http://www.itv.com/news/london/2016-05-23/sadiq-khan-6th-most-intelligent-politician-in-history/

[Bunty Collocks]

Fairly taxed and legally protected

Typically contractors aren't self employed, they are directors and sole shareholders of a one-person limited company.

This means they pay national insurance twice, corporation tax and income tax. Sure, they jiggle the tax around by paying a combination of dividends and low wages. But, they shouldn't have to and this is what IR35 has been trying all these years to catch.

A new business type should be created that suits contractors, it needs the legal/financial protection of a limited company but the same fair pay structure as a sole trader.

[Anonymous Coward]

Recursive: see "recursive"

"In response to this, HMRC are developing an online tool that will help public sector bodies to determine whether or not the rules apply.”

Er, actually no it isn't.

Think about it.

[anonymous boring coward]

Things are going just great at the moment for ol' GB! Hurrrahh!

[magustus]

Skills Gap

tbh I think that if the traditional reason for using contract resource is reviewed and validated there shouldn't really be an issue.

Contractors are traditionally used where shortfalls in resource of specific skillsets are required at short notice. If this still applies, all the contarctors out there need do is raise their rates to cater for the loss due to IR35. If there is still a demand for the skillset then the market will pay, or failing that, it will in turn boost the focus of the employers to focus more on planning and employee development so that the need for contractors is diminished.

[Anonymous Coward]

rip off britain

My ex public sector client used to source consultants via a well known recruitment agency on a sensible margin. Thanks to the unfolding mess of SIAM towers and IR35 they will have to pay big consultancy rates to keep on existing staff. From approx 500/day to at least double that as of April. Congratulations to the treasury for this brilliant piece of accounting.

[neil-t]

Retrospective tax

Just to cap it all, HMRC have been threatening to go back over PsC accounts where contracts were outside of IR35. So expect some massive tax bills if you've had public sector clients and stayed through the transition to a psuedo employee without rights.

[steviebuk]

So the government wants to go "cloud" and "digital" yet also wants to screw up the very people that will help and support them in that goal.

Very clever.

Idiots.

[David Roberts]

Is this just an IT issue?

If my hazy memory serves me, one original aim of IR35 was to sweep up the vast numbers of low paid cleaners and building site workers who were forced to work as "self employed" thus saving the firms using them both NI and all the overheafs of PAYE, holiday, sick pay etc.

IT people were swept up because they worked under the same tax structure.

I assume that eventually this will be used to try and sweep up all the Uber and similar "contractors" who do so much for infrastructure like working for all the parcel firms which keep Amazon in business.

To my mind this is a worthy aim because the very low paid are being massively exploited and the need holidays, sick pay, minimum wage and pensions. Also other things like redundancy, maternity leave.

IT contractors are both collateral damage and a nice Brucie Bonus.

As for the public sector doing this, it must be a trial run. The money to pay contractors comes from taxes. Either the contractors take an effective pay cut or the rates go up and the extra tax income is matched by the extra costs. The money just goes round in a closed loop.

Finally it is easier (politically) to go after many individuals who don't have the resources to fight back instead of tackling the big consultancies who will probably be ypur next grateful employer (especially if you are a senior person in HMRC).

Private Eye is always worth a read.

[Charles Smith]

I turn down contracts

I turn down contracts where the client wants to treat me like an employee in terms of fixed hours, sitting at their desk and consequently exposing me to IR35 nonsense. If they want me and my skills they have to pay consultancy rates and I work from my own office.

If clients expose a contractor to IR35 they should also be directly contributing to the contractor's pension pot and provide employee insurance.

[Anonymous Coward]

New Tool Available and its a farce!

The tool is available here: https://www.gov.uk/guidance/check-employment-status-for-tax

Basically, If you have the right of substitution in your contract and the end client agrees with it, then you are shown by the tool to be outside the legislation!

Everyone knows that substitution is only one small part of the accumulated case law surrounding IR35, but the tool seems to ignore everything else if you have the right to substitute.

In my estimation, that would put most contractors outside the legislation, so where is the extra tax revenue promised going to come from???

HMRC, when you unequivocally, absolutely need some thing FUBAR'ed!!

[Paul Nolan]

Re: New Tool Available and its a farce!

Here is the output from my filling in the tool questions.

Which of these describes you best?

The worker

Has the worker already started this particular engagement for the end client?

Yes

How does the worker provide their services to the end client?

As a limited company

Is the worker or their business an office holder for the end client?

No

During this engagement has the worker's business arranged for someone else to do the work instead?

No - it's never happened

Would the end client accept the worker's business sending someone else to do this work instead?

Yes

Would the worker's business have to pay the person who did the work instead of them?

Yes

AND THE RESULT BASED ON JUST THESE QUESTIONS?

The intermediaries legislation does not apply to this engagement.

HAHA no one is inside IR35 if they have the right of substitution!!

[TheVogon]

Re: New Tool Available and its a farce!

"HAHA no one is inside IR35 if they have the right of substitution!!"

That's not necessarily the case although it's certainly a good indicator.

See http://www.contractoruk.com/ir35_employment_status/

[TheVogon]

Re: New Tool Available and its a farce!

"Basically, If you have the right of substitution in your contract and the end client agrees with it, then you are shown by the tool to be outside the legislation!"

To make sure it's not abused (or even used!) the client generally has the right to vet / approve the potential substitute...

[Anonymous Coward]

Yeah, @mark65 You've got to love the tool that assesses and produces a judgement regarding your IR35 status; to help HMG depts. make the correct judgement....so that the can ignore it because its not the right answer....

I'm pretty sure its crapness (low bar) was the get out of jail free card provided by HMRC to both departments (and therefore contractors) after a clueless attempt at a vote winning ministerial announcement (he won't do that again, er) to prevent the mass exodus of contractors from the public sector and collapse of GDS principles (and therefore GDS).... but in true HMG gov. style depts. are actively ignoring that outstretched arm and have decided to fall of the cliff instead.......Nailed it!!