It's happening, tech contractors: UK.gov is pushing IR35 off-payroll rules to private sector in Finance Bill The British government is steaming ahead with plans to extend its controversial off-payroll working rules to the private sector in draft legislation published today. From April 2020, medium and large companies will be responsible for determining whether the contractors they hire fall within the scope of IR35 legislation and …
. . . who will be off to the EU within the next year, making a stonking big experience hole in what the government has available as far as expertise is concerned.
You've been told people don't like something, and you expect them to stay when their expertise is useful anywhere ? If they are intelligent enough to fend for themselves, they will not blink at the prospect of expatriation to a place that doesn't choke them in taxes.
That's not exactly a controlled trial is it, unless you're comparing to your twin who had a settled childhood?
I'm not saying it isnt true, just that you cant possibly say it wasn't significant y worse (or.better) than the alternative..
My parents moved our family (four kids) back and forth between England and California several times over about a decade and a half. It wasn't all that bad.
I dunno, you turned out to be a right bellend ---->
Its a joke folks, see the icon. J.O.K.E.
I get a fair few emails for work in Germany and The Netherlands at pretty competitive day rates. Ireland not so much but I think the perm scene is not all that bad. The daft thing is, if I were to move, I would probably be better off going perm. The impetus has never been stronger - and I'm not young free or single...
Will definitely be looking into Ireland. Stupid not to.
Denmark and Sweden are expensive places to live in a large part because of higher....... taxes
Which amongst other things pays for a world class healthcare system.
You dont always get what you pay for but you certainly never get what you dont pay for...
"Denmark and Sweden are expensive places to live in a large part because of higher....... taxes"
If you are looking at work abroad the trick is to look at the costs of the local economy and the returns you need after tax to give the lifestyle you want, rather than looking at how much that rate/salary is in the UK or that the local tax rate is 40% or whatever.
(It's very true that people don't actually want money, they want the things money will buy you).
I've worked in Germany and Netherlands for over 10 years now (admittedly mostly in perm jobs) and this rule has served me well, I would say for me the lifestyle in both those countries is way better than the UK, and it's a lot safer too.
More importantly the tax authorities understand their rules, and don't make them up on the fly like in the UK.
When I was contracting in the UK I had a few demands for money with menaces from HMRC, and when you phoned them to point out where their error was you usually ended up speaking to some 17 year old who didn't have a clue what they are on about, no wonder they lose so often when these cases go to court.
Also you notice a difference in attitude from the tax authorities, the letters you receive tend to be fairly polite and business like, whereas the tone from the UK tax office tends to be "Listen you sniveling little serf, send us money or we will burn the thatch on your hovel and turn your family out into the snow", the UK is called a "Kingdom" for a reason, in other countries you are a citizen, in the UK you are a "subject".
Glad to be out of the UK madhouse, especially with King Boris's coronation incoming and the continuation of the Brexit soap opera.
in other countries you are a citizen, in the UK you are a "subject".
Not true. The status of "British subject", which applied only to overseas non-residents anyway, was abolished 30+ years ago. Look on a British passport, it clearly states "British citizen".
My experiences of dealing with the UK tax authorities have been generally positive, and a far cry from the unhelpful incompetence of the French ones, for example.
"I get a fair few emails for work in Germany and The Netherlands at pretty competitive day rates. Ireland not so much but I think the perm scene is not all that bad. The daft thing is, if I were to move, I would probably be better off going perm. "
Not sure if that's still the same as 10 years ago, but used to be if you're an expat perm in the Netherlands and the company shows that they couldn't hire a Dutch equivalent, you can get the so-called "35% ruling" that allows you to get (IIRC) 35/135 of your salary tax-free for the first 3 years
In the past couple of years I have worked in the UK, Denmark, Sweden and Norway (non-EU), all billed in the UK on a limited company basis.
In the past week alone I have turned down opportunities in the UK, the Netherlands, Germany, Luxembourg and Ireland.
Don't blink - just go where the work is.
"who will be off to the EU within the next year, making a stonking big experience hole"
There is a possible upside to this - It will push up competition for those that are employed, so increases in salary and pensions all around.
. . . who will be off to the EU within the next year,
A little bit uninformed comment. A lot of them are already in the EU. There's a huge number of contractors working in Germany, the Netherlands, France, Belgium and so on with a contract registered in the UK.
making a stonking big experience hole in what the government has available
The hole will probably be in the employer expectation who are using the scheme to dodge labour rights, but they'll probably work around the issue by moving the contracts to Ireland.
If they are intelligent enough to fend for themselves, they will not blink at the prospect of expatriation ...
Trouble is that even those intelligent enough to fend for themselves don't have a lot of choices. The nomber of contracting jobs is rising all over Europe because the schemes brought in by British capitalism worked very well to erode labour rights.
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"I'm moving to Singapore next month. We also don't want any more propaganda, anti foreigner sentiment that makes our employees feel depressed."
The punishment for illegal immigration in Singrapore is a mandatory caning sentence of not less than 3 strokes and a prison sentence.
>>>The punishment for illegal immigration in Singrapore[sic] is a mandatory caning sentence of not less than 3 strokes and a prison sentence.
Sounds like Daily Express/Mail reader heaven! No wonder Dyson's heading out there.
"We also don't want any more propaganda, anti foreigner sentiment that makes our employees feel depressed, or any more terrible humans as prime minister."
So you're going to SINGAPORE?
Must be a joke, but I don't see the punchline ...
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As a native married to a foreigner, I have the greatest sympathy with all the shit that migrants are blamed for at the moment.
I only see one positive coming from this whole mess, if/when the shit does hit the fan in the next few months. Companies will go bankrupt, factories close and redundancies start rolling in by the tens of thousands.. it will be the people who voted for it that get impacted the most, I will take perverse satisfaction seeing the shit and misery returned to them ten fold!
I've got an epic stash of popcorn and an industrial microwave on stand by.
>>> "they will not blink at the prospect of expatriation to a place that doesn't choke them in taxes."
Why-on-Earth would employers in the EU start hiring from 3rd country states instead of from within the EU?
Brexit means Brexit. It's what The People voted for.
All that will happen is that I will say that "sorry, your daily rate is not enough and you need to add another 25% to that figure". So long as Accenture, Capita, Speria etc. all understand that then my only regrets are with the poor bloody taxpayer/client as it is they who will ultimately pick up the bill.
If they are intelligent enough to fend for themselves, they will not blink at the prospect of expatriation to a place that doesn't choke them in taxes.
The level of tax that will become due, even with a bad accountant, is nowhere near brain drain levels - it won't even reach permie levels of tax because of expenses being taken before tax and we all know how fungible they are.
That's not to say I agree with the changes, but there will be no brain drain due to this. A few Europeans might go home, but its unlikely - comp here is higher than available in much of Europe and taxes are generally comparable or better here.
Read the legislation. If you're deemed inside IR35, then tax is taken as the money passes through the intermediary (agent) or client, before expenses are taken. There is an allowance of 5% for expenses that will barely cover accountancy costs.
If you want to claim expenses, you will have to pay from your taxed income, add it all up, and then quantify them on your tax form, making it less likely that you will get them allowed by HMRC than if you are a permie (and you will have to wait until the end of the tax year).
If this comes in, it will kill working through personal service companies absolutely dead!
Whatever the rights and wrongs of the government's actions, contractors (and the organisations using them) will need to adapt their practice or employment choice - or, yes, if they feel that strongly - move abroad. But that is hardly an existential crisis for IT.
No gaping hole tbh; people who don't want to be taxed like everybody else and don't want to make the effort to adapt don't have the monopoly on talent and intelligence, and won't be missed much if they bugger off elsewhere.
The contractor has to prove to a prospective client that they pay Tax and NI through their own company otherwise they'll get taxed at emergency rates until you can prove it..? What if the client decides that your proof is not good enough? You end up paying double tax and NI. Brilliant if you don't mine me saying so.
It is little wonder that the Indian Consultancies are bringing more and more people over to do the work that we'd have done in the past. Obviously IR35 does not apply to them now does it. Companies will take the easy way out.
Who'd be in IT these days eh?
So glad I got out of the whole emplyment game in 2016
"You end up paying double tax and NI."
No, you won't. You'll pay a large up front amount in Tax and NI which will be refunded when you complete your SA100 return.
Exactly as per today, all employees (PAYE or PSC) are taxed using exactly the same rules, so if you earn £50,000 then you pay tax on £50,000. The difference is when you settle the tax bill, monthly as you earn it, or nine months after the end of the tax year in which it was earned. So you could be overpaying in the first month and getting a refund 21 months later.
Its an known issue - Loss Aversion.
If you have the money in your account and you need to pay the tax man, then you feel like you are losing something that you own - your are becoming poorer. However if you pay the tax upfront and you ask for a refund you feel like you are getting a bonus. However it will be very challenging moving from one model to another.
In the old days, I could understand giving people 9 months after the tax year is finished to finalise their accounts and pay due tax. However in this digital age, it doesn't make much sense. I would be in favor of reducing this for all companies. The biggest and most complex companies will have very good tax systems and know precisely what they are meant to pay. That is how the manage to reduce their taxes. The IT systems that manage this pay for themselves.
"It is little wonder that the Indian Consultancies are bringing more and more people over to do the work that we'd have done in the past. Obviously IR35 does not apply to them now does it. Companies will take the easy way out."
Getting Indian consultancies to deliver any sort of maintainable / working system is definitely not easy!
It's worse than that - Indian consulting companies mostly pay little or no tax for their Indian employees' UK wages when they're onshore in the UK. I worked for one such company and HMRC give them a tax concession for bringing in workers to plug a "skills shortage" (and they do it for all of foreign companies plugging a "skills gap"), besides we had to train most of them once they got here.
The concession is that the foreign workers pay no PAYE or National Insurance on the wages for the first year and then some NI in the second year, so all the Indian company would do is send the worker back to India after 2 years and replace them with another with all the clock now reset for all the tax advantages on wages.
This surely would create a skill shortage amongst UK nationals because a UK company can't compete with Indian company with a big tax advantage. It also deprives the government purse and then we're expected to plug it!
This is effectively the same as a company asking for voluntary redundancies... anyone with saleable and transferable skills and the ability to move (overseas) will take up the chance and leave the less able behind. Great short term for tax and NI income to the treasury, terrible for the country in the long term.
People who voted leave / total 37.442%
People who voted remain / total 34.712%
Did not vote / total 27.791%
So by your argument, 62.5% did not vote to remain.
(Data sourced from https://en.wikipedia.org/wiki/Results_of_the_2016_United_Kingdom_European_Union_membership_referendum)
In most developed democracies, a referendum to make major constitutional change requires a representative majority ( >50% of the electorate), or even a super majority (usually 60-75% of electorate). Leaving the EU, and all it associated costs, should be classed as major constitutional change so why was, at least, a representative majority not enforced?
Parliament gave the people a NON-BINDING referendum on whether the populous thought being part of the EU was a good or bad thing. This is nothing more than an opinion poll and so positive and negative options were provided.
The Government overrode Parliament and made the poll BINDING. This decision had severe consequences, aside from undermining parliamentary democracy.
1. Once binding, it should have been a one horse race - "Do you want to change the constitution?"
2. ONLY "Leave" votes should have been counted
3. The decision to leave the EU should have only been taken if (at least) >50% of the electorate voted to do so.
The shit storm the UK is now in should never have happened if democracy had been respected.
"4 We can no longer blame Brussels. This is perhaps the most important point of all. If we left the EU, we would end this sterile debate, and we would have to recognise that most of our problems are not caused by “Bwussels”, but by chronic British short-termism, inadequate management, sloth, low skills, a culture of easy gratification and under-investment in both human and physical capital and infrastructure."
- Boris Johnson (apparently a good reason to the leave the EU...)
Source: https://www.telegraph.co.uk/news/politics/10052775/We-must-be-ready-to-leave-the-EU-if-we-dont-get-what-we-want.html
"In a 52-48 referendum this would be unfinished business by a long way."
- Nigel Farage (pre-referendum ...now post-referendum a 2nd referendum is undemocratic?)
Source: https://www.bbc.com/news/uk-politics-eu-referendum-36306681
In most developed democracies, a referendum to make major constitutional change requires a representative majority ( >50% of the electorate), or even a super majority (usually 60-75% of electorate).
Which should, of course, have been done when the attempt was made to create the EU out of the European Community by the Maastricht treaty. UK citizens weren't asked, others (France, Denmark) barely scraped through on 50+ %. You can't expect to have a supermajority vote to leave when there wasn't one to join, that would be undemocratic.
This is nothing more than an opinion poll and so positive and negative options were provided.
The Government overrode Parliament and made the poll BINDING.
If they'd wanted an opinion poll they could have had one, instead they called a referendum and are morally obliged to respect the result. If the vote had been 52% to remain I don't think you'd be complaining about it quite so much.
Everybody ignores the fact that the UK never voted to join the EU, they voted to join the EEC, which was a totally different beast. So this was the first vote on the EU and a majority of those who voted said we do not want it, those who did not want can be regarded as not caring either way.
In which case we have not had a true government for as long as I can remember (not had a majority of ALL the electorate). Be more exact, a majroity of those who voted said leave, so by normal standards in the UK, that means leave. You know what they about those who try using numbers to make their personal case....
Nigel is thst you?
Do you honestly think that, or are you just EveryArmchairCriticDailyMailReaderEver who thinks they sound intelligent if they try and make themselves 'better' than politicians?
If MPs (sorry Nige I mean the 'political elite') wanted only to win elections then by all accounts they'd be building walls and locking children in cages because that appears to be all the rage these days, but instead they argue for their principles and you want to fling stones at them for it?
What makes you think MPs argue for their principles? Some backbenchers do, no doubt, but anyone with any ambition spends their day sucking up to the whips and to the ministers. Just look at all the spineless wankers grovelling around Johnson at the moment, giving weak excuses for dropping their previous stances on policy or candidate in the hope of either keeping or getting a cabinet job.
Sure. Parliament is more backbench than front bench, but with about 95 ministerial posts up for grabs when the ruling party has 312 MPs, how many of those want to hang on to their positions and how many of the remainder want to gain them? Do you think it would be fair to say that probably less than half don't have such an interest?
Let's see a breakdown of those figures by department, and the split between tax and NI, shall we? Genuinely interested to see which government departments have ruled the most contractors inside IR35. Particularly interested in HMRC and DWP as I know freelancers in both who are on projects where practically everybody is outside IR35.
I returned to a public sector engagement (not one of the two you mentioned), in which the organisation has deemed that all contracts are within IR35. I told them it would take a 40% increase in rate (from the previous non-IR35 engagement) to make it worthwhile, expecting them to decline. They did not.
So... HM Gov dept pays me 40% extra, then another Gov dept reclaims this in tax and brags about how much money they have 'made'. Durrr...
I can see the private sector simply doing what we all hoped they would years ago, and tailoring contracts and working arrangements to be firmly outside IR35, as I can't see them rolling over and paying 40% extra so easily.
It is intended to ensure that two people working side by side in a similar role for the same employer pay the same employment taxes.
When Amazon and Google use perfectly legal tax loopholes to pay less tax, there is a general outcry "not fair, make the bastards pay more", yet when self-employed contractors do the same thing, and the treasury tries to pass legislation to level the playing field, the outcry is "not fair, I'm going to emigrate".
Why the difference? Because making "them" pay more is OK, but making "us" pay more is not?
You're comment ignores the fact that Amazon and Google are corporations with no living expenses while independent contractors may be working independently for reasons besides just income.
Maybe they can't travel/relocate to a major hub (e.g. maybe HP just fired them). Maybe they just enjoy switching jobs regularly.
Either way, independent employment has risks not associated with full-time employment. Of COURSE you won't make as much being a full-time employee, the company owns you (although they excuse the difference as "benefits"). When you're an independent contractor, you have all the responsibility. You also get to claim a lot of expenses as business related. When you're full-time, it's your employer who sees those benefits, thus you pay more in taxes for each dollar earned than a contractor who spends some of that maintaining their business.
If independant contracting pays better, why not just switch to it yourself?
And P.S., maybe people are upset about this tax change because corporations like Amazon and Google STILL don't have to pay their fair share? If everyone complains corporations aren't doing their part, and then the government raises taxes on the people, the people will only get MORE upset.
Only this evening they were saying on the radio that Facebook is getting away with paying about 1% tax on its UK sales. Not exactly comparable to a small company like a PSC which has to pay 19% corporation tax on all profits.
Of course then the director of said company takes a salary which will attract income tax + NI and/or dividends which attract dividend tax.
There are certainly tax advantages to this situation over being an employee but the annual tax bill is still going to be way more than the meagre few percent (tops) that the big tech companies get away with.
But Facebook are an American company, arent they? So why would it not be the US that the profits end up in, in the absence of any movement of goods.
Take so.ething lime Starbucks and I see a different story
They are buying coffee and sundries and selling it, it's clearly a UK operation. But Facebook do admin in the UK, they dont make their product here, the R&D is in CA, so the essence of the business is US no?
we pay a fortune in tax
And what percentage of your income was that? That's the question which really matters, not the size of the bill.
I can live with the fact that some superstar footballer is earning ten million a year, but if his tax bill is only ten percent of that then I'm going to think he's a thieving cunt.
"So all you get for doing the same work as a permie is no rights and about double the money, before tax. You can choose either. The option no longer available is double money and fuck all tax"
Where are you getting your "fuck all tax" from? I can GUARANTEE that I pay more tax than ANY permanent employee in a similar position to me.
Tell you what, you do the following.
Work inside ir35, with no holiday, no sickpay, no pension
You haven't got a clue what you are talking about.
We pay more tax, raise vat and pay NIC also.
This is a government who knows absolutely not what they do and they are just palling up to the big consultancies who will now move in and make a killing.
10s of thousands of ltds will liquidate and they'll loose corporation tax AND vat being raised on 0 sum flat rate schemes.
Its a net loss when you work it out, not a gain.
This is a gross attack on the contracting market because people think we are dripping in gold and dodge tax. neither are true. This is the politics of envy
No because I will earn much less, I mean you now have two reactions people will put up their rates to compensate so contractors go up to a minimum of 600 a day, or you can go to a consultancy for 2k a day, good luck with that because most businesses won't know what to do because we don't want to work for them as perm staff, we'll then start doing Fixed rate work but we'll charge more for it. This is badly thought out it failed in the public sector and you've no need to be envious its possible I'm not going to loose that much but I loose the flexible working don't think for a moment we'll convert to perms. We did that and left.
Again showing you have no clue.
Being found inside ir35 means you are designated an employee for tax purposes, you are not entitled by law to holiday pay, sick pay, paternity or maternity, so tell me again why is this fair ? We pay the same tax from one pot (you lose all the tax my company would pay and vat i would raise). You will get less paye from me and the nic is paid by someone else so thats 0 sum. Would you work under this.. of course you wouldn't. Its a cash grab and is grossly unfair. It is because they are unable to do proper tax reform which I personally would welcome, IR35 isn't and never was a good piece of legislation
Being found inside ir35 means you are designated an employee for tax purposes, you are not entitled by law to holiday pay, sick pay, paternity or maternity, so tell me again why is this fair ?
IR35 exists to prevent people who are de-facto employees being treated like contractors.
There are two cases here:
1) People who are claiming to be consultants so that they can be paid a large fee without it being treated as salary subject to income tax. That's the allegation made about some BBC presenters, for example.
2) Companies who prefer to treat people as contractors so that they don't have to pay all the benefits that would be due to employees.
Neither situation is acceptable.
If you're being "found inside IR35", i.e. effectively an employee but not treated as one, then I agree, it's not fair, and you should either work with your customer to hire you as an employee, or fix the business model of your consulting company. That is the company which owes you holiday pay, sick pay, paternity or maternity leave, by law.
Just complaining that it's not fair isn't going to garner a lot of sympathy.
Work inside ir35, with no holiday, no sickpay, no pension
You haven't got a clue what you are talking about.
If you're self-employed then you are both employer and employee. As an employer it's your job to provide for pensions, vacation and health cover for your employee (i.e. you). If you can't do that properly as an independent then perhaps you should be a permie? I know all too many "contractors" who raked in the cash, splashed it on fancy apartments & parties while laughing at wage-slave permies. Until they saw retirement age approaching and realized that they should have been saving... Too late now.
Demanding to pay less tax as an employee because your employer (yourself) isn't competent to arrange adequate benefits is a ludicrous position to take. If you're doing the same job as a permie you should pay the same tax as a permie. The rest is a matter of having a properly-run business, whether it's a big corp or a one-man-band.
"Demanding to pay less tax as an employee because your employer (yourself) isn't competent to arrange adequate benefits is a ludicrous position to take"
You're missing the point.
Under normal circumstances my company would be invoicing x amount per month, paying me my out of pocket expenses and then paying 19% corporation tax on whatever is left over , the remainder (Net profit) then gets split up saving some for the companies expenses and some for times when I dont have any work on (either through choice, sickness or holiday).
The key part here is that the company has money coming in with which it can make those provisions.
Inside IR35 my company will *NOT* be making any money from my engagement with the client as the pay will be coming to me personally from the client or the agent, so how do you propose that my company makes provisions for sick pay or holiday pay in that scenario?
Under IR35 we will be deemed to be employees of our clients, the clients will not however be required to give us the same benefits as a permanent employee.
What IR35 is doing is removing my ability to decide when I (personally) receive my remuneration and how much that is, it removes the ability for my company to build up funds for future use.
In reality what will happen will be rates will go up, clients will have to have more robust processes to put us outside of IR35 or they will struggle to get people in to do work.
"Its a net loss when you work it out, not a gain.
This is a gross attack on the contracting market because people think we are dripping in gold and dodge tax. neither are true. This is the politics of envy"
I cannot for the life of me understand why a supposedly Tory government is behaving like this. If it's to court more votes from left-wing Guardian types, it's not going to work, they're wasting their time as they won't vote Conservative even if they had exactly the same policies as Labour. All it will do is alienate their existing voters.
"I cannot for the life of me understand why a supposedly Tory government is behaving like this."
Honestly I don't think this is anything to do with party lines, because IR35 was initially a Labour policy from Blair's era with Brown as Chancellor. I suspect some civil servants and permanent under-secretaries are the main instigators and successive Governments have followed their advice, given that (as HMRC's court record proves) they categorically do not understand their own legislation.
With my cynics hat on, there is also the possibility/likelihood (delete as appropriate) that the likes of Capita and Accenture are lobbying heavily in favour of IR35 reform so that they can pick up the slack.
The UK isn't doing much leading compared to France, where they've gone ahead with a 4% tax on big Internet firms. President Chump is furious, as they're US firms and he thinks he should be the only person to impose taxes (in the form of tarrifs) on foreign firms.
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"According to the Treasury, the government has raised £550m in Income Tax and National Insurance contributions in the first 12 months since it was introduced."
No doubt this figure is juiced but also this is paid for by higher contractor rates to public bodies which is tax payers money, so basically HMRC have quite likely goosed 550mil from the tax payers, then given it back to them and expect them to be grateful?
They were always going to roll it into the private sector so the consultation was fake, it will have an impact in how flexible business can be and my rates will go up to cover any extras.
By the time you add up the loss in corp tax and vat.
Plus the increased rates the gov have had to pay.
There will be little left.
Then there is the cost of all the tribunals they keep losing as this law was bad in 1999 and is still as bad now. Waste of time and effort and will in the end kill the UK technology.
IPSE put the value of contractors to the economy at 130 billion, what do HMRC expect to raise 3-4 billion.
When it comes to do as I say not as I do; Phil Hammond's company paid short of 6K corp. tax on 1.6 million; I will bet there are a lot of contractors out there who paid more in corp. tax on a lot less.
Simple solution do not vote conservative, they are anti-business and are unfit to govern the UK.
Yep, see my reply to another post.
I am engaged at a gov dept, on a rate 40% higher than previously (when it was outside IR35). 40% -> HMRC -> Gov dept -> Contractor bill.
It's bean-counter misdirection, but they can brag about it to the press and the public with nice headline figures.
The 'increased rate' arrangement works to some extent, but it rankles that I now have to pay £1000/month from post-tax income on travel and accommodation - not something an employee engaged directly by the end-client would ever need to do.
First they create the loopholes, then they pretend to police the loopholes and eventually they give up also the phoney policing by privatising it. Obviously nothing will change. Still people working side by side will pay an arbitrary amount of taxes depending on the amount of labour rights they are willing to give up.
I, for one, am not pretending and not are many others. You obviously have little idea of how contacting works.
People do not realise that being a contractor involves a completely different way of working and thinking than being a permie. You accept that you can be told in a Monday morning that you are not required that week, or no longer required at all. You accept that you will not be paid for holidays, sickness etc. and have to budget for that. You have all the administration which comes with running your own company and the legal responsibilities of such. You can be sued for getting something wrong. Some clients don't pay, or pay late, and you have little protection against that. You spend a large amount of your time looking for your next contract.
We are not just "employees paying less tax". We are independent consultants going to a client, providing or expertise for a project, then moving on to find the next client.
"It is intended to ensure that two people working side by side in a similar role for the same employer pay the same employment taxes."
Fair enough - provided security of employment and all other employee benefits are considered a taxable benefit in kind.
If they're not then IR35 ensures they aren't paying the same taxes.
What the government has done here is to kill an industry stone dead.
It has made sure that people will no longer become contractors because there is no advantage in it. Lifestyle may be better but no longer can you work 6 months on 6 months off.
Permies making comments like "you are all paid too much" are just envious. You come and work at the risk we do, without any backing and then get told the money you earned for that, what you sacrificed all your career prospects and holiday and pension for. Oh yeah its gone because some politician had a short term tax motive.
This is going to be a disaster, all you have ensured is the big consultancies will now charge over 2k a day for a developer, because you will have no choice, because we won't be there anymore.
In the treasury paper it says "Those who are complying with the existing rules should feel little impact"
But when I was a contractor just after IR35 came in, I _was_ complying with the rules, and I didn't have to take my fees as a deemed salary.
This measure seems to be riding roughshod over the rules?
Yep, that's Government's favourite thing regardless of who is in power. If you have nothing to hide you have nothing to fear, except of course that we will use laws designed for one purpose to shaft you another way.
Meanwhile, the BBC are in blatant breach of IR35 and have been for years, but they aren't getting taken to court, the people that they shafted with it are.
I made a note in my diary on the way over here. Simply says "bugger"
Knew it was going to happen, HMRC do not care how wrong they are in the eyes of industry or the courts (I believe the current score is 14-1 against HMRC on IR35 cases). I suspect though it will be the same as the public sector rollout was, utter chaos for the first few months as most if not all contractors are terminated and then 2-3 months later they'll be back with much more tightly defined contracts.
Very sad to see the UK introduce communist policies. People have a right to operate their own companies and charge companies for their time as they please. There is no difference between the likes of someone like BT and a one man LLC. These discriminatory regulations will help the large contractors who are probably helping to bank roll the changes. HMRC is greedy and the government does not know when to stop wasting money, no matter the damage it does to workers and of course they do it all in the fraudulent commie name of helping the worker.
As an interim and contractor, I've sometimes done assignments where other "contractors" have been working continuously for several years doing routine jobs (almost exclusively in local government departments). This is obviously questionable, but quite different from the position of a specialist brought in to deliver a specific project or solve a specific problem. In the latter case there should be no question of "concealed employment" as the deliverables have a specific recognisable end point and continuity of sucessive assignments is far from guaranteed, but HMRC are apparently too dumb or too greedy (or both) to see the difference.
The result of IR35, as has been stated many times in plain English, is that the genuine contractor has all the personal taxation obligations but none of the benefits of employment, and furthermore cannot economically accumulate capital in their company as all receipts are considered and taxed as personal income. Thus the company doesn't have the option to expand or diversify, which is the essence of success in modern commerce.
Not only is the individual harmed by this, but the economy at large is harmed by inhibiting growth, and the potential for growth in tax revenues is itself blocked, all for a few theoretical millions in immediate tax revenue.
Most genuine project and problem related contract assignments last from weeks to a few months, so a stopgap solution to this debacle might be to set a threshold of contract length (e.g. 12 months) below which IR35 would not apply.
Anyone who would like to join a petition to this end might care to respond - it only takes a dozen supporters to get the ball rolling.
Select only Clients that agree in writing at the outset that they confirm Contract is outside IR35, and have a term in the contract that requires notice from them if they want to change their mind with the option of the contractor company to immediately terminate the contract in that eventuality.
I don't think an individual can unilaterally be compelled to become an employee (with or without employment rights) without providing their informed consent.
That would be something akin to slavery and forced labour. Arbeit Mach Frei.
IR35 isn't about whether you ARE an employee.
It's about whether you're PRETENDING not to be an employee but actually are.
As such, it's not enforced anything. It's proper taxation for the category that you fraudulently claimed not to be finally being applied to you.
And a client waiver will do nothing. That's like getting a waiver from your employer that you don't have to pay tax. It doesn't work like that.
If the nature of your work encompasses you under this tax, because it's changed and you've accepted that, or it was always like that from the outset, then you're liable for the appropriate tax. The taxman isn't going to care one jot about some letter that you agreed between you (that mutually benefits you both at the detriment of the tax man). They'll just find you guilty of fraud too, having signed a letter that clearly said you weren't covered by IR35 when they have determined in a court that you actually were.
Be an employee, or be a contractor. It's really not that hard.
The ir35 legislation is awful and always was. HMRC don't even understand it.
Businesses don't understand it - fact.
And actually it is murky as to whether in some cases you are a contractor or not.
The issue here isn't IR35 because its been about since gordon brown and we all work under it every day. The issue here is the change of responsibility. HMRC couldn't win cases against us because quite frankly we made sure we were engaged correctly as contractors. What they have chosen to do is to move the liability so risk averse customers will decided all their stuff is inside ir35 OR that they don't want to take the risk and so move to using large consultancies that employ people on lesser wages but pimp them out for thousands a day.
Everyone looses here aside the government. Its what governments do, but this is just a very very poor move. And business will not be able to engage people under the current model because people simply won't work under that model anymore. That will then force the relationship to be much more b2b which perhaps is a good thing. But employees we are not, and we also aren't treated like them, some places do but only fools work there.
"As such, it's not enforced anything. It's proper taxation for the category that you fraudulently claimed not to be finally being applied to you."
The interesting thing is that according to you, "you" being accused of behaving fraudulently because "you" seem to be is the same as "you" actually being guilty. That seems a dangerous road to go down...
"And a client waiver will do nothing. That's like getting a waiver from your employer that you don't have to pay tax. It doesn't work like that."
You know that contractors work under contracts right? And under contract law, any change to a contract MUST be agreed by both parties else the contract may be unilaterally terminated?
Maybe the solution for any contractor is to add a clause to the their contracts that states that, if the position is considered to be outside IR35 and then HMRC suddenly decides that this contract is actually covered by IR35, a 40% rate increase will be activated?
> It is intended to ensure that two people working side by side in a similar role for the same employer pay the same employment taxes.
Nope this only excuse to take more money.
Britain economy is doing worse and wore only and this only reason.
Everything else it is just pure bollocks.
We can all move out of the country sit on a beach setup a business in another country and contract remotely just as other businesses will outsource their marketing, seo and payroll off shore. My mate is currently in france for 2 weeks whilst working for an aussie company as a contractor and falls outside of all this rubbish seems like a good idea
The defintion of whether or not a company is classed as "small" - and thus exempt from the new IR35 regs - is easily findable (and not open to interpretation) at Companies House.
If it says "exemption small company" in the accounts filing history bit - then it's not medium or large - so, for the moment, outwith the new IR35 requirments.
As for your point about a larger one spinning off a small company, one would hope that's a possible solution.
There's simply not enough airtime being given to the scandal that HMRC's practices are the sort you'd expect from third-world dictatorships. Unlimited retrospective taxation, giving official advice to individuals trying honestly to stay on the right side of tax law and then reneging on it, and now building tools to entrap and mislead.
Coming from this as a contractor in a fairly grey area, and having consulted with a tax lawyer over IR35, I wonder if the industry could collectively bypass the current rules by rethinking contracts. I know it won't suit all organisations - particularly those using the contract market for 'temp' staff to cover roles they want to employ permies for - but giving trust autonomy to contractors to fulfill their end of contracts as specialists, rather than as 'overpaid permies' might keep the market going.
I've seen some absolute messes from someone copy-pasting sections of employment and service provider contracts which refer to people rather than companies, make references to health and sickness, working hours, notice periods and other expectations that you wouldn't inflict on service providers. I think we'd have a lot more chance of scoring IR35 wins if our client contracts referred to deliverables or statements of work - even fairly nebulous ones - and agreed costs instead.
Surely it is higher pay rates and not lower taxes that compensate for the job insecurity, lack of holiday, sick pay etc when someone is contracting?
If it is expected that tax should also be lower on contractors to compensate for the lack of benefits, then that is subsidising the companies who take on contractors. At the low end of the pay scale, working tax credits allow companies to pay below a genuine living wage. This is the same kind of corporate subsidy by taxpayers higher up the pay scale.
Contracting is a commercial or lifestyle choice, not some kind of public service. If employers need the flexibility then they should pay the true cost.
Obviously I'm an anonymous coward for this post because I don't expect this is the view from the contractor community...!
Yes and no.
The lower tax is more of a side effect of the way that we are made to work.
So for me to get professional indemnity insurance to cover me to work on the financial systems for a client turning over 22m per day (and to ensure that I personally dont get sued and lose every thing) I have to work through a limited company - I have literally never seen a role offered where the client would consider hiring a sole trader.. its just not going to happen.
The thing is the limited company acts as a buffer, the money paid for your time doesnt belong to you, its the companies money - this is where the problem creeps in. As the money belongs to the company and you own the company you can take the funds as dividends and salary which means you can LEGALLY reduce your tax liability.
Its that *LEGALLY* that is important. Not all contractors choose to to this, you could if you wanted take all profit as PAYE salary and pay the same tax rate as permies, this would reduce the companies corporation tax bill to pretty much zero.
To be honest I think tax reform is needed, but I dont think IR35 is the right way to go about it, for me its the loss of travel expenses thats the issue - I pay 500+ a month to get to my client, the only reason thats acceptable is that my company can offset some of that against corporation tax.
The lower tax is more of a side effect of the way that we are made to work
Spot on.
The owner of a private business, whether that is a bakery, a corner shop, or an IT contractor, can chose how (and whether) to distribute funds from their company. The current tax rules make it advantageous to draw the majority (of what is distributed) as dividends.
Running a limited company takes effort, and brings responsibilities. However, it's the only way companies will engage contractors. It's also the only sensible way to be a contractor: If you are working for a client who makes millions an hour through their website, and you accidentally screw something up which takes the site down for an hour, the client could legitimately sue you for the lost sales (something you don't have to worry about as a permie). If you were not working through a limited company, you could very well end up bankrupt for a tiny mistake.
for me its the loss of travel expenses thats the issue - I pay 500+ a month to get to my client
I've been in contracts where it cost me ITRO £2k a month in travel and accommodation, and increased my day rate by about £100 to cover it. If I needed to take that from PAYE income this would have been around half as much again, or a £3k/mo bill to the client. This is part of being a contractor: we are a flexible workforce, we go where the work is and get compensated for it. Businesses can find the expertise they need to complete a project, no matter where they are and where the contractor is. If these *legitimate business expenses* have to be taken out of post-tax earnings, businesses will either have to pay much higher rates to get the skills they need or find they can't get them.
I think the govt recognsed the loop hole as to how contractors have been dodging taxes for decades and making millions, the reason is simple if two people are doing the same job with same skill why should a permie pay more tax and a contractor pay less taxes, this is totally unacceptable, so all you contractors out there you have enjoyed your time and now it is time to pay something back. Now coming to sick leaves and other benifits, you dont get them?? so best join as a permie you get everything and all are equal - simple solution or start your own business!!!! good luck with correct taxes.
"I think the govt recognsed the loop hole as to how contractors have been dodging taxes for decades and making millions, ..."
I believe the heavy use of the Limited Company model by contractors came about through more rubbish conservative legislation (the inability to see beyond the end of their nose and the resulting unintended consequence); at one time in the building trade firms were employing labours as self employed; the labours were paid without stoppages and subsequently paid no tax; legislation was introduced to throw liability for unpaid taxes back onto the firms employing the labours; this impacted all sectors with the result contracts would not be contracted unless they worked through some sort of company entity (i.e. avoiding liability for any resulting unpaid taxes); working through a company was forced and any resulting tax advantage is the fault of the conservative government of the time!
I wonder what will happen with the latest legislation?
The original IR35 looked like the End of the World As We Know It. But then people who were familiar with this area of tax and employment law pointed out that Inland Revenue (as they were then) had a consistent record of failure when trying to prove employment status. And so it transpired: you can count HMRC's IR35 successes in the intervening 20 years without taking your shoes off.
It's a measure of the value of contractors to UK business that IR35 was absorbed without disruption. The new rules will probably be similarly accommodated. Most companies that hire contractors don't do so because they can save on the tax bill, but because they can avoid long-term commitment or because it's the only way to obtain rare skills. They won't like paying more, but their needs remain the same, so they'll either just increase rates or, more likely, devise a set of arrangements that satisfies the new requirements.
You're either an employee. Or you're not. If you are caught in the middle it means you're working *as* an employee, for a sole employer, for an extended length of time, and get all the benefits of that, while also trying to not pay the tax that you would have to if you were an employee. And you do this by pretending that you're contracting round when actually you're working for one place, at one time, for - say - one year, and just don't want to be an "employee".
IR35 should have caught up with you years ago, for sure you've had plenty of warning that it was happening.
Work as a contractor, without employee benefits or restrictions, or become an employee and pay your taxes.
If you're working "as a contractor" and this hurts you - get employed by the client, or raise your prices.
As you say "You're either an employee. Or you're not.". There is no "caught in the middle".
IT employees typically have extended notice periods, paid holidays, they often get full pay during periods of sickness, are entitled to maternity pay, have grievance procedures, union support, often there are counselling services, private medical benefits, dental insurance etc. To support those employees corporations need to provide HR functions, payroll, work space, tools etc. The cost of an employee is as much as 2.5 times their annual salary.
Contractors generally get none of the above, but can receive a higher level of income as a result. They can often be dismissed at a moments notice without compensation. They have to charge VAT and may have to wait to have their invoices paid. They take the risk that the agency or client will make the payment and have no protection if they do not.
There's a clear differentiation between contractors and permanent employees, and IR35 is simply a tax grab by a bully government, introduced at a time when the government was transferring to using major consultancies for IT services, who I assume drove the legislation in the first place in an effort to prevent the mass exodus of their often poorly treated employees.
IR35 has never really generated much in the way of revenue. It's a pointless tax designed in a world of large multi-national corporations to suppress entrepreneurs. A relic, like the Iraq war, of the worst excesses of Blairism.
The solution is simple enough. If you're a contractor and the client offers you a contract inside of IR35, turn it down and recommend they hire an employee. They'll soon change their contract terms. This is especially the case with HM government by the way.
I must have missed something. Given I no longer work in the UK perhaps not a surprise.
But doesn't IR35 already apply in the private sector? Surely it just means businesses will now have to ensure their contractors fall outside IR35 rather than leaving it up to the agencies or contractors.
And since those businesses are generally responsible for the contracts they write, this actually sounds like a positive in some respects, because instead of having to battle to get a contract that lies outside of IR35, the businesses themselves will make sure of the terms do so. Otherwise they might just as well hire an employee - which I suspect is really what the government wants.
"But doesn't IR35 already apply in the private sector?"
Yes, you are correct, it does.
"Surely it just means businesses will now have to ensure their contractors fall outside IR35 rather than leaving it up to the agencies or contractors."
Well, sort of... but how many just took the agency contract. Under the new system, they just state "all in" - its easier / less risk to the.
"And since those businesses are generally responsible for the contracts they write"
See above.
"the businesses themselves will make sure of the terms do so"
And here's the detail... the contract is less relevant than the working practises. So an "IR35" friendly contract is a fiction.
"Otherwise they might just as well hire an employee"
Why? Engaging business still wants the flexibility of hire/fire as budgets/projects dictate. this just means the costs will be a bit higher. They still don't have to give employment rights etc. So they will not take the permie over the inside IR35 contractor
Its a shit show.
The issue here is that many companies don't understand whats going on and are having to take specialist advice.
The real problem here is that liability shifted from us to them, meaning if they don't understand it or are risk averse they will simply no longer hire contractors. They will use large consultancies it will be more expensive but it is flexible.
So yes this isn't the introduction of IR35 as so many keep stating this is the changing of liability of who pays if an ir35 decision is found not to be true.
Story about MegaCorp not paying all taxes due - Commentariat says "BWAAAH - PAY YOUR TAXES!".
Story about tax laws changing for fake self-employed - Commentariat says "BWAAH - I'M NOT TECHNICALLY EMPLOYED!"
If you think corps should pay their correct taxes, then that sentiment also applies to you! Raise your day rates, and don't accept roles that don't pay enough to cover sickness/holidays etc - it's really quite simple.
They also don't get the same fucking rights. No paid leave or holiday you cocks.
"It is intended to ensure that two people working side by side in a similar role for the same employer pay the same employment taxes."
And I also, could be wrong, they don't get the company paying into a pension for them either.
There is literally zero "VAT raised" by IT or similar contractors unless they are working for a consumer who cannot reclaim it - hardly likely.
VAT is invoiced to the, ahem, "employer", OK, Buyer. The buyer reclaims the VAT in full. End of story.
Oh, actually it isn't the end of the story because some contractors leverage a flat rate VAT scheme to actually retain a small sliver of the VAT they charge. Yet the buyer still reclaims the full amount of VAT. So this is in fact a net loss to the Exchequer. This only applies to contractors who don't get a benefit from reclaiming VAT on their purchases (because their purchases are so much lower than their sales).
I'm sure most of those whinging about the 'exhorbitant contractor rates' here have never been contractors and experienced what it really means. It can be good money but it definitely takes it's toll in other ways as many have outlined.
I can confidently say that contractor productivity is significantly higher than their permie counterparts in most cases as the motivation is quite different. You stand on your own merits and only get rewarded for your own direct efforts, and you have to stay ahead of the game with the tools and business practices.
I've been on both sides of the fence and permie's take the piss in numerous ways, through sick (i.e. a terrible fecking hangover, or just can't be arsed) leave, over inflated overtime, self promotion on the back of others efforts, being obstructive to save their own positions etc etc, etc.
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