back to article GlaxoSmithKline ditches IR35 contractors: Go PAYE or go home

Contractor organisations are insisting the Tory government sticks to promises to revisit IR35 reforms as it emerges that GlaxoSmithKline is ordering contractors to switch to pay as you earn tax arrangements or leave the company. In an email dated 11 December sent by the pharmaceutical giant to its base of freelancers, GSK …

  1. Lee D Silver badge

    "Vessey noted that Glaxo risks losing experienced and skilled staff with detailed knowledge of the firm's systems"

    That's true anyway.

    And a salaried member of staff is far better in that regard that a random contractor who's in and out of all your competitor's systems too. I mean... they are contractors, right? So they only work when contracted, right? So they could disappear as soon as that contract ends, right?

    IR35: If you're affected, raise your prices or go full-employed. It's really not that hard.

    1. cambsukguy

      True, if it is super-important design etc. don't trust it to a contractor unless it comes with serious design docs/seminars etc. to pass on the knowledge at that time (not when they given notice for instance).

      Sometimes internal people just don't have the skill-set (and the company may not need that design skill in future - much). But, it may be much easier to pass on a design to someone else.

      It really is much easier to maintain well-designed code that it is to design it in the first place.

      Contractors have a place for this sort of thing.

      Most of my contracts in the past few years have been 'fixing' systems that don't work or are super late, mostly because the in-house staff, some of whom were intelligent enough, were just in-experienced for instance.

      Some are just not good enough of course but were entrusted with the task anyway.

      Btw, many contractors of my experience are also not good enough for they are doing, it is not a permie thing, it is a person thing.

      1. Gaius

        Sometimes internal people just don't have the skill-set (and the company may not need that design skill in future - much)

        Cost of a contractor vs cost of a training course and having those skills on tap if they are ever needed again. Should be simple maths.

        1. James 139

          But training courses dont bring experience, they just bring knowledge, and sometimes not even that.

        2. Gordan

          You are not buying the cost of a training course when you are hiring a contractor - you are buying a decade or two of experience. You cannot magically imbue that into an employee you already have in time for a project you have to deliver in less than a year.

    2. Hans Neeson-Bumpsadese Silver badge

      IR35: If you're affected, raise your prices or go full-employed. It's really not that hard.

      Makes total sense.

      Various companies I work for routinely review their prices and pass increases in therr costs on to me. Acme are supplying me with pre-fangled widgets at £10 a pop, having sourced un-fangled widgets from their supplier at £5 a pop. Their supplier ups their wholesale price to £7 due to price fluctuations in the international widget market, then I understand why I might well end up paying £12 instead of £10.

      If a contractor's costs, in the form of taxation, go up then it makes sense to just add that to their rate to the customer.

      That becomes the going rate for contract labour. It's then up to the employer to decide if they'd rather pay that bit extra and retain the flexibility of contracted labour, or commit to employing staff.

    3. macjules Silver badge

      Really very simple. Small businesses with less than 50 employed staff (or 49, depending upon which HMRC manual you read) are not affected. GSK could set up a small independent contracting company, like IBM have done, which then sources contractors to carry out work which it gets from GSK. There might even be a tax break in there somewhere for GSK. There is no upper limit on contractors that you can employ, so a "small" company could have as many as 10,000 PSC-employed staff.

    4. Anonymous Coward
      Anonymous Coward

      I disagree. A bored shitless PAYE guy is more likely to shifty in my opinion. He also has more time and privileges to exploit....therefore greater opportunity.

      A contractor rarely has any high level privileges and once the job is done he's off and out until he's called back for more work.

      1. Richard 12 Silver badge
        Pirate

        So a contractor has an incentive to ensure they will be called back.

        If the job is something the engager doesn't understand particularly well, that's an incentive for an unscrupulous contractor to make sure it will break...

        An employee doesn't have that incentive.

        Just saying.

        1. matt 83

          yes but...

          An employee doesn't have any incentive to ever finish a project as the salary comes in every month no matter what.

          A contractor has to have something to show at the end of the contract even if it's likely to break in the future.

          1. GhilleDhu

            Muppet

            An Employee does have an incentive. Its called not being fired (re-orged/resttructured/or whatever). Also some companies do give bonuses to completed projects so thats another option. Having been both a Perm and a PSC its about what you want at the time, stability, share options, med insurance, 9-5??

    5. JohnG Silver badge

      I have had a few contracts where I was there longer than some of the so-called permanent staff. Just because an individual is salaried and has an employment contract, it doesn't mean they are any more loyal than a contractor.

      Currently, I have been subcontracted for the same end client for ten years - albeit, in different divisions and countries and via different prime contractors.

      1. ron_the_techie

        10 years that very good going, assuming those sort of lengths of contracts ring alarm bells are HMRC

  2. cambsukguy

    Yes, I can see this will be right at the top of the first cabinet agenda.

    Nothing else they need to get 'done' right?

    1. Gordon 10 Silver badge
      Unhappy

      expect that promise to be worth the paper it was written on.

      1. alain williams Silver badge

        Gov't promises ...

        with a whopping majority they don't need to worry about promises

        1. Anonymous Coward
          Anonymous Coward

          Re: Gov't promises ...

          Let me predict the official response: "We did review it, and it looked jolly good to us. Full steam ahead, and triples all round."

          Wankers.

    2. BebopWeBop Silver badge

      Is there anything else they are capble of 'getting done'?

      1. iron Silver badge

        Reply Icon

        Is there anything they are capable of 'getting done'?

        FTFY

        1. Intractable Potsherd Silver badge

          Only screwing over anyone that owns less than half of Derbyshire, just like every other Tory government.

  3. tip pc Silver badge

    Play by the rules

    "The rules state that a contractor that performs the same function as a full-time employee must pay similar tax and National Insurance contributions, even though they do not have access to the same benefits such as sick pay or holiday allowance."

    If those are the rules then, as noted by Lee D, contractors need to up their day rate or go permie and change jobs when they need to, benefiting from sick, holday and pension pay.

    1. cambsukguy

      Re: Play by the rules

      I think an issue here is that contractors doing essentially regular jobs also have a sensible place in companies, namely, doing regular work for shorter periods.

      Sometimes there is just more work than the staff can do in the time required. But, it would be nasty to lure/hire new staff to do this work and then simply fire them (or their less useful colleagues), make them redundant technically, because the work is finished.

      Obviously, this happens a bit always, companies absorb extra work, staff work later etc. and then, at other times, there is a bit of housekeeping and coasting, holidays are taken, all totally reasonable.

      But, large 'lumps' of work that need extra personnel are perfect for contracting.

      This should remain. Something like six months or a year is reasonable (because it is unreasonable to fire someone after a year knowing in advance that would be the case).

      The only IR35 solution would be to hire contractor from the likes of Logica (Capita?) that actually have jobs but get some of the dis-benefits of being contractors whilst earning a regular salary - I did this once, before I became a contractor of course.

      1. Anonymous Coward
        Anonymous Coward

        Re: Play by the rules

        Why would you have to fire them. You employ on fixed term contracts - regular workers just with a fixed end date. It's like that for many job roles to cover maternity for instance.

        Contractors working for their own one man ltd company have been prevalent in ICT but other job functions need the same capabilities but they tend to use agency staff or fixed term contracts.

      2. ExampleOne

        Re: Play by the rules

        But, large 'lumps' of work that need extra personnel are perfect for contracting.

        So contract for project, not for time.

        1. Anonymous Coward
          Anonymous Coward

          Re: Play by the rules

          I think this is where permies get confused. I'm a contractor and only work on a per project basis. It doesn't make sense for me to go full time anywhere as I'd be bored to tears and have very little to do.

          I can see what IR35 is trying to achieve, but I can also see that the rules are too vague and sweeping which is catching genuine contractors in the cross fire.

  4. cantankerous swineherd Silver badge

    "experienced and skilled staff with detailed knowledge of the firm's systems" - good working definition of a long term employee right there.

    as for the whining about "we voted conservative, you've got to do us a favour": what planet are you from?

    1. Pascal Monett Silver badge

      A planet where a promise should be made good ? They didn't vote to get something, they voted because they were promised something. It is normal that said promise be fulfilled.

      Well, normal to an idiot like me, that is. I'm not a politician.

      1. BebopWeBop Silver badge

        You said it!

      2. Andytug

        Ahahahahahahahaha.....

        hahahahaha…..<breathe>

        You seriously believe a politician's promise? Especially one with a track record of being, at the least, economical with the truth?

        Wanna buy a bridge?

        1. Anonymous Coward
          Anonymous Coward

          Re: Ahahahahahahahaha.....

          Only if it's a Garden Bridge.

        2. Omgwtfbbqtime

          "...economical with the truth?"

          The truth is valuable, you should always be economical with it.

      3. Charlie Clark Silver badge

        Election manifestos have no legal status and MPs are not delegates: two common misconceptions. The British electoral system is more tribal than most.

        1. BebopWeBop Silver badge

          And under the surface, as corrupt as most.

          1. Anonymous Coward
            Anonymous Coward

            It's corrupt sure, but as corrupt as say...the Congo? South Africa? The US? No. The UK has one of the least corrupt (albeit still corrupt to some degree) governments on Earth.

            We also tend to produce less wanky (but still wanky) leaders.

            Look at Cambodia, The Norks, Thailand, anywhere in Africa...they have some of the weakest chinned pussies ever.

            Any leader that insists on being called something, refuses to face the people or just outright hates the people is weak sauce dude.

            If like the Cambodian president, Boris Johnson tried to convince the people to call him "Glorious Commander and Supreme Leader of Glorious Nation Great Britain" or other such dumbfuckery he'd be out faster than you can blink.

            1. Anonymous Coward
              Anonymous Coward

              Corruption is corruption, it's hard to put an objective value on how bad it is from an ethical standpoint. I suspect what you mean is that some of those other governments are more obviously corrupt than the UK, which is almost certainly true, but doesn't automatically make it worse. Corruption in the UK tends to be well hidden but has the potential to be far more lucrative than anything the third world has to offer. In purely monetary terms I'm not sure we'd do so well in a worldwide league table.

        2. David Hicklin

          "Election manifestos have no legal status"

          As I understood the reporting during the election, the manifesto is important when it come to the House of lords i.e anything in it can't be blocked or delayed as the manifesto is the "will of the people", or something like that.

          Hence why they contain everything possible..

    2. John Brown (no body) Silver badge

      Not to mention that having another look at IR35 and actually changing it in favour of contractors are two very different beasts.

  5. BebopWeBop Silver badge

    Contractor organisations are insisting the Tory government sticks to promises to revisit IR35 reforms

    Ho Ho Ho (season appropriate), if by any sparrow farts chance of them following an election pledge, revisited can be ticked off by looking at the front page of the regs and throwing them in the out tray marked "NO FURTHER ATTENTION".

    1. Crypto Monad

      "it emerges that GlaxoSmithKline is ordering contractors to switch to pay as you earn tax arrangements or leave the company."

      Isn't that exactly the outcome which IR35 was intended to deliver - more people ending up on PAYE? It's unlikely government would backtrack on that, if it's what they wanted to happen in the first place.

      More likely outcome: more IT work outsourced to other countries.

      1. This post has been deleted by a moderator

  6. Mark #255
    Facepalm

    Well...

    If they don't delay, then the promise was nothing short of an arrogant and disingenuous move to secure votes

    ...I think the icon says everything needed to respond to this.

  7. Anonymous Coward
    Anonymous Coward

    "...even though they do not have access to the same benefits such as sick pay or holiday allowance".

    Sorry... but they do have the same benefits (but can be much better) they are just provided by the actual company they are employed by not the one they are contracted to. The company they work for decides exactly how much holiday they get and sets up either a self funded sick-pay scheme or has insurance to cover sickness. That is paid for with income from the higher rates that they choose to charge the contracting company to cover this.

    1. d3vy Silver badge

      Could you clarify what you mean when you say "the company they work for"?

      I need to work out how wrong you are before I comment further.

      1. tip pc Silver badge

        "the company they work for"

        that's the company the individual own's and likely takes minimum wages from + dividends.

        1. Anonymous Coward
          Anonymous Coward

          that's the company the individual owns and likely takes minimum wages from + dividends, in order to minimise the amount of tax they pay / maximise the amount of money they get in their pocket

          completed that sentence for you (and fixed the errant opostrophe in "owns" because it was annoying me)

        2. d3vy Silver badge

          "that's the company the individual own's and likely takes minimum wages from + dividends."

          That's what I thought you meant, and this is why you're wrong :

          We are talking about IR35. When a contractor is inside IR35 the company that they own is removed from the equation meaning that it has no income with which to give them the sick pay or holiday pay that you are suggesting they can pay themselves.

          Inside IR35 the contractor is no longer an employee of *their own* company [1], they are an employee of the company that pays them (ie the client - the company that the end product belongs to) except they do not get holiday pay, sick pay, pension contributions, maternity/paternity pay. Yet they pay exactly the same % Tax and NI as people who do (Actually with their slightly higher day rates they pay *more* £ than the employees who get these benefits.

          [1] Well they are unless they decide to close the company down but as the company has zero income they are unlikely to pay themselves a wage.

          1. flibble

            I’m unsure if you meant the above literally, but if you did this actual guidance seems to disagree - the default position if a contract is found inside ir35 is that the company receiving the service will make some tax deductions but otherwise pay the payment to the contractor’s own company as before:

            https://www.gov.uk/guidance/april-2020-changes-to-off-payroll-working-for-intermediaries#your-responsibilities-from-6-april-2020

            In many ways the end effect is the same as if the service company did not exist though, and admittedly in the case of a contractor only having inside IR35 contracts then it doesn’t make sense to have/use a PSC in most cases.

            It’s important to remember though that there are few if any inherent reasons why a person who does not receive holiday pay should pay less tax than an employee who does. The lower costs for the employer by not paying holiday pay etc should be catered for in the pay the former person negotiates, giving them extra income to compensate for the lack of benefits.

          2. Anonymous Coward
            Anonymous Coward

            That is not true. If you become an 'employee' of the contracting company then you are entitled to all associated rights including minimum/living wage, holiday and sick pay. If you are inside IR35 and rertain your ltd company status then taxes will need to be deducted at source before paying into your ltd company. You can then use this as tax paid in your final self assessment to HMRC. Including any tax reclaims. As a Ltd company you can still provide your staff (yourself) with holidays and sickness cover as applicable and sickness insurance can be used as an operating expense to reduce tax.

            If you choose to be an employee then ask for your rights, any reluctance will allow you to sue and reclaim your holiday as a percentage increase in rates of 12.07%.

      2. Anonymous Coward
        Anonymous Coward

        "Could you clarify what you mean when you say "the company they work for"?"

        If your confused about the meaning of that, then it might suggest that you are inside IR35. Genuine contractors all know which company they work for.

    2. Peter Gathercole Silver badge

      @AC Benefits package

      Well, the benefits are not the same, even if you set aside money to cover for sickness and insurance.

      Back when I ran my own Ltd company, I was engaged by one of the Big Banks on a contract that was to run for a number of months.

      Shortly after the contract started, I suffered a rupture of both distal brachialis tendons in my right arm (it's an age related issue that can happen if you don't warm up enough before doing some heavy lifting). Basically, my biceps were no longer attached at the elbow end in my right arm.

      I obviously didn't go into work, and attended hospital to work out how it would be treated. The only serious treatment was surgery, but that would result in 6 weeks of having the elbow immobilized followed at best by 6 weeks of physio to get the arm working again, without the ability to drive, and with some pretty serious potential side effects.

      Now I had income protection, but in order to make it affordable (at the time) it only kicked in after three months of lack of income, something I had catered for (I had money in the business account, but 3 months of paying salary would have wiped it out). But when I checked with the client, I was told that if I took that much time off, they would regard it as breach of contract, and would terminate the contract after about 4 weeks of non-attendance. At the time, it was not normal to have a clause for substitution, and my contract didn't have it.

      Now tell me that the way illness is treated is the same. Even though I had made provision, I would have significantly lost out if I had the treatment, whereas if I had been a permie, I would have been given the time off to have the treatment at a significant proportion of full pay (the sickness policy of the Bank at the time allowed that), but as I was a contractor, I would lose the contract, possibly be charged with breach of contract, and not actually had any income (to my company) for the time I didn't work.

      As it was, I decided to not have the surgery (the possible side effects were pretty alarming, including calcification of the elbow and nerve damage to my right hand), and returned to work as soon as I could safely drive. As a result, my arm functions, but it lacks strength and stamina.

      But if I had been a permie, I may well have opted to have the surgery, knowing that the time off would have been paid for as long as it was necessary.

      1. tip pc Silver badge

        Re: @AC Benefits package

        Most sick pay and other benefits don't kick in for 6 months for permies.

        1. Anonymous Coward
          Anonymous Coward

          Re: @AC Benefits package

          12 months for me. I pay some after-tax income into a private insurance scheme to give me some cover if the worst happens

        2. Peter Gathercole Silver badge

          Re: @AC Benefits package @tip pc

          That's total bollocks.

          In most large companies in the UK, you have immediate sickness cover at full pay for a period of time, followed by a gradated reducing percentage of salary for periods up to a set time (often as much as a year) followed by a review to see whether you should be invalided out of the company, normally with a payment from the pension if you are still unable to work.

          That is what I would have got from any of the employers I worked for before I went contracting, and that covered local government, education, and IT companies, and I know the bank I was engaged by had a similar policy, because soon after I returned, one of the permies went off long term sick for a period of about four months, and was supported on full pay for the entire duration of his absence.

          Over time, I've been asked to look over employment contracts by my kids, and they've all had at least some provision for immediate sickness cover above statutory minimum, which would cover some period of time at full pay.

          I don't know what company you were working for, but it sounds like you were sold a duff benefits package that may actually be against the law. Maybe you're quoting what is the insurance backed cover once the company reaches the end of the period they are prepared to cover themselves. If you're still there, I suggest you get clarification, but what you've said is just wrong in the UK.

          1. Tom Paine Silver badge

            Re: @AC Benefits package @tip pc

            That may be the legal position; it's certainly not the real world position. My last employer but one didn't allow anyone PTO on their first six months. If that's not legal, what would you suggest a new employee does about it?

          2. Rob Daglish

            Re: @AC Benefits package @tip pc

            The last large IT company I worked for had a policy where nobody got any sick pay at all until your SSP kicked in, and then all you got was SSP...

            1. NeilPost Bronze badge

              Re: @AC Benefits package @tip pc

              I presume you left working for the aforementioned shit large IT company.

        3. Anonymous Coward
          Anonymous Coward

          Re: @AC Benefits package

          >>>Most sick pay and other benefits don't kick in for 6 months for permies.

          Although that is currently untrue, give it 3 years and I'm sure the Etonians will sort that for you.

    3. Doctor Syntax Silver badge

      That is bwas paid for with pre-tax income of the company from the higher rates that they choose to charge are able to negotiate with the contracting company to cover this.

      FTFY

      And note that the "higher" income is obviously more advantageous to the client than the costs of engaging a permanent employee. That's because the "lower rate" of the permanent employee doesn't include that until you take into account the employee benefits.

  8. steviebuk Silver badge

    Sod ya then...

    ...if only I'd had the confidence to say that years ago. Anyway. That's what these contractors should say, if they can afford it, know they are skilled enough to easily get work elsewhere then I'd up and leave and let Glaxo be stuck in the lurch when they realise all their knowledgeable contractors have left. Because of their bullshit "Be perm or else" threat.

    1. Franco Silver badge

      Re: Sod ya then...

      That's what I have been saying to anyone enquiring about my availability for inside IR35 roles. Most places aren't offering any extra and will scoff if you ask, and also claiming travelling expenses isn't possible so greatly limits the areas I could do it anyway. Plus if it's inside it's probably a BAU role rather than project, so wouldn't interest me anyway.

      Lots of recruiters seem to think I'm mad for showing no interest, but the only power I have over this is to withhold my services, so that's what I'm doing.

  9. d3vy Silver badge

    "This decision means that GSK will not extend the contracts of any workers who operate through their own personal services company "

    Thats fine - I do it through a Limited company.

    Seeing as a "Personal Service Company" isnt a real legal entity - its just a term HMRC made up to mean "Small limited company that we want to tax more" I dont see the issue ;)

    1. NeilPost Bronze badge

      If you are happy, so is HMRC as the nudge on behaviour around tax has generated the desired outcome.

      It’s the others who will avoid with dividends and blowing the difference to a permie on a Porsche Macan that they are after.

  10. Anonymous Coward
    Anonymous Coward

    Why politicians get reelected

    Because people do the same thing over and over expecting different results.

  11. Anonymous Coward
    Anonymous Coward

    "or to complete or terminate your existing contract"

    Sorry, why would the contractor choose to terminate the contract? Surely that agency/client need to terminate it?

    1. matjaggard

      Re: "or to complete or terminate your existing contract"

      Possibly they're allowing them to opt out early if they find another contract or get a proper job?

  12. Anonymous Coward
    Anonymous Coward

    Killing the Goose that lays the Golden Eggs

    As I have mentioned before - the large US based Multi-National that I am currently contracting for is laying* off *ALL* UK Contractors - without exception.

    I had at least three more years worth of work lined up with them - worth around £750,000. Now - nothing.

    I wasn't doing the same job as a permanent employee - there are very few people in the world who do what I do - and you would only ever need one person like me per Company anyway.

    So all the tax on that £750,000 - plus me spending whatever is left and thus contributing to the economy in that way as well - has just disappeared. The UK economy will get zero tax and zero input.

    Although I expect a large consultancy company (Anderson Consulting perhaps - as they advised HMRC on the IR35 review) would be delighted to pick up the extra work. If they could find someone who knew how to do it. But I suspect they would just bring in someone from offshore and *claim* they knew how to do it. Who knows - maybe they could even Bullsh*t it for a week or two.

    Thanks HMRC - that really helps.

    Idiots.

    *Laying off. No chance to go PAYE - as whilst HMRC have "said" they won't review earlier contract periods - there is nothing in law that says they can't - if they so choose.

    1. tip pc Silver badge

      Re: Killing the Goose that lays the Golden Eggs

      Maybe move to Europe and work from here claiming to work from there?

      You'll no longer be classed as a UK contractor. or perhaps move to the US?

      if they pay you that much, surely they would be willing to continue the relationship under terms that work for both of you?

      1. Anonymous Coward
        Anonymous Coward

        Re: Killing the Goose that lays the Golden Eggs

        We are working on it - but the people in the Company making the rules are not the same as the ones who want to keep me.

        Luckily Remote Working is an option. Fingers crossed.

        At least I can live and work anywhere in Europe that I want to. Oh! Hang on....

        IR35 + Brexit = F*cked. Maybe.

      2. YTC#1

        Re: Killing the Goose that lays the Golden Eggs

        Assuming he is a UK citizen. Moving to Europe will shortly not be an option for him.

        And obtaining s US work visa is another mine field.

        1. Korev Silver badge

          Re: Killing the Goose that lays the Golden Eggs

          Moving ASAP would be prudent, the rules will be different in many place for people who are already in the EU country when the UK leaves.

          Switzerland is also good option for this (they've waived the normal non-EU person employment rules for Brits for a bit for people arriving after Brexit).

    2. elaar

      Re: Killing the Goose that lays the Golden Eggs

      My personal view is that if you have 3 years worth of work with a company, that should make you a permanent employee.

      "I wasn't doing the same job as a permanent employee"

      What does that even mean? A permanent employee isn't inherently restricted to certain jobs/work/hours/projects etc.

      1. This post has been deleted by its author

      2. Anonymous Coward
        Anonymous Coward

        Re: Killing the Goose that lays the Golden Eggs

        My personal view is that I have yet to come across a company willing to pay a permanent employee £250,000 a year. For some reason they seem to balk at that.

        Your mileage may vary. Perhaps you have a full time job as a Twatdangler.

        1. Anonymous Coward
          Anonymous Coward

          Re: Killing the Goose that lays the Golden Eggs

          Really? I guess I'm lucky then. That's about my comp after working eight years as a permanent employee in Europe for a large US company.

          1. Anonymous Coward
            Anonymous Coward

            Re: Killing the Goose that lays the Golden Eggs

            "That's about my comp after working eight years as a permanent employee"

            I suspect £250,000 per annum was not your starting salary eight years ago.

            But nice one!

            1. ratfox Silver badge
              Trollface

              Re: Killing the Goose that lays the Golden Eggs

              He still has his job, though, and will probably keep it for many years to come...

      3. Wayland Bronze badge

        Re: Killing the Goose that lays the Golden Eggs

        Yeah the permies are restricted due to envy. They envy the contractors hours and money anyway but the contractors are outside the employment structure so there is less basis to make a comparison. If the company were to bring the contractors into the employment structure then that would unbalance the salaries of both the former contractor and the other employees.

        This whole IR35 was created out of envy. "Why should they make such huge amounts of money and not pay much tax?" Yet they don't apply those rules to bigger companies, just the one man contractors. If it was about collecting taxes rather than an attempt to force fairness then they would scrap IR35 or apply the same principle to all businesses. Tax their expenses and materials costs as if they were profit.

    3. HmmmYes

      Re: Killing the Goose that lays the Golden Eggs

      US companies are riddled with lawyers.

      Obe thing most US orgs are careful about is obey the law - habit picked up from operating in US which is a minefield.

      If UK creates a law, us org will obey it.

    4. HmmmYes

      Re: Killing the Goose that lays the Golden Eggs

      Dont contractors make a big fuss about keeping up to date?

      Anderson went under in 2002.....

      If theres only a few people in the world with your skills why would they work for Accenture?

      Lets take your story at face value - 750k is transfered from Me Inc to AnotherLtd. Theyll pay tax on PAYE, corp tax, etc.

      1. Anonymous Coward
        Anonymous Coward

        Re: Killing the Goose that lays the Golden Eggs

        "If theres (sic) only a few people in the world with your skills why would they work for Accenture?"

        We don't. We work as independent consultants. Not contractors. But in this case I have been swept up by the IR35 broomstick.

        Hence my point.

        And no - 750k will not be transferred from my Company to *A Big Consultancy Firm*. Because they don't have anyone with the skills. Which is incidentally why I get paid so much. Or rather - why I *was* getting paid so much.

        My client will just have to take the hit of not having access to those skills. They will still get the job done in the end - it will just be a lot more painful, a lot more time consuming, and a hell of a lot more expensive.

        Now I'm unemployed. But I have been doing this for 20 years - so I guess I should take it as a hint I should retire and go and enjoy my ill gotten gains.

        And HMRC can go f*ck themselves.

        1. An Angry Man

          Re: Killing the Goose that lays the Golden Eggs

          I dont blame you mate for telling HMRC to go F*ck themselves. They are completely screwing up the whole market for all us hard working contractors. We will always have the perm's who a jealous...because they either dont have the skill to do what we do, or they are too scared to take the plunge.

          screen

          One thing for sure though, I would not go into contracting at this point, its a world where the large firms screw us to the wall whilst at the same time claim how valuable a resource we are to them

          Screw HMRC and the companies who take on the contractors because they are just as bad.

    5. Reg Reader 1

      Re: Killing the Goose that lays the Golden Eggs

      If I were cynical, I'd have to wonder if these new tax laws weren't designed to break the economy. Why?, you might ask. Well, the wealthy have their stuff paid for and are in control of the economic system anyway. So, by breaking what's there they get to grab back the little we Plebs have been able to gather together over the years since WW2.

      It seems to me that there is a worldwide movement to the right and Fascism. It's not just these tax laws it appears that Governments everywhere are moving in this direction. If you were to guess that I am quite cynical you be correct and maybe left :)

    6. matjaggard

      Re: Killing the Goose that lays the Golden Eggs

      IBM?

    7. Wayland Bronze badge

      Re: Killing the Goose that lays the Golden Eggs

      Two problems here with IR35

      1. HMRC come up with terrible ideas poorly implemented

      2. Clients panic and don't want the problems rather than wisely work their way through and around this nonsense with the contractor's help.

      Companies should know that the Government tends to create problems which have to be solved to stay competitive in business.

    8. Anonymous Coward
      Anonymous Coward

      Re: Killing the Goose that lays the Golden Eggs

      You and your client are thinking about this in an _completely_ wrong way.

      Instead of being contracted by the UK subsidiary of the client ask them to terminate you and offer you instead a contract at the same rate from a non-UK subsidiary.

      Benefits:

      - Their foreign subsidiary is not subject to IR35, so April changes don't apply to them, so you carry on under old rules where it is up to you to determine your IR35 status.

      - You don't charge VAT to foreign clients. Therefore your services to them may become cheaper, depending on various arrangements. And HMRC get the own goal of losing £50K/year in VAT from you.

      1. Anonymous Coward
        Anonymous Coward

        Re: Killing the Goose that lays the Golden Eggs

        I wish it was that simple. Sadly - it's not.

        Still - HMRC! Yayy - go HMRC! Rah! Rah! Rah! Great job!

        Twunts. Massive Twunts in the pocket of the big consultancy firms.

        Thanks HMRC. Thanks a f*cking Million.

  13. Alister Silver badge

    The likelihood is, many freelancers and contractors will have voted Conservative based on the party's IR35 promise.

    I doubt that many of the Conservative votes were swayed by the IR35 consideration, given the other more pressing issues.

    1. BebopWeBop Silver badge

      Their bank balances I assume, and if they don't have them 'FrEEEEEEEdom'?)

  14. Peter Galbavy

    Once you change your viewpoint and look at this from the perspective of the big, expensive and incompetent consultancy firms (Crapita, et al.) then this is going perfectly to plan.

    Stack the system to ensure all the fleet-of-foot and ocmpetative small players are forced out by regulation you have paid for, you will be rolling in the money.

  15. Daedalus Silver badge

    Missing the point

    The freelancers here commenting on what they would get as permies are inadvertently pointing at the root cause of all this. Just because employers in the UK don't have to provide health coverage like in the US, it doesn't mean there aren't a myriad of other expensive impositions. Sick leave, family leave, diversity compliance etc. etc. all make it more expensive to hire people. It's much better from the employer's viewpoint to hire temps, substitutes and freelancers. Keeping track of transient workers and their output is a different kind of nightmare, but employers seem to think it's better, or they are too blind to see how it is just a different kind of bad.

  16. Erik4872

    Is this a cost thing or legal thing?

    In the US, the IRS says that independent contractors have a special status, mainly revolving around the fact that employers can't treat them as FTEs. This is, of course, not adhered to anywhere I've ever worked, but the letter of the law says employers can get in a lot of trouble for not paying their FTEs the way a W-2 employee usually gets paid (i.e. Social Security/Medicare and income taxes withheld by the employer.) Basically they can't get away with a contractor workforce just to avoid paying a person's full cost.

    Is this what the IR35 thing is all about? Or is it the UK cracking down on the other thing US contractors like to do...setting up a corporation through which they pass all their personal expenses to offset income? Buying private insurance costs an arm and a leg, but it's less of a burden if you're allowed to write the entire thing off against your already-high contractor hourly wage. Being able to drive your "company car" to work and work on your "company-owned laptop" isn't too far a leap from there, and since the US tax system outside of W-2 income is self-reporting, audits are less than 2%, and everyone's doing it...I'm not surprised it happens.

    1. Yet Another Anonymous coward Silver badge

      Re: Is this a cost thing or legal thing?

      It's a tax thing.

      There are lot fewer ways of avoiding tax for the regular worker than in the USA.

      So workers that were in high demand went to their employers and said - I'm out of here, rehire me on monday as a contractor for the same amount and job/desk.

      The employer avoids social insurance contributions and sick/holiday pay.

      The contractor gets to pay themselves in (was upon a time) 10% taxed dividends, paid no insurance (because they had zero salary) and claimed their car/spare bedroom/laptop/phone/cat etc as expenses

  17. boltar Silver badge

    Whats wrong with temporary staff?

    Other industries use temporary staff who are permie except only for 3/6/12 months then thats it. The plus for them is they get paid slightly more than full time permies. Why is/was the IT industry so wedded to self employed contracting?

    1. Erik4872

      Re: Whats wrong with temporary staff?

      "Why is/was the IT industry so wedded to self employed contracting?"

      I think it's disposability and accounting.

      Salaries go in a different bucket than contractor invoices and through the magic of accounting the invoice bucket is much better to be in than the salary one.

      The other "advantage" is that there's even more ability for the employer to treat their contractors like disposable garbage. In the US we have at-will employment and no emplyment contracts or statutory redundancy outside of unions or executives negotiating their own deals. That means my boss can walk over to me, say "I don't like your shirt, you're fired" and I have zero recourse. Other countries might have slightly more protections...I know France has a big permatemp problem because their employees enjoy a lot more rights than the rest of the world.

    2. devTrail

      Re: Whats wrong with temporary staff?

      From one side the pace of changes in IT is much faster than in other sectors, employers one day need people with a set of skills and the next day people with a completely different set of skills. From the other side distances are quickly shrinking, the employer knows that some work that now has to be done by people locally in few years could be outsourced to people in a country where labour is cheaper (well, in this case the same is happening in a lot of industries, but moving some coding work is much easier than a physical factory). Knowing all of this employers prefer to keep the open the possibility to get rid of the workers in any moment.

    3. JohnG Silver badge

      Re: Whats wrong with temporary staff?

      It it possible to hire people as temporary workers, via an agency, which is then responsible for all the PAYE, etc. Client companies typically like to have a limited company between themselves and any temporary workers/contractors and will avoid hiring them directly. In IT and other fields, many contractors have chosen to provide the limited company isolation themselves, because of the tax benefits.

      One potential downside for the government in pushing contractors from PSCs to agency work is that temporary workers can sign on as unemployed (to get their mortgage paid) after the end of every contract, which can't happen with contractors running PSCs.

  18. Tom Paine Silver badge

    If they don't delay, then the promise was nothing short of an arrogant and disingenuous move to secure votes.

    REALLY?? YA THINK????

    Jesus wept.

  19. HmmmYes

    "Vessey noted that Glaxo risks losing experienced and skilled staff ....."

    Yees....... when ive contracted or engaged contractors, theyve gained limited knowledge of the org. They were hired to implement a specific part of a system for a limited period, using specialist knowledge outside of the company. Then they are out, 6 months tops.

    If a contractor is import andor has useful experience, essential to the company is not a contractor.

  20. Anonymous Coward
    Anonymous Coward

    A play

    Contractor: I get paid more because they can get rid of me any time

    Company: *gets rid of contractors*

    Contractor: No what I meant was I want to be paid more, and have all the protections of permanent staff, oh and I don’t want to pay any taxes either

    Permies: *play world’s smallest violin*

  21. rwill2

    Perms can still get fired with nothing

    GSKer Don't bother going permie, you get nothing if you are fired within 2 years and after that £525 per year of service, what is the point???!!!

    Having been made redundant ... I recommend you go contracting or start your own company (like me)!

    FYI - the law sucks in this country ...

    https://www.gov.uk/redundancy-your-rights/redundancy-pay

    "[...] If you were made redundant on or after 6 April 2019, your weekly pay is capped at £525 and the maximum statutory redundancy pay you can get is £15,750 [...]"

    Imagine u a fired after working for 30 years on a great job and you get only £15K!!

    In Luxembourg I know a guy, made redundant for incompetence getting 1 year salary, he sued them and got 2 years full pay!

  22. OzBob

    I am an IT contractor to a government department

    and the reason I am there is several-fold,

    1. The department has a really bad rep (even compared to other government departments) for HR, career development and managerial competence (or lack thereof).

    2. They can't recruit a permie with a similar skillset to replace me because they pay cr4p

    3. The permie they did hire to replace me was such a loose cannon they had to "manage him out" (which is seriously impressive given the loons that stll work there).

    4. They announced a reorg 3 years ago and have yet to complete it, so have been on a hiring freeze.

    5. I have advanced certifications and skillsets in Linux that the perm staff do not have

    1. TimMaher Bronze badge
      Coat

      Re: I am an IT contractor to a government department

      I have to ask @OzBob... is it H.M.R.C?

    2. Anonymous Coward
      Anonymous Coward

      Re: I am an IT contractor to a government department

      I think you have hit the nail on the head there OzBob!

      "2. They can't recruit a permie with a similar skillset to replace me because they pay cr4p".

      I suspect that's probably the number one reason for long term contracts.

      My last three contracts have been six and a half years, seven and a half years, and one and a half years (would have been four and a half years but..... thanks HMRC).

      I'm sure the companies involved would have loved me to go permanent - but there was no way they could pay me a market realistic amount - because of pay scales etc.

      And those pay scales are normally outside of the control of the people who want to do the hiring.

      So what is someone like me (or you) supposed to do? Work for a rate a fraction of what the market says we are worth? And also put up with yearly performance reviews etc. "Mr Anonymous Coward - we see you are at the top of your field. Next year your goal is to become even better. You pay rise will depend upon you out-achieving your own next years performance."

      I once took a brief permanent job (in order to acquire some additional skills that would complement my existing ones). This involved a huge drop in daily rate - but they offered me as much as they could - namely the top of the pay scale for that role. When I accepted the job HR got involved and said "Sorry - we can't pay you as much as you have been offered - because if we do - we won't be able to give you a pay rise next year."

      Unbe-F*cking-lievable! They even kept a straight face as they said it!

  23. volsano

    For those unfortunate enough to have a Tory MP - it's time to phone them ask to get IR35 done.

    Remind them - per page 59 of their manifesto - that they will "put you first" and their job is "to serve you".

    And so tell them you won't hang up until they have done their priority job of fixing IR35 for you - wouldn't want them to get distracted with another task that isn't serving you.

  24. Anonymous Coward
    Anonymous Coward

    the promise was nothing short of an arrogant and disingenuous move to secure votes.

    Surely not ? Tell me it ain't so. And even if it is, Whatcha gonna do about it ?

  25. Wayland Bronze badge

    It's like IR35 all over again

    The first time IR35 happened I was running my own company with a couple of employees and doing some contracting work at a global corporate. They wanted us all to work through an agency because of IR35. I explained I was exempt from the IR35 due to actually running a company rather than just using it as a protective suit. The contract they wanted us to sign gave all rights to our work to the agency. Everything I touched then belonged to the agency. The other 10 contractors never read it, just signed it. I refused. That was my one and only encounter with IR35 about 20 years ago.

    The legislation just gets in the way of the business of contracting.

  26. An Angry Man

    Lets face it, HMRC know that the big firms will play into their arms and as you can see most of them are doing it with a so called "process change" by choosing not to use PCS's anymore.

    The fact of the matter is that they do not want to open themselves to scrutiny so they are not officially saying the roles are inside IR35 either, simply to avoid the backlash of contractors wanting benefits for "becomming on payroll"

    I think its one big joke to be honest, but HMRC do not care as long as their greedy coffers fill up with our hard earned money.

    This will not result in the increase HMRC estimated. Some clown number cruncher has made a big mess here.

  27. An Angry Man

    Ok so a question to all you contractors out there. How many of you are actually going to not pay your corporation tax if its due at the end of December or later this year? Well for me, I have a 5 figure tax bill, and I have just been informed I no longer have a business with the existing firm I contract too after Feb unless I either go PAYE or umbrella, and they have not even offered me a PAYE contract yet.

    So, my business is about to hit serious casflow issues because the clowns in HMRC fail to see how much of a mess they are making of this. The large firms are all following suit, not making any assessment because it opens them up to scrutiny, so instead they label this as a process change.

    Process change my a$$. But we still really value our contractor resource but we are not accessing the roles....how about going perm with our firm who lie to everyone yet make front of house look squeeky clean to ensure they dont get in trouble.

    My view is that every contractor this year should be looking to hold back on paying their corporation tax because at the moment there is no business from April, and HMRC are putting people like us out of business. Later in the year if the market is stable, then pay the tax that is owed. This is what many firms have to do who cannot pay their way.

    Look at this another way. If the firm I contract to have not assessed my role for being inside or outside of IR35, can I then bring a claim against HMRC for my tax money back when I prove I am clearly outside.

    I am already looking at other business models and I will not be part of the game HMRC or the big firms play. All a bunch of ar$eholes if you as me, the lot of them.

    And to all you jealous permies, its always been a game of us and you because we do what you cannot, and is why we were handsomely paid for our skills

  28. An Angry Man

    do the register actually post anyones comments?

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2020