UK contractors planning 'mass exodus' ahead of IR35 tax clampdown – survey More than half of the contractors and consultants working for private companies plan to leave their clients rather than face Her Majesty's Revenue & Customs' tax reforms, according to a new study. The research by Inni Accounts (PDF), which comprises 1,485 anonymous posts on the Offpayroll website, found that 52.5 per cent of …
Well, when contractors get holiday pay, sick pay, bank holiday pay etc...
Then that woudl be fine. But as a contractor (many year back now) I was paying substantially more tax than my peers.
Employers NI fell on my shoulders for instance.
The headline figures for contractor rates should be compared with the actual rates paid by companies for people - including such nicities as NI, holidays, sick pay/maternity pay etc...
>The headline figures for contractor rates should be compared
>with the actual rates paid by companies for people -
>including such nicities as NI, holidays, sick pay/maternity pay etc
Sure, definitely compare things properly, but if the current situation was so awful for contractors then switching to permanent roles would be more popular.
So we know we're getting a good deal as things stand, it's the reason almost all of us are doing it.
If you genuinely believe your contracts should be outside IR35 convince your cowardly clients to help make that clear, or ask for substantial pay rises from those clients that won't. The work needs doing, if they want contract staff then they can pay the going rate, and that rate is affected by this change.
If you only have one client, and expect to turn up at that client 9-5 Mon-Fri for the foreseeable future and they expect the same from you then maybe it's time to embrace your status as a permanent employee and enjoy the paid holiday, sick leave, easy tax returns and so on.
There will continue to be a need for contract staff, if the pool of contractors shrinks significantly this might end up being a very good thing for those of us that stick it out.
That's fine, and it's a reasonable choice that people should be allowed to make.
Just don't bitch that you can't find a job and have to sell your house when there are plenty of permanent jobs available.
I don't want to work for a living but nobody's offering me two grand a week to pursue my dreams so I'm being a little more realistic. That anonymous contractor can do the same.
Apologies in advance as I don’t like to be personally critical but don’t be naive that you think that this won’t affect permies in years to come. When orgs can push all “perms” was through umbrella companies, which they will do, who’s gonna pay for your holiday, sickness etc. cover and your pension contributions. When orgs understand they can get the same workforce (if we do give in) and save themselves about 40-50% “taxes” (Employers NI of 13.8%, Apprenticship Levy 0.5%, holiday pay ~5-10%, pension contributions ~5-10%, training ~3%...+ expenses and perks like company car, health insurance), which way do you think they’re gonna go? I hope you are very comfortable and confident in your specialties in your role...because, quite frankly, there are probably 10x the amount of contractors that have more experience cross-industry in that specialism than you (yes, I admit I haven’t read your profile).
Also bear in mind that contractors in the £50k-£150k bracket, i.e. most contractors I know and have known, actually pay 3.3% more in effective tax than permies already (https://www.contractorcalculator.co.uk/comparing_taxes_contractors_versus_employees.aspx)...and that’s excluding the 20% VAT that contractors pay as they are often end of the line.
"who’s gonna pay for your holiday, sickness etc. cover and your pension contributions"
... erm most people in reality expect **YOU TO*. Esp. from the much larger wad you get as renumeration for your services compared to a permie.
Same as a plumber, electrician, taxi driver, freelance journo/writer, Independant Shop Owner, publican, hotelier etc would do. IT/Contractors are not a special needs case ??
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"... erm most people in reality expect **YOU TO*. Esp. from the much larger wad you get as renumeration for your services compared to a permie."
I don't think you quite understand my post, NeilPost. I am not saying that contractors, IT or otherwise, aren't expecting to pay for those. That's all part of our life choice of contracting. But, if they are going to be taxed and treated like perm employees who *do* get all of that, then they should also get all of that. Yes, Gig economy/zero-hours contractors also don't get these but that is a slightly different story (though arguable that it shouldn't be).
What my post was saying is that permies will soon be going the same way, i.e. through umbrellas...and then they won't get any of those either.
Also, your salary as a permie is not the same as the cost of employing a permie to an organisation (and I am not talking recruitment but ongoing salary after year 1). A permie's salary is Net *after* getting all those perks/rights; a contractor's rate is Gross *before* they have to pay for all of that and more.
Many years ago I went permanent with a firm I had happily freelanced for over a period of 5 years or more.
Our relationship broke down within weeks of the change and I was signed off sick for months. And this was working with exactly the same people with whom I'd had a great rapport up to that point.
I believe that the legal definition of whether someone is an employee is that the employer-employee relationship is a master-slave relationship. As a contractor, I was asked to do things - as an employee I was ordered to do things.
I believe that the legal definition of whether someone is an employee is that the employer-employee relationship is a master-slave relationship. As a contractor, I was asked to do things - as an employee I was ordered to do things.
Good luck with that. If I wanted to give or receive orders I'd have joined the Army and if obedience is important to you then buy a dog.
My permies & contractors work(ed) the same way, which the teams define for themselves. I hire the best engineers I can, however they work(ed) for the business, and I expect them to show up and use their brains rather than follow unquestioningly whatever falls out of mine. they are all paid professionals and should not need hand-holding.
I always make requests, I never give orders: being fit to lead is not the same thing as being fit to command - if I screw up the projects are late, if a military commander has a bad day then people die.
In my experience, I COULD NOT GET a permanent position for many years - there just weren't the jobs in my area to have so I didn't have any choice - if I wanted to work I had to go contracting. This is the case for a lot of smaller and less skilled contractors, the employers don't want to take on a permanent employee if they can see that role being phased out after 6-12-18 months, such as hardware and software roll-outs. This sort of job will always exist as long as technology keeps moving forward and things need to be periodically refreshed where companies don't have the in house resources to do this. (read most companies). I do agree with a previous comment about contractors needing to talk to the cowards of employers and make sure they can be placed outside this legislation - it can be done and quite legally, I managed it when I worked for the NHS at a South Wales health trust but we were about the only contractors who weren't 'in scope' (I think the thought of either losing us or having to pay a lot more urged the contract manager to do something about it.)
I've moved on from there now and I was in the position recently that the company I was contracting to saw the value of taking me on permanently and my salary has even improved slightly as a result - this is the position I wanted to be in from the start. Many many others aren't quite as lucky.
Companies hiring permanent staff look for younger people who are cheaper and will work longer hours and more flexibly.
Companies hiring contract staff will take the most experienced they can find, at the rate they are prepared to pay. That's us older, wiser folk.
Many contractors don't do this to amass a pile of cash, they (and I) do it for the flexibility. I can take as much or little holiday as I like, and I get to pick and choose where I work and for how long. That's worth far more to me than money in the bank.
You're also assuming that those permanent roles are there to be taken. My current client has a very large number of contractors on site but is only advertising for about ten technical staff at the moment. It's a similar story across the industry. Companies don't only use contractors to fill recruitment gaps. They use contractors instead of having permanent employees, full stop. And that aspect has been growing for well over 25 years.
"older, wiser folk"
versus
"I haven't been able to work for near six months,"
I don't know about you, but the market for full time jobs in IT in London is still pretty good, so rather than sell your house, maybe just get a permanent role (remember, it's only as permanent as your notice period).
No, we all know it's because the contractors want there £800/day rates when their full-time peers are getting £300.
I won't be selling my house. I'll be doing what any sensible person would - making the best of it. If I have to work inside IR35 then I will. I've never been out of work for more than a month in 14 years of contracting.
And I regret to inform you I've never got anywhere close to £800 a day. I did say it wasn't about the money. Keep up.
>making the best of it. If I have to work inside IR35 then I will.
You'll only know if HMRC deem you to be inside IR35 after the event...
>And I regret to inform you I've never got anywhere close to £800 a day.
Suggest might be worth doing some re-assessment of your skills and self worth - and doing a little investment on a few soft skills courses...
>I did say it wasn't about the money.
Yes, it might not be about the money, but the fee has a massive impact on the relationship and the amount of respect and freedom the client grants you. Years back I worked with a management consultant who regarded the best rate as being whatever the client wanted to pay plus £1 - it had zero impact on what was delivered and how it was delivered but it had a major impact on how the client viewed the worth of your contribution.
You’re actually probably getting about £400 per day for holiday/sickness etc. and another 5-10% as pension contribution...and it is much harder for them to get rid of you, even if you happen to be a useless muppet. You also don’t have to pay for indemnity insurance and all that.
Perms gripe a lot that contractors get more. Yes, we get more (not much) but I e have expenses that a perm wouldn’t think about and have to ride the famine-feast cycle. Which is why we are happy to pay the 3.3% more (+ another 20% of VAT on sales) for they flexibility and risk (https://www.contractorcalculator.co.uk/comparing_taxes_contractors_versus_employees.aspx). If you were that jealous, go and join.
Without contractors (genuine outside-IR35 ones, that is...or even those inside), this country will fri d to a halt.
Hope you’re confident that you won’t get a P45 for resting on your laurels as a perm.
Contractors don't pay "VAT on sales".
Contractors add VAT to their invoice, on top of their agreed rate.
Clients pay the VAT, to the contractor, who pays it onto HMRC.
Clients deduct the VAT they paid from their own VAT liability when paying HMRC.
Net outcome: neither client nor contractor pay any meaningful amount of VAT.
The VAT is ultimately paid by the consumer at the end of the chain - i.e. the person in the street who buys goods or services in a shop or online, which the client was involved in producing somewhere along the chain. It's just collected in little bits along the chain, at each point where there's a difference between input and output costs (the "value added")
Banks ( and some other financial services companies) can't reclaim vat, so that is a positive for HMRC right away collected by contractor - so in these cases the client and contractor DO pay a meaningful amount of VAT
Yes and with the reforms and all the banks getting rid of contractors, HMRC will lose all of that VAT income. They may make more PAYE, but they will lose significantly more in VAT and corporate tax, especially with all the little PSC companies going to the wall.
>Net outcome: neither client nor contractor pay any meaningful amount of VAT.
So paying 14.5% of the gross figure on my VAT inclusive invoice to HMRC isn't "any meaningful amount"...
I suspect you are confusing the net effects seen at HMRC of my liability and the client's deduction against their's arising from this transaction, and the actual monies being moved between bank accounts as part of the transaction.
I can assure you that any competent accountant will be considering the VAT angle. For example, one client is able to recover all their input VAT, so provided your price isn't outrageous they will prefer to pay a little more to a VAT registered business than less to a business that doesn't provide VAT Invoices...
there is a lot more to the country than london.
once you get out of the smog, perm job opertunnitites become few and far between, as you are waiting for someone to fall out so you can step in.
A lot of firms are smaller and dont need the expertise all the time so rely on bringing in the skills for a specific project, rather than keep them in house.
contractors day rates only get that high when your looking at really short term, as contracting generally works in 3 month windows and if you take a short term you are likley to spend a couple of months waiting for something else to come up, and in order to take the risk you need to have an incentive.
If its so good being a contractor, do it, by the time you have paid for your own benefits, sick pay, employers NI, done all your own paperwork, had a fight with HMRC, negotiated the complexities of companies house, worked for free while waiting for 60 days for the company to pay your invoice (with a 30day limit) as its company policy, then when it finally does get paid have to put a over 50% of it away to cover tax, the gap between contracts, pensions, health insurance (to cover loss of earnings,) and then do the actuall job on top of all that. You'll be glad to forgo any extra you come out with and settle for your £300 and Holiday pay, Sick Pay, workplace pension, guarenteed payday and lower levels of government beurocracy.
however, you may enjoy the chance to pick and choose where you go, schedule work around your life, noot the other way round .....
"I don't know about you, but the market for full time jobs in IT in London is still pretty good, so rather than sell your house, maybe just get a permanent role (remember, it's only as permanent as your notice period)."
Yeah right, then you get the "You have been contracting a while now, why do you want a permanent job, how do we know you won't be off in 6 months when you find another contract?" reaction.
Moving back into permanent work is not so easy as you seem to assume.
” If you only have one client, and expect to turn up at that client 9-5 Mon-Fri for the foreseeable future and they expect the same from you then maybe it's time to embrace your status as a permanent employee...”
Unpopular view, but this sums it up.
I wonder what percentage of contractors fit this description?
Contractors are often hired for either project work or to fill a temporary gap in the workforce.
Unfortunately due to the nature of most IT work, it's not something you can do for 4 hours a day at one client and the remaining hours at another.
Doesn't mean that contractors are secretly 'employees'. Usually get this sort of reaction from envious permies who are too afraid (or too unskilled) to make the leap to contracting.
If you only have one client, and expect to turn up at that client 9-5 Mon-Fri for the foreseeable future...
Well firstly you need to define "one client" in the way HMRC are applying it for IR35 purposes, which as we've seen is as per contract/assignment, so you can be part-time at a client (9-5 mon's) and working concurrently with other clients, but due to the contract, HMRC could deem that specific contract to be within IR35.
"Switching to permanent roles would be more popular". I dunno how easy that is in the UK, but here in Canada, it's not easy at all. From the employing firm's POV, it's much cheaper to outsource. They have no incentive to encourage "switching to more permanent roles." On the contrary.
> Well, when contractors get holiday pay, sick pay, bank holiday pay etc...
I see we're still confusing legitimate contractors with the people IR35 explicitly targets as what you'd politely call tax avoiders and more accurately call tax evaders.
People targetted by IR35 are explicitly entitled to all those things because they're employees *pretending* to be contractors. That's why IR35 exists.
Because we can't have an adult conversation about the execution problems we can't have a conversation and the government is going to ignore the noise as a result - much like, by the way, Universal Credit - the parallels make my head explode.
Can't believe we're still arguing about this shit. The law is clear. It doesn't affect all contractors. It affects employees posing as contractors. If you're an employee posing as a contractor you're entitled to employee protections.
I know these forums are packed with contractors - and I'm going to get downvoted as a result for speaking truth - I used to be one and I get the pain, but please can we stop confusing who the IR35 is targetting, execution problems (to the extent they exist) and ACTUAL contractors doing contract work - IR35 for the latter being relatively trivial. Our tax system aint that complex and we should stop pretending it is.
Completely agree. I was a contractor for a couple of years before IR35 came in. As soon as it did I started paying IR35, my wife (a former accountant) said that I couldn't avoid it because of my working arrangements.
Plenty of my colleagues stayed outside despite also being under direction and control, that's why the Govt acted. The original IR35 rule was effectively ignored.
There are people who are genuine contractors, going from gig to gig, and they are being unfairly hit by this. But there are also a lot of contractors who are effectively disguised employees.
There isn't a bank in the City who would allow a substitute (unless agreed well in advance), it would make a complete nonsense of their security arrangements. Getting a login account and permissions to systems would take days.
I ended up going permie and never regretted it.
It doesn't affect all contractors. It affects employees posing as contractors.
You are correct, the law doesn't. We genuine contractors should not be affected by that.
However, there is a large difference between "should" and "will". A large number of companies are deciding not to engage contractors through their limited companies anymore whether they are inside or outside IR35 in reality. They don't want the extra work and risk involved. This does affect genuine contractors, whether their current client is one of those companies or not. It is shaking up the entire market.
Let's take a quick example: Let's say that the govt made you liable for any tax owed by a self-employed plumber who came to do a job at your house. You had to evaluate him, check he was paying the correct taxes, and if he wasn't you could be clobbered with his tax bill.
On the other hand, you could go to a large plumbing company. They would charge more, but you would have no extra work to do and no tax liability.
Which would you go for? The one which takes a large amount of your time and effort to evaluate and which could land you with the massive expense and disruption of a tax investigation, with the possibility of a large extra tax bill?
So, even though we genuine contractors should not be affected, as the law does not apply to us, we will be affected due to the massive disruption to the market for our services.
(By the way, look at the example and see who benefits in that hypothetical...)
Avoidance is another way of saying evasion. Avoidance is used as a polite term by press because they think it sounds less accusative than evasion. What they mean is they're not paying a tax they should be because they found some loophole in the law. All synthetic "avoidance" measures are now illegal (via catch-all) in UK law are are, in fact, evasion.
Part of the problem is that legal means of avoiding tax (such as your tax allowance, expenses, r&d investment etc.) no longer have a name. These *used* to be what people referred to as 'tax avoidance', and are legal means of reducing your tax burden.
However, newspeak and propaganda now defines 'tax avoidance' as the means of avoiding tax by the use of (technically) legal 'loopholes' - i.e. going against the spirit of tax laws. Evasion being the use of illegal means of not paying taxes.
Where does that leave all the legitimate ways of reducing your tax burden? What do we call them now?
What happens is that they are still referred to as tax avoidance, and so seeks to imply that everything you are doing (by way of legal and totally legitimate means) to reduce your tax burden are somehow now borderline illegal and certainly immoral.
It's a stitch up, nothing more, nothing less.
The small guys are being put out of business to the benefit of the larger consultancies. Keep an eye out of juicy directorship roles going to 'key players' in ir35 legislation on the boards of the big agencies.
Avoidance is another way of saying evasion. Avoidance is used as a polite term by press because they think it sounds less accusative than evasion.
Not at all. Tax evasion is a specific criminal offence for which you can be prosecuted. Tax avoidance is a legitimate use of tax law to reduce your tax bill. If you get paid under the table and stash it in the Caymans, that's tax evasion. If you pay into your pension from pre-tax income, declared on your tax form, that's tax avoidance.
What they mean is they're not paying a tax they should be because they found some loophole in the law.
If there is a loophole which allows someone to legally pay less tax they would be foolish not to use it. Government makes the laws, if they leave a loophole it's their fault and up to them to close it, but until they do it's the law and can be used quite legitimately.
"I see we're still confusing legitimate contractors with the people IR35 explicitly targets
...
Can't believe we're still arguing about this shit. The law is clear. It doesn't affect all contractors. It affects employees posing as contractors.
"
The reason we are still arguing "about this shit" is because of the way IR35 is currently being enforced, deeming the contractor to be the party liable for the unpaid PAYE and NI.
Firstly, I agree if an employer is defining and treating a job post as employment, then that post should be taxed and benefits paid as if it were employment. The question now arises about the actual contract between the employer and the holder of the post. I just don't see contractors "posing as (a) contractor", a person is either an employee or a contractor; although I do accept that long-term contractors can go native and forget they are contractors and not employees, and that some employees can see themselves as internal contractors whilst maintaining all the perks of employment.
This leads to my second point, who is responsible for the situation where an employer engages a contractor to fill an employee job post, and thus becomes a 'deemed employee'? I suggest the party carrying primary responsibility is the employer, a secondary party will the agency who took the job description and put contractors forward for consideration, finally the contractor who accepted the post.
All good so far, until we look at how HMRC determine who pays what...
HMRC has todate determined that it is the contractor who is wholly liable for the employee and employer NI & PAYE owed, not the employer and so required them to be taken out of the monies paid to the contractor's company.
However, I suggest, if HMRC had done the sensible and deemed the monies paid to the contractor where equivalent to the net monies paid to an employee and thus the employer was wholly liable for PAYE and NI on the invoiced amounts, there would be less of a problem with IR35 - since employers and agencies would rapidly get their act together.
I see the main reform due to come in April 2020 is for the liability for employers NI to fall on the employer and/or agency and not the contractor; a small step in the right direction...
a person is either an employee or a contractor
Except that plainly isn't true. Companies started making people who were *explicitly* even previously employees doing the same job become contractors for the sole purpose of not paying tax they aught pay, people were taking sick pay from the state (i.e. taxpayers) rather than the company who should have been paying it and all sorts of nonsense. That's how bad it got.
The whole thing is *supposed* to be coercive. Everybody involved is supposed to look at the situation and say "oh shit, that doesn't work for us, lets not do the contracting thing and pretend and employee isn't an employee because the tax implications of not keeping it legit are catastrophic" and those employees are supposed to look at it and say to their employer "I'm not playing that game with you, it's not worth my time". Again, to make absolutely clear, it's *supposed* to be coercive to all parties that's why when you come under it then it becomes a horrible nightmare.
Now, if what we're really talking is people who shouldn't be considered employees but are under the system that's a whole different argument/discussion, but it's one that it's utterly impossible to have because of all the noise around people moaning about it doing the job it's supposed to be doing.
It's not that I don't have sympathy, because I do - I got my current permanent job via a freelancing job, I've been there and I get why people freelance. My thing is we need to start by separating the two issues out, telling the people who IR35 actually targets to stop ruining freelancing and contracting and do one; only then can we seriously get into the detail of what the actual problem is.
@Streaky
a person is either an employee or a contractor
Except that plainly isn't true.
I think you are getting confused between the reality of the situation and what employers have and are trying to do - namely move employees off-the-payroll and what HMRC are trying to do to both counteract this and attack what they perceive to be a load of individuals who have wrappered themselves in an Ltd blanket and so are now able to legally use the tax rules that (in HMRC's eyes) are there for "real company's"...
"Well, when contractors get holiday pay, sick pay, bank holiday pay etc..."
... well y'know the **extra money you get paid compared to a permy**
- Save some for a rainy/hhardship day fund
- Save some for a holiday fund
- Get some sickness insurance
... or is the lure of a shiny new Porsche Macan on the driveway of your massive house too much to resist and you spaffed the money on the initial deposit for that.
IR35: if it's hurting, it's working (as designed).
Most contractors (I know) do this.
However, they do this within their company, so that their company can provide them with holiday and sick pay. Inside IR35 this is, effectively, impossible.
Let's take an example of a person who works for one whole year then is sick the entirety of the next.
An employee (with a reasonable employer) gets, say, £50k both years, and pays relevant taxes on this.
A contractor outside IR35 earns £100k profit and draws £50k in the first year, paying relevant taxes. He then has enough to draw £50k in the next year, again paying relevant taxes.
A contractor inside IR35 has to draw the whole £100k in the first year, being clobbered by the extra tax on that. The second year, he has to pay for his own sickness out of the over taxed amount, and cannot offset the fact that he was unable to earn anything that year against other tax years.
I think you mean "...like a dog whistle for people with chips on their shoulders" about people doing the same job and getting paid shedloads more than them. I was on a total 'salary package' including pension, holiday, NI, tax, take-home pay etc of just over £25k, a contractor doing *exactly the same job* was on just over £45k.
Taking into account the fact that his accountant was able to offset a hell of a lot of everyday expenses against tax - I'm sure it was legal, but that isn't always the same as 'right' or 'fair' - his disposable income every month was nearly three times mine.
And while I had to ask permission in advance if I wanted leave, he was able to take it at short notice - sometimes as short as ringing up on the day and saying "I'm not coming in today."
We could both do the job equally well, the only difference was that I was a wage slave while he was a contractor.
So news that contractors are going to have to pay the same tax and NI as us mere mortals sounds perfectly fair to me.
"For all those who are critical of the rates that some contractors are on please remember that it’s a club you are welcome to join"
Those people also need to remember that it's not just IT contractors affected by this.
Truck drivers.
Locum doctors.
Tradesmen working on site for a larger company
All also affected - I'm sure there are more.
"I was on a total...of just over £25k, a contractor...was on just over £45k........."
"....and it just wasn't fair. He got time off when he wanted. And.. and... he got a comfy chair... and and... his car was better than mine... and he was always down the pub... and... and..."
So if you felt so hard done by, why didn't you leave? Maybe even to go contracting? But not necessarily.
Or is it more personally fulfilling to just complain about it?
I was on a total 'salary package' including pension, holiday, NI, tax, take-home pay etc of just over £25k, a contractor doing *exactly the same job* was on just over £45k.
If the contractor's job was exactly the same as yours, why didn't you look for a contract and add £20k to your earnings?
And what line of work was this? There can't be many competent contractors earning £45k.
The difference here is that your salary is a net number, and your colleague's is gross. You can't compare the two and whine that his is bigger than yours. Your contractor colleague's salary is his company income, not his own. What he actually gets to keep of that is no doubt more than you're getting paid, but nowhere near that gross number. Remember that employers national insurance, pension contributions, putting money aside for sick and holiday period pay and various expenses all have to come out of his gross rate before you can start calling it 'salary'.
What role are you in that pays only £25k? Sounds awfully low for an IT role. Sounds more likely that you're one of the unlucky ones who joined a company years ago and not been given decent annual raises, while your contractor colleague's rate reflects current market rates.
"Salary is not a net number. It has to cover income tax and NI, and what you keep is substantially less than that headline figure.
Just like a contractor, except they start from a substantially higher number."
And get an even bigger percentage carved off, and then have to put a significant proportion to one side to cover illness/holiday/...
There is a lot of misunderstanding about the way contractors get paid. My clients pay my limited company, which pays corporation tax at 19%, NI, expenses etc before paying me. Then I still have to pay personal taxes like any other employee. The fact that I can receive some of my pay in dividends results in a small tax advantage but it's nowhere near what permanent employees seem to think, and hardly covers the lack of sick / holiday pay.
"Salary is not a net number. It has to cover income tax and NI, and what you keep is substantially less than that headline figure.
Just like a contractor, except they start from a substantially higher number."
Close.... The number the contractor starts on seems higher because your salary *even the gross* doesn't include all of the cost of your employment that is covered by your employer... Your pension matching, your sick pay, your holiday pay. The per head amount that is needed for HR and people management every year... Your travel expenses, your training costs...
All of these things and more your employer pays *not from your gross* but on top of it - they don't have any of that for a contractor.
I also used to be a “Big 4” consultancy perm hired out to clients at £3.5k per day. How much did I get for that? Less than £200 per day. That’s why I went independent even if I only got 25% of that.
I am, however, glad that those big consultancies have been told they can’t take on the likes of me as Associates and apply their 50% markup without doing anything. They had probably been rubbing their hands together (see page 16 of https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/806331/28_05_2019_Full_Review_SOL_Final_Report_1159.pdf...though not so much now).
"We could both do the job equally well, the only difference was that I was a wage slave while he was a contractor."
Sounds terrible, in what way was this nasty contractor forcing you to be a permie?
Seriously, complaining that you get shitty conditions so everyone else should have the same is ridiculous... Speak to your employer and ask for changes, if you're good enough they will comply (to an extent) to retain you.. but then again... There's probably a reason you didn't do this.
I was on a total 'salary package' including pension, holiday, NI, tax, take-home pay etc of just over £25k, a contractor doing *exactly the same job* was on just over £45k. ...
This sort of comparison is quite telling about a person's mindset.
It is clear, that this person clearly thinks firstly it is okay for their employer to pay two people totally different rates for the same job: £25K and £45k and secondly, it is the contractor who is in the wrong for willingly take £45K from the employer, rather than the £25k they are being paid...
I bet if the other person was also an employee, this person would either be straight into their managers office demanding a pay rise or calling up their union demanding representation...
I was one of those contractors earning 3x what the permies got. Why? I was once one of those permies and got fed up with the situation so joined them. Moral of the story is that if you don't have the stones to make the leap then keep quiet and take your lower risk income.
It is funny to see how triggered people get about how much other people earn. I bet the political class are laughing at us, look how the chattering classes measure each other.
It reminds me of the days when managers sized each other up by the badge on their fucking Cortina. "I see you have the GXL now Rupert, yes Nigel, and you remain in your lowly GL - you really must learn to lick more arse dear boy."
Wait until the true purpose of this nonsense comes out over time, the creation of a new 'zero rights employment' class where people work as perms under 'inside IR35' rules but with zero of the current perm benefits, no pension, no or basic holiday pay, might get statutory sick pay if you're lucky, that all new hires will fall under in a couple of years time.
This, 1000 times this!
How long before ASDA, for instance, starts offering to pay a slightly higher rate if people choose to become "Inside IR35 Contractors"? They receive a higher rate, but no holiday pay, no sick pay, no pension contributions, no staff discount. People will take it because of the higher pay. I know some who have said they would, even knowing they would no longer receive those benefits, because they are living hand to mouth and are, basically, desperate.
How long after that until ASDA chooses to force everyone into that situation?
An "Inside IR35" role* is a staff role. It should be treated as such, with all relevant rights and benefits. Allowing "Inside IR35 Contractors" is allowing employers to opt out of providing employment rights and benefits, which should not be allowed.
* I mean a truly Inside role, not just one a company has assessed to be inside to avoid any tax liability risk.
This is the typical stock response and it's simply not true.
As an ex contractor myself, and someone who has spoken to many, money is NOT the reason most contractors work that way - it's usually about control of your own destiny and clarity on your relationship with your client. As the other responders have pointed out, overall, it's not really that much better anyway - CT + Dividend tax is more that simple income tax. You avoid NICs but have to cover holiday pay, statutory payments, redundancy, sickness cover, unemployment yourself.
Arguably the rate that contractor gets is a much fairer reflection of the value of their skill - it's not mixed in with value of the non-financial benefits permies get. Because the contractor market is far more liquid, the prices reflect the value more accurately.
Done properly, the IR35 tests WILL correctly identify disguised employees and distinguish them from genuinely independent consultants (you would never argue that the guy fitting your windows was your employee - neither is the man repainting your workplace car park, nor the team re-cabling your office, nor the company redesigning your public website, nor the developer migrating your app to the latest version of .net)
Contractors don't want to be employees of their clients, and up to now the relationship has worked well for both clients (who get flexible skilled specialists) and contractors, who get to work on their terms.
Mr Pavilicec will of course be very pro IR35 - he can now go into RBS, JLR etc and claim to offer that same flexibility with large teams in Eastern Europe etc. No IR35 risk, no status test risk. Clients will pay the same, but now the money goes overseas..
>Done properly, the IR35 tests WILL correctly identify disguised employees and distinguish them from genuinely independent consultants
No problem with this aspect of IR35, just with the way HMRC has decided who pays most of the penalties arising from 'deemed employment'...
>Mr Pavilicec will of course be very pro IR35...
This should be people's greater concern. They should be lobbying HMRC to bring all arrangements in scope, so those foreign workers could be (and probably are) deemed employees so requiring the liability to fall wholly on the UK employer and agencies...
To be fair, for me money was a significant incentive. Although when I went contracting in 1995 companies didn't have a clue about iT professionals so there we no real method of progression without moving away from the technical side of things and becoming management. In my late 20's I wasn't management material and I certainly didn't want that kind of role as it was dead boring.
When I went contracting I didn't want to setup a LTD company, it's a pain in the butt, the only benefit was the ability for me to employ my wife when the kids were very young and charge certain expenses through the business. I knew bugger all about tax so I got an accountant and they told me what I could claim and what I couldn't.
None of this is tax avoidance, it's running a business.
I've dealt with very little prejudice in relation to me as a contractor over the past 25 years but there have been the occasional snipe. Generally they come from people who - in my experience - are not very good at their jobs and are fearful of being made to look inadequate.
The ones that are good generally don't have an issue with it, they are just after a bit more stability.
"When I went contracting I didn't want to setup a LTD company, it's a pain in the butt, the only benefit was the ability for me to employ my wife when the kids were very young and charge certain expenses through the business"
This is where you missed the main point (and many contractors do).
As a contractor, you are liable for your work. If you are a dev and introduced a bug which cost the client sales, they have the right to sue you to recover those lost sales (and other damages). Even with professional indemnity insurance covering millions, a claim could well exceed this.
If you were taken on directly as a sole trader, a claim could cost you your house and make you bankrupt. The claim (over any insurance payout) would fall on your shoulders and could cost you everything.
An Ltd is a Limited Liability Company: The client could not sue you, but could sue your company, and only assets of the company could be touched. They could not take your house, your TV, your personal savings.
This is the main reason for running a Ltd company. Tax and other benefits are secondary at best.
"Getting paid way more than a permy doing the same job, just pay more tax and be done with it, or go permy and get paid the same as your peers, simple."
Usual reply: If it's as simple as that why are you permie (it's obvious from your comment that you are)? Is it that you don't fancy the risks you were so quick to dismiss?
"Usual reply: If it's as simple as that why are you permie (it's obvious from your comment that you are)? Is it that you don't fancy the risks you were so quick to dismiss?"
Fine, that might explain why you get paid more by the company. Now explain why you think you should pay less tax.
Okay I'll bite.
I made the jump to contracting and I pay 5 times as much tax as I did as a permie and jumped from paying 25% of my income as pay to 32%.
Under which metric would you say I'm paying less tax?
I bet more of the value that I generate is taxed than the average employee working for a large corportation.
"I made the jump to contracting and I pay 5 times as much tax as I did as a permie and jumped from paying 25% of my income as pay to 32%.
Under which metric would you say I'm paying less tax?"
Under the metric where your situation is compared to a permie with the same take home pay (or the same gross earnings) - including adding in any benefits like pension. That is after all the ethos of our tax system - the amount of tax paid is intended to be proportional to what you earn.
I presume someone will now respond saying "ah, but the permie gets holidays". That's right, but why should whether the person gets paid holidays or not affect how much tax they pay? And that "paid holiday" is taxed, it's not like it's a tax free benefit.
In my opinion the tax system is just far too complex; it'd be better to go back to a significantly system - e.g. entirely dump all the nonsense of employee NI and roll it into income tax.
So I think you're saying if you are paid the same a contractor will take home more?
If you're paid 50k a year that's about £200 a day pre tax including the days you get paid but don't work. That gives you a net income of £3,127.99 plus pension, sick pay, job security, etc
As a contractor on £200 a day, you estimate on working 220 days in the year (if you're lucky enough to be in constant work), your monthly take home is on average £2,955 minus (pre-tax) expenses for accountants, bank charges, insurances, equipment, etc. Contractor calculator equates it a £43k permie role. Inside IR35 that drops to £35k
In terms of tax paid I think you're right a £200 a day permie pays marginally more tax but £200 a day contractor is technically being paid less.
I agree a simpler system would make more sense but I think the needs of the self employed are slightly different. I think you should pay minimal tax to take a "living" wage out of the business and be worthwhile keeping money aside for lean times but once you have that buffer and steady work a "rewarding" wage should be taxed like anyone else.
Yes, essentially you're going on the lines I meant. I don't think there's many contractors on £200 per day so it's probably more realistic to compare a higher figure, and (on reflection) it's likely best to compare similar take home pay/benefit. 220 days is probably slightly on the low side too as that's more "days off" than an average premie takes I believe - but your figure is justifiable if (say) the contractor is doing training on their own time (something the genuine contractors often do, but the people that are really 'disguised employees' tend to do less in my opinion).
It's really hard to come up with hard figures due to all the variables. As I mentioned in another post, the contractor calculator is quite biased towards being pessimistic for the contractor case due to the narrative they want to put across - once you add in the flexibility of the outside-IR35 contractor (i.e. ability to defer earnings to later tax years if they want, closing company & taking profits at the 10% entrepreneurs rate, using lower tax rates of other family members, more flexibility over pension payments, deferred payment of tax, reclaiming travel expenses to their "temporary" place of work, etc) it can easily skew towards the contractor - depending on the generosity of the employee's benefits and how much the person values those benefits.
>220 days is probably slightly on the low side too as that's more "days off" than an average premie takes I believe
365 days less:
104 for weekends
9 for public holidays
20 for holidays
Leaves you with 232 days.
As you are running your own business then you will probably require 1 day a month just to keep it ticking over. so now at 220, before sales (remember getting that next contract takes time), sickness and training. I budget for 10 days training and 5 days sickness/appointments (I have kids), leaving 5 days sales time. So better figure for budgeting is 200 working/paying days per annum, that way some years you'll potentially do slightly better, instead of most years doing slightly worse... :)
So to get that £50K pa gross figure, you'll need a basic day rate of £250. Given the typical employee has a benefits bundle on top of the £50K, that can take the gross package to £70~80K - £80K pa is £400 p.day...
Obviously the company will have some overheads (insurance, accounting, training and accreditations, etc.), which will need monies being added to the above...
Not saying having got your hands on the money there aren't games that can be played to spend it more efficiently, just that there is a reason why I'm charging what seems at first glance to be significantly more than what an employee is seeing in their pay cheque (ie. if you are an employee read your pay slip and monetise all the stuff (eg. Cisco training) you get for free out of your employer.
“ Well put. I wonder if all the contractors in this thread can see the irony of telling a permie to stop moaning and get a job while they're all simultaneously crying about about having to pay tax like the rest of us.”
We, contractors, pay more than 3.3% in effective tax” than permies (https://www.contractorcalculator.co.uk/comparing_taxes_contractors_versus_employees.aspx) More when you also include VAT.
There is one benefit that comes out of this: orgs (before they force all new permies to go through umbrella companies in the gig economy) will realise how much dead weight that they have in their permies that were compensated for by contractors.
"We, contractors, pay more than 3.3% in effective tax” than permies (https://www.contractorcalculator.co.uk/comparing_taxes_contractors_versus_employees.aspx) More when you also include VAT."
Why would you include VAT given it's paid by the client? (and in most cases then claimed back by the client, it's a zero sum game).
As for the 3.3% - sure, that does appear to be accurate in the very specific situation that contractorcalculator outlines, which to some extent is biased by the narrative they want to create. In reality, the majority of us know the outside-IR35 contractors (particularly the higher paid ones) do better in most situations - e.g. pension contributions made direct from a company avoid NI that the employee can't (unless their employer operates a salary sacrifice scheme, which many don't and even if they do is less flexible), reclaiming travel to "temporary workplaces", the PSCs that pay dividends to family members other than the fee earner, deferring income, extracting profits by closing company & claiming entrepreneurs relief, and so on.
Did I miss something? Could I have spent another couple of decades in the UK without any IR35 hassles?
HMRC Inspector Callahan "You have to ask yourself, are you inside or outside IR35? Do you feel lucky punk?"
But in the 20+ years since this high fibre turd started floating, HMRC has stumbled along with various determinations. Often that contractors were inside IR35, and therefore must pay up. But then those determinations were frequently challenged, and contractors found to be outside. So HMRC spent millions on.. contractors to develop a state-of-the-art AI* based system that with only a few simple questions would rule contractors inside IR35.
So tool in hand, it was announced that henceforth in the public sector, employers would now be responsible for determining IR35 status. Which promptly lead to public sector contractors seeking pastures new, and projects being delayed or costing more. Now we're into the next phase where private sector is facing the same challenge.
Parts of the private sector are ecstatic, ie the usual suspects like Crapita*** who can now try to fill zero-hours positions** to fulfill public and private sector.. err.. contracts.
*HMRC hired a top consultancy that determined the self-determination system has an equivalent level of intelligence as a pet rock. But less utility.
**By zero-hours, I mean whatever Crapita can come up with to ensure psuedo-employees still won't get sick or holiday pay, or any unnecessary costs that might otherwise impact margins and profitability.
***As we get closer to IR35 day, I've noticed an increasing number of agency calls telling me about wonderful opportunities to work for the usual suspects.
First off the UK does not want to descend into no permanent jobs as occurs in the Philippines with 'endos'. It was a lurk, and its ending.
Secondly contractors do not do the same job - they rarely teach and pass on knowledge, and mostly withhold important stuff. You would too if you wanted a renewal.
Thirdly the umbrella company solution may not work, or may get hammered, as the intention is clear, and if there is no real independence. See Uber 'tests' in civilised countries not pretending to be blind.
Lastly, there will be a temptation to phoenix umbrella companies(go insolvent/broke then restart) and wipe out monies and benefits owed to employees. As such non-compete or transfer knowledge to rival competitors ENDS. If you sign a secrecy agreement with the client - then IR35 may bounce back.
If you need a security clearance and a .gov pass with defined roles in say SAP, I wonder if IR35 is triggered..
In my own case, I get asked to come in because I have a skill set the company does not have expertise in. It will usually be my role to build the project and ensure skill and knowledge transfer to the permanent staff. It works well, no-one feels threatened since I make it very clear that I am out the door at the end of the project. I don't have to worry about the brown nosing for a promotion and the politics of the place. I can just focus on the thing I enjoy building good software to modern standards.
If I take a recent project out of a team of 10, 8 were temporary staff:
2 testers from a big consultancy (imported from offshore in India paid low wages whilst the consultancy charged extortionate rates)
2 back end java developers from Europe
1 PM form Europe
3 UI developers working in typescript and Angular
As a result of IR35 changes the 2 Java devs went to work in Zurich
The PM went to work in France and the 2 UI guys in Eire
We are the master masons of the digital age who build your cathedrals of commerce, each of us was paid in excess of £100,000, Thats half a million pounds of taxable revenue in one team.
The CTO is unable to find their replacements at one of the best companies in the FT 250 to work for.
I am considering contracts in the USA or in Eire, one we lose these guys they don't come back, there is a world a difference between someone of my skill set and new graduate or a permie of less than 7 years solid commercial experience. My craft and productivity are orders of magnitude ahead.
In my experience, low rate contracts treat you like garbage and are run by Neanderthals, so the project is just a pain in the proverbial's. Why would I subject myself to that, Life is too short and I will go and do something I enjoy or just retire.
Typical know nothing moronic permie answer.
Contractor wages have been falling for two decades. I earn 20% less now than I did in 2001 and I get NO expenses.
So, what, get slightly more than a permie, no holidays, no sick pay, pay your own pension, pay for your company, pay employers NI and employees NI get fucked over for 52% tax (if you are lucky), then have NO job security, no union, no employment tribunal if anything goes wrong. Have to pay for millions in public liability and personal liability insurance for your company?
Then the government wants us to be flexible, work where the work is needed, as the work is needed, for as long as the work is needed (sometimes as short as 4 months).
Fuck you Very Much. I've already handed in my notice. The UK is no longer worth working in for a contractor.
Try reading some of the analysis about what happens if we stick two fingers up and walk away. Brexit? No comparison in economic damage.
If you get no expenses, blame your employer.
If you get no holidays, blame your employer.
If you get no sick pay, blame your employer.
If you're paying public and personal liability insurance and not your employer, blame your employer.
Just that.. your employer is the company you own. If it isn't then you're an employee of the person hiring your services and too damn right you should be in IR35.
Interestingly I have moved from being a contractor to being permanent at the same company. Result is I have 37% less takehome, BUT I am also paying 29% LESS tax overall.....
People keep failing to take into account the 19% corporate tax you have to pay even before dividends, which means you actually pay 19% Corp tax plus 7.5% dividend tax. So while permies pay 20% tax, the contractors are effectively paying 26.5% tax. That gets even worse at the top end with 19% corp tax plus 32.5% dividend tax, so permie pays 40% contractor pays 51.5%.....
"I haven't been able to work for near six months," he said. "I've had to use any savings I did have in my company to survive. I'm now faced with a very bleak future, not knowing what I'm going to do, selling my house."
That sounds quite extreme. Does he in fact mean "I haven't been able to work in a way that I find advantageous regarding taxation [...]"? I find it hard to believe that for someone who has technical skills and the will to work, that employment prospects are so bleak. Given a choice between burning through my savings / selling my assets versus taking up direct employment I know which way I'd go.
Times change, and sometimes we need to change with them.
Not happy with the rate, then ask for more. Don't get more? Then maybe the person isn't worth as much as they think are.. that's just the way the market goes.
None of this should be a surprise to anyone that has contracted for a while. I have done a mix of contract and perm work. Made some extra money with decent contracts but knew the tax man was after the contract business for years now.
There is still plenty of IT work. Not working for 6 months and sell your house sounds odd to me..
There is still plenty of IT work. Not working for 6 months and sell your house sounds odd to me..
Agreed. Even if he can't find employment in IT then there's nothing stopping him from taking some other type of job if it's the difference between having a house or not. As the great Mr Jagger once put it, and I think rather succinctly, you can't always get what you want but if you try sometime you find you get what you need.
For example, someone I used to know...super-clever guy got made redundant from his job in academia and got a job in a hose factory. Basically it consisted of him sitting next to a machine for 8 hours a night, and every minute or so pressing a button to make the machine do something that was part of the hose-making process.
A million miles away from what he truly wanted to do, but the money he got for those utterly mind-numbing night shifts meant that he kept food on the table and roof overhead for his family.
Quite quickly he got so he could do the job on autopilot and used to spend the time letting his mind freewheel, coming up with all sorts of wazzo ideas. I think he ended up doing something like publishing a book of logic puzzles that he'd formulated while sitting at the machine.
And I bet you were far fitter and healthier than you would have been if you'd spent that time sitting behind a desk.
In between tech jobs a far younger me did a stint working for the city library service. The job mostly consisted of humping great piles of books around from one place to another. My musculoskeletal system has never been in better shape. The only physical downside was recurrent ringworm - a common complaint amongst my colleagues at the time, due to some weird things that lived in and between dusty pages of books.
Why is this issue being presented in such apocalyptic terms. It's just a issue around paying tax and whether you need to pay more or less tax. Work will still exist and rates may vary but both are dependent on demand / skills. Whether the tax rules are fair is a completely different argument.
Black cab / uber drivers are complaining about the amount of money they make, not simply because of tax laws, but because the market is flooded. This is also a risk in the IT contracting marking - as long as there are people who accept less money than others, businesses will always be able to get contractors. Just don't assume businesses care about quality. It's just another risk that comes with the territory.
The issue involves paying more tax, but the important part for many freelancers is that big companies are now refusing to employ freelance staff at all.
Companies lose the ability to use freelance staff as a flexible workforce, too.
This is definitely a big problem for some people. How many will lose out is not really known, but can be estimated to an order of magnitude. There are no winners.
big companies are now refusing to employ freelance staff at all.
Companies lose the ability to use freelance staff as a flexible workforce, too.
Because many of those companies were abusing the system and hiring contractors to avoid the cost and complexity of having full-time staff. It was easier for BigCorp to just pay a generous day rate & let the contractor worry about all the paperwork. Now those companies have been caught at it, and told that if they are treating people as full-time permanent staff they need to do so in accordance with the law.
It's unfortunate that some contractors who went along with the scheme are getting burned, but didn't they wonder how "contracting" with the same employer for years could be legit?
The length of the contract has nothing to do with whether the contractor is acting like an employee or not. Some 'permanent' workers stay in roles for less than a month; contractors can certainly work with a single client for many years without necessarily taking on the attributes of an employee.
Why is it seen as fine for two companies to have a successful multi-year partnership (or even unsuccessful when it comes to Capita, IBM, etc) but a contractor cannot?
If a role is going to take more than 1 year, then I would be looking to ensure staff were involved and eventually take over the role - whether that is retraining staff or bringing in new staff. 1 year is more than enough time to train somebody on any platform/technology if you are willing to put the time, effort and budget into it. Any company that allows an external provider (whether contractor or consultancy) to spend 2 or 3 years working on a new solution and then they walk out without ensuring internal knowledge remains, is asking for trouble. However it does happen, which shows that a lot of companies are just badly run and looking at everything in the short term.
“ Now those companies have been caught at it, and told that if they are treating people as full-time permanent staff they need to do so in accordance with the law.”
And you don’t just think that BigCorp won’t just then push all new “perms” through the umbrella, inside-IR35 channel?! Think a bit longer term: they’re f**king us all, slice by slice.
BigCO I'm working for loves beuracracy, so I don't think it's that.
Most of the contracts I work on are to build a specific thing and bugger off.
People like to bring in extra people to make something and their option now will be to use other countries.
Where I work there are teams in China and India, it just means less dev work will happen in the UK.
the important part for many freelancers is that big companies are now refusing to employ freelance staff at all
Relax. They've been trying to kick the contractor habit for decades. Give it a year and they'll be on the hunt again.
The annoying thing is the way this plays into the hands of "consultancies". For the past year, I've been working on a body of code created by a well-known "consultancy". The "consultants" seem to have been a mix of incompetent and totally bonkers.
The problem is that IR35 is so ill defined that even HMRC are having trouble explaining it. so they don't even bother. They never provided companies with clear set of unambiguous rules that would allow them to make proper determination of the tax status of the freelancers they employ
Which lead to a situation where the biggest market for freelance work - large corporations are faced with a choice:
A) Accept quantifiable risk of HMRC investigation and tax grab
B) Stop using freelancers at all
Guess which option most of them are going for...
It's not apocalyptic, labour market have seen much bigger upheavals through the years, but there will be significant impact for both clients and freelancers.
HMRC doesn't care either way, they wan their pound of flesh
Oh but HMRC do care. They want this blanket "no contractors through limited companies" approach because it achieves through threats that are baseless in law (which isn't changing) what they've not been able to achieve through legislation. Taxing freelancers - who have no workers rights, sick pay, holiday pay or employee benefits paid by their client - as if they have all of them. That's what pisses me, and my fellow contractors, off.
Make it sufficiently "risky" to use a limited company contractor and companies simply won't.
Taxing freelancers - who have no workers rights, sick pay, holiday pay or employee benefits paid by their client - as if they have all of them.
If you're a freelancer you're self-employed. That means that you are your own employer, and you are responsible for providing your sick pay, holiday pay and employee benefits. You should charge your client a daily rate which is sufficient to cover them.
If you choose to skimp that's up to you, but it isn't a reason to justify paying less tax.
You seem to have missed the point. It is really quite simple. According to HMRC if I’m inside IR35 I’m NOT freelance, I’m a disguised employee. And I’m to be taxed directly on turnover on that basis. That is literally what the problem is. Yet you’re suggesting I am still self employed and should be managing the risks in this situation. How? My company can’t keep profits on one side, pay corporation tax on them and leave them in the bank for a rainy day. There are no more profits. Everything is net pay. Whether I want it that way or not.
As a contractor working through a limited company (a requirement of HMRC) I agree with every word you’ve written. I’m taking on the risks and operating my business in a way that takes account of them. Keeping money back for periods of sickness and unemployment. I won’t be able to do that any more. The risks haven’t gone away.
Most contractors I've worked with aren't contracting but are disgised perms. The only difference is that have decided to sell their rights (holidays, sick pay etc) in return for more money.
This is fine, but when they get ill they still use the NHS (which they opted out of by not paying there tax), still expect to send there kids to school etc. I'm very happy for the current process to continue as long as they really lose what they have opted out of .... but they dont.
This clampdown on tax evasion cant come soon enough.
Yes they are, there's always two sides to unfairness. They're happy to be paid twice as much as a permie while not taking any responsibility for what they deliver, clearly unfair, but not happy to only be paid one and a half times what a permie gets without having to take responsibility for what they deliver. Not unfair enough for them.
They're happy to be paid twice as much as a permie while not taking any responsibility for what they deliver,
If life as a contractor was really that good (in years gone by) - why did you not become one ?
I ask people that and they stutter out a variety of reasons - which just show that being a contractor is not the bed of roses that some make it out to be.
Indeed it isn't. I have no intention of changing, unless HMRC essentially make it impossible to carry on, but not everything is for everybody.
I love the freedom, the technical challenges and (mostly) the lack of having to deal with HR departments or office politics. Some of my friends visibly get the fear though when I tell them I don't have another contract lined up and it might be a month or 2.
"They're happy to be paid twice as much as a permie while not taking any responsibility for what they deliver"
If that's the case, your company is hiring bad contractors and giving them bad contracts that don't have clear deliverables in them.
If that's the case, your company is hiring bad contractors and giving them bad contracts that don't have clear deliverables in them.
Absolutely. Those guys (clients and contractors) are going to suffer and it's largely their own fault.
Once the panic around this has died out contractors who really are not just permies in disguise will carry on as before and those employers that need them will know where to find us.
Absolutely - the genuine contractors who offer skills and depth of knowledge worth paying for will always be OK, might have to pay slightly more tax but fundamentally that's not really a problem give they are worth paying reasonably well.
HMRC are shaking the tree and all the fake contractors who are really permies will fall out leaving the genuine to continue. What's wrong with that ?
And I know this site is full of contractors so down vote me . . . go on :)
“ HMRC doesn't care either way, they wan their pound of flesh”
No, they’re not shaking the tree, they are shaking the whole orchard and countryside.
The Government is risking 14.5% (£305bn) of GDP to collect 0.17% (£1.3bn) of tax revenue but lose at least 3.3% of tax revenue in the process (+ another 20% if including lost VAT), just to catch 3.4% (170,000 or 230,000) of PSCs while impacting 100% of PSCs (5 million), 60,000 engager organisations and 20,000 agencies, introducing extra significant admin, confusion and risk to all, many PSCs of which will be incorrectly classed as inside-IR35
I am more concerned about the fact my main contract is with a large multi national and they still haven’t made a decision.
The tool says I am outside. My manager agrees but we have legal, tax, partner management and HR all saying it’s one of the other decision.
I take financial risk, I set my own hours, I decide where I work and my manager doesn’t control me.
If I accept a project within the contract that has 20 days PM time at £500 a day I get paid £10,000 at the end. If it takes me 25 days I still get £10,000.
I did. The money was great but there's more to life than money. Now I'm back permanent because i like to build things long term not fanny around with the latest shiny.
Doesn't change anything i said, contractors main problem with ir35 is they don't want to pay tax. Flexibility my arse.
Who is 'they' in the 'They don't want to pay more tax'?
I think you'll find it's the end client, or in your case: employer.
They avoid business insurances, employer national insurance contributions (NICs), pension, wasting time with one-to-ones, etc. They can scale up and down as required. The issue here is that many permanent jobs were made into contracts to save the client/company money and impress the stock market: less employee headcount = share price goes up.
Use your brain before posting; life is not the black and white you seem to think it is and neither is contracting.
I often asked this question when given a hard time by permies, often trotted out was 'responsibilities', 'family life', 'mortgage', 'pension' etc etc.
So on the one hand they thought it was unfair for me to be seemingly paid more but on the other they could clearly identify the risks of being a contractor and the benefits of being an employee.
They seemed to forget I had to either travel a long way each day or in the vast majority of cases have the costs of B&B/hotel or renting a weekday home for the period of the contract.
That's a ridiculous statement, I've worked as a contractor in places where I care more about what I deliver than the permies around me. That's not having a go at permies, it's simply pointing out that it's got little to do with employment status and more about the individual, and the culture of the business
You sound bitter that you're not a contractor.
I've been contracting with a friend (via a Ltd company) since the late 90's usually on a per-job basis, some of the penalty clauses in contracts we have taken would have totally wiped us out if things had gone wrong so don't assume that contractors don't care or take responsibility for their work.
some of the penalty clauses in contracts we have taken would have totally wiped us out if things had gone wrong
Those penalty clauses exist to protect your customers from your potential incompetence. If you haven't paid for insurance to cover those liabilities you deserve to be wiped out, and I feel sorry for the customers you let down.
In my last contract my gross day rate over a year was about £120,000 with no holiday pay, sick pay pension and I paid employer NI. I went permanent for £85,000 per year, 10% bonus, 5% profit share, 9% employer pension contribution, private healthcare, holiday pay and sick pay. To say contractors get paid double a permie is nonsense. I'm better off permanent with the same company I was at for two years as a contractor.
" To say contractors get paid double a permie is nonsense"
It's not necessarily nonsense, it just turns out it applies to some situations and not others. I've found it's a reasonable rule of thumb (and it's generally comparing gross salary to gross day rate), though it can fall over in the employee benefits are generous and are things you want (I suspect many contractors choose not to get private medical cover). Sounds like the permie position works well for you - congrats!
"No one is saying you'll never work in this town again, just that you might need to pay a bit more tax"
A bit? That's an understatement considering the limited company pays a significant amount of corporation tax, on top of the tax being paid on salary/dividends to the individual. It really doesn't make sense to tax someone as an employee when they don't get the benefits of full employment.
“ It really doesn't make sense to treat someone as an employee without giving them the benefits that the law obliges them to do.”
I totally agree but, unfortunately as I only found out myself last week, Employment Status is different between Employment Law and Tax Law (https://www.nidirect.gov.uk/articles/employment-status) which is where, I think, much of the problem lies. (also outlined in the Taylor Review of Modern Work Practices (11/07/2017) on page 33 - https://www.gov.uk/government/publications/good-work-the-taylor-review-of-modern-working-practices).
"It really doesn't make sense to tax someone as an employee when they don't get the benefits of full employment."
It doesn't make sense to tax the contractor/contractors company when all the benefits of using a contractor over an employee fall in favour of the employer.
This is HMRC wanting to get rid of contractors because its easier to deal with big employers than individuals...
" It really doesn't make sense to tax someone as an employee when they don't get the benefits of full employment."
Can you explain why this is please? Our tax system is mostly trying to be based on tax paid being related to how much you earn, not the details of the contract between you and the company paying you. Surely what benefits you are / aren't getting are something you negotiate when agreeing on the T&Cs and the rate rate? Should employees earning the same pay different rates of tax depending on whether they've negotiated 30 or 60 days of paid holiday a year?
I totally get your point. Money is money .
The issue is that a contractor earns more because of all the downsides: all the risks, liability insurance, etc.
If the net pay par worked hour (ie after holidays, sickness days, pension, health insurance) shows no meaningful gap to make up for the downsides there is an issue. That's what people are moaning about. I think.
Also, everybody should be moaning that this is obviously the thin end of the wedge. A breach is opening and now more and more people can be pushed in zero-hour zero-benefit type contracts.
it will be interesting to see whether it's promises promises (as with mass promises and threats in general), or whether contractors do have some traits that go against general human trends). And no, I'm not being sarcastic towards contractors, just genuinely curious.
They should do if they have sense/savings, even if its just a merry go round and musical chair shift to other clients. Who wants a retrospective HMRC investigation if they deem you've moved from an 'outside IR35' to 'inside IR35' contract at the same client?
Yup. Me too. CEST has put me outside of IR35 but my end client is also taking a blanket "in" approach and their alternatives are unacceptable to me. So I'll be taking a well earned 2 - 3 months off to let the dust settle before getting back to work.
Credit to the IT department leadership at my current client however for trying to push back on Corporate, as they do only bring in contractors to fulfil specialist roles, and they are well aware of the gaps that this exodus will create. Still...
My notice is written, dated and ready to dispatch on March 5th. Every contractor in my team is doing the same. The only people working as contractors I've come across who aren't doing so are either (a) already inside IR35 or (b) aren't taking enough of an interest in what is going on.
"Jovan Pavlicevic, managing director at professional employment outsourcing company Granite BPO, doubts that the survey offers a true representation of the contractor community. "These surveys are created by firms that have an interest in creating a scare story, and their respondents represent a very particular, small subset of the PSC population," he said."
Funny because he is only saying these things because it benefits him.
I was a contractor for years, I was never paid double but I did have a day rate that was higher than others, but as has been stated, I also paid corporation tax, my own tax on dividends, had to cover my own holiday and sick pay.
But it was convenient when I had a young family
It is a small increase. Look at the stats for which mainly are sourced from figures from the govt:
The Government is risking 14.5% (£305bn) of GDP to collect 0.17% (£1.3bn) of tax revenue but lose at least 3.3% of tax revenue in the process (+ another 20% if including lost VAT), just to catch 3.4% (170,000 or 230,000) of PSCs while impacting 100% of PSCs (5 million), 60,000 engager organisations and 20,000 agencies.
There have been a lot of tax increases in the last few years, making the UK a significantly less desirable place to work for high earners. Many contractors from EU countries are actively looking for work elsewhere in Europe; and fewer are arriving here.
Recent tax increases include:
* Pension Lifetime Allowance of £1.5m introduced (2006)
* Personal allowance withdrawal over £100k (2010)
* Additional Rate tax over £150k (2010)
* VAT rises to 20% (2011)
* High Income Child Benefit Charge (2013)
* Air Passenger Duty continuous rises
* Marriage Allowance excludes high earners (2015)
* Dividend tax (2016)
* Travel and subsistence expense clampdown (2016)
* Pension Lifetime Allowance reduced to £1m (2016)
* BiK (Benefits in Kind) clampdown (2017)
* IR35 for public-sector (2017)
* Tax Free Child Care excludes anyone earning over £100k (2017)
* Insurance Premium Tax rises to 12% (2017)
* Dividend tax threshold reduced (2018)
* Pension contributions capped at 20% (2020?)
The rising burden of regulation on limited companies means accountancy fees have been rising too.
Don't get me started on childcare.
In 2005, Childcare Vouchers were introduced, saving a higher-rate taxpayer up to £2,916/yr.
In 2011, higher-rate taxpayers' savings were capped at £1,484/yr.
In 2018, childcare vouchers were finally scrapped, replaced with Tax Free Child Care. This offers savings of up to £2,000/yr. If you earn £99,999, you qualify. But if you earn just £1 more, you face a bill for £2,000.
You can use pension contributions to reduce your "adjusted income" to below £100k; but pension contributions have an annual limit of £40,000, so if you earn over £140,000 then you can't bring yourself below the magic £100k mark again.
Even that £40,000 limit represents a new tax of sorts. The pension contribution annual allowance for the 2010/11 tax year was £255,000 but reduced to £50,000 for the 2011/12 tax year and £40,000 with effect from April 2014. Not to mention the fact that pension allowances taper off above £150k.
Look, I don't expect much sympathy for people on £100k+ wages. But understand that the environment today for skilled (i.e. high-earning) workers, particularly contractors, is nowhere near as attractive as it once was. No surprise that many of them are planning to leave these shores.
Why so?
To be honest, I don't expect any form of sensical answer from you as I highly suspect that you have no actual experience in the matter. On the other hand I have contracted in amongst others Italy, France, The Netherlands, Spain and the UAE over the years, and am only back in the UK due to family issues.
There are pros and cons to it, but in my experience the pros very much outweigh the cons. But then you'd know that wouldn't you if you had ever done it...
Are you sure?
Tax in Norway is very high - but it's number one place to live in the world for quality of live. Sweden and Denmark come close. I can go work there, take my family, have a much better standard of education, send them to university for free in Scotland and *still* make more money.
What you don't realise is that the UK isn't all that good a place to live, especially much of England and Wales. Land is mostly owned by a few people, unlike anywhere else that's in Europe. We never had a revolution and therefore land is limited to a few select people. Rich people pay very little tax due to complex evasion/aggressive avoidance processes.
The main issue I've found here in the UK is that you people think it's a great place to live, as you're constantly marketed this by your own government and media, yet on standards of living, press media freedom and such the UK is rated REALLY low!
Check out any university based methodical study and Scandinavia rates extremely highly. The UK has went from number 40 to number 33 in the world for media press freedom, see here, due to some other countries getting even worse, not because the UK has gotten better:
https://rsf.org/en/ranking
Quality of living is lower, especially for the poorest third of the UK, versus developed European countries (naturally excluding places like Hungary, Albania, Russia, etc).
My advice is to take a sabbatical or some holidays elsewhere and pretend you're living there. Many people I know are now moving abroad and the main issue is they have great skills and are in high profile jobs - it's important to notice this trend and address why this is happening.
We never had a revolution
We did. Even topped the King. His republican replacement (Cromwell) turned out to be even worse.
Rich people pay very little tax due to complex evasion/aggressive avoidance processes.
Tax evasion is illegal. Tax avoidance is open is open to everyone, for example if you have a pension fund, or an ISA, etc. It's more profitable for the rich for the obvious reason that saving 10% of GBP 20m nets you a lot more than saving 20% of GBP 20k
The main issue I've found here in the UK is that you people think it's a great place to live, as you're constantly marketed this by your own government and media, yet on standards of living, press media freedom and such the UK is rated REALLY low!
A lot depends on the media you read. The left wing press like the Guardian or Independent will tell you everything is terrible because of capitalism, the ranty right wing press like the Daily Mail will tell you everything is terrible because of socialism and immigration. The more moderate media have their biases but they're fairly positive about the country as a whole.
Standard of living is around the middle of the EU range, pulled down by high housing costs due to the higher population density than places like France. The UK is one of the least corrupt countries in the world. It's no coincidence that many other countries still have legal systems based on the UK's, and you'll find the principles from Magna Carta and the English Bill of Rights still embodied in many places.
My advice is to take a sabbatical or some holidays elsewhere and pretend you're living there.
My advice is to actually live in another country for a few years. I can assure you that you'll not find the other places as good as they seem from a distance. After 30 years away I plan to move back to the UK as soon as I can.
Cromwell was just the top guy of the religious-military junta.
Charles Second was more a case of deciding to go back to the old ways was the least worse option after the Republic/Protectorate. At least insofar as England was concerned, Scotland and Ireland suffered in their own different ways. And the swing of power to Parliament meant it was a different type of monarchy afterwards - and thus get to replacement of James a few years down the line.
“Out of that list VAT isn't really a cost for the freelancer. It might be for some classes of client.“
VAT is passed along and paid by the org/consumer last in line. For most freelancers, that is the case, so technically or otherwise, the freelancer DOES pay the VAT.
Without those freelancers, the client won’t be paying VAT for those services they don’t get, so won’t be able to reclaim VAT against their profits.
I am a contractor but inside IR35 for the last two years. I raised my rate to compensate that and have worked through an umbrella company. I get no sick pay, no holiay pay BUT I also have no HR appraisals to do, no management training courses to attend, so it evens out.
I am just going outside IR35 (possibly for eight weeks only) as my contractual situation has changed. I may have to go back inside April 5th.
I've set a limited company up, got the indemnity insurance, registered for VAT and had a long talk with my newly appointed acountant about what I can and can't claim for. It turns out that I can't claim for the £10K of travel I do per year (2nd class at that), I can't claim for hotels, indeed the list of what I can claim for is remarkably small. I'll break even for the eight weeks of being outside IR35, but her view was that under certain circumstances being outside IR35 is actually not much better than being inside as HMRC re making it so, so difficult. The levels of corporation tax and tax on dividends means it's not actually that different (in some circumstances) to being inisde IR35. We'll see how it pans out.
We then had a brief discussion that simply taxing Google, Facebook, Starbucks, Vodafone, IBM etc etc even a nominal rate would easily bring in 10x what HMRC are expected to bring in from IR35, but that these companies can afford far bigger laywers than HMRC and that HMRC are genuinely afraid of losing the court battle after spending a fortune. It is very much one law for the rich and one law for the contractors.
I'm interested to know where the contractors are going to go if they do leave their present companies. It's getting difficult to get jobs outside IR35 and the glut of people applying to them will probably depress contract rates. Simple economics of supply and demand.
One way around the issue is for 21 contractors to band together to form a company, this means each person has less than a 'material' stake in the company and bascially become a small consultancy akin to Cap or Logica or IBM. If there's enough people you easily have a substitute you can use, so thats one issue off the IR35 regs to worry about.
To be fair, the advantages of being a Contractor (apart from the higher salary) have been eroded recently with the changes in taxation on dividend payment. I was briefly a contract through my software development company, which has multiple clients so did not come under IR35, and it was a toss up whether to pay myself via PAYE or through diviies.
I guess it depends on what "advantages" you are in it for. My sole reason for becoming a contractor were (and still remain) the flexibility, better work/life balance and to be the sole captain of my ship in terms of what I do with my life. The uncertainties that it can bring are still vastly outweighed by the benefits.
My main problems with IR35 are not primarily financial, but with HRMC now effectively trying to dictate how I work. And that is absolutely not the job of Government.
For me as a contractor it isn't necessarily just about the impact on me.... of course I could adapt my lifestyle to work inside IR35 however its the impact on the wider economy that the government are failing to take into account.
An example.... as a contractor it is more cost effective for me to work myself and employee a decorator to paint my house than it is to take time off (unpaid) and then decorate my house. If I was paid holiday pay I would take time off and paint the house myself.
This is just one example of the wider impact....there is also the drop in income across many industries accountants, SAAS accounting solutions like xero, freeagent etc. B&B's in locations that contractors commute to work in etc.
The impact is potentially a lot larger especially when work is just moved offshore.
As many things actually point out... the tax lost isn't from the contractor themselves they pay near enough the same tax as a permie (normally more) it just doesn't come from PAYE but corporation tax, dividend tax, vat etc
Well I am one (permie) and I did exactly that, although it was roofing building and plumbing rather than painting. The Mrs does the painting and decorating (which she does as a business too).
Even when I used to be a contractor, garage hourly rates were so high that the calculation to do jobs on my car meant I usually did them.
As for the wage slave above on £27k a year - if you're in computing, you're in the wrong job! For god's sake go on the job websites and get something that pays as much as your contractor colleague!
"As for the wage slave above on £27k a year - if you're in computing, you're in the wrong job!"
Bit of a blanket statement when location has a major impact on this. £27k is a bad entry-level starting salary in the South or around London but is only a touch low for a mid-level salary for many IT jobs in the North - not uncommon if you're at an SME in Manchester or Leeds. I've often noted that I could be earning easily twice my salary if I took the same job in London (along with tripling my living costs and having to live within easy travel distance of my mother-in-law, which removes it from consideration)
And it's a sudden increase, rather than a gradual one. I - like many - have a mortgage, car payments and childcare to pay for, all predicated on the amount I currently earn.
A bit more tax would be fine, I could absorb it, and even a lot more would be manageable if it was gradually staged to give me a chance to reduce my expenditure. But suddenly being hit with a 20% increase in one go is too much. Much too much.
No, he was a permitractor. And people like him are the reason for the reform.
This is the only positive thing about the IR35 reform - it will weed out impostors like him that give contractors bad name.
Unfortunately the ham-fisted approach by HMRC is going to make a lot of collateral damage.
Fingers crossed, once the dust settles, the rest of us will be able to resume providing our services on a flexible and professional basis.
By government-own papers (stats anyway): to catch 3.4% (170,000 or 230,000) of PSCs while impacting 100% of PSCs (5 million), 60,000 engager organisations and 20,000 agencies
Sounds like a Death-Star to crack a nut without realising the cost of making that Dearh-Star.
before this thread becomes a permie vs contractor argument even further.... have the permies thought that
by implementing the changes to IR35 the government are by stealth effectively creating a method for large companies to remove permies completly by creating "Employed for tax purposes" staff without any of the benefits (but the same income as they currently get)? Therefore the life of a permie is also potentially at threat of becoming a no benefits employee
This is my fear too. In April you'll have two classes of employee. Those with benefits and rights, and those without. No need to guess which way the bean counters will jump here. An employee package typically adds a minimum of 50% overhead on top of an annual salary (Employer's NI, cost of holiday and sick pay, pension contributions and other benefits to attract employees in the first place).
If the day rate can be kept below this nominal figure then it is madness to employ permanent staff, who also have pesky employment rights.
I think it will be a little more "conspiratorial" than that. Here in Oz, when they introduced Work Choices (no penalty rates, zero hour contracts, no union representation [Molly the checkout girl gets to personally argue her case for a payrise to a clutch of company lawyers and accountants]), they negotiated with existing workers with the argument "This will not affect you - it will only apply to new starters. Plus you will get a little bonus for signing up", thus allowing those employees to decide on the working conditions for their replacements without having to endure them themselves.
I imagine this will be the same: "Hey, if you up to this, we save 50% of our employee costs, so that we can give all current employees a 15% pay rise and shaft the new entrants further down the line"
Trebles all round!
The whole thing is badly managed and thought through, we've only just seen the DRAFT legislation with only a few weeks to go before the changes take effect. The recent change from it applying to when the payment is received to when the work is done granted a few extra weeks, but the end outcome is the same. Most contractors I know, myself included, having been given an Inside decision, are walking, simply because we don't want to invite an HMRC investigation. Who would? HMRC could have avoided a lot of the chaos by stating that roles which got ruled Inside under the new rules, but that were considered Outside before, would not automatically trigger an investigation. We might not have believed them, but it would have removed some of the worry. Instead they have inferred the opposite position, Outside > Inside == Investigation. Hence contractors thinking they have no choice but to walk. That simple decision by HMRC is the cause of a lot of the upheaval firms are seeing.
Repeat after me: Contractors pay a greater percentage of tax than permies. Yes, it's true when you add up all the taxes that get paid, contractors put a greater percentage into Treasury coffers than permies.
Believe it or not, contractors aren't complaining about being forced to pay less tax. They're complaining because "inside IR35", aka "employed for tax purposes" is actually No Rights Employment. All the costs and downsides of a permie, but with none of the benefits and protections.
FWIW, the "no rights employee" is set to become the predominant employment type available in a couple of years. The benefits to (big) business are huge - NREs don't count towards "headcount" in your public accounts filings, so your "earnings per employee" go up by hiring NREs. Higher EperE means a higher share price, which means more foreign investment. So, look out for public listed companies hiring lots of NREs suddenly being sold off to the Americans, Chinese and elsewhere. Oh, and then look out for sites/divisions being shut down overnight because NREs can be fired with no notice or reason given.
Now, as for an unofficial strike - not through choice - there simply isn't enough work around for all the contractors to get a gig. As such, a lot of us are going to sit it out for a couple of months in the hope we'll find something in the meantime. Again, much less money for the Exchequer, but that doesn't seem to be a concern for them.
Not sure about elsewhere but around my way the specialist contractors we used on and off for years seem to have vanished in favour of a swarm of replacement contract staff shipped in from offshore.
Shame they're all absolutely useless, quite possibly worse than the last offshoring experiment from 14 years ago.
What an absolute shitshow this whole thing is turning out to be from whatever side of the contractor/customer relationship you sit on.
I think there are some here that are forgetting that many, many industries absolutely need access to highly skilled people but cannot always justify taking on permanent staff.
Technical jobs also have seasonality.
Contractors may earn more but we take on a hell of a lot of risk. Comparing contractors and permies is absolutely pointless, the work may be similar or the same but their respective situations absolutely are not the same.
A lot of industries have seasonal or short-term requirements for people. They typically fill those requirements by some combination of:
zero-hours employment contracts
permanent part-time employment contracts
short-term employment contracts
agency staff
Your typical IT contractor is taking no more risk that someone who works habitually in construction - considerably less if you included the potential for accidents. They're also generally significantly better remunerated, less regulated and perfectly capable of working under any of the above arrangements in most cases.
I have been a contractor, been a permanent employee and run a company with staff providing consulting services to a variety of clients simultaneously. The first two were very similar, the latter was very different. You're at risk as an employee too - look at the terms of unemployment insurance and you'll see just how big the risk actually is by what they won't insure - and in neither case are you potentially looking at meeting the salary costs of other staff if the work starts to dry up.
I don't think contractors are the special case they have convinced themselves they are and if they're worth the net pay they believe they are, they'll continue to get it.
“I have been a contractor, been a permanent employee and run a company with staff providing consulting services to a variety of clients simultaneously. The first two were very similar ...
I don't think contractors are the special case they have convinced themselves ”
Although I agree to a degree, as someone who does Target Operating Models and frameworks for orgs and hence outside IR35, this fustercluck has got the sphincters of 60,000 orgs and 20,000 agencies involved (P3 of https://www.gov.uk/government/publications/rules-for-off-payroll-working-from-april-2020/rules-for-off-payroll-working-from-april-2020) in a right dither, all to just try and snare 3.4% (170,000 or 230,000) of PSCs while impacting 100% of PSCs (5 million).
Their business case and rationale is just not common sense...unless they have something to gain personally longer term.
>This is a disguised ad for an outsourcing company
Not sure if I would use Granite BPO as a result of this article - the quotes don't inspire confidence in them.
A quick lookup and I'm even more concerned at the other companies 'sharing' the same directors:
Granite Locums Ltd
Granite Financial Group Ltd
IR35 has been a mess since it was introduced. It is so subjective.
Why not have simple rules that say "if you have worked for a single client for more than x months then you pay full tax" and an extra rule to stop leaving for a month and rejoining. As far as the value of x, then 24 seems fair.
It is wrong that there are contractors who have out lasted all of the permanent staff. I worked with one chap who had been a contractor for 20 years at a Govt dept and previous to that was employed for 10 years. So hardly taking any risks.
..because you will find Project managers from KPMG etc etc working inside corporates for 5+ years. Are they employees of the corporate or KPMG?
HMRC don't care, in both cases they are employed, by whom makes no difference, but they are NOT caught by IR35. What if "KPMG" is instead a 5 person consultancy? Now are they employed? Clearly not - the relationship is the same as it was with KPMG
What about a one-person consultancy? Same contracts, same rates, same work.
Still outside.
All along, IR35 is about the relationship between client and "worker" - and if assessed fairly, no-one has an issue
I find all this unbelievable. If a person wants to be self employed with all the risks that entails then you go on self assessment. If there are no risks, no short term contracts INSTEAD the person continually works for the same Company, the Company decides on what, when and where the person works for years then that is an employee. Not difficult to determine, the criteria was decided by the Building Industry back about 1990. So get rid of IR35 and those silly companies and concentrate on the criteria to determine and employee. It is not difficult
Generally, you can't.
Companies won't engage people who are self-employed, only those operating through a PSC. This happened a few years ago with the last push on IR35. Probably around the avoidance (by the client/employer) of employer NICs.
Tax wise, SA would be better than PSC, ALTHOUGH one thing with a PSC is you pour money in when you are working (lumpy) and take it out at a fixed rate to live. with SA it's assessed as you earn
Self employed pay Class IV NICs (few £ a week) and SA income tax would be lower than CT + Divi tax on a given day rate.
CIS is to avoid a slightly different problem, namely mass avoidance of tax by self employed subbies. BUT there's a big plus with CIS: it has a very tight definition - one that IR35 has never managed - Construction or demolition work done on a building site and paid for by a commercial entity is covered. Try "Using a PC at a desk" (it's a laptop, and I'm at home). "Writing software" - my outsourced supplier in India are therefor employees.
This is the most common sense I have seen on this thread. 'Contractors' (i.e. permanent staff dressed up as such for tax avoidance) have had it so good for so long, but this was always going to happen - someone has to pay for the increasingly lower UK tax culture.
There will be no 'mass exodus' as economic reality becomes apparent. - where are they going for a start ? EU looks like a big risk currenlty. As previously pointed out, there are loads of very well paid permanent jobs in UK currenlty. Be thankful.
Here speaks a man with no business knowledge. The point of a limited company is to limit your risk.
Its not about the tax.
As a self employed individual, they can come after your house, your family, your assets. A limited company is a legal entity in its own right, a firewall between you and 'shit happens'
Employers LOVE to use contractors here in the US. Not only does the accounting put those costs in some magic OpEx bucket where they don't matter, but they get essentially an FTE. It drives me crazy to see contractors (or their body shops) billing 4x a full time salary and companies saying they're saving so much money by doing so. There are IRS rules saying you can't treat contractors like employees, but they're not enforced at all. Big tech companies have a majority contract staff for that reason...they don't have to pay their taxes and benefits, and can snap their fingers and have them gone in an hour.
It's a pretty sweet deal for the independent contractors who aren't having the majority of their earnings taken by an agency. Once you're your own company, the company is the one racking up the expenses and pulling in the income, not you...so there are massive tax advantages to go this way. Regular W-2 employees have almost none of the raft of deductions available to even pass-through business owners.
So, go and ask someone who's going to make piles of money out of this...
And he must be an idiot, if he thinks a 20% (for me it would closer to 35% as they NI/NI/tax the 10K expenses a year) is a "little more tax".
I'm currently in an outside of IR35 contract. Once that is done, I don't expect to work as a contractor any more...
I suppose a "little more tax" on the HMRC getting nothing is a little more.
A lot of clients are terminating contracts now because they have been led to believe that under the currently proposed draft legislation, even if a contract finishes before April 6th, if any outstanding Client->Agency or Agency->Contractor payments are made after April 5th then the new rules will apply to that contract.
I did that twenty years ago. But it's interesting that the same story was around when ir35 was mooted back in 1999/2000.
The difference this time is that the clients have the liability which makes it harder to fight.
The changes to contractors are that those on Ltd companies will need to pay more NI. Including employers out of their fee, as dividends, already under attack, are no longer possible.
So far that puts them on an equal footing with existing umbrella company users.
Where the bite is, is that many contractors work long distances from home for relatively short periods of time.
They will no longer be able to pay the expenses out of pre-tax income, and it is that which will hit clients, as they'll find it much harder to find contractors. This will in turn impact permies, as the clients turn to cheaper options, like folk from India, thus further hastening the demise of British IT experts.
They won't get their money, very few contractors are going inside unless the company rises the rate and very few companies are accepting that. The option contractors a generally doing is to try to get another job outside or accept a perm role with a pay cut of at least 30% or more, depending on the benefits cost for the companies, so the ones outside will keep paying the tax they pay now, the perms due to the income cut more likely pay either similar to outside or less. Plus taxes lost from companies that lose clients like Accountancy and Insurance companies. So the only way for HMRC to get their money is if most of the contractors end up accepting going inside with an equal or greater rate, and I don't see that much happening, it is more likely that the companies will eventually change their ways to get contracts outside.
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If you go through an umbrella company company you will have to pay employees and employer national insurance, aprentice levey, Tax and a fee to receive your own money
You cannot claim any expenses because you are now classed as an employee. They will include in this rate holiday pay that they will pay you up front. You can't claim expenses as you are now classed as an employee. So you will pay far more tax than if you were employed with no benefits. As you are now classed as an employee they will also be able to offset the money they send to the hmrc against their corporation tax liabilities.
Utterly disgraceful
“ If you go through an umbrella company company you will have to pay employees and employer national insurance, aprentice levey”
Not quite true: it is against the law for an employer to take Employer’s NI and Apprenticeship Levy out of a worker’s pay.
However, as many umbrellas do, they have a sneaky clause in their contract with the worker that this is what they are doing i.e. the worker is unbeknowningly taking a 14.3% pay cut...before tax. If the worker signs that contract, they have agreed to it and can no longer complain. So all should watch out for it.
Is this going to be the same as all the celebrities who were going to leave the UK if Boris Johnson got elected? Most contractors will just have to suck it up or take a permanent role and actually pay the same tax as everyone else. What are the alternatives? Work abroad? Become a strolling minstrel? Actually become a proper consultant, working for multiple customers simultaneously? The model has been based on hiring contractors and everyone paying fewer overheads and taxes for far too long. The sooner that is broken, the better.
Time to ditch big companies they don't deserve your skills and experience, work for startup and small companies which is much more interesting, fast paced and less political and now earn more outside IR35 legally too!
Having worked over a decade in large organisations, I am much more hands on techy and involved in all key tech decision minus political layers in a startup now!
https://www.gov.uk/guidance/april-2020-changes-to-off-payroll-working-for-clients
The rules apply to all public sector clients and private sector companies that meet 2 or more of the following conditions:
* you have an annual turnover of more than £10.2 million
* you have a balance sheet total of more than £5.1 million
* you have more than 50 employees
Tesco, Asda, morrisons etc are currently being taken to court for equal pay claims because they paid shop staff a lower rate than they paid warehouseman. The expensive lawyers are asking the court to consider whether (as the law states) the work done by a warehouseman and a shop worker is of equal value, or provides an equal contribution to the company.
I'm intrigued by the idea that, if my ex-employer decides that the new rules effectively retrospectively put the contractors I worked with inside ir35, effectively making them employees, then presumably it was unfair to pay me a different rate than them to do the same job. Especially as I was interchangeable with contracting analysts and on more than one occasion was 'swapped' with a contractor as I wanted to do the work they were doing at that time for my personal development.
Taking account of redundancy rights, sick pay rights, pension etc I reckon that only takes about half the difference in equivalent daily pay. And that's completely disregarding the preferential tax treatment for contractors.
You do realise that the rest of the money is kept in the company to cover sickness, major illness, holiday days/weeks off, time finding a contract in between contracts. In addition you can be shown the door in a day, as has happened to me. One minute, 2 hour meeting finalising major deadline, the next minute: entire project cancelled, 20 contractors taken off site. Any complaints? No; it's par for the course with being a true professional project contractor.
I forgot to mention studying. Contractors pay for their own studies via their Limited Company. Keeping on top of the latest technologies, security and skills is key to being a great contractor. Public or private sector I have seen plenty of horrendous permanent staff who are too difficult to remove from the job due to contractual terms. A contractor? Rubbish? Get out, cya later alligator; and quite right too, given the day rate. Beware what you wish for.
It's the attitude of the permies on this thread that sickens me. It's like they think they are getting their own back! Do they not realise how this destroys employee rights for everyone in the long term?
I'm contract because my skilset is specialist and rare. In short I charge a lot because I'm worth it. I've paid a lot of tax and frankly I'm fed up with being an unpaid tax collector.
The big businesses are being intransigent, attempting to force people into backpocket umbrella companies (in many cases they don't even hide the PSL) and the agencies are not helping (no change there, but do they not realise what will happen to them?)
Fuckem, I've delivered some clever stuff in my time, they can do without me... I may be the only one that notices, but I will do so from the fore-deck of my yacht in the Bahamas with 20 years of active life before state pension claims the permies and they realise gov.co nicked their pension along with their employment "benefits"
Over the last year I've had 4 contractors work on a project with me... Two were very good. One was so awful we had to redo all the work he did and the other was just about ok but needed lots of supervision. The only reason we use contractors is when we need short term help and we would be unlikely to employ someone permanently as our workload varies a lot...
We believe the worst contractor is bouncing from one company to another primarily as he can't hold a job down... Yes I know for most contractors the reason is, not in any order, money, control, ability to walk away, varied work, specialisation.
Contractors should be putting money aside for holiday, training and sickness... Potential they should consider insurance for sickness. Moaning about the lack of when it is down to the company you own is questionable at best...
Yes I've been contracting...
"Contractors should be putting money aside for holiday, training and sickness."
Can't argue with that, however by making it simpler for clients to assess their suppliers as inside-ir35 they are effectively putting us out of business.
No more company money to pay for training, pension, holidays, sick pay, equipment, temporary help from other contractors, accountants fees - it all gets taxed at source so won't be paid into my company to be used properly.
They are trying to put us out of business - it's that simple, but the larger firms doing *exactly* the same thing get a free pass. Something stinks, and it isn't my socks.
As an permie' I've just claimed for equipment, software and technical books against my tax. I suspect that I can claim for training too... just be reasonable on what is claimed.
Very few permi's get applicable training in my experience. If they do it is usually not what they need or it's the usual Elf and Safety or how to use a computer.
Declaration, never been a contractor, not a permie anymore (too old), just an interested observer.
Contractors, when you consider it, is a pure form of capitalism: a person selling their skills/time either individually or through a trade guild of some sort. The contractor has picked up specialist skills through self learning through college, University, work/job or just life. And is willing to sell those skills and availability to the highest payer.
Permies, supposedly similar, but in selling their time and availability, they will also learn skills to enable the business to expand/survive, and by doing so, will increase their value and incidently their wages, in theory, to retain their services instead of allowing them to transfer those skills to a competitor business. (A number of times I have moved jobs, most of the original employers offered higher wages to stay, a couple, significantly higher. My thoughts were, should have done it sooner. Greenbackmail was never my thing, as you could only really do it once.) I have to admit that I was one of the very few at the time who did this, as too many were only happy to hang on for retirement or until the business model imploded, bankruptcy, new business models arriving, bought by competitors and closed.
Nowadays, most people have transferable skills of some sort, and so it comes down to availability to work as required by the employers. Zero hours contracts anyone? Supposedly, offering similar terms to the Contractor status, but at the behest of retention by a single employer, and being taxed under PAYE/NI/etc.. Paid holidays? Paid sick leave? Maternity /paternity leave and pay? Pension?
Conspiracy theory, is that while capitalism is fine for some, it has to be controlled. In Australia, articles in this site refer to the wants of the government to create a cashless society, and without notice or alarm, it is also happening in the UK and elsewhere as bank branches and post offices close. Records of every electronic transaction people make will be available to the government. All those who provide grey services, window cleaners, dog walkers, barbers, cafe owners, or all those whose financial records are a little, er, interesting, will be recorded. Even the tooth fairy! And Contractors, no off the record side jobs (or at least that is how the government sees it) and brown envelopes.
As been oft said, "Always follow the money" and other scenarios become visible. Governments have a lot of stupid people involved, but they also have some very clever ones. And a few are too clever for anyone's good...
It's a bigger rabbit hole than you think.
The knock on effect this will have on other sectors such as hospitality and transportation is going to be in the mid billions of £. As contractors spending on expenses starts to decrease mon to fri. This will impact so many businesses and create mass redundancies. So it does not just directly effect contractors. HS2 will be a disaster too and most likely cost the tax payers even more billions than it has already. As a majority of people involved are funnily enough contractors...
Lol ironic
The numbers in this article of circa 175k contractors is for the IT sector alone. The contractor market is in the millions as it spreads over multiple sectors not just IT.
Thr trouble with clients declaring that a contractor is caught, they are also tacitly admitting that the contractor is indeed a full time employee, as per the comments of Judge Burton in the IR35 Judicial Review nearly 20 years ago.That means the contractor is due paid holidays and all the other rights that go with that position.It is debatable if the rights are removed even if they push the contractor into working for an umbrella company either.
Of course as most contractors are in it for the freedoms contracting offers and not the tax benefits most contractors are not going to enforce this and have decided that walking is preferable.
There seems to be a lot of confusion about working relationships and the nature of contracts all round (not just here). If you're self-employed you're effectively a sole trader. A limited company contractor is not a sole trader, but a director and employee of their limited company (which has a legal existence independent of its directors and employees). Consequently a limited company contractor is not self employed.
An employee operates under a contract of service, whereby the employer dictates the services to be performed and the conditions under which they are performed, and which includes by law provisions for employee security. A limited company contractor (or a self employed sole trader) in a genuine commercial relationship operates to the client under a contract for services, where the services and conditions are mutually agreed between the provider and recipient of the services, and no provisions other than those in the contract exist. By ignoring the nature of the contract, IR35 creates a new class of working relationship that has no basis in law other than for taxation purposes.
The issue of "employment rights" (holiday pay, sick pay, pension &c.) is separate. These rights are only applicable to employees under contracts of service. The problem here is that under IR35 a contractor will be obliged to operate under a contract for services with all the associated insecurity but be treated for tax as if under a contract of service (that in principle provides for said rights). Traditionally, these rights would be provided for by the contractor's limited company out of the company's revenues, but under IR35 there will be no "company revenues" out of which to do so. The resulting position, arising from a conflict between employment law and taxation law, may in principle be unlawful, but so far nobody has succeeded in challenging it. It's about time someone who can afford to did so.
Here is something most permanent staff commenters and contractors haven't commented on; please read through to the end before getting irate and posting in anger:
Two words: Expenses, Pensions. The new rules and new umbrella rules proposed will mean that inside IR35 (seemingly almost all private sector contractors!) cannot deduct valid business expenses and will eventually be unable to pay into a pension *before* personal tax. When you add all this together it's completely insane to allow this. Nobody will become a contractor, even if he/she is highly suited to the mobility and methodology of working in this way on short term projects.
Are you aware that the dividend taxation on dividends (shares, stocks, Limited Companies) is taxed quite highly now? People are already paying a lot more proportionally as very few have as much money as you think due to the high expenses of travelling around one of the UK's 4 countries for work Mon-Fri (including weekends often!)
I'm a highly paid contractor who has to travel for work for weeks at a time, or Monday to Friday in one of the UK's four countries. Under roles all being inside IR35 and via umbrella I am unable to claim expenses. The *reason* I am paid £700/day is because about £150/day of that is taken up with driving, flights, expenses, food, subsistence that your permie job would pay you *if* you had a good enough permie job. I work on projects for 3/6/9 months and then leave once the milestones are completed.
I am NOT a disguised a member of staff and, quite frankly, have better skills. My type of role is suitable to temporary work and completing complex projects that permanent staff generally have no chance to complete in quick time, as they'd require so much training it would take years to implement and iron out the mistakes made. It is therefore understandable that SME and large corporates hire people like me and others to get projects completed.
Blanket 'inside IR35' and 'no Limited Companies' rules by companies is short-sighted. Who do you think is there doing hours for free to get things fixed/working/projects completed by the deadlines? The permanent staff in everywhere I've been are out the door when they've done their hours; we folk simply don't do that as we have a reputation to protect for the next imminent project.
As mentioned, IR35 will mean people like myself don't travel and have to lower our standards to get a generic permanent job within a short distance of our home. Nobody is going to earn 30% less with no raised day rate AND pay all your own expenses to travel across the UK, being away from your family, friends and other loved ones for days or weeks on end. On top of this you also play the 'employer NICS' (National Insurance Contributions) AND the employee contributions! Companies are now getting away with shoving all the various taxes on to the so called disguised employee to save money. Don't you realise that your permanent job in future is at risk, especially when you move companies? Companies will be less inclined to hire permanent employees and you yourself will be placed on a rubbish FTC (fixed term contract) or on an inside IR35 umbrella arrangement. Just as with private healthcare you *think* you're saving money and using it wisely by avoiding a public health system until you age a bit, inevitably get unwell (we all do, eventually, trust me) and end up paying more out of your savings to cover your cost.
In finality, please be aware that if you earn £50k as permanent staff you actually cost around £100k total for the company. As expert contractors who don't work as disguised staff (I appreciate some do but this private sector implementation is decimating both types of contractor!) we are now forced to face ALL the costs of employing somebody, such as employer and employee NICs, expenses, to the extent that there is no point in doing it anymore outwith our home town area. This actually decreases social mobility and decreases the ability to gain expertise.
I could go and get a £50-£80k job with Deloitte, EY, KPMG or some other company that uses offshore Cayman islands complex arrangement to avoid paying appropriate tax but instead I pay myself via my Limited Company and pay full UK tax on all that money removed from the Limited Company. I also benefit the economy by being mobile and endeavour to work on projects to the best of my ability with a month or two off (rather than intermittent holidays at random) in between contracts.
Beware your permanent staff ire and prejudice because I can assure you that you are next. Right wing political parties wish to move to a more USA-ized system of insecure employment; you can already get sacked without redundancy within 2/3 years. Extended probation periods are used to try keep you on your toes and feeling insecure.
Anybody who's ever worked at HPE/DXC/CSC will know how insecure some IT work can be and how bad an employer can really be, especially American corporates.
At the end of the day we all have a part to play in the IT world and the new rules are forcing us to pay far higher tax as relatively lower to middle middle-class households. We're not rich. If you see some contractor driving a fancy car, first ask if he/she has a family - many don't, perhaps their choice or perhaps dictated by their lifestyle of travelling around in insecure work. Don't forget that humans are humans and often think 'afford' means "I can spend any money in my bank that's there." These new rules will see some bankruptcies but I have little sympathy for those who over-extended their own finances.
If you have any questions please post below and I will answer them as best as I can. I've been doing high profile UK project roles for 20 years in this capacity and so am keen to explain rather than fight.
You however arguably have the least to worry about. You work on clear projects that can easily be converted from a day rate to a Statement of Work with fixed deliverables and a fee for completion. You write assumptions and conditions into the contract that allow you to adjust the vale of the contract if the client causes any delay to the project outside your control. You build into the SoW interim payment dates so that you're still getting money in the meantime. You also charge separately for expenses.
This is exactly what a "consultancy" would do. You could too.
The issue of course is that clients are wary of issuing contracts like this to small businesses. They'd rather just go to a "real consultancy" with all the additional costs therein.
Y2K was a gift to contractors but IR35 was poison.
It's not so much what the rules say but how your client interprets them. What they don't want is a big ol' expensive mess requiring highly skilled (expensive) accountants and lawyers to sort out just so you can get a better deal.
I was quite sure IR35 did not apply to me as I had a limited company employing 3 programmers and taking on work for multiple clients. I personally did work for a big corporate on site as well as off site. They did prefer me on site but that may have been the problem. They had a new contract hastily drawn up for all contractors. It was terrible, it stated that all the programs I wrote belonged to their middle man. I refused to sign it and pointed out to my client that it was bad for them. They did get it re-written but I said goodbye.
It's the same thing again. Obviously the contractors, agencies and clients have managed to work around the current IR35 so the HMRC are stepping up their game. Obviously again the contract market will take a big hit and lose more contractors but then gradually recover as everyone works out how to work around IR35.
As for HMRC becoming a more profitable (extortion) business, I doubt it. They will simply take a bigger proportion of a smaller pie.
Isn't it the biggest waste of time ever for HMRC? Last time I checked they had stopped reporting the revenue it was so poor.
Government is so inefficient that once you start the engine of state on its rails, it can't be stopped. No doubt there are hundreds of HMRC employees who are dependent on IR35 for their livelihoods, and so no matter how stupid the policy may be, it cannot be changed.
The point isn't to generate revenue, it's to eliminate fake contractor jobs. Most of the tax dodge issues with contracting were eliminated years ago.
Realistically, we shouldn't have a system where it's cheaper for me to employ a contractor for 10 years on double the rate of regular staff, but we currently do. In these cases, the employer saves on all the benefits and so reduces their bill, and the contractor takes home a fair bit more pay than his permanent colleagues too due to inefficiencies in the tax system (and yes, before many of the 'contractors pay 3% more tax!' people jump in, at some income levels contractors pay more, but at others they pay rather less than they ought to - particularly the lower end. This is intended to protect professionals during slow business periods, given that they then over-pay during good years, but if your take-home pay is always £25k then it's not a 'slow period', you're just underpaying tax for your income rate forever).
Often the low-end contractor in question doesn't particularly want to be a contractor but just isn't given the option of a permanent role by the employer. I was a contractor when I started out on the helpdesk 20 years ago, and 17 year old me certainly wasn't taking advantage of any tax opportunities - I was being exploited by an employer who wanted the option of firing me on a day's notice despite me working for them for 4 years. And yes, my pretax hourly rate was 50% higher than I would've got as a permy, but I was paying an effective 35% tax on under 20 grand a year, so the 20% or so extra money in my pocket at the end of the day wasn't much compensation for no paid holidays, no paid sick leave, no pension and no protections.
The idea is supposed to be this: If you're a genuine contractor, then offset any losses by simply charging your client the difference. It's a business cost and you pass those through to your client, after all. If they actually need a contractor for the work (short-term project, specialist 1-off expertise requirement etc) then they'll pay up because, well, they don't have an option. If what they actually need is a permanent employee but they're looking for ways to avoid paying the full cost for one, then your increased price ought to make the permy a better economic option and so cut the dodgy practices.
Unfortunately, the legislation is drafted poorly and HMRC have done a terrible job of putting it into practice, so what ought to actually be a fairly good idea has arrived as a turd.
"No one is saying you'll never work in this town again"
Actually they are saying that. I currently work in Bristol and live in north of London. My LTD currently pays my expenses for travelling to the Client and staying away to work at Client Site during the week. This is the cost of doing business that I am happy to pay (of course my day rate factors this in).
Client has just made a blanket inside IR35 statement and asked current contractors to move to Umbrella.
Current Umbrella rules mean that I can no longer claim back those expenses. Ergo, I won't be working in Bristol for much longer.
"Current Umbrella rules mean that I can no longer claim back those expenses. Ergo, I won't be working in Bristol for much longer."
Exactly why I've just ditched a client (perks of being a contractor) and found a new one closer to home.
I'm not saying I was doing them a favor exactly but they were chronically short of staff and paid well so me spending 15-20 hours a week commuting was beneficial to both of us. From April I'd be paying 6k a year on travel expenses out of my own pocket instead of my LTD... Just not going to fly I'm afraid. They are now down one contractor and the other 30-40 will be leaving in the next 6 weeks.
I guess I could have summed that up more succinctly with what I've been saying to recruiters..
Outside IR35 I'm willing to commute anywhere in the UK.
Inside I need to be within 45 minutes of home (in traffic)*
In the long term it's bad for clients.
* What actually ended up happening was a double whammy where I got a role outside IR35 15 minutes from home..
The level of disruption caused by IR35 is so huge that many brands are now looking further afield in order to find the talent they need and stay competitive.
After all, in an increasingly interconnected world, it isn’t as if the talent that they’re looking for can only be found in the UK. The regulation which seeks to stop contractors from paying themselves through dividends (which aren’t subject to National Insurance), will be more difficult for companies to ignore. Indeed, Barclays have already jumped the gun and have moved their IT contract roles to PAYE. Other companies are likely to follow suit.
Particularly for IT expertise – like those Barclays have moved to pay-as-you-earn (PAYE) – pockets of highly skilled people are available across Europe. If you’re looking to compliment your full time IT staff with the flexibility that you’ve grown used to with contractors, it might end up making more sense for you to consider an overseas extended team.
Lots of brands have already found success doing just that. And when you consider that the day rates of developers in IT hubs such as Ukraine are often much more cost-effective than the UK, it’s not hard to see why.
The full impact of the IR35 changes due to roll out in April might not be completely clear until around this time next year. But it seems that those most likely to suffer will be the UK-based contractors themselves.
Why would you accept less money with no upside!
I think its easy for the outsourcer, or the internal teams to say to a contractor its not a big deal, but, these contractors have no employment rights.
They pay tax and ni the same as an employee but
Still no holiday or sick pay
Still no paternity or maternity pay
Still no benefits (health insurance, life cover etc.,)
Still no expenses
Still no security
If you asked an employee to accept that - you would have a mass exodus of the workforce, you can't have all the pain and no gain - that's just not right!
It's incredible the amount of vitriol on both sides of this debate and why is it between employees and contractors?
Why is your anger not towards shareholders, and employers who don't want to give people permanent roles but use them the same as permanent employees without giving them any of the benefits?
Some people are not brave enough to be contractors because there is a risk you might not get paid, there is a risk you are signed off sick and are not earning and they just like structure. Why does this make the risk-takers, who want to be in charge of their own destiny bad people?
As a permanent employee - if you're employer said as of 1st April, we are going to give you a 20% pay cut and you won't get any benefits any more - would you not think of leaving?
The contractors should get together and start an offshore operation, say in India or the (shudder) EU. That offshore operation then gets contracted for services, takes a small cut, and hires the contractors. Or the contractors could even be employees of the offshore enterprise. Perhaps the contractors themselves would cooperatively own the contracting body.
You're welcome,
SATD.
Lots of people (like myself a long while back) don't want to be employees in large companies. We don't want to be obliged to play all the political games. We don't want promotion and the ignominy of being sacked. We just want to do a specific technical job without all that crap. Without needing to attend endless meetings where everyone is competing to guess what the boss really wants so that they can present it as our own preferred solutions - to the delight of the boss.
Why is it so difficult for the psychopaths in politics and at the top of all these companies and ministries to understand such a simple thing?
It all comes down to power. Those in the Inland Revenue, senior management and the Permies are jealous of the freedom of those who work independently. Go ahead and watch another few TSB's blow up. Just look at the NHS application that cost untold millions - with no officials getting the sack.
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