HMRC: Contractors, don't worry about IR35 reforms in private sector 'cos it all went so well in public sector

Britain's tax collection agency has released a survey whose results downplay the impact of IR35 tax reforms in the public sector, apparently showing those in the private sector that everything went swimmingly. The study [PDF] commissioned by Her Majesty's Revenue & Customs (HMRC) in 2020 to look into the "longer-term" impact …

[Anonymous Coward]

Typical DoubleSpeak from the government.

I was vaguely aware before a couple of years ago that this kind of thing happens, and it's just "spin" but I've now realised that it's much more widespread than I thought. My trust in the government has been greatly reduced due to all the blatant lies and placing things way out of context. Same thing for the BBC and the rest of MSM, and sadly also The Register (to a lesser extent). Anonymous because I work for the government.

However, if you were looking at The Reg comments, or LinkedIN or IPSE or just talking to other contractors you would know very well that it really didn't "all go so well". A better description would be "complete clusterfuck" and "mass exodus" (which has been great news for MSPs).

[Anonymous Coward]

Re: Typical DoubleSpeak from the government.

TBH, Governments (both Tory and Lab) come and go but the beancounters at the HMRC stay put until it is time for a knighthood and a cushy job in the private sector.

IR35 might have seemed like a good idea at the time but once the HMRC nailed it to their mainmast, it was going to happen no matter what.

The HMRC are not renowned for doing 'U-turns; instead, they just keep digging the hole deeper and deeper.

Until someone nukes the Treasury IR35 is here to stay.

It makes me sad that such a stupid policy has singlehandedly destroyed a vibrant part of the IT Industry and has sent countless thousand jobs abroad (mainly to Indian IT Consultancies) never to return.

I spent 15 years contracting and playing by the rules. I paid both employees and employers NI but when the company I was contracted for decided that I was going to pay even more TAX & NI, I called it a day.

I know that I'm not alone there.

[Anonymous Coward]

Re: Typical DoubleSpeak from the government.

Why would you be paying more NI now if you were already paying Employers NI contributions on top of the Employee's NI contributions before?

I was paying myself the minimum PAYE to qualify for the NI stamp and taking the rest as dividend, saving both NI's (which is what the gov't was hoping to clamp down on).

The umbrella company now puts everything through as salary, paying both lumps of NI and PAYE. Thankfully I can afford to shovel 70% of it into my pension so it's a bit less painful.

[elsergiovolador]

Re: Typical DoubleSpeak from the government.

I was paying myself the minimum PAYE to qualify for the NI stamp and taking the rest as dividend, saving both NI's (which is what the gov't was hoping to clamp down on).

\

Since 2017 when you combine this with Corporation Tax, that would have worked out very much the same as PAYE (minus the Employers NI, that is where clients were getting advantage, not the contractor).

People don't realise that the the tax output regardless how it is labelled essentially lands in the same bin, so it does not matter if you pay CT + Dividend Tax or PAYE.

Contrary to popular belief, NI is not hypothecated.

[Cederic]

Re: Typical DoubleSpeak from the government.

Hypothecated? Nicely done!

[Anonymous Coward]

Re: Typical DoubleSpeak from the government.

I'm not sure that you are wholly right there Elser'

You are correct that clients benefit by ducking employers NI (and sick pay, holidays, pension contributions etc) but the original poster claimed to already be paying both Employers and Employees NI.

But working via Ltd company meant 19% corporation tax on profits and a 7% personal tax on those dividends (less the £2K tax free allowance at one point) plus any accountants fees.

Call it 26% all in.

Working via an umbrella company today means 20% PAYE, employers NI at 13.8% and employees NI at 12%. Go over £50K and your PAYE jumps to 40%.

That is a minimum of 45.8%, effectively 20% more than billing via a limited company. Very much not the same!

[fix]

Re: Typical DoubleSpeak from the government.

You maths is not complete either

That jump to the 40% tax level at about 50k kicks in regardless of choosing the NI / Income tax or the CT / Dividend route.

[RichardB]

Re: Typical DoubleSpeak from the government.

"(mainly to Indian IT Consultancies)"

One might somehow speculate that in a less open and transparent government there might be some personal or family related interests at play...

[Anonymous Coward]

Re: Typical DoubleSpeak from the government.

Ouch. "MSM", "doublespeak"... Yeah, such things (just like the Left blaming "the System" or "the Man") sort of discredit your whole comment. I don't disagree per se: The government (I'd say _any_ government, not just the current one in the UK) has never really been one to admit how much they f'd up, so I take all of these "statistics" (they are not!) with a grain of salt, and a heavy dose of chili powder anyway. Always ask cui bono - same with so-called statistics published by e.g. ad slingers how much revenue small businesses are losing due to blocked cookies (or whatever).

[Anonymous Coward]

Re: Typical DoubleSpeak from the government.

OP here. I think the left would have made an even worse hash of things over the last two years, they have been constantly calling for greater restrictions, such as shutting down schools (which is proving to be as pointless as it was damaging). They also introduced IR35 in the first place IIRC. I should have said "Any government". I can't think of any government who would have done a better job, but surely such a thing could exist? Somehow?

I think "MSM" is a fair thing to say. To give just one example, I'm talking about all the channels that are currently pretty much ignoring the truckers in Ottowa, when it's all over Twitter, Instagram and YouTube (and even LinkedIN) for all to see. When they do mention it they often paint them as "right wing extremists", and mention swastikas, etc. Hence the "doublespeak". They don't mention the bouncy castles, the camaraderie, and the fact that most of them are vaxxed (like myself) but just don't think it should be mandated (like myself). To me that doesn't seem like a radical opinion, and it's the "MSM" who are trying to paint it that way when in fact it's them that have the radical opinion.

When they say "Austria are the first country in Europe to mandate..." (implying that many others will follow?) it should have been "Austria are the only country..." (implying that Austria are the outliers).

[General Purpose]

Re: Typical DoubleSpeak from the government.

>all the channels that are currently pretty much ignoring the truckers in Ottowa

Let's see - you posted 3 hours ago and a quick search for "Ottawa" on DuckDuckGo's news tab shows reports older than 3 hours from the Independent, BBC, Guardian, Daily Mail, Metro and Telegraph, to mention only the UK media, which doesn't usually take much interest in Canada.

>they often paint them as "right wing extremists", and mention swastikas, etc. Hence the "doublespeak". They don't mention the bouncy castles

The long Telegraph report included "Justin Trudeau ... has dismissed the convoy as a fringe group of "a few people shouting and waving swastikas”" and continued "While far-right activists have at times joined the protests, displaying Confederate flags and Nazi symbols, some of the convoy's organisers have disavowed their involvement."

The long Times report included "The police crackdown followed a raucous weekend in which protesters set up speaker systems, tent kitchens and bouncy castles." It also had "“When I saw a swastika go down my street last weekend I was furious,” Portia Ymer Sobel, a 25-year-old administrator, said at the counterprotest, adding that her grandfather died in the Holocaust. “I am not going to let Nazis terrorise my city.”"

An opinion piece in the Guardian includes "What’s unfolding in Ottawa is not a grassroots protest that has spontaneously erupted out of the frustration of local lorry drivers. Rather, it’s an astroturfed movement – one that creates an impression of widespread grassroots support where little exists – funded by a global network of highly organised far-right groups and amplified by Facebook’s misinformation machine."

The others don't mention "far-right" or "swastika", and as you see, one does mention bouncy castles.

[Tilda Rice]

Re: Typical DoubleSpeak from the government.

You are being selective, here is my grab from DuckDuck News tab with Ottawa, going top to bottom:

(Left, definitely trying to characterise this as "right wing", disgraceful MSM as usual)

From the Guardian, literally the sub headlines:

"How did this ‘grassroots’ rebellion paralyse the Canadian capital? With funding from the far right and a boost from Facebook misinformation"

Mail Online:

"Brian Gregg, a long-haul driver for almost 30 years, drove from Indianapolis to Ottawa to support his fellow 'brother and sister Canadian truck drivers'

He tells DailyMail.com, 'I support them and will support them to the very end. These mandates need to stop they are hurting Canadian families'

Telegraph

"Inside the Ottawa protests: Food, hugs and fuel keep Canada truckers in it for long haul

As Canada's capital is brought to a standstill over vaccine rules, neglected blue-collar workers are making their voice heard"

Mail Online:

"Great-grandfather, 78, is handcuffed by Ottawa cops for HONKING his car horn in support of Freedom Convoy: Video of arrest which left 4ft 10ins elderly man bloodied and bruised emerges after Justin Trudeau smeared protesters as 'swastika-wavers'"

I've looked at the photos of these protests, if there are swastikas, very hard to see/find.

Just looks like Canadian flags.

Smearing anti mandate protesters is not cool.

[General Purpose]

Re: Typical DoubleSpeak from the government.

Glad you agree the OP is misrepresenting the MSM, which - per the quotes I provided - only mentions swastikas rarely and does mention bouncy castles.

[Mike 137]

Strange statistics

Over the last year I've been offered nothing but "within IR35" contracts, so I'm not sure where HMRC got their stats from.

[Franco]

Re: Strange statistics

I do, they make them up to fit their narrative.

[ConsumedByFire]

Re: Strange statistics

I've gone permie but all my old recruiters still keep approaching me. Always inside IR35. Always a crap rate. Its just killed it.

TBH I was sick of getting my renewal and sweating on my next all the time but its quire annoying HMRC aren't allowing self employed people to be taxed as self employed (and take the risk themselves). I was always clearly self employed during my 15 years of contracting then suddenly rules changed and my employer decided all contractors are employees. Doh!!

ARSE!!!!

[Strahd Ivarius]

Re: Strange statistics

There are lies, damn lies, and statistics

[Aristotles slow and dimwitted horse]

I'm not surprised in the slightest that a lot of companies just took a "blanket in" approach when the HMRC assessment tooling itself can't be relied upon, and even if it does give an "outside" result, that HMRC won't take that as final. It was far far easier just to give ultimatums to the contractors to take the new working terms, or leave.

I guess I'm kind of lucky that my public sector end client did take it seriously and we are all agreed with QDOS that I remain outside.

[elsergiovolador]

This assessment process is smoke and mirrors because it does not matter. It only tells you whether your legal team has constructed the contract properly.

If company wants contractors to be in scope of IR35 they write a contract to be in scope (restrict substitution clause, specify hours of work is enough to place the contract inside in most cases).

The individual circumstances of the contractor whether he or she runs legitimate business or not are irrelevant.

Companies are creating in-scope contracts because this is the only way to be off the HMRC hook.

Nudge politics at work.

[Eclectic Man]

UK Employment rate - More or Less (BBC Radio 4)

On this morning's 'More or Less' on BBC Radio 4, the UK Prime Minister was taken to task fro claiming that UK employment has gone up by 14% since before the pandemic. But this was based purely on the number of people paying tax by PAYE (Pay As You Earn) through an employer, and ignored the substantial drop in self-employed people, who generally pay taxes at the end of the tax year. If they are taken into account UK employment rate has dropped by 14% since the pandemic hit.

The PAYE 'employment rate' is considered by statisticians to be an 'experimental' measure, but it seems there is no way to censure the Prime Minister for his repeated misleading statements to parliament on this (or indeed ay other) matter.

[Yet Another Anonymous coward]

Re: UK Employment rate - More or Less (BBC Radio 4)

In the good old days if 4million unemployed they just 'seasonally adjusted' it to under 4M every month

[Anonymous Coward]

Re: UK Employment rate - More or Less (BBC Radio 4)

"it seems there is no way to censure the Prime Minister for his repeated misleading statements to parliament on this (or indeed ay other) matter."

Notice how often Boris is seen in hard hat and fluorescent jacket these days...

"Your diary for today, PM. You've got another whale hospital to open, the site of a new steam car factory to visit, along with a blancmange factory. No, no, we can deal with the unimportant stuff like PMQs. You're needed on the front line, impressing the public with your Churchillian majesty and your Latin wit"

[Anonymous Coward]

Acid test?

We have heard of about plenty of HMRC audits finding outside "workers" as having been assessed incorrectly and issued penalties to the hiring Dept.

Anyone heard of ANY occasions of the reverse (an inside worker being assessed incorrectly and their role being determined as outside)? In fact, I wonder if there has ever been any audits of anyone working an inside gig?

[elsergiovolador]

Re: Acid test?

The penalties are only one sided - there is no penalty for the opposite scenario - as with Nudge principles.

They can't ban small business because this will look bad, but they can make it difficult to run, even impossible to the same effect and if you give a bit of smear that small businesses are nothing but tax dodge, then they can easily get away with it.

[Franco]

Re: Acid test?

I keep going back to this example, but not only are there no re-assessments of inside contractors being made public (if they are happening, which I doubt), but the BBC and Sky (and probably others) have not been penalised for forcing on-air talent in to accepting work only as a contractor, but those presenters HAVE been hit with big bills. Christa Ackroyd was the HMRC test case (BBC), Dave Clark (Sky Sports presenter) was another one. Both found inside, both testified that they were given the ultimatum of accept this or be let go by the broadcasters so that they could avoid paying benefits and employer's NIC.

[Anonymous Coward]

One question

I note that all HMRC talk with great enthusiasm about "recouping" x amount of money (which is a true doublespeak euphemism for "taxing people more than before", but I digress), but what I really want to see is a study of what it has cost the country in knowledge that walked out and missed opportunities because those with skills and any kind of mobility used the latter to bail - some spurred on extra by Brexit, 'coz not all the smart ones are British.

So, the key unanswered question is: what did this IR35 idiocy cost the UK?

I suspect that a truly unbiased study (i.e. not one paid by the government or HMRC specific to arrive at a pre-defined outcome) would probably conclude that the losses outweigh the "recoup" by a substantial margin. Of course, such a study will never happen because it would be politically rather inconvenient.

[elsergiovolador]

Re: One question

It does not matter. What matters is that all big consultancies that lobbied for these changes got increased market share.

Nobody talks about the fact that big consultancy does do anything different than a one man band, except the latter is now taxed on revenue, whereas big consultancy can easily transfer their profits offshore.

One also must mention that large scale umbrella fraud that followed the changes. That is many billions lost for the tax payer.

The problem is that tax payer is not protected for these types of corruption, so the exploitation by big corporations will only continue.

[elsergiovolador]

Cynical

Do contractors working in public sector have to obey by the CS code, which means they cannot frustrate governments policies by e.g. voicing their critical opinion?

[DaemonProcess]

VAT

One key difference between private and public sector contracting is the public government sector VAT effectively goes in a loop - outside IR35 contractors in government charge VAT from the government (through an agency) which is re-paid (minus the purchase VAT which isn't much for contractors).

For the private sector the government effectively gets new money out of VAT, therefore more income from the economy.

Therefore the gains from IR35 inside government world are limited to increased PAYE (tax/ni) less a reduction in dividend tax, which Sunak increased recently.

[Franco]

Re: VAT

HMRC actually do take a (small) hit on VAT though, as the majority of services based businesses are on the flat-rate scheme and so get a VAT rate decrease.

[Kubla Cant]

about 48 per cent of public sector bodies found none of their contractors were assessed as falling inside IR35

Rubbish. The contract market is fairly buoyant at present, so most days I receive up to ten emails about contracts, some of them in the public sector. I'd estimate that fewer than 5% are outside IR35. I'd guess that the 48% simply forced all their contractors to work through umbrella companies, so nobody got assessed.

As well as extra tax, IR35 has introduced an additional layer of intermediaries who do nothing but take their slice of contractors' earnings and expose them to risk of payment default and data loss.

[Anonymous Coward]

it's a win for inflation

As far as I can tell the inside ir35 rates after tax are higher than outside ir35 ones were couple of years ago for similar roles.

One of the biggest advantage for outside ir35 was claiming travel and staying away expenses - now with WFH there's no need!

I think all it has really done is inject a large dose of inflation into the economy.

But at least HMG have got plenty of cash now to give to fraudsters..

[Cederic]

disagree on 'employees'

I would challenge "This means they will be taxed as employees". People caught by IR35 are taxed at a higher rate than employees.

I got an email yesterday inviting me to apply for an 'inside IR35' role that pays around £100/day more than I'm earning in a permanent role. Net income would be lower, despite that higher rate. That's a big difference.

[Secondrule]

The whole idea is to prevent tax avoidance - which is legal. (Tax evasion isnt)

Make life so bloody uncomfortable for the contractor that they come over to being permie.

Then it is an easier managed situation.

Im permie and will never contract in this country again, but when I watched 3 of the most highly technical people walk out of the HMG door due to being "inside" I realised it was the death knell for contracting.

HMRC dont need to get it right(if you are old and cynical like me) they just need to make it high profile enough that contractors will leave and come into PAYE for companies

[GrahamsTenPenneth]

Looming IR35 case

There are contractors who have more than a single client.

It would be interesting to take an "inside" client at the same time as another client and see exactly how much this would screw up the HMRC.

You can't be a "disguised employee" to multiple employers.