UK government faces calls to end IR35 double tax anomaly

Campaigners have called for the UK tax collector to respond to a consultation on how to avoid tech contractors paying a double tax while their status is defined. Freelance workers – including many providing IT skills – who worked via professional services companies (PSCs) have been hit by the introduction of IR35, laws putting …

[Anonymous Coward]

The Starmer Party won't do a thing

To the donors of the Lab Party... aka The Trade Unions, Contractors of all sorts are the enemy. Not unionised as in affiliated to the TUC, the contractors are scum and should be made to pay triple tax.

[Doctor Syntax]

Re: The Starmer Party won't do a thing

I reckoned at the time we should have had a whip-round for Labour funds. I'm sure we could have managed half a Bernie,especially as it would be refundable when the press found out. As we'd have had to include some freelance journalists on the basis that they might be affected it would have been hard to prevent them finding out.

Mine's got a brown envelope in the pocket.

[RegGuy1]

Re: The Starmer Party won't do a thing

All UK political parties should be funded via public funds. That would take the abuse and corruption out of the process.

But that's unlikely to happen. We have an electorate that's not even willing to pay to support their beloved NHS or care workers to wipe their arses when they become incontinent. Another 30 years I guess, before it has got so bad that a 1945 moment returns and a new cycle begins.

[SundogUK]

Re: The Starmer Party won't do a thing

How do you determine how much funding a party gets? Because this approach is pretty much guaranteed to entrench the current bastards (labour/conservative) in power permanently.

[NeilPost]

Re: The Starmer Party won't do a thing

As the article says - TBH a bit too late - just reclaim the overpaid tax back.

As a contractor, if you have haphazard tax affairs - tough shit.

As a contractor, if you have haphazard tax affairs - have you really even paid the correct amount of tax.

[Julian 8]

Re: The Starmer Party won't do a thing

As a contactor, if you have a job that is outside IR35 and pay your dues, and then HMRC decide you are inside IR35, not your fault. The best you could do was to use CEST (Which clearly a number of gvt agencies use and get the wrong answer due to the way the wind was blowing at the time)

[Strahd Ivarius]

Re: The Starmer Party won't do a thing

It may be likely that ChatGPT, in one of its earliest incarnation, is behind CEST

[Anonymous Coward]

This is a dead - not lame - duck government.

Nothing of any non-posturing import will happen now, until they are defenestrated in the next election.

It's bitterly ironic that one of the arguments against the Fixed Term Parliament act was it could lead to a "zombie government", but it's only since that act was repealed, we actually got one.

[NeilPost]

Re: This is a dead - not lame - duck government.

Considering that fixed Term Parliament Act was bucked twice almost as soon as it was laid down as law - for political gain/opportunism - by Theresa May and Boris Johnson … it’s a pointless/ludicrous piece of legislation.

[Roland6]

Re: This is a dead - not lame - duck government.

> it’s a pointless/ludicrous piece of legislation.

Disagree, it’s just yet another example of how easy it is for an Executive to override a supposedly sovereign Parliament.

The laugh about the fixed term Parliament Act was that the LibDems were instrumental in getting it passed, yet they were also happy to play the Conservative game and have a general election rather than using the sovereign power of Parliament to overrule the Executive.

[Bebu]

Re: This is a dead - not lame - duck government.

a "zombie government",

From my antipodal viewpoint the UK not only has a "zombie government" ie the institution, but a government that has been composed of zombies presumably since Boris had what passed for a brain sucked out with a drinking straw (one suspects Dominic Cummings obliged with the required partial vacuum.)

Apparently dispatching zombies is not all that easy unfortunately.

[Anonymous Coward]

Should have given Liz Truss' brave budget a chance, rather than panic into huge tax rises which have now doomed the Tory Government to an election defeat and years in the wilderness.

If I am ppaying that much tax might as well have Labour nationalise key infrastructure and give socialism a try.

[Old Cynic]

Agree.

Let's face it - there is very little between the Conservatives and Labour, maybe Labour would spend more but they're being careful to appear more responsible. With the current mob, we have spending off the charts, inflation off the charts, absurd energy policy, no growth, high borrowing, high immigration, high taxes, failing NHS. This sounds like a Corbyn government, no?

The only alternative put forward in recent memory is that of Liz Truss - unfortunately, we all know how the 'system' reacted and made sure as sh1t that low tax for mere mortals couldn't even be contemplated. And no, her budget didn't crash the markets, the markets were poised for a wipe-out due to pension LDI risk taking. And the markets, media, BoE and civil servants were in on the coup to get things back to normal i.e. making sure us mortals stay skint, heavily taxed and in debt.

[AbortRetryFail]

@Old Cynic

"The creatures outside looked from pig to man, and from man to pig, and from pig to man again, but already it was impossible to say which was which."

[Paul 14]

Re: @Old Cynic

Under rated comment

[Steve Davies 3]

Labour is not Socialist

They are Tory Light. They have been that way since Denis Healey had to go cap in hand to the IMF in the late 1970's.

[SundogUK]

Re: Labour is not Socialist

Rubbish. The average Labour supporter is verging on Communist at the moment. The party leadership lie about it because they know they would have no chance at government if the truth got out.

[Anonymous Coward]

"Two steps away from Toryism" Starmer and Communism? Pull the other one.

> The average Labour supporter is verging on Communist at the moment.

I'd have said this was risible given that Starmer is a blatant Tory panderer (maybe even more so than Blair) and- by traditional standards- comfortably right of centre and to the right of many pre-Thatcher Tory governments. He's Labour in name only, the idea that *he's* a communist is ridiculous.

Then again, the capacity for self-delusion in Labour supporters (e.g. actual left wingers and pro-EU types) who know they haven't a chance in hell for any other alternative to the Tories is remarkable. (*) So while *your* comment may well come from your obvious wingnuttery- here and elsewhere- it does remain true that some actual left-wing types (albeit most nowhere near "communist") continue to support Labour for whatever delusional reasons.

(*) I still regularly see pro-EU Labour apologists salve their cognitive dissonance by claiming that Starmer "secretly" plans to take the UK back into the EU- in complete contradiction to their public policy. And even if that's what they believe in private, they're not going to risk losing all the support from "Red Wall" Leave voters (who they've already shown they're so desprate to win back that they'll utterly abandon their former Remain supporting principles for) by doing so.

[Ian Johnston]

What "huge tax rises"?

[NeilPost]

ROFLMAO is you consider Liz Truss anything but a joke politician.

[Michael Strorm]

Lettuce not imply that Truss was a joke.

[a pressbutton]

It could have been worse.

Starmer isnt ... that great ... but the alternative is a bunch of incompetant nutjobs (*) who think

being horrid to refugee children

adding poo to the water

after 13 years of trying to kill the NHS, pointing out the NHS is not in a good state

pointing out the key 'benefits' of brexit being your children need to learn to pick fruit

is a vote winner. and they have a lot of really unsavoury friends.

(*) sunak excepted, hunt, hmmm

I think Corbyn could win against this lot.

[RegGuy1]

It's not rocket science -- if you want a decent society for all *everyone* should contribute. Everybody puts in and then everyone can take something out. We need proper funding for education because that's all our futures. Try and turn them into starving criminals because some Daily Fail article winds up the gullible and in a few years they will bite back.

Of course wanting to protect the untaxed capital gains in one's home is more attractive, so that wins every time.

[SundogUK]

"Everybody puts in and then everyone can take something out."

So, "From each according to his ability, to each according to his needs" perhaps?

Communist has been tried. It didn't work.

[Michael Strorm]

OMG COMMIES!!!!!!1111

Yes, because anything that isn't 100% dog-eat-dog, screw-you-I've-got-mine, zero-sum, race-to-the-bottom unmitigated capitalist self-interest must be "communism", obviously.

I'm not sure whether it would say more about you if you actually believed this, or if you didn't but said it anyway wanting the rest of us to believe this obvious false dichotomy.

(In your case, a mix of both, I suspect).

[JimmyPage]

if you want a decent society for all *everyone* should contribute.

I pay my taxes. It buys me civilisation.

https://en.wikipedia.org/wiki/The_Price_of_Civilization

[breakfast]

IR35 is kind of bullshit but it would be funny to see the Tories becoming the "tax our most loyal voters twice" party if it wasn't a problem I also have to deal with every time I'm considering a new contract*. It's complicated, stupid and it works for no-one.

If I was pushing for political power I think "make tax understandable" would be a pretty good element to one's campaign.

* Hypocritical? Absolutely, but I never voted for the leopards eating people's faces party. Seeing people who did get their faces eaten is schadenfreudelicious.

[jmch]

"make tax understandable"

Big thumbs-up for that. For all businesses, being able to plan ahead and have a reasonable forecast over the next 1-2 years is fundamental. For private individuals / families who have to understand all of this without the benefit of an accounting degree and a highly-paid tax lawyer, it's just insane.

I also would be very curious to see a breakdown of how much tax is avoided / permanently deferred through each of the large number of concessions, allowances, and purposely-built loopholes in the tax code. And which segments of the population are benefiting from that. No doubt the underlying data lurks somewhere at HMRC like a poisonous toad that nobody wants to approach

[Anonymous Coward]

make tax understandable

That isn't going to happen, too many vested interests in the current system. If people understood tax, because it was understandable, then there would be so much less scope for tricking people into getting it wrong and then having to pay penalties and interest.

I've just had a letter from HMRC telling me I owe more tax because they've re-calculated my tax calculation. For good measure, because the tax was due last January, they want interest on the tax I don't actually owe. And because it takes the total payable last January to over £1k, they now want another grand - half it payable by last January and so also gathering interest. Fortunately for me, I can see where their mistake is (it seems that even their own staff don't understand some of the basics) and so can show that I don't in fact owe it - it will be interesting to see if they accept my version, or if I have to take it to the tribunal.

[A.P. Veening]

If you do have to take it to tribunal (and win), don't forget to claim all expenses (including time) unnecessarily made through their incompetence.

[Julian 8]

As I stopped contracting due to the IR35 shit storm, I got a letter through at the end of the year saying "You do not need to submit a tax return next year".

Like fuck, I'm going to, just to cover my arse.

Many years ago, I got stung by child benefits partway through a year (change of our situation, blah bla blah). I spoke to a HMRC droid as I was not sure if I would have to fill one of the tax returns in, and it was they who said "No, you do not need to fill in a form." Come the Feb, I got a fine and interest for not filling one in.

[DevOpsTimothyC]

How about tax law follows employment rights (or employment rights follows tax law) rather than allowing the current "You're an employee for tax purposes, but not for employment rights / benefits"

[AbortRetryFail]

@DevOpsTimothyC

Ah yes. I call the current situation "Schrödinger's Employee"

[Crypto Monad]

make tax understandable

Hmm: that would be from the party which *didn't* introduce a 62% marginal tax rate for people earning between £100K and £125K? No no, all they did was taper the personal allowance for people earning over £100K.

Because that's completely different, right?

(The 62% includes 2% national insurance, now no longer capped, and is basically just income tax under a different name)

[Nematode]

Sooooo glad I retired in 2016. 17 years of (successfully) fighting IR35 was quite enough. But if you think IR35 is bad, try being an Accidental American in the age of FATCA, which I tripped over in 2018 at the age of 64. Fought that one and won, too.

Nil Illegitimi Carborundum, folks

[A.P. Veening]

How did you manage to win that latter one? I am pretty sure more Accidental Americans (and permanent expats) would like to know.

[Strahd Ivarius]

He said he was a Commie and immediately lost his citizenship

[Anonymous Coward]

Dying societies accumulate laws like dying men accumulate remedies.

[Paul 14]

IR35 is only "necessary" because dividends are taxed at a lower rate than earned income.

Or putting it another way, sitting on your a*se owning a piece of paper because you were rich in the first place means paying a lower tax rate on income for doing nothing, than anyone earning money actually doing some work.

IR35 further punishes normal people simply choosing to operate as a small business rather than an employee, bu stillt lets big multinational businesses get away with all manner of intricate tax avoidance schemes.

This system stinks.

[Anonymous Coward]

IR35 is only "necessary" because dividends are taxed at a lower rate than earned income.

Perhaps the answer, then, is to tax Dividends (and Capital Gains) at the same rate as earned Income?

And perhaps add National Insurance on top as well.

[Crypto Monad]

Re: IR35 is only "necessary" because dividends are taxed at a lower rate than earned income.

Perhaps the answer, then, is to tax Dividends (and Capital Gains) at the same rate as earned Income?

And perhaps add National Insurance on top as well.

I think it's a good idea - indeed to combine income tax and national insurance too. Then make earned and unearned income treated the same. I see two main sticking points:

1. The hidden tax of employer's NI contributions, where a company pays 13.8% of the salary for the privilege of hiring an employee.

2. Double taxation of corporate profits (i.e. company pays corporation tax, then the recipient of dividends also pays income tax)

[jmch]

Re: IR35 is only "necessary" because dividends are taxed at a lower rate than earned income.

"The hidden tax of employer's NI contributions, where a company pays 13.8% of the salary for the privilege of hiring an employee"

It is indeed a hidden tax, but on the employee not the employer. From the employer POV, they see how much it costs them to hire an employee as a total. If there were no employer NI contribution, the same market forces that currently set employee salaries at a certain level would push salaries up by the same amount. In effect, 100% of NI (both 'employee' and 'employer' part) are paid by the employee either directly or as reduced salary. The employer contribution is simply an accounting fantasy designed to make both the government ("oh the NI isn't that high") and the employer ("look how generous they contribute to the NI") look good.

"Double taxation of corporate profits (i.e. company pays corporation tax, then the recipient of dividends also pays income tax)"

That partially explains why dividends are taxed at a lower rate as earned income, but not why capital gains are taxed so little.

[Roland6]

It would still exist!

Even with the tax changes you suggest, a contractor can still make use of expenses etc.to reduce their tax, compared to an employee. Remember HMRC are basically happy if a contractor (inside or outside of IR35) is using an umbrella company ie. One which treats the entire invoice as income plus VAT.

[Strahd Ivarius]

In some countries (look at the other side of the Channel), as an employee you can either reduce your taxes for all expenses related to your work, or claim a flat-rate deduction (10% if I properly remember).

Hell, I think you can even claim the flat-rate deduction when you are retired!

[Anonymous Coward]

Nope - this is completely wrong

From an income tax perspective dividends and salary taxation is identical - however you earn pounds you are taxed on them.

The difference is if you want to take a dividend it comes out of profits (not just cash lying around) and this is between 19-25%. So if you take a dividend you pay the same in income tax and 19-25% in corporation tax.

If you pay in salary you pay income tax and employers NI (13.8%) and employee NI (a weird mix depending on your code (maybe 9%) so its income tax and around 22% NI.

So if you're running a business and taking dividends there's next to no difference. Where you get stuffed is if you keep cash reserves as a contractor for a rainy day (say you bring in 80k and only take 40k as salary which is wise) that spare cash gets hit with corporation tax - that's mandatory. So you HAVE to take that money out of the company via dividends. Well you don't have to but you'd pay corporation tax, income tax, employers NI and employee NI for every pound earned.

[Anonymous Coward]

"Time is of the essence with this."

And it wasn't (how many) year's ago?

[Julian 8]

Not going to change where a lot of IT contracts go to the FiL's company and Rishi benefits.