UK political parties fall over themselves to win tech contractor vote by pledging to review IR35

Controversial UK tax legislation IR35, coming to a private sector near you from the spring, is the latest tool being used to curry favour and win votes in the upcoming General Election in Britain. IR35 shifts liability for determining a contractor's employment status to the employer, meaning organisations that use freelancers …

[Buzzword]

There are an estimated 4.6 million contractors in the UK.

Bollocks. In FY2018-19, just 1.2m companies submitted accounts to Companies House under the "Micro Entity" accounting rules, which apply to contractors' limited companies. That's the upper limit of the number of people affected by changes to IR35.

[Oh Matron!]

Re: There are an estimated 4.6 million contractors in the UK.

It doesn't say that those 4.6 million will ALL be affected by IR35. Some may already be working in Umbrella companies, etc, etc.

[Buzzword]

Re: There are an estimated 4.6 million contractors in the UK.

Sure, and some of them are Uber drivers or whatever. But this is an article about IR35 in an IT publication. Exaggerating the figures by an order of magnitude simply isn't helpful.

HMRC themselves reckon only 170,000 individuals will be affected: https://www.gov.uk/government/publications/rules-for-off-payroll-working-from-april-2020/rules-for-off-payroll-working-from-april-2020#impact-on-individuals-households-and-families

[phuzz]

Re: There are an estimated 4.6 million contractors in the UK.

Note that it wasn't elReg stating that number, they were quoting the boss at Harvey Nash.

That said, I wouldn't trust HMRC's figures on this either, given that it's all got a bit political they have every incentive to downplay the numbers of people involved.

Probably the real number is somewhere in the middle.

[Steve Button]

Re: There are an estimated 4.6 million contractors in the UK.

Downplay?

You'd think they have to sell this to someone (Treasury?) and justify all the effort that they are going to, so that they will get more revenue. So, if the numbers are too small, it's not worth doing it.

OTOH, if it's affecting a million+ people then it's a political hot potato an they need to be more careful.

So, they have to both downplay and up-play the numbers!?

[phuzz]

Re: There are an estimated 4.6 million contractors in the UK.

No, they clearly already have funding, that's why they've been able to go ahead with it, they just have to downplay the numbers affected, so that it doesn't get seen as a big problem. Otherwise they risk having to do a U-turn and cancel the whole idea, and that's worse by far for a civil servant than going over budget.

[Anonymous Coward]

Re: There are an estimated 4.6 million contractors in the UK.

you are right the contractor folks are simply exagerating the numbers, there are only 170K and it is defnitely not 5 million, load of bullshit from tax dodgers..

IR35 must be implemented!!

[Intractable Potsherd]

Re: There are an estimated 4.6 million contractors in the UK.

Would you like some salt and vinegar for that chip on your shoulder? IR35 is a totally disproportionate and probably unfair system. The benefits are trivial, but the costs are huge. I'm not, and never have been, a contractor, but any objective view shows this to be asinine action by HMRC.

[MrMerrymaker]

Re: There are an estimated 4.6 million contractors in the UK.

Hi there. I don't use IR35 as I work through an umbrella company.

As do a fair few of my colleagues.

So you don't need a limited company to be a contractor. Hence the term "umbrella" company.

So your maths is therefore faulty.

[Happy Ranter]

Re: There are an estimated 4.6 million contractors in the UK.

I knw several contractor who have been advised by their UC that they may be liable for IR35

As for the figures? I wouldn't trust them. everyone knows 120% of government statistics are inaccurate, often by very wide margins, hence the current Conservatives massive majority that was predicted in the last election.

I do know of several contractor who basically said F*** it and took early retirement (myself included). Between IR35, HMRC, VAT changes, Digital reporting etc. it really has got to the stage where I would rather be a part time bus driver.

As for promises to repeal IR35 or even review it? More chance of me believing in the tooth fairy

[Anonymous Coward]

Re: There are an estimated 4.6 million contractors in the UK.

"advised by their UC that they may be liable for IR35". Any contractor MAY be liable, that's the issue, not even HMRC can say who is or isn't affected. And that's before you consider that in true banana republic style at any point HMRC could retrospectively apply anything new that comes up a la loan charge

[d3vy]

Re: There are an estimated 4.6 million contractors in the UK.

"advised by their UC that they may be liable for IR35"

Could you clarify this?

If you're working through an umbrella then you're already paying full whack Tax and NI so IR35 is completely irrelevant.

[Buzzword]

Re: There are an estimated 4.6 million contractors in the UK.

Re: "Could you clarify this?"

It sounds like the umbrella company is conflating IR35 with the SDC (Supervision, Direction, or Control) rules which came into force from April 2016. Under the latter, you can't claim travel expenses if you're a fake contractor.

[Wilseus]

Re: There are an estimated 4.6 million contractors in the UK.

"As for promises to repeal IR35 or even review it? More chance of me believing in the tooth fairy"

Indeed. I seem to recall a certain Mr Cameron pledging to repeal that law in the 2010 election campaign.

[Anonymous Coward]

Re: There are an estimated 4.6 million contractors in the UK.

Yup - big (200 plus bodies) Gov.uk project, just lost half the tech team - shame, it was on target and under budget until they blanket IR35'd the lot of us.

After 30 years as a contract dev I have to agree with you, the Gov have made it harder and harder to do business so time to quit.

I'm thinking about buying a franchise of some sort (my bro runs a couple of non-food franchises). Apparently this country doesn't need experienced programmers any more.

[greenawayr]

Re: There are an estimated 4.6 million contractors in the UK.

It's a general election. Surely soon and propaganda can work both ways when the parties are vying for votes.

[katrinab]

Re: There are an estimated 4.6 million contractors in the UK.

A lot of them are registered in Isle of Man, which doesn’t have any legal tax benefits unless you actually move there, nor any obvious commercial benefits.

[d3vy]

Re: There are an estimated 4.6 million contractors in the UK.

"A lot of them are registered in Isle of Man"

Any evidence of this? I've been contracting for 5 years and working in contractors heavy teams for a decade before that and I've yet to meet anyone not from the iom who has their company registered there.

[Jimmy2Cows]

Re: There are an estimated 4.6 million contractors in the UK.

Fair point, though I respectfully submit your sample size is a tiny proportion of 4.6 million (if that number is accurate), so is hardly representative.

[katrinab]

Re: There are an estimated 4.6 million contractors in the UK.

When determining whether a sample size is big enough, proportion of total population is not relevant.

In this case, it probably is too small, but more importantly, it almost certainly isn't representative.

[LucreLout]

Re: There are an estimated 4.6 million contractors in the UK.

A lot of them are registered in Isle of Man, which doesn’t have any legal tax benefits unless you actually move there

Sorry, but you have that wrong. Very wrong. You don't have to live in a place to pay tax there.

No CGT. No IHT. Top tax rate of 20% and taxes are capped at a £120k - after which its impossible to be taxed further.

It is applied on Max Sourced Income, in other words your pay from the UC, thereby allowing you to leverage dual taxation treaties to avoid paying again onshore, leaving your surplus income there to invest tax free.

The division I work in does this sort of stuff in great quantities, so I know a thing or two about it.....

[katrinab]

Re: There are an estimated 4.6 million contractors in the UK.

If an Isle of Man company trades in the UK, it has to pay tax in the UK. Where offshore stuff works legally is where they move an economic activity offshore. That might be intellectual property rights, or loan financing to other members of the group. Or, Apple for example has their European distribution centre in Ireland, so there is a big warehouse there that receives the stuff from China and distributes it to the shops, both their own and third party retailers. It can work for bit multinationals, but for a one person band where the capital requirements are basically a laptop and maybe a car, not so much.

The division I work in looks after foreign companies that want to trade in the UK, so I do know a thing about the UK side of things. There may also be Manx taxes to pay, I don't know about that, but that doesn't replace the UK taxes.

Also, UK tax is 19%. So, even if what you say is true, the break-even position is £126,316. How many one person IT contractors earn more than that? Some, but not that many in the overall scheme of things.

[LucreLout]

Re: There are an estimated 4.6 million contractors in the UK.

If an Isle of Man company trades in the UK, it has to pay tax in the UK.

Yes, on its UK profit, which is after its MANX costs such as wages under the UC are deducted.

Where offshore stuff works legally is where they move an economic activity offshore.

That's a very idealistic view of "legally", and frankly I'm afraid you're very wrong about that too. My division makes billions out of knowing this stuff better than the tax man (both foreign and domestic).

It can work for bit multinationals, but for a one person band where the capital requirements are basically a laptop and maybe a car, not so much.

There's an independent coffee shop in the next town over from me legally based in the channel islands for tax purposes. Literally a one family band. This sort of thing isn't half as hard as you'd expect to set up (and no, I didn't configure it for them as a sideline).

How many one person IT contractors earn more than that?

All of mine. Some of them quite a lot more. Most contractors in the City will be doing that even if they're taking a full chew of holidays.

UK tax is 19%. So, even if what you say is true, the break-even position is £126,316.

It would be if I ignored things like the CGT exemption in IoM and instead used an offshore entity to make the gains and retain the profit thereby increasing the value of my shares in it, which when disposed of will be zero rated for tax. You're also assuming a single legged tax structure when you should be considering a web.

I'm limited in how much I can say about tax arbitrage for professional reasons, but in the entire time I've posted here, there's only one other contributor that probably knows as much or more than I do about this, and its very possibly I work(ed) with or for him.

[katrinab]

Re: There are an estimated 4.6 million contractors in the UK.

A foreign company has to pay tax on its UK branch profits. Costs incurred in other countries can be recharged to the branch if they relate to the UK activities.

If a person employed by an overseas company works in the UK for 30 days or more per year, the company has to deduct UK tax on the portion of the salary related to UK work. The National Insurance position depends on other factors, including which other country is involved and what National Insurance or equivalent they pay there.

You can't deduct foreign tax from UK branch profits, though if it is the other way around, a UK company with a foreign branch, they can local taxes from their UK tax bill.

[Phil Endecott]

Re: There are an estimated 4.6 million contractors in the UK.

> In FY2018-19, just 1.2m companies submitted accounts to Companies House

> under the "Micro Entity" accounting rules, which apply to contractors' limited

> companies. That's the upper limit of the number of people affected by changes to IR35

No, it also applies to self-employed people who are not limited companies.

[e^iπ+1=0]

IR35 - couple of decades old now?

I'm a bit out of the loop now, but I remember IR35 being an issue a while back - part of the reason I took another contract in mainland Europe early this century instead of coming back to the UK; the rate played a role too.

Has it really taken this long for IR35 to start to bite?

What the fuck have they been doing with this legislation in the meantime?

[Chronos]

Election?

Thursday December 12th 2019

The General Erection

Whereupon all the useless pricks in the country stand up to try to win a mandate to hang around wasting time with a bag of bollocks for the next five years.

The fannies in the civil service won’t allow them to enter into any meaningful activity even if a different bunch of cocks win.

You may as well vote for a dildo. It stands more chance of penetrating the establishment and won’t go soft immediately.

[OssianScotland]

Re: Election?

That would be "election" with an "r" then?

(Damn, missed it in the above post.... must read fully....)

[Anonymous Coward]

Re: Election?

Childish.

[Chronos]

Re: Election?

Puerile digs at the establishment are our tour de force here simply because it seems to be the only sort of dig they understand. Anything else just flies straight over the top with only a slight breeze in their wigs.

[Jimmy2Cows]

Re: Childish?

And your point is...?

[e^iπ+1=0]

Re: Election?

It's a horror film - results come out on Friday the 13th part *** at around 13:13:13 if you're somewhat fortunate.

[Dave314159ggggdffsdds]

More nonsense

"Those regulations state a contractor doing the same job as a full-time employee should pay similar tax and National Insurance contributions, despite not having access to benefits including holiday entitlement and sick pay. "

The regulations are quite clear: the fake 'contractor' is really an employee, and therefore has a choice between paying taxes and receiving benefits, or continuing the pretence, paying what is still due, and receiving nothing for it. The message is 'stop pretending, you're an employee'.

The fake contractors are bollocksing everything up for those few of us who are actually legitimate contractors - it isn't a choice - and are having to jump through more and more hoops to be distinguishable from tax evaders. There are very few fully legitimate contractors, a few more with reasonable arguments, and a huge rump who are simply taking the piss.

[blcollier]

Re: More nonsense

Except in a lot of cases they don't actually receive the benefits such as sick pay, holiday pay, etc. They stay employed as a contractor and retain all the risks that entails...

All of the changes to IR35 so far are a pure political ploy so that the Tories can be seen to be "doing something" about tax avoidance without addressing the *real* problems with tax avoiders like Amazon, Google, Facebook, media companies, etc. Global megacorporations who do billions in revenue/profit in this country yet pay a disproportionately low amount of tax. The creative accounting might be perfectly legal but legal != fair.

[Phil O'Sophical]

Re: More nonsense

Except in a lot of cases they don't actually receive the benefits such as sick pay, holiday pay, etc. They stay employed as a contractor and retain all the risks that entails...

If they are genuinely self-employed contractors then it is up to their employer (i.e. themselves) to arrange holiday pay, sick pay, pensions etc., and to factor those costs into their rates. Just like the employer of a permie would have to do.

[Cederic]

Re: More nonsense

While I agree with you, the biggest issue I have with IR35 is that it creates a limbo situation in which the contractor

- is deemed to work for the company hiring the contractor's services

- is treated by them as a contractor, with no holiday/sick pay, pensions or miscellaneous other benefits

- must however pay employer's NI, employee's NI and tax on all income received from that company

- leaving no money pre-tax in that company to cover holiday/sick pay, pensions or miscellaneous other benefits

I've simplified slightly, but broadly speaking it's almost impossible to come under IR35 and also obey employment law.

[Anonymous Coward]

Re: More nonsense

- must however pay employer's NI, employee's NI and tax on all income received from that company

- leaving no money pre-tax in that company to cover holiday/sick pay, pensions or miscellaneous other benefits

So they're not charging a viable rate. If they are really doing a contract job they should be charging enough to cover those things.

[Dr. Mouse]

Re: More nonsense

"If they are really doing a contract job they should be charging enough to cover those things."

Effectively, if you are found to be inside IR35, you must take all of your companies sales as your salary. This means there is nothing left in the company to cover any of the above.

Let's say I'm contracting on £300/day. That would mean the company receives around £6k a month.

Outside IR35, they would pay expenses (account, travel, accommodation, salary). Let's say around £4.5k is left, which would be subject to corporation tax. This would leave around £3.6k. Assume around £2k is taken as dividends. There would therefore be around a grand and a half per month (£18k/year) left in the company to cover sick pay, holidays, pension contributions, and other contingencies. This is not a large amount, especially if the contractor ends up sick (or otherwise unable to work) for a significant amount of time, but it's something at least.

Inside IR35, effectively, all of the £6k must be drawn as salary. There is nothing left to cover the rest, not even to pay for the accountant. It is left up to the contractor, as an individual, to pay for these thing from his already-taxed personal income. The company cannot fulfil its obligations to its employee because it has no money left, because it has been forced to pay it all as salary.

[Doctor Syntax]

Re: More nonsense

"it has been forced to pay it all as salary."

The official line isn't "forced", it's "deemed". A weasel word if ever there was one.

Add being between contracts onto the list of what the company should be making provision for. One of the things clients usually want is instant availability. That's an expensive attribute to provide. The freelancer who's available on Monday when called on Friday has probably been "available" for some time, otherwise the agent is trying to fish in a very small pool.

[Cederic]

Re: More nonsense

Your example is precisely the reason IR35 is needed.

You're charging £6k/month and looking to make a 300% margin on it. If you'd paid a sensible salary commensurate with the skills then you wouldn't have £4.5k/month profit, wouldn't pay that much corporation tax, wouldn't be taking £2k/month in dividends.

While I disagree with many elements of IR35 I do entirely understand HMRC wanting to prevent people taking the piss.

[Dr. Mouse]

Re: More nonsense

It isn't "taking the piss" any more than using an ISA or pension is taking the piss. It's using the tax system. I know many small business owners who pay themselves little in salary and take most as dividends. However, as they don't fall into the category of a "personal service company" they don't even need to assess whether IR35 applies. Why are they treated differently?

If they wanted to stop this, there are many ways they could do so fairly such that they applied to all businesses. For example, they could say that any dividend paid to an employee/director must be treated as salary, or they could simplify the tax system to roll NI into income tax, or various other methods.

Also, please note that all in I pay a very similar amount to an employee. The tax advantages are minimal. The are where tax is being lost is in employers NI. If I was a "disguised employee" of my client (which an inside IR35 determination would mean), then that would be the client/employer avoiding tax, not me...

[pmb00cs]

Re: More nonsense

Not all employers like hiring staff proper, and will insist that potential recruits are "contractors". IR35 is sold as stripping these "contractors" of several tax dodges they could take to reduce their tax burden. As it stands for doing this it is probably quite effective. However for those (often underpaid) "contractors" it is very hard to get the employer to treat them fairly, and give them the benefits they rightly deserve, and HMRC don't give a toss about that, so IR35 isn't written to enforce that the person paying taxes is automatically, under employment law, an employee proper. As such the people it rightly targets cannot afford the consequences of the law.

On top of this, as written, IR35 impacts on contractors who knowingly, and by choice, are in positions where they don't get employee benefits, and for various reasons are happy to take that risk. As such these people often get paid a higher fee. That higher fee then under IR35 attracts higher tax rates. It is worth noting that a large number of cases that fall into this bracket have been found, in court, to not actually constitute hidden employment, and so IR35 shouldn't apply. But fighting this is expensive, particularly given cuts to legal aid.

The solution to my mind would be to change IR35 so that the tax burden is there, but the employer owes the hidden employee all the benefits they have previously denied them, and that hidden employee is automatically granted employee status. But the issue is more complex than a simple solution like this can fully cover, so there needs to be significant work put into dealing with it, and I'm sure there are edge cases that would need handling with more nuance.

[Dr. Mouse]

Re: More nonsense

"The solution to my mind would be to change IR35 so that the tax burden is there, but the employer owes the hidden employee all the benefits they have previously denied them"

This has been suggested many times over by many people: aligning tax and employment law.

I don't think anyone could legitimately argue against this. Instead of there being a tax investigation, it becomes one of employment. If the relationship is found to be employment, then the taxes are due (on both sides) but so are the rights. If not, the contractor/client relationship and associated tax regime continues.

The current fudge of "well, you're kind of an employee, so we want you to pay that tax, but you're kind of not, so you won't get any benefits" is ridiculous.

Of course, there's an even easier way to fix this by fixing (and simplifying) the tax system. Roll all NI into income tax and charge it on everything.

Of course, this would stop politicians from being able to hide the fact that the basic rate of income tax is effectively about 45%...

[pmb00cs]

Re: More nonsense

"Roll all NI into income tax and charge it on everything."

That's another strike against IR35 in my mind. Contractors have to pay Employer's NI contributions, employees don't. After a finding of being inside IR35 not only does the contractors tax bill go up (a lot) their NI bill doesn't go down (unless they can find some of the ways to reduce Employer's NI contributions, it's a complicated area, and one of the reasons I'm not a contractor, but essentially they'd need to limit their income)

[katrinab]

Re: More nonsense

Merging the two would mess up a lot of international tax and pensions agreements.

[Doctor Syntax]

Re: More nonsense

They may well have factored that into the rates. But then IR35 gets applied and changes the effective rates.

[DavCrav]

Re: More nonsense

"Except in a lot of cases they don't actually receive the benefits such as sick pay, holiday pay, etc. They stay employed as a contractor and retain all the risks that entails..."

As the previous poster said, IR35 is intended to punish liars (assuming it is applied correctly...). Being found to be inside IR35 should be a stepping stone to be turned permanent, so an end state.

[Graham Dawson]

Re: More nonsense

(assuming it is applied correctly...)

... which is where this all falls down, because it patently isn't being applied correctly. IR35 was a sledgehammer to crack a nut. It's now been upgraded to a tactical nuke and aimed at the wrong place.

[macjules]

Re: More nonsense

And incidentally, what would be the situation working for Apple or FGT in the UK as a contractor after 6th April? I say this as I have just been asked to start in March at Apple UK as a contractor.

[Doctor Syntax]

Re: More nonsense

It depends on various factors such as the attitude of HMRC and the phase of the moon. The contract and working conditions may have some minor influence but the attitude of HMRC will be that you're caught anyway.

Serious answer - get the contract reviewed by a competent reviewer along with as much additional documentation you can get your hands on about the nature of the engagement. Look like an independent company. Don't use the company account as a pipe-line to direct cash straight from Apple to you, either as salary or dividends. Pay yourself a reasonable salary whilst making provision to be able to keep paying after the engagement's ended. When a pimp agent rings up after you've finished the first question will be "Are you available?" and providing that availability will have cost your company money by continuing to pay salary whilst you're on the bench.

[Anonymous Coward]

Re: More nonsense

"what would be the situation working for Apple or FGT in the UK" - you need other income streams, you need to do a deal with the contracting agency that allows you to be replaced if you aren't available (due to sickness or whatever) and you need to make sure that your contract is split into clear work packages, each with a set of defined deliverables.

You also need to make sure that you are not acting as a manager in any respect & don't use any of their kit except what you've supplied yourself.

[Anonymous Coward]

Re: More nonsense

majority are fake contartors dodging the tax systems since decades, now it is time to pay. How could all permanent staff pay 40% taxes and get the same schools, NHS as a contractor who pays only 5 to 10% of taxes. The conservatives are very good in trying to implement IR35. Everyone should pay same taxes and enjoy same benifits and services.

[Mark 110]

Re: More nonsense

I am really not a fake contractor. 10 contracts in last 15 years makes me outsidee IR35 afaik.

I know some faake contractors that have been with the same firm for 5+ years but its not the majority by any stretch.

Regardless off IR35 status they are choosing to work without employment rights so choosing to tax them as if they had employment rights is a bit on its head.

[d3vy]

Re: More nonsense

"I am really not a fake contractor. 10 contracts in last 15 years makes me outsidee IR35 afaik."

The number of contracts you have worked has no bearing whatsoever on your IR35 status.

[Wibble]

Re: More nonsense

OOh, good to see you here Mr Corbyn

Must be a bit of a challenge with all these contractors with zero hours contracts yet quite happily getting on with life.

[d3vy]

Re: More nonsense

"majority are fake contartors dodging the tax systems since decades, now it is time to pay. How could all permanent staff pay 40% taxes and get the same schools, NHS as a contractor who pays only 5 to 10% of taxes. The conservatives are very good in trying to implement IR35. Everyone should pay same taxes and enjoy same benifits and services."

Obvious troll is obvious.

Though given your spelling and grammar, I do understand your point that not enough tax is being funnelled into schools.

[Dr. Mouse]

Re: More nonsense

"How could all permanent staff pay 40% taxes and get the same... as a contractor who pays only 5 to 10% of taxes"

I know no contractors who pay, overall, 5-10%. In fact, excluding VAT, between myself and my company I pay about the same as an employee would on a salary equivalent to what I draw from my company* (including what they would pay in NI).

I think many have a very distorted view of the tax system as applied to contractors. The tax advantages are minimal and mainly amount to 2 things:

1) We can offset expenses, like travel and accommodation. This then allows us to take contracts far from home, and this flexibility enhances the entire countries economy.

2) We don't have to pay NI on dividends. This is roughly balanced out by the higher combined rate of CT & Dividend Tax, but the client doesn't have to pay Employers' NI. This is where the main tax saving comes in, but this is the same for all companies.

* Note that what I draw is not my day rate. As a responsible business owner I put aside quite a lot to cover expenses and contingencies. I never count my day rate as my income: That's the companies sales, my own income is whatever part of that I deem available to provide myself as renumeration.

[Doctor Syntax]

Re: More nonsense

"That's the companies sale"

And that, folks, is the main point to remember. It's exactly the same as the biggest outsourcing company you can think of. Sales rate is not the same as the rate paid to whoever's doing the job The biggest differences are: lower day rate then them, less overheads and, it seems a much greater interest in doing a good job for the client because the sales and marketing staff are the same as the delivery staff.

[HMRCVictim]

Re: More nonsense

Sorry, but you are mistaken. The IR35 rules are wholly separate to the rules for employment law.

This is an issue that was identified by the Taylor Review. You can be "employed for tax purposes" but receive no employment rights - the converse is also true. The law needs to be sorted out. Clear distinctions need to be made between different categories instead of the current grey area where no one really knows where they stand.

The IR35 reforms make the issue even worse. You cannot be properly assessed until you start a role, and you have to take the chance that the companies HR department won't take the easy option and decide the contract is caught. Many large companies won't even bother, they'll just say they won't take on any independent contractors. Who wins? The large consultancies.

[alain williams]

Politicians' promises

Does anyone still believe in them any more than they do the existence of the tooth fairy ?

Not worth the paper that they are written on; said paper best used in the smallest room of the house.

[Zog_but_not_the_first]

Re: Politicians' promises

Once again, I'm forced to invoke Groucho...

"These are my principles. If you don't like them, I have others..."

[Commswonk]

Re: Politicians' promises

Once again, I'm forced to invoke Groucho...

Full Marx for managing to get "the Brothers" into the thread. After my mention yesterday that's two references in two days; perhaps it's the start of a trend...

Or some sort of competition...

[Anonymous Coward]

Re: Politicians' promises

Pre-election promises should be filed with "Of course, I'll respect you in the morning", and for exactly the same reason.

[Charlie Clark]

Re: Politicians' promises

Does anyone still believe in them any more than they do the existence of the tooth fairy ?

Apparently they do. Or, more likely, they believe in the person who says what they want to hear, which just encourages the snake oil salesmen and why we're seeing such extravagant promises for the NHS and the police.

[IGotOut]

Re: Politicians' promises

I think you will find the tooth fairy is far more realistic. A promise of a coin under the pillow if you leave a tooth there for most kids really happens.

A promise by a political party very rarely come true.

[tip pc]

Liebour back tracked

Looks like they rewound their position on ir35

https://smallbusiness.co.uk/labour-pledges-to-scrap-ir35-rollout-to-business-and-then-backtracks-2548952/

[tfewster]

Re: Liebour back tracked

Yep - They're politicians. When did any politician a) Tell the truth in a manifesto or b) Refuse to accept taxes that had been raised by a previous Government?

Maybe you trust the Con-servatives more? Theoretically I'd be better off under them, but I happen to think the country would be better served by "Liebour"*.

* Old vs New Labour is another argument.

I absolutely agree with the Lib Dems, that retrospective tax changes are wrong. I took a big hit on that, but it's not a big enough single issue to make me vote for them.

YMMV. I'm at the stage that I don't care who you vote for, or why. As long as you a) vote and b) keep it honest, I'll go along with the winners.

[tip pc]

Re: Liebour back tracked

Funny how I got so many down votes for reporting that the labour mp had back tracked and provided a link to the article I read it from. The latest update to this article supports my post.

Some commentators literally don’t like to read the truth when it’s against their viewpoint.

[DontFeedTheTrolls]

Smoke And Mirrors

The ONLY proposed change to IR35 is WHO makes the determination, Contractor or Client.

NOBODY is suggesting IR35 will be changed in any other way, it will still apply exactly as it does today, all that is being offered by some candidates is a review of the WHO question from 6th April 2020. This is the perfect example of political spin at its best.

Quite frankly if this is the deciding factor in this election for anybody then you probably don't deserve a vote. Much bigger issues and our children's future is at stake.

The current tax system is not fit for purpose, no politician is willing to put their head above the parapet and say it, they are too worried about their own ego and place in parliament.

[Franco]

Re: Smoke And Mirrors

"The ONLY proposed change to IR35 is WHO makes the determination, Contractor or Client."

This is not correct, the reason for the disruption is because the liability for getting it wrong has also shifted and the businesses (particularly banks) are being extremely risk averse and trying to move everyone to umbrella or on to payroll.

[Peter Gathercole]

Re: Smoke And Mirrors @DontFeedTheTrolls

Actually, your statement about assessment, although true, is not the only thing it changes.

It also changes who the obligation to pay tax and national insurance sits with.

If a contractor is deemed inside of IR35, then the engaging client, or one of the intermediaries between the client and the contractor's company has to pay the PAYE and NI to HMRC, not the contractors company. This is a huge change. This obligation also exists if HMRC challenge the IR35 determination for a contractor. If the contractor was deemed outside, and HMRC challenges it, it falls to the company that performed the IR35 determination to pay for the back tax and NI HMRC deemed is owed.

It is the risk of the IR35 status being overruled by HMRC that has the client companies running scared, as if a client with a significant number of contractors suddenly has to pony up tens of thousands of pounds per contractor, the financial risk becomes very significant, even to banks and insurance companies.

And it is then the case that if it wanted to challenge this in the court, the court costs will also be significant.

I expected some of the larger companies to try to defend their position against HMRC, but it seems like HMRC have persuaded them that the risk is too great to take the chance. So it's really HMRC sowing FUD with engaging companies, with no real idea of whether they will follow through with their threats!

From the contractors side, it has been argued that if a contractor stays in the same role, and accepts that they are inside IR35 when they had previously self assessed themselves as outside, that gives HMRC a lever to chase back tax and NI for the whole of the time the contractor has been in the role as the previous assessment was obviously incorrect. This has contractors running very, very scared, as very few of them are likely to have the money to pay this readily available. This is why contractors are looking to leave their current contracts before the end of March next year.

And this is all happening before we even know that the legislation will hit the statute books (it's still draft legislation!)

[$till$kint]

Re: Smoke And Mirrors @DontFeedTheTrolls

Perfectly summed up.

HMRC have created a test where the person answering the question has absolutely no incentive to agree the Contractor is outside IR35. The only possibly beneficiary of determining outside IR35 is the contractor, but the risk if you get that wrong sits with the client.

Granted that is a simplistic take on it, as there are other risks to saying "everyone is inside IR35", like not getting the right resource at the right price, but from a very binary cash/risk perspective, it's a no-brainer for the client.

I'm trying to think of a non-employment scenario as an example that mirrors this mendacity, but am struggling as it's so fundamentally obtuse!

[Anonymous Coward]

Re: Smoke And Mirrors @DontFeedTheTrolls

Assume a contractor bills £100k and the client assesses the contractor as inside IR35 and the 'client' pays Employer's NI + "Employee's" NI + Income Tax on the gross figure to HMRC.

What happens when the contractor, for example, pays £40k into a pension (max allowance) -- can said contractor get the overpayments back? As in all three components?

[d3vy]

Re: Smoke And Mirrors

"The ONLY proposed change to IR35 is WHO makes the determination, Contractor or Client."

True(ish) - have an upvote, however I think everyone recognises that its not being implemented very well (See recent reports about the CEST tool) - the guidance for business isn't finalised yet and isnt due out until a few weeks before the legislation comes into effect. You also need to look at liability, why would a client deem a contractor oustide IR35 and accept liability for their tax if that decision if found to be wrong?!

The effect this is having on the sector NOW is ridiculous with many companies deciding its easier to take the safe route and either can all contractors or move them all to PAYE without an actual review to determine their status* (See articles about Barclays/Lloyds/Tesco/GSK)

"Quite frankly if this is the deciding factor in this election for anybody then you probably don't deserve a vote. Much bigger issues and our children's future is at stake."

Its one of many deciding factors, it will be for many.

Personally my children's present *and future* is massively impacted by how much I earn (Being that i bring in 90% of the household income) so a tax hike which effectively cuts 15-20% of my income IS a big factor for me - and Im fairly sure it will be a big factor for others too.

* Something that back at the start HMRC said that they should not do.. but backtracked on when it was realised that they had left it too late to actually do the reviews properly.

[Dwarf]

Clarity

There needs to be clarity from politicians (yes, I know, wishing a lot). There is a big difference between "review" and "when".

You might agree to review something then forget to do it for 3 years. Much like the winning party will do about many of their pledges.

The key point is that there is a more pressing time frame on this, it has to be done before the damage is done to the country by forcing people into a process that doesn't work for anyone and making the wheels fall off of many large projects with unnecessary disruption..

Looking at the numbers listed above, if its 170K people affected, then how are they going to make the £Massive£ increase in tax that they think they will generate, particularly as I'm also hearing that several of the affected companies have just off-shored many of the roles, meaning that there will be zero tax arriving in HMRC's coffers.

This is all just a complete mess and it needs a real re-think about what businesses need in terms of flexible resourcing and how people want to work outside of the corporate BS processes that companies have invented to torture the drones that work in the collective.

I don't expect many of those who work in a permanent basis to appreciate that position in much the same way that a frog being warmed up in water isn't too worried either.

As someone once said - a Cigarette or a beer may take a couple of minutes off your life, but a day of work takes 8 hours off your life.

[tip pc]

Re: Clarity

if they could have off shored they would have done instead of getting domestic contractors. If its all about saving costs then offshore is always cheaper.

[Dwarf]

Re: Clarity

@tip pc

That depends on what cost you are comparing to and what level of local skill set you are prepared to loose.

The costs change when the model changes, hence the outcome of where things go will be affected.

The point is result of unintended consequences. Off-shoring does not bring any revenue into the government of this country.

[Dr. G. Freeman]

RE: Smoke and Mirrors

"The current tax system is not fit for purpose"

yes, we're still paying for the Napoleonic war in 1799 (Income tax) , maybe time to rethink things.

[Anonymous Coward]

Re: RE: Smoke and Mirrors

>"The current tax system is not fit for purpose"

It depends what you think the purpose is, which in turn depends on who's opinion counts in defining that purpose.

As far as the people who run the country are concerned, pretty well everything is subordinate to maintaining that position, and they are mostly the ones who get to choose what the purpose of something is. The tax system has persisted because they have found it to be hugely fit for their purpose.

[Rich 2]

So why'd you do it then?

"Bill Esterson, shadow [ie, Labour] minister for Small Business, said: ".....We need to support the self-employed in this country....."

So why did Labour introduce IR35 in the first place then?

[macjules]

Re: So why'd you do it then?

Left hand: "We support business and the small business man"

Right hand: "Sod that. Tax the lot of them"

[$till$kint]

Re: So why'd you do it then?

I think you meant "Left hand" and "Lefter hand"

[Peter Gathercole]

Re: So why'd you do it then? @Rich 2

You've missed the point.

When IR35 was first mooted, and increasingly as it has morphed into what we have today, the premise was that the 'companies' and 'small businesses' were really not companies at all, but a vehicle to be employed by a company with some significant financial benefits. So they introduced the term 'disguised employees' and then deemed that their Personal Service Company (PSC) was not really a business at all, so did not fall into the category of either businesses or companies, and thus are not in scope for his statement.

In addition, for tax purposes, self-employed and employed by a PSC are completely different things, even now. So they can very easily claim that they are supporting the self-employed while taxing the hell out of a PSC.

The problem they have is differentiating a PSC from a larger company with more employees. As far as corporate law is concerned, there is not a lot of difference between a PSC and a small employer/SMB. There are some accounting and audit differences once you get over a certain level of revenue, but most of the tax/PAYE/dividend rules are largely the same for joe_blogs_it_systems Ltd, and the domestic larger IT consultancies like Capita, Deloitte, NTT, PWC, Earnst and Young etc.

So they want to put rules in place that hit PSCs, but do not affect the larger PLCs. And so far, they've been vary poor at it. Now with the wave of a legislative wand, the treasury want to put laws in place that threaten the engaging companies rather than the PSCs, hoping that the large companies will just turf over the yax and NI while still engaging the contractors. But actually, the large companies are so risk averse that they will just stop employing contractors and taking the people onto the books, but at permie rates not contractor rates.

Of course, if this happened, the tax take would actually go down, so one wonders whether this may end up being an own goal!

Alternatively. we may actually see a rise in the number of IT professionals engaged through the large consulting firms, which would probably benefit nobody other than the shareholders of those firms!

[Graham Dawson]

Re: So why'd you do it then? @Rich 2

so one wonders whether this may end up being an own goal!

Wouldn't be the first time.

[Mark 110]

Re: So why'd you do it then? @Rich 2

Given us contractors pay a shit load off tax, then making us all go permie is going to make it a smaller poo . .

[Doctor Syntax]

Re: So why'd you do it then? @Rich 2

"When IR35 was first mooted, and increasingly as it has morphed into what we have today, the premise was that the 'companies' and 'small businesses' were really not companies at all, but a vehicle to be employed by a company with some significant financial benefits. So they introduced the term 'disguised employees' and then deemed that their Personal Service Company (PSC) was not really a business at all, so did not fall into the category of either businesses or companies, and thus are not in scope for his statement."

This doesn't seem to have changed as far as Labour is concerned. The only morphing here is that the Conservatives have ceased to be the party for small businesses. And can we please avoid the term PSC. The individual freelancer's company, as you go on to say, is just a smaller version of the bigger outsourcing companies although probably better motivated to do a better job. The correct terms should be "Small Outsourcing Company".

"In addition, for tax purposes, self-employed and employed by a PSC are completely different things, even now. So they can very easily claim that they are supporting the self-employed while taxing the hell out of a PSC."

Limited company freelancing only came into existence (AFAIK - it was before my time) because the IR as it then was came down on the nearest limited company in the chain if a self-employed person defaulted. I don't know if this was a frequent occurrence or FUD but it seems that HMRC have finally worked themselves into the same position again.

One of the central problems here is that tax rules are drawn up by people on salaries with incremental scales and reasonably secure employment and don't really understand that any other way of working exists and is essential for the economy.

[d3vy]

Re: So why'd you do it then? @Rich 2

*Personal Service Company (PSC)*

Let's remember everyone, PSC is a meaningless term, there's no legal definition. It's literally made up to stoke an us and them mentality so that there's someone to vilify.

[Peter Gathercole]

Re: So why'd you do it then? @Rich 2

The reason why I used PSC as a term is because it does have a meaning in communications from HMRC, albeit not a one in law.

It is currently used to describe the type of company where there is one director, the services are provided by the director, and the shares are all owned by the director.

When IR35 first came in, a company had to have two directors, and it was normal for one's spouse to be the other director, with the shares split in some manner between both people. If the professional services offered were done by just one director, it still counted as a Personal Service Company.

It was never a term that defined anything to do with tax legislation, just one that HMRC used as convenient shorthand for a type of company they wanted to treat separately, even though at the time there was little else in law to differentiate these companies from larger ones.

[d3vy]

Re: So why'd you do it then? @Rich 2

"It is currently used to describe the type of company where there is one director, the services are provided by the director, and the shares are all owned by the director."

Untrue - if this was the case then I could get round IR35 by simply having my partner set up the company, own all of the shares (and collect the associated dividends) whilst paying me minimum wage for my services.

And this highlights the problem - Like I said, its not a real thing, there is no legal definition of what makes a PSC so it can be all things to all men - to you a PSC is as you described it, to HMRC it could be something else.. more worryingly - on different days to different people within HMRC it could mean something else.

Which brings us back to the argument that was made a few years ago - we are forced for reasons of liability to use a limited company - why not just have a new legal entity with the liability benefits of a limited but with a tax policy more closley aligned to that of a sole trader (ie - you get taxed as normal PAYE rates on all income but are able to make deductions for expenses such as pensions, travel, hotels etc.

My plumber* isnt considered a PSC - hes the only employee of his ltd company and the only shareholder and he doesnt really sell any goods - only services - why should it only apply to IT staff?

To recap - PSC is a meaningless term - until there is a proper definition we should not use it - just say contractor - we all know what that means.

* Substitute any number of your own jobs here.

[Franco]

Re: So why'd you do it then?

"So why did Labour introduce IR35 in the first place then?"

Initially IR35 was to prevent companies doing exactly what the BBC have done, shunting people off payroll to save themselves on ENIC costs etc. It's, to say the least, rare that this is enforced as the individuals that the BBC did this to are the HMRC target, rather than the BBC themselves.

[Ian Johnston]

Wow. A whole twelve hundred tax-dodgers want to carry on dodging tax. That'll swing the election, sure. In fact there will be a lot more votes in coming down hard on the free-loaders.

[Doctor Syntax]

I take it you're too altruistic to go freelance yourself. Or is there something else that's holding you back?

[d3vy]

"I take it you're too altruistic to go freelance yourself. Or is there something else that's holding you back?"

I'd imagine there are a number of things holding him back... Not just in terms of contracting but just life in general.

It's a bit sad really.

[Doctor Syntax]

Yup. It's always the same. You get that sort of comment and think "Are they really Goody Two-shoes?". They don't have the balls to try it themselves, in fact they're so far from doing it that they haven't really looked at the details so they're completely uninformed about the realities. Dogs & mangers come to mind. Or sour grapes.

[steelpillow]

IT awareness among politicians

I am truly gobsmacked that IR35 has risen in the national political awareness enough to become an election gambit. There is hope for the human race yet. But I still wonder just how much these beloved new converts (for today anyway) of ours truly understand what these "contractors" they have so fallen for actually do for them?

[Doctor Syntax]

Re: IT awareness among politicians

It's not so much what they understand what contractors currently do for them. It's what they want them to do for them in a couple of weeks' time: vote. And the reason it's become an issue not is the realisation that over the last few years there's been a democratic shift towards all sorts of forms of non-standard (in tax terms) employment so that means more votes to lie grub for than in the past.

[Doctor Syntax]

According to https://www.bbc.co.uk/news/election-2019-50547793 Labour plan to end bogus self-employment" so maybe that's how they plan to abolish IR35. You will be directly employed irrespective of whether you or your employer want that to be the case.

Not that I believe any of it. This has been the worst election for unfulfillable promises that I can remember - and that includes N Irish elections as well as UK.

[Anonymous Coward]

IR35 must be implemented!!!

Guys as someone said everyone knows why people take contracts with risks, you get paid more via rates and less taxes, the govt ignored this for years knowing fully well how PSC's coould manage paying less taxes through intellectual accountants, but now it is time govt needs that extra 1.3 billions and hence the stick! go with it and adjust yourselves, just be happy that you all have enjoyed years of low taxes..just time to pay!!!!

I think the govt recognsed the loop hole as to how contractors have been dodging taxes for decades and making millions, the reason is simple if two people are doing the same job with same skill why should a permie pay more tax and a contractor pay less taxes, this is totally unacceptable, so all you contractors out there you have enjoyed your time and now it is time to pay something back. Now coming to sick leaves and other benifits, you dont get them?? so best join as a permie you get everything and all are equal - simple solution or start your own business!!!! good luck with correct taxes.

[Sir Runcible Spoon]

Re: IR35 must be implemented!!!

Except in the world where contractors take on permie roles HMRC will end up with less tax, a lot less. Tell me how this is supposed to benefit the country?

Just because contractors save a bit of tax on NI contributions, it certainly doesn't mean they don't pay a lot of tax overall.

[d3vy]

Re: IR35 must be implemented!!!

PSCs don't exist.

Stop it.

[Anonymous Coward]

Re: IR35 must be implemented!!!

Us contractors are a resourceful bunch with no time for ideologues. Since the IR chapter 10 talk started, I cast the net for clients overseas, as have a number of others I keep in touch. Over the past year, foreign clients went from accounting for 0% to 50% of my turnover, and that number has steadily been going up. Since overseas customers are not subject to IR35 chapter 10 rules (no jurisdiction), chapter 8 applies, i.e. business as usual as it has been for the past 20 years. And as the icing on the cake, sales abroad (exports) are not subject to VAT - so the net achievement by HMRC is that they don't even get the VAT. So not only will they not be getting 14.3% more in NI, they will be getting 20% less in VAT.

I would argue this is a massive own goal, but it was never about increasing tax revenues - it is purely about the jealous trying to drag the competent down to their level. It never works out.

[SVV]

Matt Smith, Harvey Nash boss

is obviously sticking his oar in because those big companies who make easy money from raking off rather large percentages from contractors' income for basically facilitating placements and then providing basic payroll services will be massive losers under the changed rules. Quite frankly, my sympathy for people like him is in short supply compared to the techies actually earning the money. He is obviously not stupid, as it is massively in his personal interest for the change not to go ahead, but his appeal to the vanity of the wannabe world kiing that the people who stand to lose would fall to their knees in gratitude and pledge their allegiance if he would graciously grant them what they wish within the glorious future he will deliver is a piece of nauseating grovelling and insulting to the intelligence of the intelligent, but he must have twigged that it will likely be far more successful than any appeal to rational argument is going to be in the forthcoming glorious utopia.

[zharrt]

Bill Esterson told a captive audience what they wanted to hear, when his tweet was picked up by Labour HQ it was deleted. The continued Labour campaign against all business especially those who are working for themselves so can't afford the army of accountants to find the next loop hole in the UK's mess of a tax code will continue,

[Anonymous Coward]

Don't review IR35

Just scrap it.

Full disclosure: I am a permie.

[d3vy]

Re: Don't review IR35

I'm a contractor and I don't mind it *if implemenyed correctly with clear rules and processes*

[Ashto5]

IR35 CLASSIC HMRC TAX GRAB

IR35 was invented by labour to stop people being forced into Ltd companies by business.

It is based on a falsehood, and now in order to “protect” workers they have morphed it into a tax rule to cripple individuals.

Permies who support this need to understand a few truths

We pay as much if not more taxes than you

We don’t get your benefit package

We enjoy being at the top of our game

This article is about how fast politicians can offer and retract statements

You cannot trust any of them

Companies will suffer and outsourcing will shoot up and eventually permies will be dismissed as the knowledge industry moves to India

Careful what you wish for

[TheMeerkat]

“Mop haired liar” - the quality of this article is so low. Do you really need to be so stupidly partisan?

[d3vy]

You're 50% right, it doesn't look like a mop.

[Anonymous Coward]

IR35

The tax reforms Labour are planning include taxing dividends at the same rate as salary and increasing Corporation Tax.

This means that if Labour gets in and scraps IR35, Contractors will actually be WORSE off than under the Conservative IR35 reforms.

[d3vy]

Re: IR35

Not quite as we would still be able to claim expenses, pay into pensions, decide our own working times/days etc under that regime. where as inside IR35 as it stands now theres no expenses so the 6k a year I spend commuting becomes a ridiculous prospect under IR35 but a bit more bearable if it was just a hike in tax rates.

That said, under the conservatives at least there will still be some outside IR35 roles knocking about...

[EBG]

question .. ?

Does anyone know how the US tax system works in IR35 situations ? One scenario if BJ wins is that we move clase to the US for trade (and hence regulation).

[Anonymous Coward]

What annoys me is that contractors somehow think there BETTER than employees

Just because your an expensive contractor don't think your any better at the job then the permanent employees in the company.

The company decided to bring in contractors for whatever reason, does not mean you are any better at the job than those currently there, in my experience a lot of them are not.

[d3vy]

Re: What annoys me is that contractors somehow think there BETTER than employees

Oh... Someone's a bit insecure about their abilities.

And by the way :

* You're

* You're

* Than

[Azamino]

No real contractor ...

... has just one customer for years on end.

Those of us who contract for anywhere between a weekend and six months at a time are not going to be affected by IR35.

Whilst those who stick to one client, who have to request annual leave from said client (as opposed to simply telling them that you're not available on those dates), who work the hours they're told etc are going to come unstuck.

[d3vy]

Re: No real contractor ...

For fuck sake, how can you be a "real contractor" and still not know that length of contract and number of clients has nothing to do with IR35

You could have 2 clients simultaneously for a week and depending on how you work for them.be inside with one and outside with the other.

[rwill2]

Who has not pivoted on GreenTech, Startup investment, Brexit and IR35?

Maybe time for LibDems ... for me only clear party that has not flipflopped or sat on the fence (Labor) on Brexit and IR35 from start!

And they have some green, start-up and ethical AI:

https://www.computerweekly.com/news/252474448/General-election-2019-the-Lib-Dems-technology-policies-and-digital-plans

[Anonymous Coward]

Missing the point

All the comments I've read here so far seem to miss the obvious and only important point.

IR35 is nothing to do with tax revenue. It is very unlikely indeed that HMRC will make a profit on it. Nor is it about fairness.

IR35 is driven from the big consulting organisations through lobbying.

The sole purpose is to drive revenue to the big consulting firms - that's it. Nothing more.

And it is working. Public sector organisations cannot afford the time and effort it takes to make sure contractors are outside IR35. Many contractors won't work inside IR35.

It is easier for PS orgs to go to the big firms.

The cost to the public sector has gone up massively and we end up paying at least double for the same resource either because we have to buy from the big firms who charge £2k pd for a graduate or because we have to pay more to get contractors inside IR35.