* Posts by Dr. Mouse

2133 posts • joined 22 May 2007

UK MPs to off-payroll workers: Delay IR35 reforms until 2023? You wish

Dr. Mouse Silver badge

"No its legal, its just legal tax avoidance."

No, at least 90% of what you've listed is fraud. Done may be difficult to prove, but that doesn't make it legal. If I drive at 120mph on a public road with no cops or cameras, that would be illegal whether anyone could prove it or not.

"they literally are the same job - I'm not just the FTE remember, I'm the guy doing the hiring"

If you are getting contractors in to do exactly the same job as an FTE, with exactly the same working practices and conditions, then those contractors should be employees. That doesn't mean we all are, though, and it sounds more like dodgy recruitment practices on your part than the contractors.

"And yet not so when an FTEs spouse does the same."

If you need stationery for work purposes as an FTE, your employer should be providing it. It shouldn't be up to your wife to go to the shops and buy it for them.

"Reducing the tax bill may be the primary driver but it can't be proven."

Just because something cannot be proven didn't make it legal, see above. Even so, I think the majority could be proven beyond reasonable doubt.

"If you can't run your business without the massive tax subsidy it has enjoyed up to this part then it is a business that society will not miss"

It's not about a massive tax subsidy, it's about being able to run as a business. There are very few businesses which would survive if they had to have PAYE tax paid as if salary to the owner on all sales, without a thought to the expenses required to make those sales.

Dr. Mouse Silver badge

"And another almost 5k in NI"

11k in total tax and NI. I would not pay any more tax or NI on that as an FTE on 50k making a 5% pension contribution and an 8k salary sacrifice for an electric car.

"so you've moved the first 15k of your life costs onto the company. As an FTE I too need a phone, laptop, and car for the reasons you give, but mine aren't deductible"

If you need a phone or laptop for work, your employer should be providing them. If you allow them to get away with making you provide your own equipment for work use, more fool you. Phone is not used for personal, I have another for that. I do not need a laptop for personal use, and use my desktop and tablet for that which I bought personally (even though I could legitimately use my business laptop for incidental personal use). None of these are my life costs, they are my business costs, all required for me to be able to do my job and used only for doing my job.

The car can be had in salary sacrifice, as I listed above. Several clients I've spoken to have said they'd be fine with that for an FTE.

"You're paying less income tax than you've already avoided just on your gadgetry."

I have avoided nothing on "gadgetry", I've paid legitimate business expenses and bought equipment for business use. Exactly the kind of thing I wouldn't have to pay for anyway as an FTE because my employer would provide it if I needed it for work.

"Yeah, see, its not a few grand though is it - it's tens of thousands of pounds each and every year. It is literally multiples of the money you're actually paying."

No, it isn't. I'm paying more tax than I'd pay as an FTE, and only a few grand less than I'd pay to take home the same amount as I currently do. I've shown the figures.

"If your business model isn't viable paying a "fair" and for that read equivalent level of tax, then it isn't viable"

I do pay an equivalent level of tax. I've just shown you the blooming figures!!

Unless you are going to insist that businesses shouldn't be allowed to provide any equipment to their workers or for their business use... No computers, no servers, no offices, no fork lift trucks, no manufacturing machinery. If you are not arguing that, then why are you arguing that equipment I use for work (which would be provided by my employer were I an FTE, which I would not have to pay for at all) cannot be provided to me by my business?!

Dr. Mouse Silver badge

"I've never met a one that was paying as much tax as the FTE next to them, and that on a 50% uplift in gross."

OK, here's my rough figures. They vary from year to year, as business incomes will (much more than an FTE would have to face). The FTE figures are fairly realistic based on discussions I've had with clients.

Were I an FTE, I would be bringing in around £50k. With the standard 5% contribution to a pension and salary sacrifice for a company electric car, I'd take home around £30k and pay just over £11k in taxes. I would also be provided with a high spec company laptop (as well as training and other employee benefits, which most of the places I contract for provide their employees).

As a contractor, I pull in around £80k after accounting for holidays, sickness, and time between contracts. This varies from contract to contract.

Around £2k goes on accountants and insurances. Mobile phone £120 (I need this for keeping in touch with clients and agents, as well as often for connectivity to do my job out and about, used only for business as I keep personal and business separate, mainly for my sanity). Laptop is around £3k every few years (needed because I regularly work with clients who require me to provide my own equipment), let's be generous and say £1k/year and it's worthless at the end (which it isn't). New phone, £600 every few years, let's be generous and say £200/year and worthless at the end. Electric company car £8k/year ish. £3k in pension contributions (£2k equivalent of what I would pay as an employee, plus £1k which the employer would pay). Let's add a few odds and ends and make it £15k in expenses, leaving £65k.

From this, I take £9k ish salary, which is not taxed, leaving £56k profits. CT at 19% is about £11k already.

This leaves £45k profits after tax. I keep some in the business to cover unexpected circumstances (I've had periods of up to a year without a contract in the past), drawing around £37k in dividends. That is taxed at 7.5% after £2k allowance, which gives £2.5k tax.

I'm left with £44.5k in my pocket after tax, having paid £13.5k in tax. I've paid more than I would have as an employee with no additional benefits. I'd have £8k extra profit retained in the company for to cover unexpected circumstances, which is not much in the grand scheme of things.

If you look, instead, at someone taking home the same as I do, they'd be on £62k and be paying £17.5k in tax. They would be paying around £4k more tax than I do, but they would also have better benefits than I do. They would not have to spend time keeping accounts up to date outside work. They would not have to make filings to HMRC regularly. They would not have to continuously search for new work, or plan for periods without.

I would be happy to pay an extra few grand in tax, if implemented in a fair manner which applied to all business owners instead of just contractors. However, I am not happy with the government coming along and basically making my company illegal to operate. I don't want to be a FTE, not because of tax but because of the working practices, but it is not viable to work as I do without operating as a company.

Dr. Mouse Silver badge

"you can drive to and from the train station and claim parking, while FTEs have to pay both out of already taxed income"

Personally, I would prefer this deduction to be allowed for all as it would make sense: it's wholy and exclusively for work purposes. However, it is different for a contractor, as the client site is not the main, permanent place of work for the contractor. If, for instance, an employee had to work at the office of one of their employer's clients for a few months, they would legitimately be allowed to claim mileage/travel expenses for that (and hotel expenses if needed).

"The flights are baked in certainty for the contractor as are the first and last week hotels - all at tax free rates, saving between 50-67% over what it'd cost the FTE. The middle week can be justified if its cheaper than returning flights, so provided he's not staying 5 star then this should be easy to justify."

If the first and last week, all week, he is actually doing training which involves him needing to be at that location then that's legit. I have known employers do this, too (and in that base the employer paid for the employee's entire holiday in doing so). A previous employer, before I went contracting, allowed any staff member who went on a business trip abroad to extend their stay, as long as they took the extra as holiday and paid the extra hotel themselves.

If it's a couple of days at the start and end, I doubt he'd be able to justify it. The cost of the hotel in between would far outweigh most flights and, even so, a tax inspector would definitely flag it as dodgy.

This assumes, of course, that he's actually doing some training. If it's all just a sham, that's fraud.

"The family going, well, you can either take the board meeting approach, or you can find courses for them too"

I agree that the training would be possible, although it would be a stretch and would likely be flagged by HMRC. The whole "trip abroad for a board meeting" thing should not be allowable for anyone, contractor or otherwise. If it is currently allowed, that loophole should be closed for everyone.

"Worst case scenario, you need flights for the family, but the mrs will be staying in your room so now you've only junior to house, if you didn't get a suite."

Any tax inspector should flag that up. If he went with the wife and 2 kids, only 25% at most should be deductible. He has gained a benefit in kind of 75% of the room costs.

"[Club membership] depends on what you do with it and with whom you do business"

No, it doesn't. Golf club and similar membership is classed as a benefit in kind, no matter who you are or what you do (with the possible exception of a golf professional). Claiming it as a business expense is fraud and tax evasion.

"if the company could send anyone along and its in the company name, then its an expense for client entertaining"

Client entertaining is not deductible for corporation tax purposes. So, even if you could convince a tax inspector that it was legit and not a benefit in kind (very difficult if only you and your family are employed), you'd still have to pay out of post-tax profits.

"as he rolls the company every 3 years anyway (capital gains disbursement rather than income you see) he's unlikley to have to repay much in the way of taxes on it, but has had about 20 years worth of Boss suits on the tax payer"

The tax man could go back 20 years and demand income tax (and any other relevant taxes) on this, as it reeks of deliberate evasion. It doesn't matter if he "rolls" the company (which, in itself, smacks of dodgy practices).

"Contractors not interested in avoiding taxes can simply pay 100% of their income out as PAYE and claim no deductions"

A contractor paying 100% PAYE will pay more tax than an FTE on the same gross (as well as not being able to run a business, pay insurances, pay an accountant). It's perfectly legit to structure a company as you wish, but only truly legitimate expenses should be claimed. There's a middle ground, not defrauding the tax man but structuring your company to pay the correct taxes. FTEs could refuse all pension, ISA, childcare etc tax breaks, if they wanted...

When it comes to expenses, ask yourself: Would an employer allow this?

If I asked an employer to get me a new, high end laptop, because my old one is old and slow and is impeding my work, it would likely be allowed. If I asked them for a new laptop, even though I never needed one because all my work was done at my desk and I had a high end desktop there, the answer would likely be no.

If I asked and employer for a 2 week training course which would improve my abilities to do my job, there's a good chance the answer would be yes. If I asked him to send me on two training courses in the Bahamas, each for 2 days, one 3 weeks after the other, and cover the hotel costs in between, the answer would probably be no.

If I asked my employer to pay for a meeting room at a hotel for a big client meeting, the answer may be yes. If I asked him to pay for my gym/golf club membership, it would be no.

There are a lot of legitimate business expenses which must be allowable for a small business. And that is what contractors are: Small businesses. Some small (and larger) business owners defraud the tax man. Many get away with it. But punishing those of us who operate their businesses legally, morally and ethically, that's wrong!

Dr. Mouse Silver badge

They probably won't ever be audited on it, and were they to be so, provided they never write down "I'm employing the Doris because it'll reduce my tax liability" then they'll sail on through.

So, it's illegal but they are unlikely to be caught... I'm unlikely to be caught if I exceed the speed limit, but it's still illegal. I'm unlikely to be caught shop lifting, but it's still illegal. I'm unlikely to be caught if I break into a house and steal the TV, so long as I'm careful about it, but it's still illegal.

If I claim my wife is working for my company when she isn't, that's fraud. Likelihood of getting caught doesn't change that.

some do legitimately do the mileage, its just that as an FTE they can't claim it back, despite doing the same journey for the same reason to the same place

Because a contractor is not doing the same job or operating the same way. I realise this one will be contentious as, to an FTE, it seems they are doing the same job. However (assuming the person is not actually a disguised employee, which some are) it is more akin to a builder coming on site for 3 months. Noone would argue that they were not entitled to claim mileage for that job.

since a contractor defines what their role it anything they do online is "work purposes"

That would never fly in court. Saying "I am on Facebook chatting with my friends for work purposes" clearly fraudulent and would be laughed out of court. It is a balls-out lie.

A contractor can say whatever they want in defining their role, but if that does not match reality then it's fraudulent. I could say that part of my job was sampling the beers at the local pub and discussing current events with my friends, but it wouldn't be true and I couldn't put my nights out through my company as an expense legally.

my Mrs for instance often picks up stationary while out, its just that I don't get to pay her to do so out of my pre-tax earnings

If she is out only to pick up that stationary which is only for company use, and is paid only for that time and at a commensurate rate, it's legitimate to do so. If she's out shopping, buying stationary for household use which the company occasionally uses some of, and being paid way over the odds for that work and time, it isn't and would be counted as fraud.

Let's say your wife does 1 trip a week to buy stationary, 48 weeks a year. Let's be generous an say it takes her 2 hours to do so, and that is all she ever does for the company. All that stationary is for company use, never used by the household. You could legitimately get someone on minimum wage to do this for you, so you could legitimately pay her about £840/yr to do so, plus possibly mileage payments. This is negligible and would barely be worth going, but it would be legitimate. If you are paying her more than that, you are probably committing fraud.

If people are getting their wives to do this for them for work purposes, and their work are not paying her for it... Well, that's not very smart, is it? Their employer should be providing them with the resources they need to work, and paying someone to source them.

And yet none of it is [tax fraud]

Yes, it is. You, and any contractor doing this, is specifically lying in order to reduce their tax bill. It is fraud. Whether they are likely to get caught doesn't change that.

You're using the law as a shield here when specifically they are changing the law because what contractors are doing amounts to abuse of it

What some contractors are doing is abuse of it (and is already illegal). What most contractors I have met are doing is running a business, which the new regulations are effectively banning (by placing a massive administrative burden and financial risk on our clients, even though we are operating clearly outside IR35). It also doesn't stop other business owners from doing the very things you say it is trying to stop.

Dr. Mouse Silver badge

OK, IANAL, but most of this I am reasonably certain would be picked up in an investigation.

However, if it would be legal and get through an investigation then it is open to abuse by all company owners/directors, not just contractors. If that's the case, changing rules for contractors only may reduce the scale but would leave other business owners able to abuse the the system. This is not making the system fairer, it's making it less fair.

On top of that, it penalises those of us who are not abusing the system.

A fairer way would be to change the rules to stop the abuse. Specifically prohibit the abuses mentioned. The fact that they don't makes it seem like they are keeping the loopholes open for their mates, while closing them for the little guys who don't have the resources to fight them. One rule for them, another for us.

By the way, if the majority of contractors are operating in this manner then I can understand why people consider them tax dodgers. Personally, I doubt they are. Most that I have spoken to operate as I do, putting valid, legitimate expenses through their company (the kind of thing an employer would accept as an expense). They pay similar levels of tax to an employee who pulls a salary similar to what they take from their company. I discuss these matters with most contractors I come across, and find it hard to believe that I would not have come across any who behave as you describe if it is as prevalent as you say.

Dr. Mouse Silver badge

"If you're going to pretend that no contract does any of the things I've suggested in this thread"

I won't pretend that. I know some do it. However, I also know that the majority of what you have written are fraudulent and would be breaking the law. Some would be completely disallowed, or taxable as Benefits in Kind, if they were ever investigated.

"none of them involve lying about the purpose of the expense"

Let's break a few of them down, then:

- "Holidays become training courses - One of my guys takes 3 weeks off every year and goes abroad with the family - he just does one cert a week at each end of the holiday."

The purpose of the expense is, quite clearly, a holiday. Doing a cert "at the beginning and end" doesn't change that. Assuming the certs are taken physically in the location he is visiting, he may be able to get away with the flights there and back, and accommodation for a couple of nights each, but not for a full 3 week holiday for a full family. Any tax inspector worth their salt would laugh in his face, and any accountant or lawyer advising that to be legit should be banned from practising.

- "The first 2 years at an employer mean on top of the mileage claims you can expense your train ticket"

As mentioned previously, if you are claiming for mileage you didn't do for work purposes, that's fraud. I've also been told that it's risky to put a train/bus season ticket through, a HMRC can and will see it as usable for non-work purposes. Doing the 2 together: You can't both drive to the client site and get the train there at the same time, so this is most definitely fraud.

- "Club access - golf, social etc are easily obtainable through your company before taxes become due."

Nope. The company could pay for it, but it would be taxable as a benefit in kind. It is not a legitimate or legal business expense.

- "I've a former colleague with a lovely range of boss suits with his corporate logo embroidered very discreetly on the cuffs, which is a corporate uniform"

Doubt that would pass an inspection, but you are right, this one is a grey area.

- "Charity donations, when either you benefit from attending the functions, or where you might even run the charitable trust yourself."

Where you benefit: this can be done by anyone who can afford the typically large amounts needed for a charity to grant benefits. You can do gift aid, and can claim anything beyond basic rate back on your SATR.

Where you run the charitable trust, you'd have to be very careful. I doubt many contractors run charitable trusts, though.

Dr. Mouse Silver badge

"We're not even getting close to a grey area here"

No, you're completely over the line into tax evasion. Most of them involve lying about the purpose of the expense, and that equates to fraud.

Tax evasion has very clear tax advantages. Contracting through a limited company, done legally without fraud or tax evasion, has some minor tax advantages.

Dr. Mouse Silver badge

"Contractors don't need receipts so most just claim the full allowance (x2 because of the spouse)."

=Fraud (you can only legally claim for miles traveled for business purposes)

"No contractor I know uses their home PC for work, because they don't work for BYOD companies, nor do they need their mobile phone to be on the company"

=Fraud (equipment must be for business use)

"Popping to the shops for stationary is about as much work as most contractor spouses do."

=Fraud (must actually do a job, and not be paid more than the market rate for that job)

"Yes, but all he's doing is tweeting occasionally and managing the facebook page. Neither are tasks that actually need doing"

Many companies employ people whose job doesn't actually need doing. What is important is that he's doing it, how much time he spends doing it, and what he is paid to do it. If the pay is now than you could employ someone outside the family to do it...

=Fraud

"Nothing I have described is specifically illegal unless its only done to reduce tax."

Yes, it is, it's tax fraud and, therefore, tax evasion (and you've basically said yourself that those things are done only to reduce tax). If investigated, it's highly unlikely that those would be found to be legitimate.

Don't tar us all with the same brush. There are many company owners out there who play fast and loose with the rules to their benefit, but that doesn't mean we all do. Investigate, catch and punish those breaking the law, don't punish those of us who are operating correctly!

Dr. Mouse Silver badge

Ok, anyone doing all that is plainly gaming the system and is acting illegally. No regulations need to change, the tax man just needs to investigate and catch those who are breaking the law

If someone is claiming mileage for miles they didn't travel for work purposes, they are breaking the law. If someone is purchasing it equipment which is not solely for work purposes (with incidental personal use), they are breaking the law. If someone is paying their wife, when their wife is not doing and work, or paying an amount which is more than the market rate for what they are doing, they are breaking the law. If someone is billing their company for utility bills which are not for business use, they are breaking the law.

A large proportion of what you point out there is tax fraud. If people are committing fraud, investigate them and charge them for it, don't penalise those of us who are operating within the law!

Dr. Mouse Silver badge

Also, even if what you say on this is correct, it's still not true that the employee "paying several magnitudes the tax the contractor pays". The employee would pay more (if he was earning the same amount), but not "several magnitudes"*.

* I assume he meant either "several orders of magnitude", which is so wrong as to be laughable but seems closest to what he said, or "several times". If the latter, I would generally define "several" in integer terms as "more than 2", so 3 or greater. I doubt that any contractor is legitimately (legally) paying a third of the tax a permie would pay on the same gross, assuming the permie is taking advantage of the tax breaks available to him... Especially if you discount the things a contractor is paying for which a permie would have been provided by his employer.

Dr. Mouse Silver badge

"accept what you're doing"

Tax free mileage: I used to claim this, but then so can any employee when travelling to anywhere that is not their main place of work. If their employer doesn't pay the mileage, or pays less than the statutory rate, they can claim it on a SATR. A friend of mine, a permie salesman, does this as his employer refuses to pay for his mileage when visiting clients. Personally, I stopped since I got a company car (before you get arsey, many employees could do this too, whether through negotiations or salary sacrifice).

Incidentals for lunch: I did this at the very beginning, but stopped because it was such a PITA keeping all the receipts for a few quid savings here and there. However, again AFAIK an employee can declare this on a SATR if he's travelling somewhere other than his main place of work.

Work equipment: Yes, too right that's tax deductible. It is for someone's employer too, and AFAIK also for an employee on a SATR. As long as it IS work equipment, if not you're breaking the law.

PluralSight Sub: That's a tricky one. I've seen a lot of contradictory info on what a contractor's company is allowed to provide when it comes to training, so I don't do it. Then again, I'm very cautious with what I put through.

Wife on the books: If the wife is actually doing a job for the company then why shouldn't she be paid the going rate for this? If she isn't, you're breaking the law.

Son on the books: Again, if he's actually doing a job and being paid something commensurate with that job, this is (and should be) acceptable. Many business owners employ their kids when they are old enough, and many parents help their kids to get a job. (However, in this case it sounds like he's pulling a fast one and is probably breaking the law.)

Everything you talk of is either legitimate (both legally and morally correct) or illegal. The illegal stuff is not a "tax advantage of being a contractor", it's tax evasion (which has very obvious tax advantages). Much of the legal stuff is available to an employee, too, if they can be arsed to fill in a tax return.

Dr. Mouse Silver badge

Exactly, this one of the worst points about IR35 as things stand: It's far too difficult to make a status determination, and 2 people can reach completely different conclusions on the same set of circumstances*. Introducing an even more "flexible" system like this would make things even worse!

What is needed (assuming IR35 is to continue in some form or another, which I would argue it shouldn't but will) is a simple, effective legal definition. At most, a few simple, unambiguous yes/no questions. Ideally, this should be directly connected to employment law such that someone found "inside IR35" became an employee of the client.

* Of those 2 people, one would probably be a legal expert and one a HMRC investigator, as HMRC strongly disagree with those who understand tax laws. Legal experts (including judges in tribunals) normally agree on status, and normally agree that status is "outside", whereas HMRC disagree and thing everyone is "inside"...

Dr. Mouse Silver badge

"A contractor bringing in 50k gross and an FTE bringing in 50k gross have such disparate bottom lines, with the FTE paying several magnitudes the tax the contractor pays"

I call bull excrement!

A contractor (including his company, which is relevant to the overall calculations here) pulling in £50k gross taking his earnings as an efficient mix of dividends and salary will pay around £8k in corporation tax, then draw the remaining £42k. He will pay £2k income tax on this, for a total of £10k tax.

A PAYE employee will take home around £38k, so pay £12k tax.

How is this even close to "paying several magnitudes the tax the contractor pays"?!?!

Dr. Mouse Silver badge

Re: Benefits

"Life is not all about money"

True, and this is the case for myself with IR35, too.

I don't care much about the extra tax. However, I run a business and being declared inside IR35 would stop me from being able to run that business. The business would no longer be able to pay for an accountant, the required insurances, or anything else. The business would no longer be able to budget for the inevitable periods where it had no (or reduced) income, or for jobs taking longer than expected. The business would no longer be able to provide me with holiday or sick pay. In short, the business would no longer be able to function.

I would be perfectly happy with the government increasing the combination of dividend tax plus corp tax to be the same as income tax plus NI (although that would require them to reduce higher rate dividend tax). This would leave contractors paying the same, overall, as an employee drawing the same salary as the contractor takes as a salary/dividend mix, but would allow the business to continue to function as a business.

Dr. Mouse Silver badge

How does anything in what TheVogon said indicate an unsustainable business model? In fact, how does it indicate anything about any business model?

The only thing it does, really, is say that business owners (contractor or otherwise) have a business model, because they are running a business, while employees don't because they aren't.

Dr. Mouse Silver badge

There is an ever simpler method: Equalise total tax on dividends and salary. However, this isn't going to happen because:

a) It would show that they are already pretty much equal (taking into account corporation tax and national insurance), and at higher rate dividends are taxed more than salary

b) It would show that, contrary to what HMRC & UK.gov have been claiming all this time, even "fake" contractors (disguised employees) are not avoiding tax but their clients/"disguised employers" are (in employer's NI)

c) It would not be as helpful to the government's large backers, like Capita and other body shops, who stand to make a killing out of these reforms (and export all that profit out of the UK, of course).

Dr. Mouse Silver badge

"The reforms are set to make medium and large-sized businesses responsible for determining the employment status of contractors, rather than the contractors themselves."

I am constantly surprised that el'Reg, a techie publication with a large contractor readership, keeps making mistakes like this.

IR35 has nothing to do with employment status, and therefore the reforms have no effect on who has responsibility for determining the employment status of contractors.

What it does is move the responsibility to determine employment status *for tax purposes*. While this sounds similar, it is a very different thing. If it was about determining their employment status, one found inside IR35 would become, effectively, an employee of the company, with all the rights and benefits that entails. Instead, this basically just nullifies the existence of the contractor's company and taxes the entire fee that the company is being paid as if it were the salary of the contractor. It is for tax purposes only, not employment purposes, and ensures that an inside-IR35 contractor pays more tax than an equivalent employee while receiving none of their benefits (from the "deemed employer" or the government).

Swedish data centre offers rack-scale dielectric immersion cooling

Dr. Mouse Silver badge

Re: This would only work for cloud computing

https://xkcd.com/1737/

Dr. Mouse Silver badge

Re: In days of yore

"Unless you have more fans on the water cooler sink, in which case, it's more fans and a big copper heatsink would also do the same and similar dB noise."

I think it comes down to surface area. There's a limit to the amount of heat you can extract using just a copper heatsink because of the distance the heat must travel (very much simplifying it). Heat pipes do much better (better than water cooling, in fact), but they are limited by not being flexible.

A liquid cooler, however, can be positioned and configured in such a way that it gives a massive space area, by comparison, and a huge thermal conductivity.

Dr. Mouse Silver badge

Re: Interesting but .....

From reading this, how is it allowing servers to be less per efficient?

The main thing it does is allow servers to be more densely packed. There is a limit to the amount of computations we can currently attain per unit of energy, so a limit to the amount of "work" which can be performed in a rack within a certain power envelope. To go beyond that, we have to increase the power envelope, which is what this did. It doesn't let servers be less efficient, it allows now servers to be crammed into the same rack space. As the article mentions, datacentres are basically real estate, so this is like building a block of flats instead of a bungalow.

UK IT contractors slipping back into old ways of working now IR35 tax reforms delayed

Dr. Mouse Silver badge

Re: Goodbye gravy train

"Hopefully this sees an end to contracting and more permanent jobs, with no special cases"

And what of those of us who do not want a permanent job?

I like being a contractor. I enjoy being able to pick and choose my clients, to move from one to another, to always have a new challenge. I work differently to employees, and like doing so.

I don't really care about the taxes involved, as long as I am able to work the way I would like. If declared inside IR35;

1 - The role would not be one I would want (if it has been assessed correctly). It would be an employee role, exactly what I wanted to avoid by becoming a contractor.

2 - I would not have the business flexibility needed to be able to work as I wish.

The other things is that being declared inside IR35 would, effectively, be calling me a liar. As you can probably appreciate, I take exception to that.

Dr. Mouse Silver badge

Re: You can't run business under those circumstances

No, it's not financially viable to run a business inside IR35. However, that also means your own company cannot provide you with employment rights and benefits, and the client or agent isn't obliged to, making "inside IR35 contractors" into "zero rights employees".

When the contractor is making this determination himself, this can be understood. They are making a business and personal decision about the circumstances. Where the client makes this determination, the government are effectively allowing and legitimising their ability to opt out of providing basic employment rights.

As this status is legitimised, how long do you think before companies stop recruiting staff and only take on "inside IR35 contractors"? They can avoid all those pesky rights, like sick pay and holidays, and the government has said it's OK to do so.

Dr. Mouse Silver badge

"She successfully argued that although she was a company director, she was not aware of her husbands loan application and had no liability for it."

As far as I am aware, she wouldn't. If the loan was to the company, the company owes it. It's a limited liability company, so unless she signed a personal guarantee she would never have any liability.

There could be financial consequences to it (lower company profits or value of shares) which could affect the divorce settlement, though. It shouldn't matter whether she knew about the loan or not in that case.

Dr. Mouse Silver badge

I don't think that's actually true. NI goes into the national insurance fund, which is separate but for contributory benefits (and a small contribution to the NHS) only.

If it's in surplus, the government can borrow from it for other things (like paying down debt), but it's still technically owed to the fund.

However, the benefits he mentioned aren't contributory benefits so don't come out of that pot anyway, but from general taxation.

Dr. Mouse Silver badge

"The higher rate of tax is 45% not 40% ... and your lose your tax free allowance as well"

Actually, higher rate is 40%, from £50-150k. 45% is additional rate, for £150k+.

The personal allowance is gradually removed from about £100k if I remember correctly.

Dr. Mouse Silver badge

Re: but without the same holiday and sick pay benefits

Note that even the 5% allowance disappeared once the reforms come in.

Dr. Mouse Silver badge

Edit: However, if the contractor is viewed as a "disguised employee" of the client

Dr. Mouse Silver badge

I think you've got your numbers very mixed up there.

Basic rate is 20%, or 32% including NI. Dividends may be 7.5%, but that's after 19% corporation tax, making 25% overall tax for dividends.

Higher rate is 40%, or 42% including NI. Dividends are 32.5% but, again, taking corporation tax into account that's actually over 45%, so it's actually a higher marginal rate!

The savings come from employer's NI. However, if the contractor is viewed as a "disguised employer" of the client, it is the *client* who is avoiding this tax, not the contractor. The contractor is already paying roughly the same amount of tax as an employee earning the same amount.

Dr. Mouse Silver badge

"One of my fellow contractors claimed a tax deduction for the cost of a new carpet in his spare bedroom, since he pretended it was his home office and that the wear and tear on the old carpet was down to business use. And yes, he got that one past HMRC."

I don't see how this is relevant. If he has falsely claimed something as a business expense, then this is fraud. It is not a tax advantage of being a contractor.

And any business owner can do similar things. For instance, the MD of a company I once worked for had some of his warehouse staff use the company van to pick up a load of his furniture from his house and store it at the warehouse for several years. He paid nothing for this (except in any reduction of profits), the company basically providing him the services of a mover and a storage unit for free. IMHO, this is no different to what your fellow contractor did.

Dr. Mouse Silver badge

There are many things which bug me about IR35, but here's one few seem to have brought up in the past.

There are a fair number of digital agencies out there who supply development services to clients on a man-hour basis. They will bill out their staff to the client for an inflated rate: One I know of charged their client around £500 per developer day, with their staff devs being paid around £175/day (£45k/yr). They employed support staff, too, and paid for office space and the like, but made a hefty profit which was partially paid out in dividends.

Many of these arrangements I have seen would fall inside IR35. The client has significant control of the developers, they insisted on particular, named devs (no substitution), there is a contract in place with a retainer for a set number of dev-hours (MOO) etc.

If these were considered to be inside the reformed IR35 rules, the entire £500/day charged to the client would need to have income tax and national insurance deducted by the client, regardless of the other expenses incurred by the agency. The payments for those other expenses would have to come from already-taxed funds, including paying other employees (which would be taxed again).

A digital agency is allowed to operate this way without IR35 applying, yet a contractor is not. How is this right?

Lords: New IR35 off-payroll tax rules 'riddled with problems, unfairnesses, unintended consequences'

Dr. Mouse Silver badge

Re: unintended consequences

True. However, senior civil servants have greater access to ministers than the rest of the population. They have much more opportunity to influence their decisions, as well as to manipulate the information upon which they make the decision and discredit those who provide a different point of view.

Dr. Mouse Silver badge

Re: unintended consequences

"the problems with IR35 come more from ministers than civil servants in this case"

I disagree. IR35 has spanned multiple governments, cabinets, PMs, ministers, and even parties in power. If the problems were coming from ministers, it would be expected that they would change a reasonable amount through the different governments. As they haven't, it's much more likely that the problems are coming from the civil service.

Dr. Mouse Silver badge

Re: How to make it go away

How many times...

Multiple engagements don't rule out IR35. You could have one engagement inside, one outside. Each individual engagement must be evaluated separately.

Dr. Mouse Silver badge

As an employee of my own company, yes, I provide myself holiday party, sick pay, pension contributions and a whole range of benefits.

However, were I to be declared inside IR35, this would no longer be possible as all payments to the company world have to be taken immediately as salary. I would be unable to work as a business, putting aside funds to cover the benefits I wish to provide myself. I would be forced to act as an irresponsible business owner, and would then have to budget, as an individual, for the benefits my employer should be providing.

This is why an inside IR35 contractor becomes, effectively, a zero rights employee.

Dr. Mouse Silver badge

"On the one hand they want everyone to know they are definitely not employees per se and are definitely not doing this just to reduce their tax burden. On the other hand they want the powers that be to think of freelancers as "zero rights employees". We can't have it both ways."

I think you misunderstand. Contractors are not calling themselves "zero rights employees". They are saying that, if declared inside IR35, they are effectively being treated as "zero rights employees".

UK MPs fume after Huawei posts open letter stating: 'Disrupting our involvement in the 5G rollout would do Britain a disservice'

Dr. Mouse Silver badge

Re: The problem with China...

"But a lot of this is driven by the desire for short term corporate profits by managers who do not care a jot about things like human rights."

I think it is also driven by the desire for people to have as much of the "stuff" they want as they can afford. This leads them to buy the cheap, Chinese-made tat rather than the expensive, UK-made tat, which leads to the UK tat industry closing down and there being no option for tat but China.

Yes, there is a drive for corporate profits, but there is also an inherent greed in society. People will not normally think about the moral implications, they'll see 2 near-identical items on the shelf next to each other, one for half the price of the other and suddenly at a price they can afford...

Your Agile-built IT platform was 'terrible', Co-Op Insurance chief complained to High Court

Dr. Mouse Silver badge

Re: frAGILE bahhhhh hummm buggg

Agile methodologies, used well and understood to a reasonable level throughout the business, can be very effective. A lot of the time, it just becomes a pattern which helps a team to organise themselves. Done right, it's highly flexible and can be made to work in a wide variety of circumstances.

Unfortunately there are a lot of places which use it badly. This often comes down to a lack of training or bad management or team members. This is the same as most problems in projects.

Agile is a tool. Used well in the right circumstances, it's great. Used badly and/or in the wrong circumstances, it will cause problems.

Dr. Mouse Silver badge

Re: Is this normal in the IT world?

I did not know that.

I'm based in the UK. I am not aware of anything similar over here, but then again I am not a lawyer so there may be.

It seems a bit ridiculous, though, when your contract was never with the subcontractor in the first place. Then again, I know consumer protections are much different on that side of the pond.

Dr. Mouse Silver badge

Re: Is this normal in the IT world?

"Perhaps my views are out of date (excuse; I am long retired!) but if I were to contract out a chunk of work I would expect the company winning the contract to actually do the work and not pass it on to subcontractors of whom I have no knowledge"

My views are a little different: I would expect the company winning the contract to be responsible for delivering it and to manage any sub-contractors. I would not expect to know about them, but I certainly wouldn't expect them to be blamed for any mistakes/delays etc as it would be none of my business who was doing the work.

Let's say I got a builder in to do an extension on my house. We agree the plans, the price and the timescales. I don't really care if he has to subcontract parts: He may need plumbers, plasterers, glasiers etc. However, I would not expect to have to organise things with these subcontractors directly. It would be the original builder's responsibility to organise these contractors, to ensure they are up to scratch, to QA their work and to pay them. If they failed to deliver on time, it would be the original builder who would be hit by any penalties, so I would expect them to ensure the subcontractors were on track.

Bad news: Coronavirus is spreading rapidly across the world. Good news: Nitrogen dioxide levels are decreasing and the air on Earth is cleaner

Dr. Mouse Silver badge

I have seen the bottom, and it is ve' nice!

UK government puts IR35 tax reforms on hold for a year in wake of coronavirus crisis

Dr. Mouse Silver badge

"So just continue as planned. It’s just a deferment."

A large part of this has been assessments for all the contractors. Most of these will not be there next April. Even those who are will probably have to be assessed again, as their roles and circumstances may have changed over that time. Therefore all the effort and money they put into doing this the right way, individually assessing each contractor on their own specific role and circumstances, is likely wasted.

Dr. Mouse Silver badge

My client, a fairly large consultancy, is fairly ticked off right now. They have spent the last 6 months planning, assessing contractors, negotiating with clients, engaging lawyers etc. so they could keep as many of the outside IR35 contractors they currently engage. They've paid for insurance policies against the assessments, which were carried out by outside specialists. One pretty senior member of staff has been dedicated to preparing for this fuster cluck reform for that entire 6 months!

OK, some of this effort can be carried over to next year. However there are many parts which can't be.

US prez Donald Trump declares America closed to those flying in from Schengen zone over coronavirus woes

Dr. Mouse Silver badge

Re: Green card holders and the immediate family of US citizens get a pass.

What a horrible thought... I'm sure even Melania would agree!

HMRC claims victory in another IR35 dispute to sting Nationwide contractor for nearly £75k in back taxes

Dr. Mouse Silver badge

Re: Wait? I'm a contractior now?

"There is no real problem with IR35, though"

You say that, but have you looked at the complexity involved in applying them? Have you seen how often HMRC, the people who should know the rules, get it wrong? How much trouble even large businesses are having in applying them correctly now?

If they want to make the tax system fairer, make it fairer (and simpler). Get rid of NI and apply the same tax rates to all income. Allow people to run their business how they want, but even out the tax advantages so they can't "dodge" their "share". Remove the loophole by simplifying the system, not by making it more complex.

Review of IR35 is in: Quelle surprise, UK.gov will forge ahead with controversial tax reforms in the private sector

Dr. Mouse Silver badge

But... HMRC could write easily say that they suspect anyone now found inside who was previously operating outside, especially on the same contract, to have committed fraud. Their logic would be that they wouldn't have been found inside of they were actually outside, and wouldn't have accepted an issue determination of they were actually outside, so they must have been fraudulently claiming to be outside previously. The same, although more tenuously, with anyone moving from outside to a PAYE FTC or Umbrella.

BAE Systems tosses its contractors a blanket... ban on off-payroll working under upcoming IR35 tax reforms

Dr. Mouse Silver badge

Re: "[HMRC] has predicted the reforms will recoup £1.2bn a year by 2023"

They are also the correct ones for those who should be outside IR35 but are "forced" inside/umbrella/PAYE by a client.

I would be perfectly happy to have the combination of dividend and corporation changed to match income tax + employees NI. Please note, though, that higher and additional rates already exceeds these (45%/50% vs 42%/47%).

I think you have a strange view on "perks of offsetting", though.

I used to offset mileage when visiting a client site. An employee can do the same, it is called Mileage Allowance Relief. All you have to do is complete a tax return.

I now have an electric company car, so I no longer offset mileage. Many employees can negotiate this, too, or use salary sacrifice for it.

I cannot offset clothes, as they must be wholly and exclusively for business use. This is a very narrow definition for clothes: You can't say you never wear a suit outside work, for instance.

I am able to offset meals when travelling to a client site, but rarely do. It is not worth the time of keeping the records or the effort of keeping receipts for a couple of quid, IMHO.

10% of my home? I have no idea where you got that from. If you want to go to the effort of working out the total costs of running a home, and the exact proportion of it which can be counted as business expenses, you may get that (although you have to be careful and it's a lot of work to figure it out accurately). I don't think it's worth it, and use the £4/week "use of home as office" allowance. Again, AFAIK employees can claim this too if they complete a tax return.

Dr. Mouse Silver badge

Re: "[HMRC] has predicted the reforms will recoup £1.2bn a year by 2023"

"you screw the taxpayer to earn that extra 30% whereas the poor permie pays all the correct taxes"

We contractors also pay all the correct taxes. The taxes are not the same as those on PAYE pay, but they are the correct ones.

Dr. Mouse Silver badge

Re: BAe

"there is no punishment if you falsely over-tax - and what exactly is the path for Contractors to get a review? There isn't one."

I think there is likely to be a test case brought challenging a determination in the near future. It will be interesting to see what form it takes and how it goes: Will it be a contractor suing their client for a wrong determination, a FTT case for over paid tax, or something else entirely? Will any of these even be possible, given how the law is worded? Will there be any legal mechanism to challenge this?

Don't worry, IT contractors. New UK chancellor says HMRC will be gentle pushing IR35 rules

Dr. Mouse Silver badge

I have had clients, and agents, tell me this when I've attempted to negotiate changes. At that point I have to weigh up, as a business decision, whether I want to accept the terms of that are on offer or go somewhere else.

This is a business matter, though, not one of employment vs contracting. If a small business wishes to supply services to a large one, the larger business often has a strong hand in negotiations. They may well produce a contract and say "take it or leave it".

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