* Posts by elsergiovolador

22 posts • joined 27 Apr 2020

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elsergiovolador

Companies now are trying to bait the self-employed shafted by the government. They hope the entrepreneurs run out of money and will have to accept employment.

That's the whole plan of the government to destroy entrepreneurship and create monopoly of big companies (that happen to be party donors) on temporary specialised labour.

We desperately need national inquiry into the actions of Chancellor and treasury.

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

elsergiovolador

Re: You can't run business under those circumstances

Don't forget by working inside you cannot offset any business costs against tax, so it is actually taxed more than employment.

elsergiovolador

Re: Goodbye gravy train

Google norightsemployee - there is a website that explains this issue concisely.

Funnily enough it is Labour who invented this and Tories took it to next level.

elsergiovolador

Re: Goodbye gravy train

You believed in an HMRC lie and seem very salty, but be careful what you wish for. The "reform" has also something for permanent employees. The day it gets implemented, companies will be able to fire all their permanent staff and offer them "inside IR35" contracts instead.

Employers will not have to care about employment law any more. This "reform" even removes provisions like equal pay or discrimination. Got sick at work? Employer will be able to wave you good bye legally.

elsergiovolador

Re: You can't run business under those circumstances

This "reform" also allows companies to fire existing staff and give them take it or leave it offer of "inside IR35" contract. To work in a such way the staff will not be required to start a company, but only to join designated umbrella.

elsergiovolador

I still think that is just labelling. I'll give you an example. Let's say you have a mortgage to pay that is X, you receive a salary and you have to pay X out of your salary to cover the mortgage. Now let's say that your employer tells you that Z of your salary is meant to pay for your mortgage and you cannot spend it on anything else and he or she gives you Z in a separate envelope. The you go home and mix all the money and pay X. Is there going to be a difference? If Z was lower than X, you would use the rest of salary to cover it. The NI is not truly ring-fenced, so it really is just a matter of label. If there is not enough NI to fund NIF, then it would come from other sources.

Only difference I can see is that NI contributions register your entitlement to benefits.

I would agree with you if NIF couldn't be funded by anything else than NI.

elsergiovolador

You are incorrect. The NI and Dividend tax land it the same bucket, so it doesn't really matter how it is labelled. Dividend tax pays for those benefits just like NI.

elsergiovolador

Re: but without the same holiday and sick pay benefits

If your engagement is determined as "inside IR35" then your company will not have any profit to provide you with those benefits, because you have to take entire fee as salary (there is 5% allowance in private sector for company costs)

Imagine an employer would have spent all available company cash on salary. That's what IR35 does.

You can't run business under those circumstances.

Also because the fines are so disproportionate for classing someone as "outside" wrong, companies will not bother and class everyone inside or stop using contractors and we had evidence of that as the April was approaching.

elsergiovolador

If you think they evaded tax then you should have reported them.

In 2017 the tax on dividends changed and there is no more tax advantage to work through PSC.

elsergiovolador

If government think there should be even more tax paid, they then should just raise tax on dividends or make them subject to NI and deductible from CT. There is absolutely no need for IR35.

Well, except if you want to make your party donors rich.

elsergiovolador

Re: "Inside IR35" jobs still being advertised

The penalty for getting the status determination wrong is disproportionate - the client will have to pay full PAYE tax plus fine and interest, even if the contractor has paid the tax already.

Since HMRC is unable to get status determination correctly, they expect the businesses will get it.

Nobody is going to risk taking on independent contractors when IR35 change gets implemented.

The whole thing has been created to increase profits of large consultancies that some of them happen to be party donors. HMRC uses lies and deception to push this through.

We should have national inquiry about this.

elsergiovolador

You hit the nail on the head. Some of these agencies are party donors.

Such agency would charge much more for a developer per day - area of £1000 per day is more realistic. This will provide a developer hired as an employee at about £50-70k, so there is no IR35 involved, as the worker is on PAYE.

Imagine how much money these agencies made when changes to IR35 were introduced in public sector. They can't wait for this to be introduced in private sector now so they can make a killing.

Company can take a contractor on £500 and risk heavy fines if they get contract and status wrong, or they can take on agency at slightly higher cost, but no risk of crossing HMRC.

The result is that small companies providing IT services can pack their bags, as no company is going to risk getting the IR35 status wrong.

elsergiovolador

You are missing the fact that you also pay Corporation Tax on dividends. There is marginal difference between this way or PAYE since 2017.

If he is indeed using his spare bedroom as an office and the carpet was worn, then I see no reason why this wouldn't be a valid expense. The same as employer would deduct that cost if the office he or she works in needs repair.

Business owner can hire whoever he or she wants if it is needed for business. I am sure every business owner has a spouse and take her on the books to save few quid of tax. You can't be serious.

If you are not aware, everyone has personal tax allowance. If the spouse is not working and can help with the business, I see no reason why he or she couldn't be hired.

I think you are looking at this from a perspective of a hurt employee. Start a business one day, it's so simple, you pay virtually no tax and you'll get a spouse and new carpet!

elsergiovolador

Under inside IR35 you cannot operate like a business and in fact you pay more tax than employee, because your company cannot for example offset the cost equipment against tax, but employer can do that.

This change is constructed so that heavy penalty is applied only if company assess the contractor "outside" when in fact he or she is working "inside". There is no penalty other way around. That means when this "reform" gets implemented, there will be no market for small independent contractors that offer better rates and quality than consultancies that happen to be party donors.

HMRC falsely claims the IR35 is about tax - since 2017 there is no tax advantage to operate via PSC.

Given how Treasury ignored perfectly valid Lords report about plethora of issues with this ill legislation, I am convinced that there is under the table deal going on. We need national inquiry about what's going on with people behind that and why they push it so hard and don't listen.

If this was a tax issue, they could just raise tax on dividends or make other small changes, without killing the whole market.

Government has no problem when agency worker gets paid small salary + commission, but there is perceived problem when contractor pays small salary + dividend (that is double taxed). The difference in tax is nulled by the fact contractor has to do full accounting, pay for insurance and do other things employer should be providing. HMRC could just make dividends to be subject to NI and deductible from CT, so it is treated the same as commission.

They won't do that, because the tax will be simplified, inspectors will have nothing to do, and party donor will have to compete with independent contractors and won't make their extra billions.

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

elsergiovolador

Re: unintended consequences

The new IR35 will cause precisely that. Why should employer bother with employment laws if they can just lay off most of the staff and give them inside IR35 contracts? No more worry about unions, equal pay and other pesky rights.

elsergiovolador

Companies would happily take specialists Outside IR35 but the rules are so complicated with huge financial penalty for getting it wrong it has essentially become illegal to freelance (in all but name).

elsergiovolador

He wont change it because IR35 is perfect for companies like Infosys who is owned by his father in law and I doubt he declared it as conflict of interest.

elsergiovolador

Re: Dividends

That is definitely one of the reasons. Imagine tax inspector assessing company accounts through automated tool in minutes versus deliberating with multiple colleagues, accountants and organisation for months on cushy CS salary. If that is not corrupt behaviour then what it is? We need a deep reform of this institution.

elsergiovolador

You can't run a business on inside IR35 contract, because you get entire fee as a salary and your company gets nothing (5% in private sector). How do you pay company bills? Your company asks you for a loan?

elsergiovolador

Whether it is tax paid on dividend or employee commission it doesn't matter as it all lands into the same pot. Contractors have slight tax advantage because they don't receive benefits and protections as employees.

There is nothing wrong in servicing one client for years if you are self employed working on your own account. Do you want to deprive businesses off specialists just because they used them more than say one year? Do you want people to be forced into employment and be someone's servant?

It has nothing to do with tax and since 2017 changes to dividends I don't think people even consider this when choosing self employment.

elsergiovolador

The solution to IR35 is extremely simple and could be done today.

Government is okay that deemed employee is hired by an umbrella and receives small basic salary + bonus. Government however is not happy that a director pays him or herself small salary + dividend.

The difference between the two scenarios is that the end tax level is very similar, but deemed employee pays NI on the bonus.

Just make NI payable on dividends and make them deductible from Corporation Tax.

Problem solved.

This is not going to happen, however, because large consultancies have their greasy hands in many pockets.

Self-employed person being wrongly assessed as inside cannot claim business expenses (they can 5% in the private sector). This means if they need to buy tools to do their job, they need to pay them off their salary, however an employees employer can buy the same tools and deduct them from the tax.

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