Worst case scenario

[LisaContractorUmbrella]

I thought the worst case scenario was to get hit by a meteor the day before the IR35 announcement so wiping out 99% of life on the planet and to top it off we find out that we are all hit by IR35 in the announcement.

That's the spirit - think positive

[eek]

Interesting. Thank you for the correction. I used a different site and I am afraid that I misread the results.

I'm obviously too tired to think straight today, let me just get back to the client's work.

Don't worry about it. This stuff is a nightmare... It gets even worse when you look at a typical contractor who currently takes only necessary money out of the company and leaves the rest in it.

I calculated that £10k of expenses will cost me £22k by the time I pay the dividend tax on it and account for the lose of child benefit as my income went from £40k to £62k

[WordIsBond]

I thought the worst case scenario was to get hit by a meteor the day before the IR35 announcement so wiping out 99% of life on the planet and to top it off we find out that we are all hit by IR35 in the announcement.

No. In this scenario, if you get hit by IR35, it means you are part of the extremely fortunate 1% who survived the meteor. How can someone that lucky be in the worst case?

Further to that, it will end forever any threat (real or imagined) of global warming, so you will not only be spared more "green" taxes, you also won't have to read any more posts on the topic in General. It seems almost (not quite, but almost) worth sacrificing 99% of humanity.

[northernladuk]

No. In this scenario, if you get hit by IR35, it means you are part of the extremely fortunate 1% who survived the meteor. How can someone that lucky be in the worst case?

Further to that, it will end forever any threat (real or imagined) of global warming, so you will not only be spared more "green" taxes, you also won't have to read any more posts on the topic in General. It seems almost (not quite, but almost) worth sacrificing 99% of humanity.

Well if 100% of plant life gets wiped out we will have a lot less agents to deal with as well.

[WordIsBond]

Well if 100% of plant life gets wiped out we will have a lot less agents to deal with as well.

You win the Internet for the day.

[pr1]

That's not right.

Using the CUK site on £400 a day, £10k expenses, £10k wage


Outside IR35 net monthly income: £6,452 with expenses paid.


Inside IR35 net monthly income: £4,288 with expenses still be paid.


with expenses included
Gross income
outside £6452
inside £4288


after expenses
outside £5619
inside £3455


Note the very slight difference in take home (after expenses pay)...

Outside IR35 net monthly income: £6,452 with expenses paid.

this isn't net, it doesn't include higher rate tax on income/dividends

[jamesbrown]

I was under the impression that the end client would not have to do anything other than declare to hmrc that they consider you inside ir35?

There's a legitimate question here about the mechanism. It can't be fully on-payroll because that would no longer be a B2B supply and it would remove the contracting business from the equation entirely (i.e. it would be a de facto employment arrangement, and the discussion document rules that out by talking about income/NI only). If it's a B2B supply, then the contractor's company is still involved, along with all the implications of that (VAT, limited liability etc.), and a B2B supply cannot be operated through PAYE. The only compromise I can see is that the contractor is required to operate a deemed payment and must provide proof of that deemed payment to the client, in order to mitigate their risk. That way, the client polices the arrangement, by judging status and seeking assurances from the contractor, but it remains off payroll. I can't envisage a halfway mechanism that doesn't encounter all sorts of problems (contractual arrangement, lack of limited liability, transfer of PAYE from business to contractor etc.). For those instances where an arrangement is deemed outside, the client may nevertheless require the contractor to indemnify them by way of an insurance policy (much like the current offerings, but for clients rather than contractors).

[BrilloPad]

Three issues here :-

1. HMRC first of all went after aggressive avoidance. Now they are going after avoidance full stop.
2. HMRC tell the government of the day what to do.
3. This country is full of internet warriors who will whine and moan. Online.

Stop any one of those three and the natural order will assert itself.

[webberg]

I'd have to agree with a poster above that the end game for HMG here is that everybody is an employee and the employer is acting as unpaid tax collector and sending regular chunks of cash to them.

Having royally messed up IR35 in 1990's, I suspect that this time around, a better job will be done.

We may also see the rise of yet more dodgy schemes that claim to reverse the effect of being regarded as an employee. In particular the schemes that say, "divert some of your salary to some form of third party (trust) and take a loan" or "use some of your earnings to buy share options that magically are worth pretty much the same (less our fees) when they mature". All 100% HMRC compliant, backed by QC opinion and usually offshore so that the fee recipients are safe from HMRC action.

The survey being run by "eek" is a CRUCIAL piece in resisting the proposition as it is EVIDENCE based. If you have yet to complete it, do it now.

What I don't see in this debate yet is reaction from the clients. These proposals will make them responsible for making decisions about employment/contractor status and for deducting and paying money to HMG. failure in these areas will have consequences.

I would have thought that all and any industry collectives, trade associations, etc would be piling in here about the potential increase in their costs and the HR consequences. Perhaps I'm not looking in the right places and perhaps they are engaged in a quiet and subtle lobbying effort, but I'd prefer to see more PR and active resistance.

I would generally agree with those here who see this as the end of choice in terms of how to sell your services for 90% or more of contractors.

Differences in numbers between your present arrangements and full permanent employment will disappear very rapidly.

Please, please DO NOT BE TEMPTED INTO THE SORT OF SCHEME ABOVE.

[expat]

Somehow I find it possible to imagine mandating PAYE by the client company. Just like IR35 itself: no you are not an employee with security, holidays, sick pay etc; but yes you pay tax like one. So: no you are not a client employee; but yes you pay tax like one.

The mechanism is easy: "You the client will operate PAYE for this contractor. By order."

Then what the contractor gets is the tax of an employee, without the benefits. Sound familiar?

TBH I don't believe that is what HMG/HMRC want: they simply want everybody inside PAYE; they regard the missing benefits as your problem/mistake.

I think it was Margaret Beckett who responded to the question
"Why should IR35-caught contractors pay tax like an employee when they don't get the benefits of an employee?"
with the reply:
"If you have the correct employment status then the correct benefits will follow".