IR35 Update following discussion group yesterday - survey request

[TheFaQQer]

HMRC's analysts have told them that only about 10% of contractors who should be working under IR35 are and that this costs the Treasury (or the tax payer) £430 million per year. I questioned their figures as I cannot see how analysts can possibly determine working practices with any particular effectiveness but the team heading the discussion were not able to provide information on how the data was gathered or how it was analysed in order to produce these figures. It's my feeling that the figures are inaccurate and that we should provide them with something a bit more reliable.

Even if the £430 million figure was right (and I don't think it was), it isn't any more - because it was calculated before the change to the dividend tax rates.

So without doing anything to do with IR35, the "loss" to the exchequer has been drastically reduced.

[MrMarkyMark]

yes, and you'd also pay employers NI (another 13.8%)

Eh?!

Missed the point, yet, again.

If you were deemed an employee by client co, then they would be due the employees NI.
You would pay 45% tax.
You would employees NI at the full rate.
You would get no company benefits, bonus, holidays etc etc

Capiche?

[gables]

Quite often when discussions come up about being in business\self employed\not an employee, comparisons are drawn to other self employed trades e.g. decorators who are quite clearly accepted as being self employed. I consider myself self employed as a contractor whether at a client for one month or several years, mainly for the reason that I am not employed by the client, and if you asked the client if I was I an employee I would expect them to say no; I'm not on their PAYE payroll and don't get employee benefits - for me it is that simple.

Now in order for me to operate, I have in theory two choices; LTD or sole trader (like my decorator friend), I say in theory as Sole Trader isn't an option but for the life can't think why or the legislation sometimes referred to by other posters.

So, would an option be to create a construct (FLC) that is taxed as a sole trader but fits in line why we're forced to go LTD?

I haven't worked out if the taxation difference between LTD and sole trader is unattractive to contractors, but the cloud of IR35 certainly is unattractive, is it a price worth paying to be recognised as self employed?

Maybe someone could work the figures for comparison?

[The Spartan]

Eh?!

Missed the point, yet, again.

If you were deemed an employee by client co, then they would be due the employees NI.
You would pay 45% tax.
You would employees NI at the full rate.
You would get no company benefits, bonus, holidays etc etc

Capiche?

I think the point is lost on pr1, everyone else understands it though and it's a good point at that. Save your sanity and ignore him/her

[MrMarkyMark]

I think the point is lost on pr1, everyone else understands it though and it's a good point at that. Save your sanity and ignore him/her

Cheers Spartan, Northernladuk, I don't know why he has so much trouble getting it.

Probably just a disgruntled perm, who does not want to take the realities of contracting into account.

[LondonManc]

If I'm found to be a perm, can I claim my holiday pay (which is the days that I made myself unavailable for work) and sick pay (which is when a dodgy salad or similar forced me off work) back off HMRC? Can they also give me back my statutory redundancy pay as my limited company is now laying me off as they cannot afford to keep the business going?

[pr1]

[SueEllen]

23 month rule - unfair.

Some people get repeat business and the gaps would look suspicious under your guidelines.

Obviously you need contracts for pieces of work.

1st year PAYE -
Unfair to people like me who have half their family self-employed in some form. I didn't have to do lots of research I just had to ask family.

T&S -
80 mile rule impractical as 80 miles can take me 3 hours or just over an hour.

In SE commuting is done on time rather than distance which is why the government put in a time limit of 90 minutes for those on JSA. This is more consistent.

Not being able to claim JSA between contracts -
I know contracts who were left near bankrupt after the banking crisis so impractical.

[DaveB]

How about...

1st year of LTD is PAYE
A vast number of contractors don't have a clue about legislations and how to be a business so would therefore still be disguised employees so taxed as such for the first year until they understand the business side. It would also deter people shutting down companies regularly to claim any relief associated with it.

23 month rule
More than 23 months at a client then PAYE kicks in. Stops people becoming part and parcel

Retrospective taxation of 4 years at a client
From the 1st of April anyone that is contract and been there more than 4 years get anything over 23 months taxed as PAYE. 4 years is more than enough to become part and parcel.

PAYE when returning to a perm site within 4 years
High likelihood of being treated as perm and would save years of man days of people asking about IR35 when going back.

T&S capped under 80 miles per day
Only long journeys and overnight stays applicable to remove journeys that permies would make.

Ban on LTD owners claiming JSA
This should save the economy £75 a week for 6 weeks every couple of years.

That should start to clean up contracting and weedle out the disguised permies.

!st year PAYE: No. Too much of a blanket staement and would penalise those who do know what they are doing or have taken proffessional advice for the sake of those who don't.

23 Month Rule : Yes, but make it 24 months to tie in with the current T&S rules.

Taxed after 4 years : Maybe. How would this affect those of us who have long term partime client or who come back to us for one off pieces of work? If it was only applied to contracts that were in effect full time or sole client then it may be better.

PAYE on return : No. The rules on this are already sufficiently clear and are about the only bit of IR35 that works. It also prevents unscrupulous employers binning permies on Friday and bringing them back on monday as contractors in order to avoid employers NI etc. Maybe make it 6 months to discourage abuse.

Minimum T&S distance : Yes, but match it to official figures. According to the 2011 Census the average commuting distance for permanent employees was 15 Kilometers. 80 Miles is probably a bit excessive.

[northernladuk]

Ah good points from both on some aspects being unfair.. Maybe we should just have a blanket policy that covers all of us all of the time... That would be better wouldn't it

23 month rule - unfair.
Why? 2 years is more than enough to get caught part and parcel. We are shouting at HMRC that we do 3-6 months gigs yet you say 2 years cap is unfair? There has to be a limit to differentiate us.

Some people get repeat business and the gaps would look suspicious under your guidelines.
Don't agree if done right

1st year PAYE -
Unfair to people like me who have half their family self-employed in some form. I didn't have to do lots of research I just had to ask family.
It's only one year. It's that or forever. You are thinking very personally here and not the bigger picture. YOU might do that. 99.9% of contractors don't.

T&S -
80 mile rule impractical as 80 miles can take me 3 hours or just over an hour.
Same could be said for a permie. That's not a differentiator. Maybe 80 miles is a bit much though.

In SE commuting is done on time rather than distance which is why the government put in a time limit of 90 minutes for those on JSA. This is more consistent.

Not being able to claim JSA between contracts -
I know contracts who were left near bankrupt after the banking crisis so impractical.
Fine, shut the company like anyone else so you have no payment vehicle you can just start up again and then claim. The near bankrupt people can claim and but the in between gigs can't. It's only 75 quid a week and it's being abused on the whole.

!st year PAYE: No. Too much of a blanket staement and would penalise those who do know what they are doing or have taken proffessional advice for the sake of those who don't.
So some people get hit and after that we are all in the clear. Tough world. It's only a year.

23 Month Rule : Yes, but make it 24 months to tie in with the current T&S rules.
I went under 24 months to make sure it doesn't. 24 months can still apply as it's geographic not client. Would make it even more confusing?

Taxed after 4 years : Maybe. How would this affect those of us who have long term partime client or who come back to us for one off pieces of work? If it was only applied to contracts that were in effect full time or sole client then it may be better. - Correct.

PAYE on return : No. The rules on this are already sufficiently clear and are about the only bit of IR35 that works. It also prevents unscrupulous employers binning permies on Friday and bringing them back on monday as contractors in order to avoid employers NI etc. Maybe make it 6 months to discourage abuse.
Ok less than I said but more than 6 months IMO

Minimum T&S distance : Yes, but match it to official figures. According to the 2011 Census the average commuting distance for permanent employees was 15 Kilometers. 80 Miles is probably a bit excessive.
Which census asked the question in KM????? Maybe a bit excessive possibly.

Anyway, it was a bit tongue in cheek but it does show that some people want the rules to suit them and their situations but we've got to think beyond that if we are going to find a solution that isn't just a sledgehammer that affects us all, all of the time.