IR35 Update following discussion group yesterday - survey request

[PurpleGorilla]

IR35 Update following discussion group yesterday - survey request

How much tax is lost with cash in hand work by builders etc? (This article suggest £2-8bn per year http://www.theguardian.com/politics/...x-taxavoidance - go after them, and go after the big corporates.

[TheFaQQer]

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?

If you make £10600 before paying any salary, you're £380 better off in a limited company

£20000, you save £1220
£30000, you save £2200
£40000, you save £3000
£50000, you save £3350

All figures are approximate. IANAA.

[SueEllen]

Actually apart from being able to find info out easily my arguement against your other points were done thinking of other people.

Personally I'm for the arguement everyone gets tax relief on travel to work expenses. Why? Makes it harder for people to have justification to claim the dole.

[gables]

If you make £10600 before paying any salary, you're £380 better off in a limited company

£20000, you save £1220
£30000, you save £2200
£40000, you save £3000
£50000, you save £3350

All figures are approximate. IANAA.

I know YANAA ;-) but... I suppose it would be better to understand what the tax paid when LTD (and being efficient with distribution), LTD under IR35 and sole trader and the net income to the contractor

[DaveB]

Which census asked the question in KM????? Maybe a bit excessive possibly.

The question waqs asked in Miles but converted to KM in the results to standardise with other census results for other countries.

Gory details here if you really want them.

2011 Census Analysis - Distance Travelled to Work - ONS

And loads of other "interesting"* stuff to go with it.

http://www.ons.gov.uk/ons/rel/census...ensus-analysis

*For varying definitions of interesting.

[Contreras]

Yes, employees don't pay VAT. Employees don't put up websites advertising their services, and you don't have to spend £1000 on advertising to be acting like a business. Employees don't go on the bench for three weeks. They don't buy PI insurance. They don't pay an accountant to file their business accounts. They don't have their contracts reviewed by both a lawyer and an IR35 specialist.

Disguised employees can do any of these things. Genuine businesses do not necessarily need to do any of these things. And therein lies one problem with the BETs, both as originally proposed, and with HMRC's implementation.

The only way that BETs might work IMHO would be to abandon the idea of a points scoring system. Obviously this then precludes any qualifications which can be 'bought' or artificially constructed (ref. your points above).

2. Hold the engagers (and not the contractors) liable for the employer NI if the risk is high.
3. Hit engagers with heavy penalties if a contract of a high-risk contractor is found to be within IR35.

I think in many cases clients are content to suffer the NI and it would become de-facto just as they suffer the agency margin. If you want a big stick to wave then it is the threat of employment rights, *that* is really what is being avoided in many cases.

If engagers want to avoid that liability, they can require contractors to document that they are medium or low risk, or pay the NI up front. QDOS will develop, within a week, a BETs certification service, insurance backed.

Please, no. No more 'solutions' that involve paying even a single penny to the parasitic industry that has grown up around IR35.

[WordIsBond]

Disguised employees can do any of these things. Genuine businesses do not necessarily need to do any of these things.

So? Genuine businesses generally do quite a few business-like things and disguised employees rarely do. If you set the threshold for "low risk" high enough, disguised employees can't reach it, and if you set the threshold for "high risk" low enough, you avoid a presumption of guilt except for those who almost certainly are disguised employees. That leaves a large middle ground, but it reduces the uncertainty for many and the abuse of the low-paid. It would be a step forward from where we are now.

The only way that BETs might work IMHO would be to abandon the idea of a points scoring system. Obviously this then precludes any qualifications which can be 'bought' or artificially constructed (ref. your points above).

Points scoring is only a problem if it is made an absolute determiner of status rather than a general category of risk. And even then, it is only a problem if the system can be gamed.

I think in many cases clients are content to suffer the NI and it would become de-facto just as they suffer the agency margin.

And this is bad? Clients say, "We don't want the risk, we'll just pay the NI?" HMRC is happy. I'm happy. You're happy. If you want to operate inside IR35, at least you don't have employer NI, and if you think you've got a case, you can operate outside of IR35. It's a win for contractors and for HMRC. And clients would have to pay more, but as you said, they suffer the agency margin, and they still avoid the employment rights problems. Will they cut rates? Maybe slightly. An equilibrium will be reached, based on supply and demand.

Please, no. No more 'solutions' that involve paying even a single penny to the parasitic industry that has grown up around IR35.

Do you pay any pennies to the parasitic accounting industry that has grown up around personal and corporate taxation? What about to the parasitic insurance industry that has grown up around tort law?

Suppose an engager said, "I'll pay you X / day, but if an independent professional certified you BET-friendly so I don't have to pay NI, I'll pay you X+10% per day." Would you pay £50-75 per contract to that independent professional?

The fairest solution is for the employer NI to be paid by the engager if it is truly false self-employment. What I proposed is one way to make that happen. If you provide a better one, I'll be all in.

[WordIsBond]

Nor do a vast number of contractors, including 'proper contractors' to be fair.

Which doesn't really change the point that a lot of contractors that they want to throw into IR35 are not behaving like disguised employees at all. But they've decided that they are losing money because all the contractors aren't employees.

[WordIsBond]

Employees don't pay VAT? Employees pay lots of VAT on everything they spend. Contractors can reclaim VAT on travel to work, which employees can't, so if anything it's contractors that don't pay VAT and employees do. Weird to drag VAT into the argument as for most contractors (on the FRS) being VAT registered is just free money.

Employees don't pay VAT on their revenue, contractors do. HMRC wants you to be an employee for purposes of employee NI and income tax, an employer for purposes of employer NI, but oh, you're a business, too, so make sure you register for VAT and file a corporation tax return. Most people talk out of both sides of their mouth, but HMRC has found a third side of theirs and uses all three.

There's still this idea that there might be an alternative to IR35 that allows everyone to continue to pay less tax than the equivalent permie. That's not very realistic.

Unless someone is a disguised employee, there IS NO equivalent permie.

[gables]

Employees don't pay VAT on their revenue, contractors do. HMRC wants you to be an employee for purposes of employee NI and income tax, an employer for purposes of employer NI, but oh, you're a business, too, so make sure you register for VAT and file a corporation tax return. Most people talk out of both sides of their mouth, but HMRC has found a third side of theirs and uses all three.


Unless someone is a disguised employee, there IS NO equivalent permie.

And in my mind a disguised employee is NOT a contractor who has chosen to leave permiedom\made redundant etc, chase contracts whether through agencies or direct, foregoes any employee benefits, funds their own training\skills etc even if they work in BAU\support\development\projects and have long stints at clients.