Accountants in Denial over IR35

[splitbrain]

My advice to you would be sack SJD off. I mean, you're paying the earth of a service that is well known to be getting worse and isn't using market leading book keeping software.

I'd suggest you sign up with Gorilla Accounting and I'll split the referral fee with you to try and reduce the hit of the brolly payments when they hit.

Can't say fairer than that can I?

I had intended to sack SJD off, but that's pointless now I may as well put up with them for another year until I wind up, claim ER, pay off the mortgage, pay for my 2 years olds private education and possibly spend a month in the mauritius in my villa before returning to work at the same client

Point being, the shutting down and using ER (which is an absolutely massive tax break) is a very valid and lucrative option for those of us who have been doing this for a long time, and allowed the cash to stack in the biz accounts, we all knew this was coming eventually and now is the time to pull the trigger, which is what I am doing.

[saptastic]

It is in SJD's interests to sugar coat this to their clients - they need to hold on to as many clients as they can so that they can continue to service their debt to the bank.

On their last accounts, their holding company (Optionis Limited) carried debt of £166m, made a EBITDA of £19m and paid almost £17m of it in interest - that doesn't just go away if they lose clients.

https://www.contractoruk.com/forums/...sale-300m.html

Will the budget announcement affect the above......

[WordIsBond]

Point being, the shutting down and using ER (which is an absolutely massive tax break) is a very valid and lucrative option for those of us who have been doing this for a long time, and allowed the cash to stack in the biz accounts, we all knew this was coming eventually and now is the time to pull the trigger, which is what I am doing.

If you really think that is the way to go, you should probably get it done before the next budget, in case instant changes are brought it. It's unlikely that they would make overnight changes to ER, but if you have that much money at risk it probably not worth taking any chances just to go a few more months.

[splitbrain]

If you really think that is the way to go, you should probably get it done before the next budget, in case instant changes are brought it. It's unlikely that they would make overnight changes to ER, but if you have that much money at risk it probably not worth taking any chances just to go a few more months.

My plan is for July 2019, my next renewal, will get client to switch my contract to an umbrella and I'll just carry on as usual but paying more to hector. May stretch it to Jan 2020 but see below.

Any changes to ER would take place in the following financial year, so April 2020 is the soonest or that's my understanding anyway. Are you saying Hammond has the power to change ER immediately following budget day in October/Nov 2019? If thats the case then I'll defo have to get it done in July 2019 rather than Jan 2020.

[northernladuk]

My plan is for July 2019, my next renewal, will get client to switch my contract to an umbrella and I'll just carry on as usual but paying more to hector. May stretch it to Jan 2020 but see below.

Any changes to ER would take place in the following financial year, so April 2020 is the soonest or that's my understanding anyway. Are you saying Hammond has the power to change ER immediately following budget day in October/Nov 2019? If thats the case then I'll defo have to get it done in July 2019 rather than Jan 2020.

Didn't he already do that with some changes to ER in this budget? But yes he can. I seem to remember he made changes to tighten it up in 2015 which were effective immediately.

There is still a question about going brolly and claiming ER isn't there. No one really knows if it's allowable. I wouldn't be surprised if changes in the near future will clarify that, and not in a good way for us. I'm sure his intention wasn't to allow us to pop out and back in every 2 years? Or was he happy just to get the 2 years normal tax? If he wants some cheap money he just extends the 2 years. But then again, who knows.

[WordIsBond]

Any changes to ER would take place in the following financial year, so April 2020 is the soonest or that's my understanding anyway. Are you saying Hammond has the power to change ER immediately following budget day in October/Nov 2019? If thats the case then I'll defo have to get it done in July 2019 rather than Jan 2020.

Hammond has the power to do that if he chooses to do so and Parliament backs him. Whether he could pull it off or not, and whether or not he'd try, I can't say.

If he thinks there is significant avoidance/cheating going on, he could do something like change the rules with immediate effect for any who are not already in the process. I think he'd have a hard time changing the rules for someone who had already started the process, too many people would say that's not fair, and it isn't like he has a big enough majority not to be worried about a few rebels.

If I had significant funds that I wanted to get out using ER before April 2020 I'd definitely want to start the process before November. Maybe I'm just being paranoid but the more money that comes into play the more paranoid I tend to get. Sounds like you've got enough that it matters.

Edit: and this discussion assumes Hammond will do the next budget, which is not a given. If an election is called you might want to consider just making the leap then, because Labour would have a new Budget immediately after being elected, and for them Entrepreneur Relief is simply to relieve all entrepreneurs of all their money.

[northernladuk]

Totally agree with the above.

[splitbrain]

Hammond has the power to do that if he chooses to do so and Parliament backs him. Whether he could pull it off or not, and whether or not he'd try, I can't say.

If he thinks there is significant avoidance/cheating going on, he could do something like change the rules with immediate effect for any who are not already in the process. I think he'd have a hard time changing the rules for someone who had already started the process, too many people would say that's not fair, and it isn't like he has a big enough majority not to be worried about a few rebels.

If I had significant funds that I wanted to get out using ER before April 2020 I'd definitely want to start the process before November. Maybe I'm just being paranoid but the more money that comes into play the more paranoid I tend to get. Sounds like you've got enough that it matters.

Edit: and this discussion assumes Hammond will do the next budget, which is not a given. If an election is called you might want to consider just making the leap then, because Labour would have a new Budget immediately after being elected, and for them Entrepreneur Relief is simply to relieve all entrepreneurs of all their money.

Good point, very good point indeed! Kicking myself for not thinking about that myself.

High chance of a snap election and Jez/John scrapping ER, I do recall reading Labour hate it. Fortunately my client will allow me to change to brolly mid-way through the contract (I have that in writing) so I can trigger an MVL on the day of an annoucement of an election.

Hector can fark right off, I'm ready for them.

[webberg]

In my opinion, most private sector engagers will react by applying a very high hurdle for any contract claimed to be outside IR35.

To date, end users have sought to lay off certain employment related risks to agencies and intermediaries. These risks, such as liability for holiday pay, sick pay, etc are arguably low value for the large enterprises and manageable because a contractor is perhaps unlikely to want to bite the hand that feeds them.

Whilst I know that some enterprises (including my former employers) have metrics that seek to measure the risk and the impact on bottom line, the final result is usually a low (and manageable) number.

The IR35 reforms however make that risk more real and importantly, more capable of being calculated, and a finance director asking for and receiving a report on the possible cost, is going to be quite concerned.

How will they react?

Either they will seek to reduce the risk by reducing the number of contractors - in favour of permies perhaps - which at least allows them to forecast numbers and prevent embarrassing reports to stock exchanges of errors and unknown contingencies - which means higher costs which will be offset against paying employees a lower rate than the contractor role - or they will apply blanket "inside IR35" decisions and impose cuts in rates to offset costs.

This they will do as it will be difficult to transfer a legal obligation to pay tax and em'er NIC to an intermediary. To do that, they would have to rely upon a warranty or indemnity from the intermediary which means taking a significant financial risk on that intermediaries integrity. Would you do that?

End users who have any sense of the impact of the impending changes, will be taking action soon. They will not go to the cliff edge of 5th April 2020. This group will want their intermediaries to be talking to them about coping strategies in the same time frame.

End users who are not so aware, probably those at the lower end of the demographic, will be reliant upon the intermediaries and may be pushed into a position in which they have to take a decision quite quickly and without thinking over the consequences. This will leave them exposed perhaps to what will be a new crop of "schemes" designed to keep the IR35 risk away from individuals and end users.

There are no doubt an endless series of positions between the above.

So in my opinion, there will be section of the market which will see "business as usual" for a long period yet, but eventually the legal obligations of the parties here will demand that new business models are adopted.

[Maslins]

I'm sending out two newsletters:

Maslins - everything as normal, nothing to see here, keep on contracting indefinitely peeps!

MVLO - OMG contracting's gonna collapse, everyone liquidate via us quick before it's too late!

Hope nobody notices the contradiction