IR35 repealed

[escapeUK]

Yeah, why should anyone have to contribute to the society they live in? Bloody nanny state.

Every penny is squandered. But if you disagree with my view, feel free to PAYE. Just don't expect me to voluntarily allow my earnings to be stolen and wasted.

According to the email i just got from my accountant (mainly informing about the IR35 changes)

Well yes, but it used to be that because dividends were paid out of profit that had already paid corp tax, that no further tax was due, up-to higher tax rate. Currently we pay corporation tax, and then personally dividend tax. Hence my comment about double taxed, and it being impossible to achieve 80% take home.

[malvolio]

Every penny is squandered. But if you disagree with my view, feel free to PAYE. Just don't expect me to voluntarily allow my earnings to be stolen and wasted.



Well yes, but it used to be that because dividends were paid out of profit that had already paid corp tax, that no further tax was due, up-to higher tax rate. Currently we pay corporation tax, and then personally dividend tax. Hence my comment about double taxed, and it being impossible to achieve 80% take home.

It was never possible to achieve 80% take home. At least, not without building up a rolling taxation debt that would come back to bite you at some point.. It's that kind of screwed up thinking that got us IR35 in the first place, when HMT persuaded Labour that people were not paying taxes that were legitimately due and they needed a mechanism to recover them. Sadly, the implementation was so badly done (like a lot of then current new legislation) that we finally ended up where we were a week ago.

I refuse to think in terms of taxes paid, I prefer to look at net income. As long as that was generous and sufficient for my lifestyle, then fine. I was generating around £40k a year in various taxes without cutting any corners, so could live (and sleep) perfectly well.

And, just to be clear, dividends are actually a reward for financial risk and successful financial growth of personal effort to the benefit of the UK in general. We could benefit from them because we had to use Ltd Cos to manage our income. We have very little justification for taking them in terms of their actual intent, since our personal investment and risk levels struggle to justify them.

YMMV of course. Tant pis.

[eek]

It was never possible to achieve 80% take home. At least, not without building up a rolling taxation debt that would come back to bite you at some point.. It's that kind of screwed up thinking that got us IR35 in the first place, when HMT persuaded Labour that people were not paying taxes that were legitimately due and they needed a mechanism to recover them. Sadly, the implementation was so badly done (like a lot of then current new legislation) that we finally ended up where we were a week ago.

I refuse to think in terms of taxes paid, I prefer to look at net income. As long as that was generous and sufficient for my lifestyle, then fine. I was generating around £40k a year in various taxes without cutting any corners, so could live (and sleep) perfectly well.

And, just to be clear, dividends are actually a reward for financial risk and successful financial growth of personal effort to the benefit of the UK in general. We could benefit from them because we had to use Ltd Cos to manage our income. We have very little justification for taking them in terms of their actual intent, since our personal investment and risk levels struggle to justify them.

YMMV of course. Tant pis.

Technically it was possible prior to the dividend tax being introduced. In 2015 you could extract £41,000 or so from the first £50,000 via a combination of Income and dividends. Heck most of that £9,000 in tax was corporation tax. It only changed to 27.5% once the dividend tax arrived....

Of course I'm saying that merely because it's fun to correct you.

In reality it's best to work on the basis that you can access 65-75% of your money risk free via a limited company, 55% or so via an umbrella and if anyone suggests you can get more than that then they are lying...

[GregRickshaw]

Do we think PSC/LTD's will be regulated differently from March, or will we back quite literally to 2017.

[eek]

Do we think PSC/LTD's will be regulated differently from March, or will we back quite literally to 2017.

No time to change regulation so literally back to 2017...

And it's likely that it will be even more people than before -

1) we know HMRC can't investigate chapter 8 IR35 cases
2) there is better knowledge in the market place as to what makes someone outside so with the risk removed companies may be happy to change things just enough for it to work....

[malvolio]

Technically it was possible prior to the dividend tax being introduced. In 2015 you could extract £41,000 or so from the first £50,000 via a combination of Income and dividends. Heck most of that £9,000 in tax was corporation tax. It only changed to 27.5% once the dividend tax arrived....

Of course I'm saying that merely because it's fun to correct you.

In reality it's best to work on the basis that you can access 65-75% of your money risk free via a limited company, 55% or so via an umbrella and if anyone suggests you can get more than that then they are lying...

WHS. Of course...

Do we think PSC/LTD's will be regulated differently from March, or will we back quite literally to 2017.

No, we are back to 2001. Chapter 8 has never been changed and was still applicable in quite a lot of contracts. Only chapter 10 provisions have been reversed.

The only thing to be careful of is trying to swap an inside-determined role to an outside one. that could prove difficult to justify. And, of course, all those idiot companies that simply banned PSCs aren't going to switch back any time soon. Why would they?

[eek]

And, of course, all those idiot companies that simply banned PSCs aren't going to switch back any time soon. Why would they?

They will because it will allow them to get a better quality contractor - i.e. those who live a distance away and are happy to travel because expenses can, once again, be deducted from pre tax income.

And anyone who just banned PSC's is actually in a perfect position to do so. Because the argument is simple - we couldn't control how our middle management and the contractors managed things so a blanket ban made sense. Now the risk is sat with the contractor (and they are "likely" to manage things to remain outside as they have the incentive to do so) we can refuse the ban immediately.

The issue for an end client wasn't that 1 person was caught inside IR35 it was that 1 person was caught inside IR35 and HMRC decided that all 5,000 other contractors should be taxed the same way. That simply isn't possible under Chapter 8 and even if it was it isn't the end client paying the big tax bill.

If I had an inside IR35 contract with an SDS determination on April 6th I would be looking for an outside contract.
Company with a blanket ban on PSCs but now allowing them to be used again - I might consider staying if the working conditions looked like they had always been outside...

[GregRickshaw]

Blimey the gift that keeps on giving...

Dividend taxation also changed...

Time to put the paint brushes down I think...

From April 2023:
• the dividend ordinary rate of 8.75% will reduce to 7.5%
• the dividend upper rate of 33.75% will reduce to 32.5% and
• the dividend additional rate will be abolished.

[jamesbrown]

They will because it will allow them to get a better quality contractor - i.e. those who live a distance away and are happy to travel because expenses can, once again, be deducted from pre tax income.

Personally, I am skeptical about that. This will be very much sector-by-sector. If big competitors do it, others may follow. But if they don't, it will probably be status quo. There is little incentive to reverse blanket bans, IMHO, because there is no large administrative saving here, they simply bypassed Chapter 10 altogether. That said, I am not confident in making this prediction, just skeptical that it will revert. The other uncertainty is what happens in, say, 2025 if/when Labour gets in, which is looking increasingly likely. Many may decide to wait and see given the legislative uncertainty.

[northernladuk]

If I had an inside IR35 contract with an SDS determination on April 6th I would be looking for an outside contract.
Company with a blanket ban on PSCs but now allowing them to be used again - I might consider staying if the working conditions looked like they had always been outside...

This is going to be the interesting one to watch. I'm sure we will see a raft of clueless permatractors trying to switch straight inside to outside. The current legislation means they need to know even less about IR35 than they did before so going to be even more clueless about what they are trying to do. Simple question to the client would be will you allow subs. It was a sham before with no one asking. If the client is more clued up now so if they say no then it's back inside, but I'm betting most contractors won't think to ask.

Just asking about subs is very simplistic yes but will be interesting to see if a client has determined it's inside properly, no Subs, they want D&C etc and will then allow an outside contractor knowing full well they won't allow the main pillars.