IR 35 inside contract – still paying Employer’s NIC?

[Bigbird]

Exactly the same as an employee though. Just that permies don't know that they pay 50%-60% tax because their salary is after employer's NI. It only seems unfair if you compare it to a permie salary, but that permie salary has already had employers NI deducted.

Good history lesson from BB.

Thank you. I forgot something important though. The other reason a contract rate was normally higher than a permie one was of course to allow some degree of risk compensation - contracting is a lot less secure than employment.

Diverse political thinking y'see. The Thatcher/Major years encouraged everyone to go out and work/think for themselves because they wanted to break the unions (which they did). They didn't forsee the bandwagon-jumping that was going to happen at a later date though!

So on the one hand you had all the tax breaks of being a Ltd company (anyone remember the 0% CT rate on the first 10k of profit, later ruled out by the non-corporate distribution CT rate? ) to encourage you to start up, on the other by the time Mr B and his NL cronies came to power the treasury was already seeing "leakage" of statutory funds and immediately started trying to plug the gaps, first NCD CT, then IR35, now MSC legislation - my vote is on the next move being either removal of the flat-rate vat scheme or the introduction of NIC on dividends.

I can kind of see where they are coming from in a way because some of the MSC companies had become a bit of a joke (£6/hour helpdesk people forced by their agency to go MSC so they wouldn't have to pay employers NIC on them? Give me a break......... ) but the problem as I see it is that they have gone from metaphorically sticking a couple of fingers in the dyke to using a sledgehammer to crack a nut. Yes the new measures will have already got rid of a lot of the dross that was giving the contractor business a bad name, but it has also had a knock-on effect on a lot of genuine contractors who SHOULD be entitled to tax breaks for the way they work, they have now been shafted both ways in that they have neither the tax breaks of independence nor the perks of secure employment.

I should be applauding the new legislation. As an independent book-keeper I'm currently swamped with new work and enquiries from ex-MSC contractors, pretty much all of which has come about through word of mouth. My sense of fairness and proportion remains outraged though because I don't think the govt's "level playing field" taxation stance is equitable or reasonable.

[/rant mode]

(sorry, I did go on a bit didn't I? )