Why did HMRC go with IR35?

[malvolio]

Ignoring the nonsense questions of fixed rate and "Why so high a proprortion", we do tend to forget that there is a real reason behind IR35, to prevent employers setting up their workforce in such a way that they avoid responsibility for both NICs, assorted social costs and employment protections. Typical of HMG to do it by hitting the worker though (tell me, what was Labour's original raison d'etre again?) since they were too inept to do it by penalising the guilty employer.

So granted that the basic assumption of IR35 is that the worker is really an employee, you can see why they are looking to charge them full tax: the 5% discount on gross is simply to cover the admin costs of working out and paying your own tax liabilitites, not those of running a full time business.

Which goes back to the original question, put rather more clearly. Should we not be able to declare ourselves to be "permanently self-employed", exchanging employment rights (including access to ETs) for a lighter taxation profile. And don't laugh, that idea seems to be taking hold in Whitehall at last, although the current model is as laughably naive as you might expect.

[xoggoth]

A simpler strategy would have had more acceptance if there had been a fairer formula, employees get all sort of hidden benefits and are able to spread salary over good and lean years, that did not start to be covered by the 5%, especially for those on low rates. Having enquired about a few documentation jobs in the past it seems there are contracts on £15ph or less.

[BrilloPad]

Ignoring the nonsense questions of fixed rate and "Why so high a proprortion", we do tend to forget that there is a real reason behind IR35, to prevent employers setting up their workforce in such a way that they avoid responsibility for both NICs, assorted social costs and employment protections. Typical of HMG to do it by hitting the worker though (tell me, what was Labour's original raison d'etre again?) since they were too inept to do it by penalising the guilty employer.

So granted that the basic assumption of IR35 is that the worker is really an employee, you can see why they are looking to charge them full tax: the 5% discount on gross is simply to cover the admin costs of working out and paying your own tax liabilitites, not those of running a full time business.

Which goes back to the original question, put rather more clearly. Should we not be able to declare ourselves to be "permanently self-employed", exchanging employment rights (including access to ETs) for a lighter taxation profile. And don't laugh, that idea seems to be taking hold in Whitehall at last, although the current model is as laughably naive as you might expect.

At ClientCo there are alot of ccenture doing their usual stuff of wrecking everything. And another large software house about to supply 1 person.

How will HMRC tell the difference between us? Apart from "contractors" being effective and "software houses" wrecking everything...

[threaded]

At ClientCo there are alot of ccenture doing their usual stuff of wrecking everything. And another large software house about to supply 1 person.

How will HMRC tell the difference between us? Apart from "contractors" being effective and "software houses" wrecking everything...

That, in a nutshell, is what IR35 is about. The large consultancies on the whole are pathetic, the small firms are so much more effective it is embarrasing. So, if you run a large consultancy, and cannot compete, it is in your interests to get the laws changed to try and put your competition at a disadvantage.

All this about raising taxes is a myth, in fact I would not be surprised if the tax take has not in fact dropped substantially, because the truth is, not many were doing the low-income, hi-divis thing, until they read that they could because of the furor over IR35.

HTH

[NotAllThere]

Babason, if you expressed yourself more clearly, then perhaps Crossroads, Sue Ellen etc. would have understood what you were getting it. Their lack of understanding is your fault, so there's no need to get all mardy.

"At the risk of asking a stupid question. Instead of the current regime, why didn't HMRC simply say all contractors (caught by IR35) must pay a fixed proportion (e.g. at least a third) of turnover as salary?"

There are no stupid questions - but there are a lot of inquisitive idiots.

Because they didn't consult, didn't think of that. Anyway, it would have to be a proportion of profit, not turnover.

[babason]

Babason, if you expressed yourself more clearly, then perhaps Crossroads, Sue Ellen etc. would have understood what you were getting it. Their lack of understanding is your fault,

Point taken. However, in my defence I simply hadn't spotted where the lack of clarity lay. I genuinely thought I was being clear and my actual point was being ignored.

so there's no need to get all mardy.

I'm not so sure that's fair either but for future reference, anyone who is dismissive, accusative or sarcastic with me is unlikely to bring out my best side...