Aren't the majority of IT contractors inside IR35?

[beaker141]

I've always thought that NI was quite a neat trick.

Employers' NI is even sneakier. Take the tax before people see that they have been taxed..

Employers NI though isnt a tax on the employee, its a tax on the employer - just in a contract scenario the client is still paying it as their cost, just asking you to do it on their behalf.

[s2budd]

shhh! Don't tell anyone.
Seriously though - who knows with this bunch of muppets.
They can't even produce laws without spelling mistakes in let alone laws that most lawyers and courts agree with.

[Gonzo]

Employers NI though isnt a tax on the employee, its a tax on the employer - just in a contract scenario the client is still paying it as their cost, just asking you to do it on their behalf.

There we go - you have fallen for the con.

Employers' NI just adds to the cost to an employer of the employee. It makes no difference to the employer whether that NI is deducted before the employee sees their wage packet or after it.

It is the total cost to the employer that matters and that is what the umbrella users see clearly but wage slaves don't.

[gingerjedi]

All, my first post. I'm an IT contractor and been contracting for 3.5 years now, in the financial sector.

Have managed to get the right clauses into my contract to be IR35 compliant.

But seriously, can a normal IT contractor ever be outside IR35?

For example, which bank will allow an IT contractor to send in a substitute?

Its fine to have the right clauses in the contract, but will we ever stand a chance if a real investigation takes place?

32 replies and no-one thought to say hi to Hector?

[NotAllThere]

The driver for the IR (as was) repeatedly attempting to introduce IR35 is, as has been pointed out, income smoothing and ERNIC. The driver for the Labour government finally acceeding to the IR's requests, was

1. Politics of envy - the government felt that contractors were a safe target, as the masses would be envious of these highly paid tax-doding scum.

2. Lobbying from large consultancies -large consultancies are undercut by contractors, who often (always?) provided a better and more independent service. Stephen Timms had worked at Logica and Ovum, and so would have been aware of the threat from freelancers, and may have been minded to help his pals out.

Thankfully, the government screwed up the legislation so badly, that for the most part, once you've got the right kind of contract in place, and legal insurance, then the risk of being affected is rather low.

[imightbewrong]

Here's what I don't get - if a myco is working for a financial serices company (such as an IB) who can't claim back VAT, then if myco invoices £100K, hector gets 20% of that as corp tax (roughly - less expenses) plus 17.5% VAT - that's 37.5% of the invoice, without thinking about dividend tax. A permie earning £100K would be paying about 35% tax overall - so surely in this case hector doesn't care who you are - he gets the same either way?

[TheCyclingProgrammer]

Employers NI though isnt a tax on the employee, its a tax on the employer

If company x has a budget of £50k for a new employee, they have to factor in the employer NI before they can calculate the salary they will actually offer, meaning the employee is the one that ends up losing out really.

[TheCyclingProgrammer]

Here's what I don't get - if a myco is working for a financial serices company (such as an IB) who can't claim back VAT, then if myco invoices £100K, hector gets 20% of that as corp tax (roughly - less expenses) plus 17.5% VAT - that's 37.5% of the invoice, without thinking about dividend tax. A permie earning £100K would be paying about 35% tax overall - so surely in this case hector doesn't care who you are - he gets the same either way?

[oversteer]

Here's what I don't get - if a myco is working for a financial serices company (such as an IB) who can't claim back VAT, then if myco invoices £100K, hector gets 20% of that as corp tax (roughly - less expenses) plus 17.5% VAT - that's 37.5% of the invoice, without thinking about dividend tax. A permie earning £100K would be paying about 35% tax overall - so surely in this case hector doesn't care who you are - he gets the same either way?

what do you think the IB does with the 17.5% VAT that they pay you ?

hint: they reclaim it from HMRC

[imightbewrong]

You sure about that? I though financial services compaines didn't charge or claim VAT - isn't the point of VAT that it bubbles along the supply chain and pops out with the final purchaser? Who do banks charge VAT to?