OTS recommended changes to IR35

[deckster]

Maybe I am missing something but if they merge the two taxes and then still make us payout Employers NIC (by whatever name it becomes) then that is basically just making us all IR35 caught ?

GULP...

I must be missing something...

Why is that a surprise? I think anybody that thought that wasn't the ultimate aim of this review is terribly naive.

The view of HMG, of all colours, is that contractors are all disguised employees who should pay full Ers & Ees NI as well as income tax on 100% of their income. The only difficulty they have is how to distinguish contractors from 'genuine' (in their eyes) businesses. IR35 botched it; this is (theoretically) going to make us all caught. This was always going to be the main driver behind the review and anybody who thought otherwise rather misunderstood what was going on.

IMHO, anyway

[dx4100]

Why is that a surprise? I think anybody that thought that wasn't the ultimate aim of this review is terribly naive.

The view of HMG, of all colours, is that contractors are all disguised employees who should pay full Ers & Ees NI as well as income tax on 100% of their income. The only difficulty they have is how to distinguish contractors from 'genuine' (in their eyes) businesses. IR35 botched it; this is (theoretically) going to make us all caught. This was always going to be the main driver behind the review and anybody who thought otherwise rather misunderstood what was going on.

IMHO, anyway

I am not surprised...

I am surprised though that some users think its a good step forward IF my understanding is right.

I don't think it is though as Alan thinks I am off the mark.

[malvolio]

I am not surprised...

I am surprised thought that some users think its a good step forward IF my understanding is right.

I don't think it is though as Alan thinks I am off the mark.

IF IR35 doesn't exist, how can anyone be caught by it?

If tax is simplified into earned income and investment income, why does it matter how you work?

Or if a clear distinction is made between employee and non-employee, so limiting the scope of IR35, why shoud anyone who is a genuine non-employee care about IR35?

Before we all claim the onset of Armageddon, let's at least wait and see what is actually decided in the Budget. However you look at it, this is still a huge step forward from where we've been for the last 11 years.

[Fred Bloggs]

Why is that a surprise? I think anybody that thought that wasn't the ultimate aim of this review is terribly naive.

The view of HMG, of all colours, is that contractors are all disguised employees who should pay full Ers & Ees NI as well as income tax on 100% of their income. The only difficulty they have is how to distinguish contractors from 'genuine' (in their eyes) businesses. IR35 botched it; this is (theoretically) going to make us all caught. This was always going to be the main driver behind the review and anybody who thought otherwise rather misunderstood what was going on.

IMHO, anyway

I believe that too. This is going to cost us very dearly. IMO.

[Fred Bloggs]

I think you are missing something.

You would be right IF the tax on dividends increased by the NIC rate, so if the higher rate tax on dividends increased to say 44.5% and 54.5% on income over £150,000 but that is a big IF!

My guess is that there may be some movement in the tax rates on dividends but the government need to be wary of people who receive dividends who are not subject to NIC such as pensioners, they will not want to make them pay more tax expecially as they tend to be vocal and vote!

Alan

I haven't seen anyone mention the fact that we pay tax of 21% before we get our dividends in our hands.

[shoes]

Or if a clear distinction is made between employee and non-employee, so limiting the scope of IR35, why shoud anyone who is a genuine non-employee care about IR35?

Because they will see an increase in taxation bought about by these changes that are in response to ir35 being ridiculous.

Simplification it may be, but at the cost of higher tax to pay? I guess we shall see.

[SorenLorensen]

Because they will see an increase in taxation bought about by these changes that are in response to ir35 being ridiculous.

Simplification it may be, but at the cost of higher tax to pay? I guess we shall see.

This is how I see it (and have done for a while ever since this OTS thing began). We've gone from uncertainty, but in a system where the majority pay less tax (but legally within the current rules), as IR35 has been a failure for the most part. Now moving to a simpler system (good), but whereby every contractor will pay a lot more tax.

[Lumiere]

If there are indeed changes to the way the dividends are taxed to be announced on the 23rd, does it make sense to declare the next tax year's dividends now and pay after the 6th of April ?

[malvolio]

Because they will see an increase in taxation bought about by these changes that are in response to ir35 being ridiculous.

Simplification it may be, but at the cost of higher tax to pay? I guess we shall see.

Oh wake up. One of the big errors in the OTS report is directly comparing employer and contractor income when assessing tax liability: you can't equate a £75k salary to a £75k gross company income. Also the average contractor already puts more tax into HMRC's coffers that the equivalent employee - they earn more, they pay CT, ErNICs, EeNICs and PAYE and generate VAT income. The average contractor's bill will stay much the same overall in proportion to the employees' one.

[dx4100]

IF IR35 doesn't exist, how can anyone be caught by it?

If tax is simplified into earned income and investment income, why does it matter how you work?

Or if a clear distinction is made between employee and non-employee, so limiting the scope of IR35, why shoud anyone who is a genuine non-employee care about IR35?

Before we all claim the onset of Armageddon, let's at least wait and see what is actually decided in the Budget. However you look at it, this is still a huge step forward from where we've been for the last 11 years.

I think certainty will be a good thing. Will give you that...

If they subject even more contractors to having to pay similar levels of tax as they do currently under IR35 then that will be bad thing.

The experts tell me I am not IR35 caught, I don't feel IR35 caught, but that doesn't mean the tax man and courts will take the same view

I want certainty, but not certainty to be taken to the cleaners by the tax man I don't mind paying more tax if I have to (from a uncaught IR35 position) but I also don't want to get subjected to the level of tax IR35 puts you under which is totally unfair IMO, disguised or not.