You can now almost Smell the end of IR35 - New announcement!

[malvolio]

I will.... anyway back to the subject.

I think some contractors might look at going perm if taxes went up a lot. For myself, why would I be away from home all week if I could get a nice perm role round the corner earning similair money? Ok, I wouldn't go perm anyway cause I can't stand the thought.....

I think this country will miss out on alot if they made contracting less rewarding, a flexible workforce is very important to the economy, they know it and won't put the taxes up (much).

That's the point. HMG have been persuaded that the UK flexible workforce is a major economic force, they won't gain anything by penalising it by dumb taxation changes.

[swamp]

Oh Dear [TM].

I take it all back.


John Whiting, tax director for the OTS, also told ContractorUK that measures to replace IR35 may need to consider a contractor's income sources, akin to Australia's retired '80-20' rule.

The former PwC partner was speaking yesterday, after accepting the unpaid role at the independent body which will review the myriad of tax reliefs and exemptions for its first task.

So they get an old body shop boss to decide the fate of contractors. Reminds me of Stephen Timms: architect of IR35 and former board member Anderson Consulting (now Accenture). No conflict of interest there then...

[Wanderer]

We're not worried. Lookiong at it one way, if we lose IR35 from the statute books then we have acheived our aims and we could simply shut up shop, share the contents of the bank account around the remaining membership and go home.

That is presuming they don't replace IR35 with something worse, in which case there will be thousands of contractors outside with burning torches baying for blood.

[northernladuk]

That is presuming they don't replace IR35 with something worse, in which case there will be thousands of contractors outside with burning torches baying for blood.

Which in my cup half empty world I am expecting

[lukemg]

I think this is setting us up for the 80-20 revenue clause, we are all stuffed. Turns out we are better off with the current system - Turkeys voting for christmas anyone ?

[malvolio]

Rubbish - read the quote, not the interpretation of it.

"We may have to go for more of the '80/20' approach but let's see where we get to. What I want...is a thoroughgoing review - not just another bit of sticking plaster."

He is clearly talking about applying a pareto approach to the work of the OTS, not how to replace IR35. The Aussie rules didn't work in Oz and will not be implemented in the UK.

[lje]

They why wait for the new rules. Put your rates up now and make even more.

The point is that ClientCo's don't care about our tax arrangements, so if they will pay more when the new rules come in, they will pay more now. If they won't pay now now, they still won't pay more when the new rules come in.

You're right that they don't care about our tax bills. But this is simple demand and supply. If contractors are taxed more then some of them will go back to being permie due to their reduced contracting income. That reduces the supply of contractors and so when a client co is looking they are more likely to find it difficult and will have to increase rates to get someone. This will reach some kind of equilibrium, which is likely to be higher than it is currently.

Similarly if they decided not to tax contractors at all (what a lovely dream!) then lots more people would go in to contracting as there would be more money to be made. People would be falling over each other to get each contract and so the rate would go down.

[centurian]

You're right that they don't care about our tax bills. But this is simple demand and supply. If contractors are taxed more then some of them will go back to being permie due to their reduced contracting income. That reduces the supply of contractors and so when a client co is looking they are more likely to find it difficult and will have to increase rates to get someone. This will reach some kind of equilibrium, which is likely to be higher than it is currently.

Yes, but if more go permie, then it can also reduce the demand for contractors. ClientCo's don't have to use contractors. They do because it currently it makes financial sense, but add on another 20% to the cost of a contractor, and they may decide it's cheaper to get a permie.

Demand will also be reduced due to price elasticity - some ClientCo bean counters will conclude that the project simply isn't worth doing because the resources (contractors) have become too expensive.

Net result Reduced supply and reduced demand - no change in rates.

I understand the underlying point you are making - and you are correct in saying that the equilibrium point may be higher if we are all caught by son-of-IR35. But if anyone thinks they can just whack on 20% to their rates and ClientCo's will just cough up - I think they will be sorely disappointed - the money has to come from somewhere...

[lukemg]

Firstly, this 80-20 revenue stream test or a variation of it may well be introduced as it will be a catch all for the vast majority and provides a definitive ruling. Result is increased tax revenue and removal of ambiguous current situation = win-win for the Man.
Secondly, yet again there is this myth of the 'I will just go permie' safety net, given a situation like this I expect many others will have the same idea reducing salaries and available jobs. In addition, I don't know any employer doing anything but reducing the size of any IT areas in the business - Where are all these perm jobs coming from ??

[dynamicsaxcontractor]

Yes, but if more go permie, then it can also reduce the demand for contractors. ClientCo's don't have to use contractors. They do because it currently it makes financial sense, but add on another 20% to the cost of a contractor, and they may decide it's cheaper to get a permie.

Demand will also be reduced due to price elasticity - some ClientCo bean counters will conclude that the project simply isn't worth doing because the resources (contractors) have become too expensive.

Net result Reduced supply and reduced demand - no change in rates.

I understand the underlying point you are making - and you are correct in saying that the equilibrium point may be higher if we are all caught by son-of-IR35. But if anyone thinks they can just whack on 20% to their rates and ClientCo's will just cough up - I think they will be sorely disappointed - the money has to come from somewhere...

Another realistic scenario is that people move abroad to work if taxes go up to much.