FLCs - LFIG Proposal

[TykeMerc]

I hadn't had time to go through and do the markup and comments, but well

WHAT HE SAID

I see no benefits and an awful lot of risks in the proposals.

[jamesbrown]

According our idea it would be to give you a by on some of the IR35 issues such as substitution and the need to have concurrent contracts.

From a contractors POV, I think a prerequisite for any proposal would be a good understanding of the existing legislation and how it impacts contractors. You've mentioned this several times now and in such a way that suggests it's intentional rather than an unfortunate turn of phrase. By definition, IR35 is silent on the need to have concurrent contracts, because it is applied on a contract-by-contract basis. It isn't even an important "soft" factor. Details matter and this lack of understanding is, from my perspective, extremely revealing. I won't repeat all of the criticisms of the FLC proposal, more generally, as they've been done to death here and elsewhere.

[mudskipper]

It seems to me that if the tax paid is to be lower than operating through a brolly, the appeal will be to brolly users. There would be no obvious incentive for a ltd company outside IR35 to become a FLC. That would result in a drop in tax revenue. I can't see that happening.

[SueEllen]

=
What I do know from reading the commentary on these ideas elsewhere is that the accountants don't seem to like it, which perhaps recommends it all the more

No it's contractors who don't like it.

You seem to have no understanding of how contractors work. Maybe you should actually talk to people then making presumptions about how we contract.

[malvolio]

I have many objections to the idea as presented, but one leaps out at me. The point of Artic was that a spouse shares equally in the risk of the income from a freelance business, especially if they are non-working or on a low income. Thankfully the Supreme Court agreed with that position, after a few minor discussions...

So the idea of banning the other half from being a shareholder in the family business is a complete non-starter.

Otherwise, what they all said.

[BolshieBastard]

It seems to me that if the tax paid is to be lower than operating through a brolly, the appeal will be to brolly users. There would be no obvious incentive for a ltd company outside IR35 to become a FLC. That would result in a drop in tax revenue. I can't see that happening.

Whichever way you look at it, the proposals will mean contractors will pay a lot more tax for the trade off of not being investigated under IR35. In effect, the tax take will be the difference between the deemed 95% taxable income under IR35 and whatever the 'fair' split of income and 'fair' dividend tax take will be.

Id suggest there wouldnt be much difference, say 10% tops.There's no way HMRC are going to counternance 50/50 income / dividend split. They already have a marker with 5% allowable expenses so why on earth would they 'allow' a dividend of double this?

These proposals are rubbish. You may as well operate as IR35 caught. And why the hell shouldnt I have as many shareholders in my company as I want. Are M&S or Tesco's limited?

[eek]

The other bit I love is

for the low paid issues around forced-self employment

and then nothing else regarding that topic. It feels like these plans are as ill thought out as IPSE's details are none existent...

[Zero Liability]

From a contractors POV, I think a prerequisite for any proposal would be a good understanding of the existing legislation and how it impacts contractors. You've mentioned this several times now and in such a way that suggests it's intentional rather than an unfortunate turn of phrase. By definition, IR35 is silent on the need to have concurrent contracts, because it is applied on a contract-by-contract basis. It isn't even an important "soft" factor. Details matter and this lack of understanding is, from my perspective, extremely revealing. I won't repeat all of the criticisms of the FLC proposal, more generally, as they've been done to death here and elsewhere.

I am quite shocked that even professional contracting websites and consultants (e.g. this*, I highly doubt Vessey is ignorant of this) keep letting this rather ignorant error slip. Granted, most are against it, but they should be catching out these points. Are they as careless when reviewing contracts? Fair enough if Ross doesn't know it, although it does raise questions about how well placed he is to make proposals on this matter, but why is it receiving such scant attention outside of this forum? Substitution is a pillar, but obviously not the only one. Really, if it were better defined, lack of MoO would be the silver bullet, as it benefits the client and contractor alike, and is very easy to write into the contract and implement in the WP, and highlights the lack of a genuine employment relationship, which granted, so does an RoS.

*some pretty good commentary there, too.

[eek]

I am quite shocked that even professional contracting websites and consultants (e.g. this, I highly doubt Vessey is ignorant of this) keep letting this rather ignorant error slip. Granted, most are against it, but they should be catching out these points. Are they as careless when reviewing contracts? Fair enough if Ross doesn't know it, although it does raise questions about how well placed he is to make proposals on this matter, but why is it receiving such scant attention outside of this forum? Substitution is a pillar, but obviously not the only one. Really, if it were better defined, lack of MoO would be the silver bullet, as it benefits the client and contractor alike, and is very easy to write into the contract and implement in the WP, and highlights the lack of a genuine employment relationship, which granted, so does an RoS.

I think the problem with MoO is that on one side we like it but many zero hour contracts work on the MoO principle. And while I personally hate the idea of a zero hour contract I can see why for some people (students say) they work well.

[Zero Liability]

Perhaps, but it's certainly an area where the client, agency (a bit less so but the client's desire for flexibility to terminate at-will is the overriding driver here) and contractor have a commonality of interests, and it is easy to reflect it in the contract and the WP, probably why it has remained a grey area that HMRC would not prefer to touch upon overly much. I'm still in the dark, though, as to what sort of tests will define being genuinely in business of your own account for the purposes of the FLC. I mean if there's any overlap with IR35 tests (about which the proposers of this scheme seem ignorant), surely if you are in a secure enough position to form an FLC, you are also in the same position to do it via a ltd anyway, so what is gained? Other than ditching one of the hurdles HMRC have to jump through? I can see why people are so deeply cynical towards this proposal, as the benefits are hugely unclear and the requirements for it equally opaque.