Crackdown on personal service companies could raise £400m in tax

[MrMarkyMark]

Exactly. My point was "you're an expert because you're an expert, not because you're a contractor". There are contractors that do nothing like you do; perhaps they man a support phone line 9-5 doing exactly what they're told to do. They should probably be inside IR35, but they're still contractors. The term "contractor" doesn't define a way of working that's different to the way a permie works. You might be different, but the majority probably are not. My experience is being part of software teams, both as a permie and as a contractor, and there's no difference day to day. Any decent team has people with different skills so you don't have to be a contractor to be doing something that nobody else can do.

You are getting there .
At least you are making a distinction now, you are more of a team player, rather than a lead player.
A true SME, also delivers valuable strategic advice to a business, rather than just going along with pre-determined tasks.
That's one of the reasons why I don't like to be lumped in with everyone else.

If one of your clients decided they had enough work to warrant keeping you around permanently and offered you a huge enough salary to make it worth it, you could take it. You could take it and carry on doing exactly the same job in the same way as before except you're now an employee.

I have been offered a huge salary, as a BI Practitioner, to set up a consultancy. I have mentioned the figure on here, before, so won't dick size again.
However, with all the extra evening hours required to smooze clients etc. I decided to stay with what I was doing.

[MarkT]

Maybe this has gotten confused?

The thing is most newspapers, Guardian and Mail very much included, only know how this works for their chums in the media, and I do wonder if this is what the government are actually going after, the likes of Fiona Bruce etc. The Guardian article is very poorly worded and seems to be talking about the T&S stuff. It's likely that their source is theDaily Mail article itself!

We don't know the detail, but the idea that contracting is suddenly made almost impossible seems very far fetched. Big business will not wear this at all, they want and need a flexible workforce, beyond Capita, KPMG et al and will in all likelihood get what they want.

My main concern is that the T&S stuff forms part of the consultation document, that sounds real, that sounds scary and that is going to happen in some form or another, very soon. That'll outlaw long distance contracting, meaning people will be moving from the North to the South to work, exactly what George doesn't want (Northern powerhouse and all). This means that the govt may be positioning themselves Sir Humphrey style:

They currently get Steak for for £5 but we can't afford to give them that, so we offer them Chicken for the same price, when they refuse, sigh and say that we could offer them rat at a higher price than steak. When they calm down at the idea of rat, offer them chicken again.

[xoggoth]

Doesn't affect me as I am retired but this is really p*ing me off. Hopefully there is no basis for it.

Can't see the relevance of what the job is or what the level of control is. It just illustrates the stupidity of government that they see those as the important points.

The two crucial factors are a) Because a contractor is there on a temporary basis, he is likely to incur extra costs that a permanent employee does not because he cannot relocate and b) Unlike a builder (who are absurdly being considered for exemption) most highly skilled contractors do not find work locally and have to travel long distances or stay away. If they are at a place for anything under six months they will not be able to rent a flat and will need to pay large costs for hotels/B&Bs. It is crazy not to take these realities into account.

[d000hg]

The uncertainty of work is not a reason to pay less tax though - it's a reason to pay the same level of tax but charge a much higher rate.

Regarding T&S: that's valid and the proposed changes in this area seem daft. BUT, maybe it will simply mean that it becomes the norm for clients - or maybe agents(?) - to pay this rather than for the contractor baking NI, travel, accommodation into their rate? It happens sometimes already, and if they want to make us more like employees then maybe this will be a natural consequence... it seems that this would be more palatable to clients than huge rate increases from contractors?

[VectraMan]

The two crucial factors are a) Because a contractor is there on a temporary basis, he is likely to incur extra costs that a permanent employee does not because he cannot relocate and b) Unlike a builder (who are absurdly being considered for exemption) most highly skilled contractors do not find work locally and have to travel long distances or stay away. If they are at a place for anything under six months they will not be able to rent a flat and will need to pay large costs for hotels/B&Bs. It is crazy not to take these realities into account.

At the risk of starting another argument: permies also commute, and can't necessarily easily relocate either. And no permanent job is permanent; it's only really as long as your notice period. I would say give everyone travel expenses for a certain time; maybe 2 years, maybe less, long enough that you can reasonably up sticks to get closer to work and be reasonably sure that it's going to last. Perhaps that encourages more people to consider work outside their area.

It won't happen of course.

[Danglekt]

The uncertainty of work is not a reason to pay less tax though - it's a reason to pay the same level of tax but charge a much higher rate.

Regarding T&S: that's valid and the proposed changes in this area seem daft. BUT, maybe it will simply mean that it becomes the norm for clients - or maybe agents(?) - to pay this rather than for the contractor baking NI, travel, accommodation into their rate? It happens sometimes already, and if they want to make us more like employees then maybe this will be a natural consequence... it seems that this would be more palatable to clients than huge rate increases from contractors?

It's a reason for us to be outside PAYE waiting for a rebate when we have been on the bench for half the year but been taxed whilst in work as if we will be in contract all year...

[d000hg]

It's a reason for us to be outside PAYE waiting for a rebate when we have been on the bench for half the year but been taxed whilst in work as if we will be in contract all year...

Isn't paying tax on account (i.e. in advance) something that's fairly common for contractors already? It's not something I've ever run into.

I'm not sure this is a convincing reason against the whole scheme though. We're used to being in arrears for payments, you should be able to cope with that! It's one small annoyance but it shouldn't swing things either way.

[xoggoth]

I would say give everyone travel expenses for a certain time; maybe 2 years, maybe less, long enough that you can reasonably up sticks to get closer to work and be reasonably sure that it's going to last. Perhaps that encourages more people to consider work outside their area.

"Geographical immobility" is a problem, especially among the lower paid, so that sounds like a good idea. For that reason I agree it won't happen.

[Danglekt]

Isn't paying tax on account (i.e. in advance) something that's fairly common for contractors already? It's not something I've ever run into.

I'm not sure this is a convincing reason against the whole scheme though. We're used to being in arrears for payments, you should be able to cope with that! It's one small annoyance but it shouldn't swing things either way.

Well I have it in a separate business account, based on the relevant assumption - but when a contractor is on anything above a very small day rate they will exceed the 40% threshold very easily, so lets assume 1st April 2017 I'm on say....£250 a day - via PAYE that means they assume I will be paid that all year (as they will assume I get paid holiday), and tax me accordingly (£65k gross) - throwing it through a salary calc thats £20k of deductions BEFORE employer NI of £7.8k which I don't know if it will be taken at source or not, assuming they do... £28k of deductions that they will profile over the full year and therefore take £2333 off me every month.

Per month

Income of £5250
Deductions of £2333
Leaving me £2917.

If I am only in the gig for three months then on the bench the rest if the year...

I have £8751 in my pocket, but I've paid out £7k in deductions - the vast majority of which I am due back, but I won't have access to it until rebate time (which I always thought happened after the turn of year...but perhaps not)

I assume there is some way to ask for it back in advance? If there isn't it's highly unfair making people wait 9 months + for their own money back, and if there is then the dept better bulk up, cos they are going to get hit with a lot of claims.

Imagine bouncing on and off the bench, there will be refund requests, and PAYE income shuttling in and out all year.

My point is, PAYE and temporary workforce isn't a very good match!

[MicrosoftBob]

And if we end up on emergency tax codes, that's a whole lot of NI overpaid that you'll never get back