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

[MrO666]

So all this doesn't apply if you invoice multiple clients. To me this seems like a likely candidate to work around this. If you can prove to whoever has the onus for making sure contractor passes test, that you invoice other clients, then that seems like a much more clearer criteria to meet than SDC. This is provided HMRC has the sense to properly define what that means of course. I suppose the criteria could be amount of time spent working for each client within a set amount of time. Typically my clients don't want to share my time as it would be too sensitive (Chinese walls and such), but if the industry is completely separate and time requirements are realistic, it could work for me. I'd happily do some low-paid work on rent-a-coder to maintain my status.

I think any approach regarding multiple clients etc would again just make things even harder to truly understand and navigate.

That's what the issue is (for me at least), HMRC will end up producing guidelines which are so difficult to understand, or which leave far too much room for interpretation, which in the long run would end up a total mess yet again.

HMRC REALLY need to actually engage business in this whole thing and jointly create an approach, instead of just trying to shoehorn some ill conceived half arsed offering on them.

[MarkT]

So all this doesn't apply if you invoice multiple clients. To me this seems like a likely candidate to work around this. If you can prove to whoever has the onus for making sure contractor passes test, that you invoice other clients, then that seems like a much more clearer criteria to meet than SDC. This is provided HMRC has the sense to properly define what that means of course. I suppose the criteria could be amount of time spent working for each client within a set amount of time. Typically my clients don't want to share my time as it would be too sensitive (Chinese walls and such), but if the industry is completely separate and time requirements are realistic, it could work for me. I'd happily do some low-paid work on rent-a-coder to maintain my status.

Surely this will be done on a "how many clients have you had and what % of the company income was through each"

[MrMarkyMark]

Surely this will be done on a "how many clients have you had and what % of the company income was through each"

They do something similar in Australia.

No one stays in a role longer than 6 months to get around the rule, business's there are complaining.

[MrO666]

Surely this will be done on a "how many clients have you had and what % of the company income was through each"

I'd be surprised as that would technically be too easy for an unscrupulous director to manipulate I'd have thought. Contracts with other contractors, invoicing between the two companies for the same £'s.......far to easy to circumvent.

Plus this could (probably would) change on a monthly basis, so it's all but useless when trying to ascertain whether a specific contract is "in or out" of the rules.

[Ned]

I think HMRC are going to have second guessed the rent-a-coder line and would look at time spent to debunk this strategy. Also remember if you are genuinely invoicing multiple clients it's currently possible to be inside IR35 on one contract and not the other as it's on a contract by contract basis. It did help with the now defunct BET's but doesn't really help in an investigation. I'm not convinced that multiple clients will be a gauranteed way out after the changes either.

Agreed, if time spent requirements are unrealistic then it would make rent-a-coder strategy difficult. I don't want to or even can sacrifice more than 10 hours a week above what I currently make available. That would make a 25%-75% split realistic if painful, but nothing above that.

I see your point with the IR35 liability being on a per-contract basis, but I think it's still a better situation than pretty much guaranteed PAYE on single exclusive 12 month contract with an understandably risk-averse ClientCo. The multiple client strategy, would be like the current situation, but with liability split amongst contracts and is still insurable under a tax-liability insurance.
As far as I understand the highly speculative information floating around this anyway.

[Ned]

Surely this will be done on a "how many clients have you had and what % of the company income was through each"

True, that would be scuttle the rent-a-coder or 'charitable' work for local businesses strategy.

[MrO666]

OK......we all know that something is going to have to give. So what ideas have people got which would help HMRC achieve their goals whilst still allowing the contractor industry to continue to function ?


One idea I had would be that a PSC (yeah I know) could take £X per annum in dividends. Anything above that threshold would need to be taken as PAYE. Whilst controversial, most genuine LTD contractors I know leave a decent portion of invoice £ in the company anyway, so if it stays in the company then no tax other than CT would arise. If somebody is taking every single penny as divi's then it does begin to look like they're treating the whole lot as a salary and just minimising the tax liability....which is what I assume HMRC are trying to stop.

Makes the whole thing VERY easy to administer too with no intervention from HMRC. Release new rules and accountants would adhere to them.

Not saying this is a good idea, i'm just floating "an" idea.

[MarkT]

I'd be surprised as that would technically be too easy for an unscrupulous director to manipulate I'd have thought. Contracts with other contractors, invoicing between the two companies for the same £'s.......far to easy to circumvent.

Plus this could (probably would) change on a monthly basis, so it's all but useless when trying to ascertain whether a specific contract is "in or out" of the rules.

I think it'll be:

1. ) "Over the past year (12 months) have you had more than one client?"
1a.) "What was the income from client 1?"
1b.) "What was the income from client 2?"

"If you have more than X% (75%) from a single client, you must take the SDC test for that client, and all others"

"Bend over"

[d000hg]

You are a funny one.

First of all when did I state I was a one-man-band?

You're not a contractor then?

Secondly - backbone of the economy? No, but they're big part of it. All the local high streets are full of them; fast food shops, mom and pop computer shops, thrift stores, cafes, sandwich vans, pubs, vape shops, newsagents, petrol stations, McDonald's, Subway, tyre places, window fitters, locksmiths. The list is pretty much endless.

I've eliminated the ones which are not one-man bands, firstly. Virtually every cafe employs staff, as do pubs, etc.

That aside, the vast majority of these places are not going to be hit (much anyway) by the changes. Of all the stuff we're talking about, surely the only one affecting these places is dividend tax? And businesses small enough to be one-man bands... sandwich vans, little 1-man newsagents, etc, are NOT making a lot of money. It's generally closer to a subsistence level or low-salary equivalent.

Tradesmen could be affected more, perhaps.

Or are there other changes which will affect your local newsagent?

Just in general to be honest, there will be a large number of people who receive some form of income via dividend

Such as who/what? I can think of small business owners and people owning shares as part of their investment portfolio. Most of the latter probably won't be earning enough dividends to start paying tax, it's a reasonably small proportion of people who have 100k+ of shares.

[LucidDementia]

You're not a contractor then?

I've eliminated the ones which are not one-man bands, firstly. Virtually every cafe employs staff, as do pubs, etc.

That aside, the vast majority of these places are not going to be hit (much anyway) by the changes. Of all the stuff we're talking about, surely the only one affecting these places is dividend tax? And businesses small enough to be one-man bands... sandwich vans, little 1-man newsagents, etc, are NOT making a lot of money. It's generally closer to a subsistence level or low-salary equivalent.

Tradesmen could be affected more, perhaps.

Or are there other changes which will affect your local newsagent?

Such as who/what? I can think of small business owners and people owning shares as part of their investment portfolio. Most of the latter probably won't be earning enough dividends to start paying tax, it's a reasonably small proportion of people who have 100k+ of shares.

Yes I am a contractor. Am I only a contractor? No.

Employing staff does not stop the dividend tax changes impacting income; again it's personal towards me instead of focussing on the issue.
You make wild assumptions on the incomes of small business owners and one man bands. Plenty do fairly well, that's why they do it. The little corner shops for example, some of them make very good money.
I find it hilarious that you think this is a negligible impact or market sector. You live in cloud cuckoo land.

I don't suppose you exist mainly in the IB arena do you?