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

[Milkyway]

I have started to think about all this mess in a positive manner , because it is going to happen, whether we moan about it or not!

TBH, what the govt are doing is great

Contractors (i.e. Consultants) who have absolute niche skills and expertise will demand that they will stick ot this one month rule, and just be there with the ClientCo to get that special piece of work (that the permies can't do) will be done and they can leave, and get on with helping other customers next
Simple and clean!

This will immediately mean: ClientCo will...

1. Not end up involving the consultant in local politics (since they wont have the time for it)
2, Will keep the requirements absolutely ready, for the consultant to come and hit the ground running with high speed, get the work done, and leave

This will also mean, if the ClientCos want to have people for more time,

1. They will have to hire permies
2. Pay all the full whack of their share of NI
3. End up paying for the hired to get all the benefits of full time employees

Also, its the clientco that will be ending up with interviewing new consultants every once in a month , since the consultant hired will want to leave in one month, being truthful to Gideon's spirits of this new law

The consultant will have done 12 or so clientcos in a year, and that is fun, since he can get back to consulting one of these again in a while, say every 2-3 years once.
There could also be repeat business from client co (needless to say at higher rates), since they will trust and hire him rather than going to try and trust a new one (every one month once).

I think, unknowingly to HMG and HMRC, what is happening is that this new legislation is only a bunch of problems for the ClientCo, not the special skills contractor.
We will moan, and move on, but ClientCos will suffer in terms of flexible work not being available, and the only resort will be either hire full time permies and pay all that lot of cash or get the Indian companies (that will surely result in low quality code for them and high maintenance cost in future!)

So i see BIG problems for businesses, not consultants, on the whole.

But hey, ClientCos are of the thinking that the IR35 changes means its all to do with contractor's tax dodging stuff and they are happily keeping quite about it.
In reality it is a law to bite the clientcos hard.

[woohoo]

Centurian is right. The definition is just splitting hairs. The government are trying to gauge whether they can get this through on public support so the definition really doesn't matter.

The crux here is whether you source work via an Agency/Intermediary. Those that are able to source work directly should be fine and congratulations to you if you are one of those people. Over the 7+ years I've been contracting about half of that time has been spent in direct contracts but unfortunately I've found them harder to source in the last 3 years.

I might have missed it and I'm hungover but why does it matter how you source your work?

[ShandyDrinker]

I have started to think about all this mess in a positive manner , because it is going to happen, whether we moan about it or not!

TBH, what the govt are doing is great

Contractors (i.e. Consultants) who have absolute niche skills and expertise will demand that they will stick ot this one month rule, and just be there with the ClientCo to get that special piece of work (that the permies can't do) will be done and they can leave, and get on with helping other customers next
Simple and clean!

This will immediately mean: ClientCo will...

1. Not end up involving the consultant in local politics (since they wont have the time for it)
2, Will keep the requirements absolutely ready, for the consultant to come and hit the ground running with high speed, get the work done, and leave

This will also mean, if the ClientCos want to have people for more time,

1. They will have to hire permies
2. Pay all the full whack of their share of NI
3. End up paying for the hired to get all the benefits of full time employees

Also, its the clientco that will be ending up with interviewing new consultants every once in a month , since the consultant hired will want to leave in one month, being truthful to Gideon's spirits of this new law

The consultant will ahve done 12 or so clientcos in a year, and that is fun, since he can get back to consulting one of these again in a while, say every 2-3 years once.
There could also be repeat business from client co (needless to say at higher rates), since they will trust and hire him rather than going to try and trust a new one (every one month once).

I think, unknowingly, what is happening is that this new legislation is only a bunch of problems for the ClientCo, not the contractor.
We will moan, and move on, but ClientCos will suffer in terms of flexible work not being available, and the only resort will be Indian companies, that will surely result in low quality code for them and high maintenance cost in future!

So i see BIG problems for businesses, not consultants, on the whole.

But hey ClientCos are of the thinking IR35 changes means something to do with contractor's tax dodging stuff
In reality it is a law to bite the clientcos hard.

A really good alternative point if view. However, if the clients are so organised to ensure requirements are absolutely ready, they may as well ensure they have the permies ready onsite to do the work.

Part of the reason for the prevalence of contractors (certainly in software development) is because many clients are so disorganised. Some are better than others but it's a general theme I've seen while contracting, whether direct or via agencies.

[Waldorf]

Lets not kid ourselves. The vast majority of the public view PSCs as outright tax dodging.

Well look at it from the eyes of the average man in the street:

Being able to claim for travel between home and place of work;

Being able to claim for lunch;

Paying a low salary to avoid paying NIC and PAYE;

Limiting income to avoid paying any personal taxes;

Paying some of earnings to a spouse in the form of salary and/or dividends;

Building up cash in the company and eventually withdrawing it paying just 10% tax.

Is it any wonder HMRC/Government/Media/General Public think using a PSC is taking the P*** ?

[Zero Liability]

Yeah, if you omit the lack of employment rights etc., it does seem like that. Of course, the average person will in practice be paying far less tax than this (even including NI), because they earn closer to £25k pa, and don't really have a problem with "tax planning" themselves when they do it. For those who do earn in the 40% threshold range, they should ask their govt why it spends so much and thinks it can just stick them with the bill for its overspending.

A really good alternative point if view. However, if the clients are so organised to ensure requirements are absolutely ready, they may as well ensure they have the permies ready onsite to do the work.

Part of the reason for the prevalence of contractors (certainly in software development) is because many clients are so disorganised. Some are better than others but it's a general theme I've seen while contracting, whether direct or via agencies.

Which other business would be forced to terminate its relationship with a client, though, after just one month, or risk being branded not a real business? A 24 month rule would have been arbitrary and potentially insensitive to the nature of projects in some industries, but at least it'd be nowhere near as bad as one month.

[ShandyDrinker]

I might have missed it and I'm hungover but why does it matter how you source your work?

Because as I understand it with the proposed changes anyone working via an agency will automatically be considered inside IR35 come April 2016. Those working direct will at least have a fighting chance of being able to prove they are outside of IR35.

I am happy to be wrong in my interpretation.

[meridian]

What I don't quite understand, is why the existing rules (Monday-to Friday, IR35, etc) weren't used on the BBC? The Fail even reports that Fiona Bruce is now back on the payroll, so surely she would be reassessed under IR35?

[ShandyDrinker]

Well look at it from the eyes of the average man in the street:

Being able to claim for travel between home and place of work;

Being able to claim for lunch;

Paying a low salary to avoid paying NIC and PAYE;

Limiting income to avoid paying any personal taxes;

Paying some of earnings to a spouse in the form of salary and/or dividends;

Building up cash in the company and eventually withdrawing it paying just 10% tax.

Is it any wonder HMRC/Government/Media/General Public think using a PSC is taking the P*** ?

But you're only taking the Daily Wail type of approach. What about the downsides such as periods out of work, benefits of being a permie etc etc?

If contracting is as easy as a regular pay cheque, let the average man on the street go out and do it and stop whinging about the fact that someone else might be doing better than they are.

[Zero Liability]

But you're only taking the Daily Wail type of approach. What about the downsides such as periods out of work, benefits of being a permie etc etc?

If contracting is as easy as a regular pay cheque, let the average man on the street go out and do it and stop whinging about the fact that someone else might be doing better than they are.

TBF to him, I think he knows that.

[Milkyway]

A really good alternative point if view. However, if the clients are so organised to ensure requirements are absolutely ready, they may as well ensure they have the permies ready onsite to do the work.

Part of the reason for the prevalence of contractors (certainly in software development) is because many clients are so disorganised. Some are better than others but it's a general theme I've seen while contracting, whether direct or via agencies.

Agreed, but i can only talk from my experience and perspective (Selfish me!)
Mine is a very special niche area/skill, and i have never seen the permies been able to do this - believe it or not!
It could be that the companies generally don't allow or encourage the permies to spend a lot of time specialising in one / certain specialist areas, and hence i have always found business.

So no matter whether they keep the requirements ready or not, the permies can't do it, so its got to be special skilled consultants like me to do it, and hence in this particular case this new law will only help me better, since i wont have to go around and tell them what they should possible have in the software that i build for them , which does take small time for me, but a lot of time for the client co to go around asking their people in various hierarchy to check and come back the chain (by that time its almost 3 weeks me doing what they had asked during that time), and i do that bit after that, costing them more money.

Also i don't have to sit around and help permies learn stuff from my deliverable when i leave (since there won't be any time for it, i will be adamant about this one month thing - i will quote HMRC and HMG law for it )- thereby i don't have to deal with holding their hands teaching them stuff bit by bit
In my experience it has been so painful.

With this new law, its a great toy for me since, as though by magic , the client co will know exactly what they want me to do (and "no teaching the permies" stuff either!), and i will have fun doing exactly that bit and get on with my next piece

Many thanks, Gideon, and our beloved HMRC.
Great minds there!

Do you lot want an extra penny in tax please? for this great new piece of law. Can't wait until 2017.
Thanks once again, Govt bods.