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

[ShandyDrinker]

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.

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.

My preference would have been for a 12 or 24 month rule as it would be simple for clients/agencies/contractors to understand. From what I can successive governments purposefully want to keep the rules vague and open to interpretation.

[Zero Liability]

My preference would have been for a 12 or 24 month rule as it would be simple for clients/agencies/contractors to understand. From what I can successive governments purposefully want to keep the rules vague and open to interpretation.

Although I'm in favour of abolition, even more so with the advent of the dividend tax, this made a lot more sense to me than time-based rules; but agreed otherwise.

[chopper]

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

Maybe its a government ruse to get rid of agencies? If we're not contracting, then agencies aren't putting their immense markups on our invoices (reduced CT) and then think of all those agents, out of work, not paying tax or NI but claiming benefits instead.

The law of unintended consequences and all that.

Of course, there will be new jobs for 'HR Business Partners' and payroll staff to deal with all the extra FTCs that come on board.

[Zero Liability]

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.

Well, they can't really call themselves the party of small or medium-sized business, and if this does go through with the details presented, I doubt most big businesses would consider them on their side either, other than a select few cronies. Maybe they should just call themselves the party of tax, borrow and spend? Or is that taken by Labour?

Maybe its a government ruse to get rid of agencies? If we're not contracting, then agencies aren't putting their immense markups on our invoices (reduced CT) and then think of all those agents, out of work, not paying tax or NI but claiming benefits instead.

The law of unintended consequences and all that.

Of course, there will be new jobs for 'HR Business Partners' and payroll staff to deal with all the extra FTCs that come on board.

The presumption of SDC was specific to the T&S consultation and IR35 discussion doc. It may be that they've just dropped that entirely and come up with something 'better'.

[ShandyDrinker]

Although I'm in favour of abolition, even more so with the advent of the dividend tax, this made a lot more sense to me than time-based rules; but agreed otherwise.

Agreed. In absence of the time based approach, if control was the only other defining factor I'd also be all for that approach.

[Milkyway]

Well, they can't really call themselves the party of small or medium-sized business, and if this does go through with the details presented, I doubt most big businesses would consider them on their side either, other than a select few cronies. Maybe they should just call themselves the party of tax, borrow and spend? Or is that taken by Labour?



The presumption of SDC was specific to the T&S consultation and IR35 discussion doc. It may be that they've just dropped that entirely and come up with something 'better'.

I have a strong feeling, that whatever it is, the outcome will be:

1. Consultants with specialist skill will be able to carry on doing consulting, at a very high rate too, and will be able to move across many pieces of work in a year
2. "Employee styled contractors" withe the mind set of "get a job through job serve for a 9-5 work" thinking, are screwed!
3. ClientCo will go through hell (they will have to pay more for special skills contractors, pay a lot more in long term by hiring all permies after the new law, and end up losing to get great contractors (especially locally!) at flexible "hire and fire" anytime (i.e. typically more than 5-6 months) notice model, and will have put up with offshored bad quality (long term costly" companies)
4. Agencies business model is screwed! They will probably be doing a "will get an employee for you, sir" type business

The winner is... Consultants!

[cojak]

I am really looking forward to watching the consequences of this in the current and future government contracts.

The Met has recently given a big contract to Atos, and no matter what they say, Atos won't have the the resources or skills to use only permies.

Next year will prove interesting...

[Zero Liability]

Agreed. In absence of the time based approach, if control was the only other defining factor I'd also be all for that approach.

Well, you'll notice that in the way the article advocated for it, the control test would also be related to whether the contractor was engaged on a particular time-bound project.

If the work is task-based and there are no specific project deliverables, then there is likely to be control. If the engager can provide specific project deliverables, which require outside expertise – even if there are internal staff doing similar work – which is for a limited time period and is not the replacement for an employed role left unfilled, then there will be no control, or no more than should be the case over an independent contractor.

Where I assume "limited period" would mean not enduring as a function within the firm integrated into its BAU operations, e.g. a cleaner.

I think the approach that article took was pretty sensible, although like the author I'm unclear on why the other two tests should be jettisoned other than making life harder for hector. However, it would at least have the virtue of eliminating Fri-Mon scenarios without decimating the rest of the market.

I have a strong feeling, that whatever it is, the outcome will be:

1. Consultants with specialist skill will be able to carry on doing consulting, at a very high rate too, and will be able to move across many pieces of work in a year
2. "Employee styled contractors" withe the mind set of "get a job through job serve for a 9-5 work" thinking, are screwed!
3. ClientCo will go through hell (they will have to pay more for special skills contractors, pay a lot more in long term by hiring all permies after the new law, and end up losing to get great contractors (especially locally!) at flexible "hire and fire" anytime (i.e. typically more than 5-6 months) notice model, and will have put up with offshored bad quality (long term costly" companies)
4. Agencies business model is screwed! They will probably be doing a "will get an employee for you, sir" type business

The winner is... Consultants!

Maybe in some cases, but what about cases where the consultant would like more time to gain an appreciation of the business, particularly where the project is quite complex and more time is required to devise a solution/offer advice? There is already a lot of resentment amongst permies in some businesses towards parachuting in consultants, who then leave a couple of months afterwards (rarely as little as one month), leaving someone else to pick up the mess. I don't think anyone is a winner from this, not even HMG itself.

I think it's best to wait on further details, as it's all speculative and hearsay ATM.

[Milkyway]

"Maybe in some cases, but what about cases where the consultant would like more time to gain an appreciation of the business, particularly where the project is quite complex and more time s required to devise a solution/offer advice? There is already a lot of resentment amongst permies in some businesses towards parachuting in consultants, who then leave a couple of months afterwards (rarely as little as one month), leaving someone else to pick up the mess. I don't think anyone is a winner from this, not even HMG itself."

Yeah, but that will be the headache of the ClientCo - not mine. They are one to come up to hiring me
As far as i am concerned, i will demand that "one month" only time model, and its up to the clientco to sort things out for me, if they are desperate to hire me.
May be they will split the work into multiple pieces, the first piece to get the knowledge thing that you are talking about, then come back in a few weeks time after that and get me another contract to do the piece of work (i.e. within another one month; and then possibly split it into multiple pieces across many consultants, to do it one after the other)
Or else have me to do it for 3 months, breaking my one month only time limit model, but me ending up demanding the moon of the rate for the 3 months piece of work.

You see, this is another headache for the ClientCo, not mine
I am an individual, i will moan, and if i was like others here - may be I will blame the foreigners and then move on!
On the other hand, ClientCo have longer term business to do for their work/projects.
So it becomes a newer headache for them to deal with - on top of other bits i have already thought of!
They have to do a lot of thinking about these things, not me!

It is going to be "hell broken lose" for ClientCos.

BUT the interesting thing is, the cliencos are completely oblivious to all this
When they wake up to reality eventually (which i doubt will happen), maybe they will just have enough time to stop Gideon throwing the hell on them, and be able to stop the law passing.
Here is hoping!

[centurian]

My preference would have been for a 12 or 24 month rule as it would be simple for clients/agencies/contractors to understand. From what I can successive governments purposefully want to keep the rules vague and open to interpretation.

We're in total agreement here. However it's a case of careful what you wish for, because that is what's being suggested - just that it kicks in after 1 month.

If there had been a proposal like, "if you stay anywhere for more than a year, you're taxed as if you are a permie, no exceptions.", I could accept that.

Even at 6 months, it would mean a lot more upheaval, but I could still understand the point of it. It helps to draw a balance between those who are genuinely consulting vs those who are effectively freelance permies. The marketplace would adjust - good contractors, who are able to get up to speed easily would be able to flourish and flip between a number of good clients.

3 months - now that would be harsh. The market would shrink - it would just be too much hassle for some ClientCo's, but true consultants would probably see rates rise.

But 1 month.... it just won't be worth the hassle to many clients.