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

[BoredBloke]

If this gets put through then you'll see a huge increase in FTC contracts. You too can earn £35k pro rata for 6 months work (£17.5k), rather than the £50k you might have got for it! But in that 6 months you might be given 2 weeks paid holiday so that's all good then!

I think you'll also see a rise in body shops as agencies move to supplying staff through their own brolly - its a win win for them as they can charge the normal fees for recruitment and then a management and payroll fee for the brolly. I think Hyphen already have this employed contractor model thing that used to appear on Jobserve. These will just act like any of the big consultancies supplying their staff to other employers.

The bog standard contractor supplying their skills to the end client via and agency will be long gone. The whole 1 month thing is rubbish. No end client is going to risk having to pick up the contractors employers NI - they will just employ people using the safest route for them. Wasn't the reason we have to use limited companies in the first place was to prevent agencies being stung for our taxes, so they stopped us from being classed as self employed?

If there are 100,000 limited company contractors working in this way, and each paid their accountant £1000 a year, that's £100,000,000 lost to the overall economy!

[VectraMan]

If there are 100,000 limited company contractors working in this way, and each paid their accountant £1000 a year, that's £100,000,000 lost to the overall economy!

Or to put it another way, £100,000,000 saved.

[LondonManc]

Did anyone see this bit in the linked article?

Awesome. I can take a couple of really crappy low cost, low involvement deals locally to do a couple of hours a week for people and I'm exempt. All hail the Fail!!

[Danglekt]

missed this last week - ouch!

Few thoughts in terms of the future direction that doesn't involve us all throwing in the towel:

Umbrella via PAYE would still work for some people - as it ticks the PAYE box, leaves the day rate as it is (increases it?....hmmm maybe not!) and is still better than Perm salary

Multiple clients - couple of part time gigs, but depends on the criteria and assume it will be a high bar

Form a consultancy with a few other contracts - risky, and a headache but possible

Hopefully the CBI will put some reasonable views across and a compromise (that is probably pre-prepared) will be come to

[BlueSharp]

Quote from the article:

The government acknowledges that a small number of professionals will still legitimately use personal service companies. Some IT workers might work for a company for a short period or they might work for multiple companies at the same time. In that case they would not be seen as an employee. Builders doing one job on a private house would be exempt.

But there are understood to be examples of professionals such as lawyers working for one company for a short period of two months. Ministers believe that in these circumstances they should be counted as employees and should pay income tax.

Could IT be exempt from the new rules?

[VectraMan]

Multiple clients - couple of part time gigs, but depends on the criteria and assume it will be a high bar

Form a consultancy with a few other contracts - risky, and a headache but possible

Seems to me there's a good argument for saying that anyone genuinely splitting their time between multiple clients or grouping together to form a consultancy and selling the service as a whole genuinely is being entrepreneurial and diserves the tax break. 99% of us don't do that and probably wouldn't.

[MrMarkyMark]

Could IT be exempt from the new rules?

Errr, not in general, no.

Otherwise they would have stated:-
IT contractors will be exempt from the legislation.

[d000hg]

"A government source said: “This is about fairness in the tax system. It is just not fair to have people in the same company doing the same jobs paying different levels of tax."

That's reasonable; but we're not doing the same job are we?


What about the NI issues? Would the client/employer now have to pay NI on contractors? If so that's going to cost companies unless rates get depressed accordingly.

I wouldn't mind too much if my gross profit is taxed exactly the same as if it were a salary - no employer's NI - if I can still charge a premium as a contractor. Well... I mind but it's hard to justify

[VectraMan]

That's reasonable; but we're not doing the same job are we?

Yes.

What about the NI issues? Would the client/employer now have to pay NI on contractors? If so that's going to cost companies unless rates get depressed accordingly.

I wouldn't mind too much if my gross profit is taxed exactly the same as if it were a salary - no employer's NI - if I can still charge a premium as a contractor. Well... I mind but it's hard to justify

They're not going to clamp down on tax avoidance and still allow some tax avoidance in the form of not paying employer's NI. Somebody is going to have to pay it. It just means your rate is gross of employer's NI, in exactly the same way as it is if you're inside IR35.

[d000hg]

If you're paying employer's NI and a permie isn't, you're not paying the same tax rate for the same job. So it would be 'preferable' if the 'employer' pays their part if we have to go this way, in terms of transparency.

If it's going to be terrible it might at least be terrible in a way that means we don't have to pay accountants any more