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

[seeourbee]

Yes, for the proposals. I was referring to 'as is' for the comparator.

[avalon111]

Some little...

snags with this.

The public, HMRC and The Guardian won't give a toss about contractors being stiffed, even if the plan is to replace them with yet more Indian imports.

But the likes of REC (the Recruitment & Employment Confederation - https://www.rec.uk.com) might get a bit miffed. The proposals are likely to decimate the contract agency industry.

Temporary and contract recruitment made up 91pc – some £26bn of the £27 billion turnover of the recruitment industry in the UK in 2013, whilst fees from placing people in permanent jobs was just 9pc at £2.7bn. (Recruitment industry now bigger than its pre-crisis peak - Telegraph)

So for a paltry £400 million, will Gideon put the kibosh on a £26 billion turnover UK industry?

It would mean the likes of Spring going under and Hays and Manpower, the two largest recruitment firms in the world, taking a humdinger hit. Computer Futures? Gone. Computer People? Gone. Sandersons? Gone. Name some large and all small contract agencies and they will be gone, robbed of the income with contractors expected to switch to the payroll of the agencies clients.

The Guardian might not be so impressed with dealing with the aftermath as lots of agency staff get the bullet and offices close.

How much tax will the HMRC lose from it? Well, I reckon £4 billion, not including the knock-on impacts of killing the flexible labor market...say another £10 billion per-year.

So say £14-15 billion lost tax revenue per year, lost from the now-mangled contract recruitment industry. Add on the knock-on impacts on say firms not being able to secure long-term security consultants (say those who work for leading consultancy firms)...lets say £100 billion per-year. Loss of investment from abroad because the country has a reputation for doing stupid things (like killing its own flexible labor market) - £100 billion.

Who would be impacted? Well I can think of quite a lot who would be beyond the PSC's. Let's start with...The Cabinet Office. Forget securing all of those wonderful researchers and policy advisers. They'll be gone for starters. Interim managers for the MOD and NHS? Gone. Those neat security consultants that MI5 send around to advise UK businesses? Gone. Those contract aerospace designers for Rolls Royce in Derby? Gone. Those chaps assisting the likes of TalkTalk right now? Gone. All those useful chaps and chappettes working for the DWP in Blackpool and the Inland Revenue? Gone. The somewhat well-paid consultants at The Home Office? Gone.

That's a pretty big legislation-imposed hit on UK PLC. But for tangibles the legislation-imposed restraint-of-trade on the recruitment industry would be an economic bomb going off. Like I said, no-one will give a toss for the PSC's, but I reckon REC would be seeking a judicial review pretty rapidly.

There is a growing opinion on CiF (Comment is Free) at The Guardian, that Gideon is, well, there's no easy way to put this...a bit thick. The theory that in Coalition, the likes of Vince Cable and Danny Alexander managed to retrain his more stupid tendencies, but that with them out-the-way, Gideon is vulnerable to any mad-cap scheme run past him, like this one.

I suspect it's a bit of skulduggery; a deliberate effort by someone in HMRC to ambush Gideon into doing something monumentally stupid, that will wreak his efforts to be PM and turn him into a laughing stock. Killing-off Britain's flexible contract market would be pretty monumentally stupid, and one that Gideon and the Tories would never live down. I reckon without a Cable or Alexander, this one will probably get through, the s^&t will promptly hit-the-fan, Gideon will go and his replacement will rapidly amend next The Finance Bill accordingly. Too late to recover, but for killing-off an entire industry, Gideon comes unstuck.

[MarkT]

Anyone prepared to fight this?

1.)What is a PSC? There is no definition in law.
2.) I run a business, I market myself to companies to whom I provide consultancy and advice for a daily fee.
3.) I pay VAT
4.) Each of my assignments is covered by a contract of engagement which shows that the assignment has a start and end date.
5.) I have no right of permanent employment, no holidays, pensions...

Anyone with me?

[SueEllen]

There is a growing opinion on CiF (Comment is Free) at The Guardian, that Gideon is, well, there's no easy way to put this...a bit thick. [/B]

The Guardian is left of centre so it's obvious they don't like Gideon.

However when the Torygraph and Times turn on Cameron and Gideon then in the next breath start lamenting about the "wonderful" Sir John Major you know the Tories have problems. I'm awaiting for them to implode on Europe like they did last time they were in power.

I suspect it's a bit of skulduggery; a deliberate effort by someone in HMRC to ambush Gideon into doing something monumentally stupid, that will wreak his efforts to be PM and turn him into a laughing stock. .

There were arguments that the Lords should have let the tax credit bill (which was a social security statutory instrument) through so Gideon would never be PM....

[SueEllen]

Anyone prepared to fight this?

1.)What is a PSC? There is no definition in law.
2.) I run a business, I market myself to companies to whom I provide consultancy and advice for a daily fee.
3.) I pay VAT
4.) Each of my assignments is covered by a contract of engagement which shows that the assignment has a start and end date.
5.) I have no right of permanent employment, no holidays, pensions...

Anyone with me?

I wish I know how to get myself or some of the people I know on the focus groups politicians use.....

[Zero Liability]

snags with this.

The public, HMRC and The Guardian won't give a toss about contractors being stiffed, even if the plan is to replace them with yet more Indian imports.

But the likes of REC (the Recruitment & Employment Confederation - https://www.rec.uk.com) might get a bit miffed. The proposals are likely to decimate the contract agency industry.

Temporary and contract recruitment made up 91pc – some £26bn of the £27 billion turnover of the recruitment industry in the UK in 2013, whilst fees from placing people in permanent jobs was just 9pc at £2.7bn. (Recruitment industry now bigger than its pre-crisis peak - Telegraph)

And besides that industry, there are all those accountancy outfits geared to servicing contractor firms. Their business models could be annihilated as a result.

However, at this point we're in the dark as to what the actual proposals are, and I wouldn't be surprised if there is some misinterpretation on behalf of or deliberate misinformation relayed to the Mail/Guardian in this instance, for whatever purposes you can imagine.

The £400m figure is a red herring, to the extent that it was ever accurate. With the incidence of the dividend tax, it'll be even lower, so I reckon JB is correct that they just need a figure that sounds vaguely impressive (which it really isn't when compared to other tax sources/outgoings) to bandy around.

[Contreras]

But the likes of REC (the Recruitment & Employment Confederation - https://www.rec.uk.com) might get a bit miffed. The proposals are likely to decimate the contract agency industry.

Miffed - yes. Decimated - no, IMHO.

Because - if this goes ahead and if it turns out to be as draconian as suggested then to be workable it would need to include an "opt-out" of some form. Think 'FLC'*, taxed as PAYE, but not actual employment.

And besides that industry, there are all those accountancy outfits geared to servicing contractor firms. Their business models could be annihilated as a result.

Ditto as above. They'll just re-factor themselves around the new landscape.

Actually, you can see it has an attraction for certain political leanings (to an ultimate wholesale destruction of employment rights for the unwashed masses).

* And remember, we asked for this.

[Zero Liability]

Yes, hence the choice of words 'business model' rather than 'business'. I think the point is simply that it will cost a lot more than any revenue it rakes in. However, this is assuming anything like what is being described in the OP goes through, as I am not yet convinced it will; I think this interpretation of it is quite plausible.

Contractors and other freelancers already lack 'employment rights' (though I am guessing you mean widespread adoption of something like the FLC model, where you still pay the price for now non-existent employment rights), but I wouldn't be too surprised if this is a move (whether as described in the OP or not) to remove any competitive advantage a contractor has relative to consultancies, as some have suggested here.

Still, all we have to go off is two press articles, and I bet some Treasury clerks are getting a good giggle out of all the reactions to these two pieces.

[BolshieBastard]

One IT contractor, who preferred to remain anonymous, told us: "I intend to bend over and take it without lube, whining to my MP who will do nothing"

HTH

I sent the link about this 'one month then on the payroll' to 6 of my IT colleagues who work alongside me. Not one has raised any concern, not one.

[MarkT]

I sent the link about this 'one month then on the payroll' to 6 of my IT colleagues who work alongside me. Not one has raised any concern, not one.

I've spoken to four where I am - none of them seem to think it applies to them, none of them are concerned, they all think that they are special.

I do admit, by doing nothing about it, you are a bit special.