The Official Budget 2016 thread

[bobspud]

That would be because you were contracting through an agency, who were contracting with Capita. You would never have seen the CLOne contract that underpinned the one with the agency unless you were directly contracted to Capita, as the majority of PS contractors were and still are. Even if your agency contract was re-written, in the event of an IR35 investigation HMRC would have regarded the CLOne contract as being primary in the relationship with DfT.

Its a nice threat but HMRC would not be wise to attempt to invoke that clause because at the point they do so it opens the government department and the middle agency to the accusation that they are guilty of committing fraud as they have offered terms as a material part of the contract for your services that can be proven to be false and worse than that because they have entered into CLone, it cam be demonstrated that they knew that they were screwing you...

The basic law of contracts is there must be
An offer of sale
An acceptance of the offer
and a principal (payment)

Part of the process is described as a meeting of minds which basically means you are both in possession of the full facts and agree the terms therein the contract for the principal... Simples isn't it... If either party are shown to have acted improperly like telling you its fine to substitute while telling the other party you are not allowed to then the fraud lands with them along with the costs and consequences of them knowingly committing fraud.

However even better than that:

We already know that working practices count more than the contract and seeing as most government departments have happily told everyone to FSCK off for 10 days unpaid time off at Christmas. For the last five or so years, they have enforced their lack of obligation to offer work and granted every contractor on site the wonderful christmas present of teflon shorts to protect them from ANY ir35 investigation EVER

[Weltchy]

Grace’s PSC invoices the Ministry monthly for £2400, which includes £400 VAT. The
Ministry treats £2000 as Grace’s earnings and deducts £223 tax and £159 employee NICs,
which it pays to HMRC via RTI with £183 employer NICs. The Ministry pays Grace’s
company £1618.

Am I right in thinking that with this example, the cost for paying employers NI is passed over to the agency now and is not deducted from the invoiced amount?

As opposed to beforehand where if inside IR35, you would also have had to pay the employers NI of £183

[m0n1k3r]

Grace’s PSC invoices the Ministry monthly for £2400, which includes £400 VAT. The
Ministry treats £2000 as Grace’s earnings and deducts £223 tax and £159 employee NICs,
which it pays to HMRC via RTI with £183 employer NICs. The Ministry pays Grace’s
company £1618.

So if the public sector client/agency decide the 'rules' apply they can pay your company less money and not honour the invoice.

They should pay the individual directly. If it is paid to the company, the company would have to either pay corporation tax before paying a dividend, or deduct income taxes and national insurance contributions before paying out, so there would be dual taxation.

[WordIsBond]

And then you think it will get better? For most working people it sounded quite positive. No interest on savings even outside ISAs, even larger, more flexible ISA allowances, etc. And for typical small businesses weren't there mentions of increased NI relief and stamp duty cuts (I wasn't listening as much)? Plus falling CT gives local companies more chance against the multinationals who avoid tax here.

I'm sure a Labour budget would have hurt a lot of people a lot more.

Yes, in most respects this wasn't a bad budget.

The damage to us was mostly done in the last one. He's not rolled any of that back, but he's done some things that help people generally.

The bad stuff in this is what he's setting up for the future. After they've done this in the public sector, they'll roll it out to the private sector soon. The private sector would scream if they did it to them, because they don't want that tax obligation and the liability of making the determination. Public sector can do it but private sector would object, and can't make anyone angry right now, can he?

But in two years, he'll say, "Well, it's working fine in the public sector, so suck it up." And then there will be a mess.

The other thing that he messed with is pensions. Smart boy, really. Oh, not smart economically, but smart politically. He just brought in a new way for basic rate taxpayers to save for retirement that is just as good as pensions, but has even more flexibility. Yay! Everyone on basic rate will use that rather than pensions -- why wouldn't they? He even named it after a famous member of CUK from Contractor Umbrella, LISA.

Next year or the year after, he'll say, "You know, these private pensions and their higher rate tax relief, WORKING FAMILIES aren't using that because they are using the LISA. So this tax relief for SIPPS is really just a tax break for the rich." So it will go. Gordon Brown must be proud -- Gordo smashed occupational pensions, Georgie is going to smash personal pensions. Planning ahead, is the Chancer, for next year's tax grabs.

[jamesbrown]

The bad stuff in this is what he's setting up for the future.

Precisely. There are so many hooks in here, it's like a tackle shop (opening on June 24 ).

[mudskipper]

They should pay the individual directly. If it is paid to the company, the company would have to either pay corporation tax before paying a dividend, or deduct income taxes and national insurance contributions before paying out, so there would be dual taxation.

If you read the examples, there will be a credit for tax paid. Sounds like an administrative nightmare.

[m0n1k3r]

A Consultancy will have shares and pay dividends, just like my company. My point is that essentially my company and the big consultancies operate in the same way. The only difference is size. So if they want to tax my company they should tax the large consultancies in the same way. Unless this then promotes a move from 'Priced' work. - i.e. they pay for a 6 month contract for deliverables and move away from weekly timesheets etc.

It is usually not the directors who performs the hands-on work for clients. Even if the company is employee-owned (such as PA Consulting), none of the hands-on employees usually own such a large portion of the company that they will qualify for the 'their own' part.

[m0n1k3r]

As PCG they were instrumental in sorting out the cluster**** that was the original Public Sector CLOne contract with Capita 2 years ago. Helped to avoid meltdown in multiple departments as contractors refused to sign the new contract. They got it re-written in contractor friendly terms that made it possible to get working arrangements agreed to put you outside IR35.

Capita has added some of the old clauses back in lately.

[m0n1k3r]

Close enough to Singapore and Hong Kong, at 16.5% and 16% respectively, although they still use remittance basis.

Come to think of it, perhaps the plan is to decrease the rate of CT to the level actually paid by the multinationals so that they can claim victory and state that the big ones now pay CT at the full rate.

[seeourbee]

It is usually not the directors who performs the hands-on work for clients. Even if the company is employee-owned (such as PA Consulting), none of the hands-on employees usually own such a large portion of the company that they will qualify for the 'their own' part.

It's the owners/shareholders that get divis. If being a director is the "test" then I can easily resign my directorship.

But to get back to your point - that's exactly my point too - they need to be very explicit in the wording and the definitions of such companies. And as soon as they do that, they're in trouble.