Tory Brexit DOOM™: Tax in a changing world of work

[d000hg]

And for the record I'm not endorsing tax rises for contractors. Just equality of taxation on earnings. "I earn X, I have Y deductibles, I pay Z% tax on the profits".

[AtW]

And for the record I'm not endorsing tax rises for contractors. Just equality of taxation on earnings. "I earn X, I have Y deductibles, I pay Z% tax on the profits".

Equality would be flat rate tax, then it's fair - like in Germany for dividends.

[vetran]

You'll understand when you earn your first million...

most successful businessmen find the second million easier. So AssSnob's hubby tells me.

[WordIsBond]

Tax breaks on foundling companies, maybe yes. Tax loopholes exploited by extremely high earning contractors... no. If you leave your permie job to earn more as a contractor than you did before, you really don't need a helping hand. If you quit your job to work 16 hours a day getting your business off the ground, that is another story and that's one issue... there's not a real delineation between the two. Hence all this PSC bodging.

There are problems with this line of argument.

1. It's extremely difficult, in fact, probably impossible, to write legislation distinguishing between the two classes you mention.
2. There's changeover between the two classes. In my own contracts, I may look like the PSC you are talking about, but I also have employees, and sometimes revenue from my own contracts pays part of their salary (other times I do very well off of them). I'm building something bigger than just a PSC, a consultancy. (HMRC's online tool doesn't even take that into consideration, BTW.) Other guys on this forum have at least talked about hiring, or about developing a product.
3. There's an economic benefit to having a flexible workforce of highly skilled contractors. It's an extremely valuable resource for industry and something that helps encourage companies to locate here. It's not a case of contractors needing a helping hand, it's a case of whether or not we want to encourage contracting, or do we want to actually push contractors into the safety of permiedom and destroy or marginalise our flexible workforce.
4. There's a societal benefit as well in not having everyone tied down to a big employer.
5. It's a spurious argument to say that taxation should be based on whether someone "needs" a tax break. Sure, contractors shouldn't "need" a tax break. Neither should savers. But savers get tax breaks because the government wants to encourage savings. Makes sense to me.
6. It's also a spurious argument to say that a tax break is suspect just because some who benefit from it don't need it. Child benefit is universal, even though many who receive it don't need it. So is the personal allowance, the dividend allowance, and a lot of other things. If it is good to encourage entrepreneurship, and doing so benefits society and the economy, but a few contractors who don't need it benefit as well, that's hardly a bad thing.

We could debate, as I said, how much government encouragement there should be. But the argument that government encouragement of entrepreneurship (including contracting) is appropriate and beneficial is rock-solid, at least until we decide to try to adopt a completely neutral tax system that doesn't try to encourage anything. But that would be stupid.

[VectraMan]

Didn't you notice that among all that ivory tower drivel there wasn't a hint of consideration for the many benefits employees enjoy compared with contractors, such as training, pensions, holiday pay, maternity rights, extra job security, redundancy pay, etc etc?

Are you able to keep a straight face when you say that? I don't think I could.

Tax breaks on foundling companies, maybe yes. Tax loopholes exploited by extremely high earning contractors... no. If you leave your permie job to earn more as a contractor than you did before, you really don't need a helping hand. If you quit your job to work 16 hours a day getting your business off the ground, that is another story and that's one issue... there's not a real delineation between the two. Hence all this PSC bodging.

Seems to me you can link the amount of tax relief allowed on dividends to investment. Somebody who invests £1m has taken a real risk and might lose that £1m, so probably the tax break is justified to encourage entrepreneurship. The typical contractor has invested £0, and as much as I'm sure the OwlHoots will say they are taking a real risk in not finding work, the reality is that's a risk every permie faces too. If the allowable dividend was a multiple of the original investment then we wouldn't need all the complicated rules around PSCs.

Maybe that does hurt the software-entrepreneur who maybe gives up work to use the time to develop something. But you could make some kind of calculation for that too, based on an allowable rate. But even if not, the idea that the entrepreneur is only motivated by his tax avoidance possibilities is ridiculous: he's obviously looking to earn a lot more and so the risk is worth taking even if he doesn't get the tax break.

[BrilloPad]

Or they could stop branding being a tax deductible expense and make google, amazon, starbucks etc pay their fair share.

[WordIsBond]

Or they could stop branding being a tax deductible expense and make google, amazon, starbucks etc pay their fair share.

Branding is a tax deductible expense?

Then what about tattoos? Or does HMRC only respect the pain aspect of being branded?

(Since corporation tax is a microscopic portion of the tax any large employer pays, this whole thing about branding is blown way out of proportion.)