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November Budget - Stop Public sector IR35 rules coming into the Private sector

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  • jonbon
    replied
    Seems pretty certain that consultation will be launched tomorrow.

    https://www.ft.com/content/48adc7d0-...1-794ce08b24dc

    Leave a comment:


  • NigelJK
    replied
    To help with this issue HMRC have introduced CEST, a tool that was late in its release and one that has gone through many updates and revisions since. CEST is somehow supposed to reduce years of case law to a number of straightforward questions that will result in an accurate determination of status.
    Worth pointing out that CEST was late (and unfinished) due the fact that the Contractors working on it down tools and left.

    Leave a comment:


  • Swamp Thing
    replied
    My letter below (adapted from IPSE template) that I sent to my (Conservative) MP last week, adapted from the IPSE template. I also have a surgery mtg with him later this week.
    I appreciate it won't change anything, but I'll be damned if I'm going quietly.

    Re: IR35 tax changes will do serious damage to my business
    I am extremely concerned by recent reports that the Chancellor is considering changing the way the IR35 tax rules work in the private sector, and may plan to announce this in the Autumn budget statement on 22 November. As a freelancer and small business, dealing with the tax system is always tricky, and IR35 is one of the most complex – and costly – tax laws for small businesses. The proposed change would not only add to the complication; it would also do serious damage to small businesses like mine, as well as the wider UK economy.

    It would make it much harder for one or two-person companies to operate on a B2B basis. In fact, it would put me out of business altogether, and force me to consider a legal challenge, at considerable personal cost, just to fight for my right to trade as a bona fide business. Not only that: by harming thousands of small businesses like mine, it would make it much harder for companies across the UK to access the vital flexible expertise they need to deliver projects and drive the economy forward.

    The proposed changes would be an extension of the extremely damaging decision the Government took in April to change the way IR35 works in the public sector. This shifted responsibility for determining IR35 status from small limited companies like mine to end-clients. And because judging IR35 status is notoriously difficult, public sector bodies have been unable to make the thousands of complex determinations necessary. Instead, many have just enforced blanket IR35 decisions, forcing contractors – whether they should be under IR35 or not – to pay employee taxes and the employers’ National Insurance charge (an effective rate of around 50 per cent). Effectively this is treating the individual as a deemed employee, yet despite paying these significant taxes, the contractors aren’t entitled to employee benefits such as holiday pay, sick pay, private health cover etc.

    Note however that professional contractors are not seeking such employee benefits above. They are happy to absorb these within their own corporate model, but want this recognised as part of the ‘risk premium’ for being entrepreneurs and trading on their own account as a business. By emulating the public sector enforced blanket IR35 decisions in the private sector, the Government immediately unbalances the risk premium against small and micro-businesses. At a stroke, these businesses will find that there is no incentive to continue in business on their own account. Agility, risk-taking and availability of unique skills to client companies will ebb away.

    This state of affairs is clearly unfair and highly at odds with the ethos of the Conservative Party. To paraphrase Norman Tebbit, I got on my bike years’ ago to set up an effective small business. I used my initiative and entrepreneurship. Now the Conservatives want to snuff this out. This Conservative government has already driven many contractors out of the public sector, causing serious disruptions to a range of Government projects. In fact, the British Medical Association has declared that “IR35 has been an administrative disaster for the NHS”. It does not surprise me that lawsuits are already being brought against public sector bodies by small and micro businesses because small business operating models have been made unviable.

    I cannot imagine why the Government would even be considering extending this ruinous legislation to the private sector, particularly at a period of time pre-Brexit, when the UK economy is entering a period of great uncertainty and more than ever will need a flexible, agile and skilled business model. All we know is that, according to Mel Stride, Financial Secretary to the Treasury, small businesses like mine apparently represent “bogus self-employment” and that he sees an issue of “fairness” to be addressed between contractors and PAYE employees. If fairness is the genuine issue, then why have public sector contractors been forced to work inside IR35 as deemed employees, but without employee benefits? This for me is unfairness (even though the issue is irrelevant to me as a small business).

    If the Government does decide to extend this change to the private sector, as I mentioned before, it would force me to wind up my business. By operating inside IR35 I would be working at a net loss. I would also lose my competitive skillset, my freedom to operate an independent business and also achieve a sensible work-life balance. These by the way, are some of the key reasons why small businesses like mine are created – not as HMRC and Treasury would have it, to avoid tax.

    I have calculated a number of scenarios where a typical small business like mine may have to swap its tax obligations (Corporation Tax, VAT, dividend tax, income tax, NI) for a full PAYE regime, which is what the proposed legislation will do. Ironically the Treasury would be worse off in terms of tax receipts under the full PAYE model. Has the Treasury really done its sums properly, or is it bulldozing through a populist campaign to bash small business?

    I am completely at a loss as to why small businesses – once described by a former chancellor as the “engines of growth” in this country – are being persistently targeted seemingly as the solution to the Treasury’s tax deficit problems. Where is HMRC’s focus on the things that really bring in tax receipts – multinational big businesses avoiding Corporation Tax, the offshore/Paradise Papers situation? I believe it is because the Treasury and HMRC do not have the skills or desire to take on big company lawyers, instead focusing on low hanging fruit like myself who cannot afford to defend themselves. This seems to me to be a highly cynical approach and flying in the face of reasonable review of the facts.

    One MP once said:
    “We need to focus on the flexibility that microbusinesses and small businesses deliver because they provide a unique adjustment factor in the economy. One reason why the Government’s IR35 initiative has been so damaging and destructive is the fact that it has hit at the most flexible part of the economy.”

    Who was that MP, back in the days of a Labour government? Our current Chancellor of the Exchequer, Mr Hammond….

    It is beyond disappointing to me that a supposedly pro-business, pro-self-employment Conservative Government would consider such a policy. It is almost as if the Conservatives are declaring war on another hard-working group. The situation is way beyond a cynical tax grab; it is wrecking people’s livelihoods. This is why as a lifelong Conservative voter, I will have to change my vote at the next General Election. I’m not a Labour supporter, but I cannot conscionably give my vote to a party that plans to destroy my business.

    An online petition was raised on 07 November: https://petition.parliament.uk/petitions/204121

    As I send this letter to you, 9,000 people have signed in one week – a clear demonstration of how serious this issue is.

    As your constituent, I urge you to raise these points with the Treasury ahead of the Autumn Budget, and do everything in your power to prevent a policy that would be a disaster both for small business people like me and for the wider economy.

    Leave a comment:


  • jamesbrown
    replied
    Originally posted by cmscotland View Post
    The FT article though does say that the chancellor has decided against rushing it, sounds like some sort of consultation might be announced rather than an implementation date. A little surprised to see that it's "only" £1.2 billion that they think they're losing out on from "disguised employment" surely there's easier ways to get that figure (Amazon, Starbucks, Vodafone, etc).....
    I thought it was a little ambiguous on that. I couldn’t tell whether the second paragraph was talking about the private sector rollout or additional rules in the PS (in terms of not rushing). I assume it’s the former, in which case a consultation, followed by implementation in 2019, does seem to be what they’re alluding to.

    Leave a comment:


  • cmscotland
    replied
    The FT article though does say that the chancellor has decided against rushing it, sounds like some sort of consultation might be announced rather than an implementation date. A little surprised to see that it's "only" £1.2 billion that they think they're losing out on from "disguised employment" surely there's easier ways to get that figure (Amazon, Starbucks, Vodafone, etc).....

    Leave a comment:


  • eek
    replied
    Originally posted by jamesbrown View Post
    Sounds like a done deal.

    https://www.ft.com/content/48adc7d0-...1-794ce08b24dc

    (If you're not a subscriber, Google "Budget to signal focus on private sector’s bogus self-employed").
    Let’s be honest, the Taylor report made it too good an opportunity to ignore. Interestingly the article speaks of long lead time so it’s exactly as I first suspected announced now for April 2019.
    Last edited by eek; 21 November 2017, 06:18.

    Leave a comment:


  • AtW
    replied
    It was always a question of when, not if.

    I guess they won't be reducing dividend taxes either

    Leave a comment:


  • jamesbrown
    replied
    Sounds like a done deal.

    https://www.ft.com/content/48adc7d0-...1-794ce08b24dc

    (If you're not a subscriber, Google "Budget to signal focus on private sector’s bogus self-employed").

    Leave a comment:


  • ChimpMaster
    replied
    Originally posted by TheCyclingProgrammer View Post
    There isn't inherently wrong with it.

    There is something wrong with a "contractor" who has been working for years for the same client, bum firmly on seat, treated like any other employee, part and parcel of the organisation and is for all intents and purposes a disguised employee. The longer you work for a client (on-site especially) the risk of you becoming one of those contractors arguably increases.

    That doesn't mean of course you can't have long-term B2B relationships with a client - in fact establishing good long term clients is a good thing for business!

    TLDR; IMO genuinely disguised employees are probably more likely to stick around with a client for longer, but it's probably a one-way correlation - length of relationship in itself is no real indicator of anything.

    Highlighted in bold, to emphasize that this could be the same for any duration, whether it's 6 months or 6 years. Over a longer period of time, I agree the risk is greater, but only if the contractor or the client allow the relationship to slip into something that more resembles an employee/employer one.

    Leave a comment:


  • SueEllen
    replied
    Originally posted by ProInDisguise View Post
    I haven't sent the below to my MP yet so any advice on where I have made errors or phrased things badly would be appreciated.

    Cheers


    I’m writing in regard to the rumoured extension of the off-payroll rules to the private sector. I contacted you last year prior to these changes being introduced to the Public Sector. I and many others predicated that the introduction of the rules in such a haphazard way would prove disastrous for the Public Sector and it turns out we were right. HMRC have presented a version of events that deems the introduction of these rules as a ‘success’. I’d like to see what their criteria for ‘success’ is but I can guarantee it is not the same measure that any reasonable business would use. There have been delays in numerous critical Public Sector Projects (TFL etc.) due to the application of these rules and the Public Sector has found it extremely difficult to hire the talent they need and are having to increase rates to secure it. I wonder has anyone in Government factored the increase in costs to Public Sector Bodies against any perceived increase in tax take?

    Contractors have also left Public Sector Bodies in droves due to blanket assessments that everyone working through a PSC was ‘inside’ IR35 even though this goes against the HMRC guidelines that reasonable care be given to each determination. However it has since been discovered that HMRC have been advising Public Sector bodies in a way that encouraged blanket determinations. This has resulted in a legal challenge by Locums, the first of many one would assume!

    Most organisations and Public Bodies take a low risk approach to legislation that could potentially result in penalties. As IR35 is a complex piece of legislation (with many grey areas) it is unreasonable to expect businesses to assess the working conditions of each and every contractor working for them with the expertise required to make an accurate determination. To help with this issue HMRC have introduced CEST, a tool that was late in its release and one that has gone through many updates and revisions since. CEST is somehow supposed to reduce years of case law to a number of straightforward questions that will result in an accurate determination of status. Unfortunately the tool is what HMRC want it to be (something that classes the vast majority of people inside IR35) rather than a fair and unbiased assessment of existing case law. They have even left out one of the key tests ‘Mutuality of Obligation’ from the tool and they claim to have done this intentionally! No court in the country would accept a CEST tool determination as an accurate assessment of IR35 status but Public Sector bodies are informed that this is the only result HMRC will accept when trying to assess status. In what universe is this ‘fair’? How have we got to a point where the tail is wagging the dog? Do Government just follow HMRC’s instruction even though it contradicts the laws of the land and has a direct negative impact on businesses both small and large in this country?

    Disguised employment is a problem and most contractors recognise this. However this does not justify the approach being considered as a solution as there will be negative outcomes for the vast majority of contractors and the businesses that use them. The upheaval and uncertainty that extending the off-payroll rules will cause will have a direct negative impact on an already fragile economy and it will drive many self-employed people away from the Conservative Party. Most self-employed people do not want to vote for Labour or Corbyn but they are being forced in that direction by a Conservative Government who seem intent on penalising small businesses in every budget and have also created wider economic uncertainty with Brexit. This is confusing given the Governments tenuous grip on power… why attack your own voter base?

    The increased Tax that HMRC hope to gain does not justify the wider problems that this legislation will create. There are plenty of sensible and business friendly measures that can be implemented to help tackle disguised employment. The Taylor report needs to be implemented in a structured way over an extended period of time that will give businesses the time and space to adapt.

    It is not fair to force an individual to pay tax in the same way as an employee but at the same time deny them access to any of the associated rights. Contractors have no entitlement to Holiday Pay, Sick Pay, Severance and their contracts can terminated on a day’s notice. Contractors take risks and perform a vital role in the economy. Having a flexible labour force creates an environment where businesses are encouraged to invest without having the burden of having to employ additional permanent staff. To try and compare a permanent employee on PAYE to a contractor who has no rights is not fair. The government’s position that people doing similar work should pay the same taxes because it’s an issue of fairness is disingenuous in the extreme. For the analysis to focus only on activities carried out is to ignore the many vital differences that justify a different tax approach.

    Please do not underestimate the strength of feeling in the Contracting community over these changes. I think the extension of these rules to the Private sector will weaken the government at one of the most crucial periods in recent history.
    Personalized your letter - write about the impact of all the changes on your individual business don't talk in general.

    So if you have done public sector work explain how the regulations have changed what work you have taken on and why.

    Then say how the changes will influence what you do in your business e.g. retire, refuse to commute, whatever.

    Leave a comment:

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