chancellor-will-create-crisis-self-employed

[LondonManc]

Surprised and disappointed the FT would headline an article "Hammond aims at employment tax cheats". That's more Daily Mail language. If that's how the FT positions it, then their journalists have truly been brainwashed by HM Treasury.

The more balanced and interesting article would have been: "Alleged bogus employment: Do Hammond's sums add up?" And then it could have discussed a number of scenarios comparing the different tax takes between outside (CT, VAT, Div tax, maybe a little NI and income tax) vs PAYE. It would point out that net net, tax receipts would typically reduce under the PAYE model.

And before anyone says it, I don't agree that VAT is somehow neutral and that Treasury doesn't factor this into the trade-off. If Treasury is contemplating reducing VAT threshold to £20K, VAT is not a neutral issue for them.

Spot on, especially after they have reduced it to 20k.

I think their plan is to trap the better paid from the "gig economy" in VAT so that they can make a fuller tax grab on them two or three years later if they think they're inside. Very crafty idea.

[eek]

Surprised and disappointed the FT would headline an article "Hammond aims at employment tax cheats". That's more Daily Mail language. If that's how the FT positions it, then their journalists have truly been brainwashed by HM Treasury.

The more balanced and interesting article would have been: "Alleged bogus employment: Do Hammond's sums add up?" And then it could have discussed a number of scenarios comparing the different tax takes between outside (CT, VAT, Div tax, maybe a little NI and income tax) vs PAYE. It would point out that net net, tax receipts would typically reduce under the PAYE model.

And before anyone says it, I don't agree that VAT is somehow neutral and that Treasury doesn't factor this into the trade-off. If Treasury is contemplating reducing VAT threshold to £20K, VAT is not a neutral issue for them.

VAT is a tax neutral thing for those who work via agencies and are working for vat registered companies. The argument is that our clients would be paying the VAT we pay Hmrc so that is revenue neutral

The reduction of the threshold down to £26k is not a neutral exercise. That is designed to capture a large number of self employed people who sell directly to the general public. Whatever vat collected there is new money to Hmrc but money that wiould have a serious negative impact on the economy as a whole

[LondonManc]

VAT is a tax neutral thing for those who work via agencies and are working for vat registered companies. The argument is that our clients would be paying the VAT we pay Hmrc so that is revenue neutral

The reduction of the threshold down to £26k is not a neutral exercise. That is designed to capture a large number of self employed people who sell directly to the general public. Whatever vat collected there is new money to Hmrc but money that wiould have a serious negative impact on the economy as a whole

Good job for HMRC that their bonuses are tied to their revenue and not the economy as a whole then.

[eek]

Good job for HMRC that their bonuses are tied to their revenue and not the economy as a whole then.

Everything here is planned to start on April 5th 2019 just as we leave the EU.

Hence everything can be blamed on Brexit and everything is being done to ensure Brexit is a disaster

[gables]

VAT is a tax neutral thing for those who work via agencies and are working for vat registered companies. The argument is that our clients would be paying the VAT we pay Hmrc so that is revenue neutral

The reduction of the threshold down to £26k is not a neutral exercise. That is designed to capture a large number of self employed people who sell directly to the general public. Whatever vat collected there is new money to Hmrc but money that wiould have a serious negative impact on the economy as a whole

Yep, this would cause an immediate rise in price from my painter friend and presumably all the trades like him, or they keep the price the same and take home less, presumably HMRC don't care as they'll get the extra VAT.

[MrMarkyMark]

Yep, this would cause an immediate rise in price from my painter friend and presumably all the trades like him, or they keep the price the same and take home less, presumably HMRC don't care as they'll get the extra VAT.

Or they will offer a reduced payment for cash

In fact many years ago even the Head of Tax Inspection at HMRC asked my old man what his cash price would be.

The old man wisely thought it could possibly be a trap and suggested he never operated in such a way

[bobspud]

Devil's advocate:

Those HelpDesk roles wouldn't pay much cash if they were converted to permanent roles. The tax take from those permanent roles wouldn't be significant when compared to a higher paying contract role. HelpDesk contracts don't pay much and the contractor similarly won't be paying much tax. More dividends taken=more tax paid.

What's the issue really? The government wouldn't be getting much more, if any, by placing them outside vs inside vs permanent. The main concern here is IR35, which requires increased enforcement, which would settle this.

So lets start by focusing on the actual problem:

A company needs a help desk person. - Do they need one that is going to stick around on a permanent basis? Or is it more of a hump thing to add some skills while they train up or deploy new production software?

If its a permanent role then the fact they end up with a contractor shows they are not paying enough to attract a full time employee so are probably grudgingly using the contractor instead. Due to their finance model the contract rate will probably also be sub market rate so the temp ends up using the leverage of a tax loophole so the company gets the body they need.

If they want the a temporary resource and hire a contractor, then they are not talking about a comparable employee market price. They are paying for a service that comes from someone that should be top in their field that has paid for their own tools and training and will provide their skills and expertise for a few months and then when they leave may wait for months between roles.

What makes this hard is that the two parties probably used a recruitment consultant that is telling one party they supply staff and the other they hire contractors. SO with this in mind we should make any party that misrepresents a contract in the chain fully liable for all penalties and taxes in an investigation. This is the one change that would absolutely solve the problem.

Nearly every case where IR35 has been proven to have been broken has had non mirrored contracts and that should be counted as serous fraud as the middle party are the only ones that see all the contracts.

If the middle man was liable it would police itself

[contractorinatractor]

So lets start by focusing on the actual problem:

A company needs a help desk person. - Do they need one that is going to stick around on a permanent basis? Or is it more of a hump thing to add some skills while they train up or deploy new production software?

If its a permanent role then the fact they end up with a contractor shows they are not paying enough to attract a full time employee so are probably grudgingly using the contractor instead. Due to their finance model the contract rate will probably also be sub market rate so the temp ends up using the leverage of a tax loophole so the company gets the body they need.

If they want the a temporary resource and hire a contractor, then they are not talking about a comparable employee market price. They are paying for a service that comes from someone that should be top in their field that has paid for their own tools and training and will provide their skills and expertise for a few months and then when they leave may wait for months between roles.

What makes this hard is that the two parties probably used a recruitment consultant that is telling one party they supply staff and the other they hire contractors. SO with this in mind we should make any party that misrepresents a contract in the chain fully liable for all penalties and taxes in an investigation. This is the one change that would absolutely solve the problem.

Nearly every case where IR35 has been proven to have been broken has had non mirrored contracts and that should be counted as serous fraud as the middle party are the only ones that see all the contracts.

If the middle man was liable it would police itself

Agreed. One thing to consider, however, is that a company will have less overheads engaged a HelpDesk contractor in a cheap contract. With this in mind, they'll absolutely save cash in the long term by engaging their HelpDesk personnel in this way. That's money that can be used on other projects, to give bonuses to permanent staff, or whatever is desired. Swings and roundabouts: won't the cash eventually end up being taxed through some other means; VAT on goods purchased with that bonus money, business cash savings eventually extracted as dividends or whatever other scenario can be thought of.

It feels to me that this simple scenario means that the government are worried they'll have to pick up the pieces of a low-paid HelpDesk contractor who hasn't paid their way into a pension all their life via their Ltd Co, retires, then only claims a state pension. But with or without a private pension, the state will be paying a state pension to that individual. Where exactly is the loss for them there?

[barrydidit]

I was trying to explain VAT to my decorator contact in the pub. Flat rate v's normal rate etc. In the end we agreed an accountant was probably the best bet, and that £100 was worth it to take away what would otherwise be a major headache for him. Then he found out I meant £100 a month

If Hammond thinks this will somehow help ANYTHING he's going to be sorely disappointed. There will be a lot more cash jobs under the radar and he's going to have to hire another million Hectors to try and unpick the mess

[LondonManc]

Everything here is planned to start on April 5th 2019 just as we leave the EU.

Hence everything can be blamed on Brexit and everything is being done to ensure Brexit is a disaster

That's no different to management burying their making redundancies at certain newspoints to hide their own incompetence and convince the world (and themselves) that the firm's failures were due to "the crash", "9/11", Brexit referendum, etc.