chancellor-will-create-crisis-self-employed

[SueEllen]

Can you explain that? I don't understand.

See eek's earlier reply linky

In short if you are providing services to another VAT registered business, the VAT you are paying is cancelled out by the VAT that registered company claims against.

[bobspud]

Lets also not forget that a lot of the rhetoric for this lands with the paradise papers and all the naughty money hiding off shore. Its time to point out the obvious and state that without doubt tax at source of employment is as bad as hiding your cash off shore because as much as the government won't want to admit it. The money it spends has a far smaller reach in terms of propagation through the economy than if you or I spend it and let it trickle back in excise, Vat and corporation taxes.

[MrMarkyMark]

VAT is cost neutral so can't be used as an argument about how much tax the Treasury loses.

I know banking and some, not all, financial services are exempt, for VAT to be claimed back.

I'm sure the 20% they keep from Banking Contractors on decent rates adds up to a fair penny.

[Swamp Thing]

VAT is cost neutral so can't be used as an argument about how much tax the Treasury loses.

Can you explain that? I don't understand.

[SueEllen]

Agreed. What I could have said more clearly though is that by pushing through the IR35 extension into private sector, converting contractors to PAYE means Treasury suffers the opportunity cost of no more VAT generated by contractors from their services to clients. Quite ironic really: Treasury drops VAT threshold to capture more micro-businesses which at the same time it wants to take out of corporate structures (and therefore VAT generation) because of "fairness".

And then on top of that, as others have said, Hammond effectively rejuvenates the cash-in-hand/black economy.

So tax receipts down across the board. I'm really struggling to see where Treasury thinks the £1.2bn black hole is.

Smart one, Mr Hammond, you couldn't make it up. Tomorrow could yet be another omnishambles for you, once the pundits and analysts really estimate the true cost benefit of this.

VAT is cost neutral so can't be used as an argument about how much tax the Treasury loses.

[Swamp Thing]

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

Agreed. What I could have said more clearly though is that by pushing through the IR35 extension into private sector, converting contractors to PAYE means Treasury suffers the opportunity cost of no more VAT generated by contractors from their services to clients. Quite ironic really: Treasury drops VAT threshold to capture more micro-businesses which at the same time it wants to take out of corporate structures (and therefore VAT generation) because of "fairness".

And then on top of that, as others have said, Hammond effectively rejuvenates the cash-in-hand/black economy.

So tax receipts down across the board. I'm really struggling to see where Treasury thinks the £1.2bn black hole is.

Smart one, Mr Hammond, you couldn't make it up. Tomorrow could yet be another omnishambles for you, once the pundits and analysts really estimate the true cost benefit of this.

[malvolio]

It's not all about "affording a permie". Most service desks* are subject to wide seasonal demand variations so being able to pick up and put down resources is a key business requirement. So a bad example in that particular case. In fact for most trades and most occupations, you need a core staffing level and the ability to add resources to deal with exceptions to BaU, be it a new project, building a car park, whatever. Arguing the cost of permie vs contractor is not all that relevant, except to say loudly that permies are always more expensive.


* Help desks are so 90s....

[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.

[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

[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?