Dodgy contractor schemes, undercutting and competition

[cailin maith]

Cailin Maith needs me!!! I knew this day would come!! Woohoo... No fear my love for I am here!!!

So if clients want to pay as little as they can, and my competitor has a lower cost base, they can undercut me. And if they can undercut me, it seems likely that they do undercut me. Just like CD sellers operating out of Jersey (VAT free) undercut UK based sellers. This is pretty basic economics, and it would be surprising if it doesn't apply. There would be a nice little research studty in there I think.

I think that you've never really gotten over that bird undercutting you And now you want to blame everytime you've not been successful on it being because you are being undercut.

Maybe it's like doodab said earlier. You have a family and a mortgage and all that goes with it and can't work for say £350 per day. Someone else has no mortgage, no family and thinks yeah feck it, I need the contract, I'll do it for £300 (forget that the agent probably is pocketing the difference!!) I can afford it.

[doodab]

Again - your Co pays the CT not you.

If you're going to compare apples to apples you need to look at the net tax paid. Also, there is a tax credit associated with a dividend, so income tax is paid with the credit + in cash for dividends over the basic rate. The actualm income tax bill is considerably higher than the amount due after the tax credit might lead you to think.

And no, I'm paid ok for what I do but I'd bet Personal Tax wise, I've paid a lot more than you.

I bet some years I've paid more in tax than you earned, esp when IR35 first came out and I was within it. Unless you have a £90k permie job of course, in which case we'd be about the same.

[cailin maith]

Why does it matter where the tax nominally comes from? If contractors pay more into the coffers than permies that's a good thing, socially, shirley?

Again I agree with you but this is about perception.

Ltd Co - 1 man bands strive to be seen as 'proper businesses' (I have no idea where the ' goes!) so the distinction needs to be made between you and what you pay personally and your Co and the CT paid.

[cailin maith]

If you're going to compare apples to apples you need to look at the net tax paid. Also, there is a tax credit associated with a dividend, so income tax is paid with the credit + in cash for dividends over the basic rate. The actual tax bill is considerably higher than the amount due after the tax credit might lead you to think.



I bet some years I've paid more in tax than you earned, esp when IR35 first came out and I was within it. Unless you have a £90k permie job of course, in which case we'd be about the same.

See my reply above - this is about perception & what you personally pay. Not your Ltd Co.

It's ok - I'm pretty au-fait with how Dividends work.

I have no doubt your Ltd Co has paid more that I've earned in a year but thats your Ltd Co, you might as well tell me that M&S paid more tax.

[northernladuk]

Hide behind me my love. I shall shield you from these heathens with by broad shoulders and shall silence them for good with my greater intellect and supreme eloquence and then we can be together forever!

[Old Greg]

I think that you've never really gotten over that bird undercutting you And now you want to blame everytime you've not been successful on it being because you are being undercut.

Maybe it's like doodab said earlier. You have a family and a mortgage and all that goes with it and can't work for say £350 per day. Someone else has no mortgage, no family and thinks yeah feck it, I need the contract, I'll do it for £300 (forget that the agent probably is pocketing the difference!!) I can afford it.

So we are agreeing that cost base is important. I'm not saying that every time I am undercut it is by a dodgy scheme person.

But if we are agreeing that low cost base can lead to undercutting and that dodgy scheme participation is one factor in low cost base, then why would we not believe that dodgy scheme participation can lead to undercutting.

[cailin maith]

Hide behind me my love. I shall shield you from these heathens with by broad shoulders and shall silence them for good with my greater intellect and supreme eloquence and then we can be together forever!

Well bloody help me out then

So we are agreeing that cost base is important. I'm not saying that every time I am undercut it is by a dodgy scheme person.

But if we are agreeing that low cost base can lead to undercutting and that dodgy scheme participation is one factor in low cost base, then why would we not believe that dodgy scheme participation can lead to undercutting.

Because it may or not be one factor that could lead to undercutting. I'm saying you had a tulipty experience with it but I do believe you are in the minority.

[Old Greg]

Well bloody help me out then



Because it may or not be one factor that could lead to undercutting. I'm saying you had a tulipty experience with it but I do believe you are in the minority.

I have said there are two things. Losing business on renewal is probably fairly unusual, but I know it happened in this case. And it got me thinking about a wider issue.

Quoting a rate for new business is an important factor in getting the business. We have agreed that cost base is a factor in price. Really, I find it hard to see how anyone could honestly think that we are not from time to time undercut by dodgy scheme folk.

[sasguru]

Really, I find it hard to see how anyone could honestly think that we are not from time to time undercut by dodgy scheme folk.

I doubt it's happened very much to me, and I'm expensive.
The "scheme folk" are judgement-lacking cretins, perhaps they congregate in certain sectors not others?

[vetran]

Again I agree with you but this is about perception.

Ltd Co - 1 man bands strive to be seen as 'proper businesses' (I have no idea where the ' goes!) so the distinction needs to be made between you and what you pay personally and your Co and the CT paid.

I'm doing it again agreeing with SAS, the source of the money is You whether you are limited, PAYE or paying tax on your savings. The argument is whether the amount of tax you pay reflects the level of risk you experience and the amount the government wants to encourage you.

For some reason the government seems to hate contractors and wants them all PAYE. This is strange as many of the (ex) contractors I know (myself included) have, are or are intending to run a business with the vision of having multiple employees or at least multiple steady concurrent customers (most I managed was 5 customers at the same time and one subbie).

Of the others I know, one has speculatively developed and sold multiple niche products for various banks, another developed race engines ECUs, one has a large support team covering most of London's SMEs and one makes drums. These were all on top of existing contracts.

Its easy to slide into a business when you own your own IP!