Dave Chaplin's anti IR35 campaign

[JohntheBike]

And again, you are focussing on highly skilled individuals where the difference between the two is proving very difficult to sort out hence all this mess.

What I tried to point out is that IR35 affects many many more people. My client has over 2000 contractors of which IT guys make up low 10's of percent. The others areas that have noteable contractor presence are service desk, depots, HR, drivers and more. In these areas you've a mix of agency/umbrella and PSC's. Most of these are going to fail the test and will be deemed inside, which is arguably correct.

The point is you are focussing on a very small group of people (us) where there is a massive grey area and we need to fight that. There are many many more where IR35 will apply successfully so you cannot fight that. Technically the legislation is fit for purpose in those areas so not a chance fighting it.

And again with this comment...



In most cases in our situation the person wants to go contracting, lured by the prospect of taking more of the money home. We see it endlessly on here. We are not really the victims of this practice, it's the lower skilled people that are being shafted by this so not quite the same argument.

If you are going to champion the fight against IR35 you've got to do it for everyone involved, not just highly skilled IT people. Something you don't seem to get.

Firstly, I welcome your more balanced response to my position.

"What I tried to point out is that IR35 affects many many more people"

agreed, but these are unfortunate collateral damage. In my opinion, WE skilled, generally highly paid IT contractors, were always the target for IR35, as we were seen to be tax avoiders. Nothing more, nothing less. The letter from MP still intimates that opinion. I really wish I could find the quote, but I did read that Cherie Blair was apparently reported as saying that she regretted the levels of remuneration that IT contractors enjoyed. If any of that were true, it really sums up the attitude of some in society towards us.

"The point is you are focussing on a very small group of people (us) where there is a massive grey area and we need to fight that"

Yes, but as I've just said, we are and have always been the principle target for IR35 and fighting means that you use every weapon at your disposal. Remember your history. The American colonials got nowhere by talking to King George's government. They used revolution to achieve what they wanted and were justifiably due. All I've ever been saying is this. We cannot rule out any weapon against IR35. The IBOYOA brigade have maintained that dialogue is the way, but there is no evidence to support that this approach has achieved anything. Conversely, court cases are having an effect on the issues, even if IR35 remains undamaged. At some point someone in government may see sense and sort the situation out. But my guess they'l not listen to dialogue, only pressure from court cases, in whichever court they are conducted.

"In most cases in our situation the person wants to go contracting, lured by the prospect of taking more of the money home"

that's a generalisation that I don't find to be true, at least in my early days of contracting. Much has been made in other places of the desire to have better control over a person's own destiny and the financial improvements have always been played down. I was made redundant at 50, and the only work I could find was in contracting. There were others in a similar boat. Permie positions were contracting as clients downsized their internal IT functions. I joined one company in 1981 which had 25 or so employees in IT, but by the time I left in 1986, there were only 6 left. Much had been outsourced to a software house. I worked initially in the steel industry, where there was even a whole IT section dedicated to designing payroll solutions. Not many would undertake that approach now. However, even those extensive IT functions were outsourced and few jobs were left for the resident employees.

"We are not really the victims of this practice"

my experience in contracting is clearly somewhat different from yours. I've said previously in the 20+ years that I've been contracting, most of those that I worked with were effectively BOS and were contracting for a number of reasons including redundancy, and in general higher income levels weren't as dominant as you claim. Personally, I'm probably earning less now as a contractor than I would have been earning by now in my permanent position.

So, it's not about that I won't change my opinion, is just that I clearly have a very different perspective of the issues from those who always criticise my opinion.

remember what German speaking people call the Matterhorn, French speakers call Cervin and Italian speakers call Cervino. It's the same object viewed from different angles and which displays different perspectives from each. If you saw a photo of Cervino, you would probably not recognise it as the Matterhorn.

It's just like every thing else. One person might be highly delighted with a particular service or product, whilst the next will have a highly critical view of the same. You can only speak as you find.

[mike67]

If you look at what Dave Chaplin actually posted, yes he is against IR35 in the private sector but the real purpose of his article is to highlight the sham of the consultation process. When they did the IR35 in the public sector consultation, HMRC published a summary of responses which did not reflect most of what the industry said, and then they followed this up with some sham research amongst a few pro-IR35 supporting departments and decided it was the greatest thing since sliced bread. What he is doing here isn't just his rant, it is a real summary of the responses given by the industry to the IR35 private sector consultation which shows that across the industry lots of bodies think this is a piss poor idea. To back it up, at the end of his piece he posted links to many of the individual consultation responses.

We are still of course expecting HMRC to publish their own fake summary of responses where they will say something like that "whilst there were a few minor concerns raised by the contracting industry, in general everyone thought this was a marvellous idea and they think we need to bring it in as soon as possible and that it will have virtually no adverse impact". At least through the work Dave has done we will all know for a fact that HMRC are liars, not that it will help as they will do whatever they want as usual.

[youngguy]

Well, the fact is that IR35 should be abolished and if we quit saying so no one else will.

There are huge imbalances in the taxation system such that, rather than merely providing an incentive to self-employment / independence, to compensate for the loss of tax-free benefits such as employment rights, the current Ltd taxation (vs the excessive ERNI/EENI/IT tax under PAYE) provides an excess incentive which encourages cheating via false self-employment and tax-motivated incorporation.

IR35 was and remains a deeply flawed and confusing attempt to rectify this. Until the excessive tax imbalance is rectified, there will always be those who want to pretend to be independent when they aren't, so there will always be a reason for HMRC/HMG to argue that IR35 is needed, and it won't go away. It could be tinkered with and improved, rather than just sledgehammer everyone into it like they are trying to do, but it is always going to be ugly and flawed, expensive and complicated to comply with and enforce.

The answer is to lessen the imbalances in the tax system and then you don't need IR35. That may not be as popular with contractors because it would cost us some dividend taxation or a higher corporation tax rate on closely held companies. It wouldn't hurt to cut the huge tax burden on employment, of course.

Personally, I'd be entirely comfortable with 2% more on div tax or CT in exchange for seeing Gordon Brown's abominable creation finally die, and it would probably be revenue positive for the government if they did that and eliminated IR35. It would cost contractors more tax but it would save on insurance, contract reviews, etc, etc. It would save HMRC concocting ever new ideas to somehow force everyone to comply that they think should.

And if you just propose abolishing IR35, the answer will be that it costs too much. If you propose simplifying tax, ending the enforcement compliance nightmare, and compensate for it with a small increase in dividend tax or CT on close companies, you might actually get a hearing.

All that is to say I do think we should be fighting IR35. It's bad law. It's an attempted sticking plaster on a tax imbalance, and the tax imbalance should be lessened and the bad law removed.

Like this.

I'm not a fan of increased div taxes as it hits savers etc but I do believe CT tax increases could work and this could generate huge amounts when you think about the Facebook's and Starbucks of this world.

I've never understood why a company that turns over 10s of K is subject to the same taxation rules as someone like Google or Apple, so would like to see a tiered CT system, similar to personal tax.

Of course the reality is, HMRC see our kind as an easy target. Big enough to get money from, but not big enough to have the resources to push back or move our operations elsewhere.

[BoredBloke]

Like this.

I'm not a fan of increased div taxes as it hits savers etc but I do believe CT tax increases could work and this could generate huge amounts when you think about the Facebook's and Starbucks of this world.

I've never understood why a company that turns over 10s of K is subject to the same taxation rules as someone like Google or Apple, so would like to see a tiered CT system, similar to personal tax.

Of course the reality is, HMRC see our kind as an easy target. Big enough to get money from, but not big enough to have the resources to push back or move our operations elsewhere.

Corp tax is due on profits - the likes of google and starbucks shift those profits to a subsidiary where they can pay the least tax. So it wouldn't raise anything - they would avoid it like they do already.

I have no objection with the original intent of IR35 - wasn't it the post office that was highlighted for getting their drivers to go self employed, yet have to work exclusively for them, turn up for shifts decided by their 'employer' wearing the uniform and driving their vans. To me that is obviously caught by IR35 and what it was designed to prevent. It's only that HMRC see it as a way of grabbing taxes from the people who clearly were self employed by making sure the 'rules' were vague and open to (mis) interpretation.

My problem about having the end client decide my status is that they will not know what other commitments I have on-going while working for them. For instance, on my current role I've worked for another 2 other companies during my first 12 months with them (1 for 9 months and 1 for just over a week). I don't see why I should tell them who else I'm working with in the same way I didn't question the plumber who fitted our bathroom who he was also doing work for.

[Maslins]

The answer is to lessen the imbalances in the tax system and then you don't need IR35. That may not be as popular with contractors because it would cost us some dividend taxation or a higher corporation tax rate on closely held companies. It wouldn't hurt to cut the huge tax burden on employment, of course.

Personally I agree with most of your post. Indeed when "the dividend tax" came in, I thought effectively this was the government's plan. Make small biz owners (contractors or otherwise) pay a bit more tax, eating into tax benefits of Ltd vs employed, negate the need for IR35.

Only hesitations I would have with your comments is proposal for higher CT rate on close companies. Seems weird to decide what CT rate a company pays based largely on how many shareholders it has. It'd also be another complication/weird threshold for people to keep track of if/when they take on investment, see when they breach a certain threshold suddenly tax rate goes up.

Personally I think we should gradually increase income tax whilst cutting NICs. Yes this could hurt pensioners, but that could be rectified (if deemed necessary) by increases in state pension. Given NICs are just a tax by a different name, it doesn't make sense to me that you pay lower taxes doing nothing and getting income from savings interest/similar than you do from working. Whilst revenue raising is a key part of taxation, another key part is discouraging/encouraging certain behaviours. Yes some may say that's why we encourage "entrepreneurs" with lower tax rates...but in my opinion if an entrepreneur ends up with more money in their pocket than an employee due primarily to lower taxes, they're pretty poor at entrepreneuring!

[JohntheBike]

Like this.

I'm not a fan of increased div taxes as it hits savers etc but I do believe CT tax increases could work and this could generate huge amounts when you think about the Facebook's and Starbucks of this world.

I've never understood why a company that turns over 10s of K is subject to the same taxation rules as someone like Google or Apple, so would like to see a tiered CT system, similar to personal tax.

Of course the reality is, HMRC see our kind as an easy target. Big enough to get money from, but not big enough to have the resources to push back or move our operations elsewhere.

"Of course the reality is, HMRC see our kind as an easy target. Big enough to get money from, but not big enough to have the resources to push back or move our operations elsewhere"


agree absolutely. No matter what others here might think, WE skilled IT contractors were always the principle target for IR35, all the others are collateral damage. Anyone who believes that IR35 is valid under any circumstances, should ask themselves is it fair that someone can be taxed as an employee without receiving employee benefits. This has always been the thrust of my position.

We must always remember that much of the IT contracting environment as we see it today has been created by the clients. This so called Friday to Monday scenario which HMRC claimed IR35 was designed to stop, was created by the clients and there is still no penalty proposed for the clients.

We can see this with the proposed new rules. If clients get the status wrong in favour of the contractor, then there is a penalty. If on the other hand they get the status wrong in favour of HMRC, then then there is no penalty.

So those that claim that IR35 is correct in some circumstances, clearly need to look a little more closely at HMRC's position and intentions.

[JohntheBike]

If you look at what Dave Chaplin actually posted, yes he is against IR35 in the private sector but the real purpose of his article is to highlight the sham of the consultation process. When they did the IR35 in the public sector consultation, HMRC published a summary of responses which did not reflect most of what the industry said, and then they followed this up with some sham research amongst a few pro-IR35 supporting departments and decided it was the greatest thing since sliced bread. What he is doing here isn't just his rant, it is a real summary of the responses given by the industry to the IR35 private sector consultation which shows that across the industry lots of bodies think this is a piss poor idea. To back it up, at the end of his piece he posted links to many of the individual consultation responses.

We are still of course expecting HMRC to publish their own fake summary of responses where they will say something like that "whilst there were a few minor concerns raised by the contracting industry, in general everyone thought this was a marvellous idea and they think we need to bring it in as soon as possible and that it will have virtually no adverse impact". At least through the work Dave has done we will all know for a fact that HMRC are liars, not that it will help as they will do whatever they want as usual.

"We are still of course expecting HMRC to publish their own fake summary of responses"

I agree absolutely. And this is why we must continue to fight HMRC over IR35 in as many ways as possible.

"At least through the work Dave has done we will all know for a fact that HMRC are liars"

agreed. But there are other so called "representative" organisations who shy away from saying so. I don't think they are doing us any favours.

It will be interesting to see if any political capital is made from the removal of Mel Stride, which presumably occurred as a result of the investigations into his possible conflict of interests.

[malvolio]

...snip

It will be interesting to see if any political capital is made from the removal of Mel Stride, which presumably occurred as a result of the investigations into his possible conflict of interests.

Do get real. He's now Leader of the House - so hardly likely to be castigated for anything.

[WordIsBond]

Only hesitations I would have with your comments is proposal for higher CT rate on close companies. Seems weird to decide what CT rate a company pays based largely on how many shareholders it has. It'd also be another complication/weird threshold for people to keep track of if/when they take on investment, see when they breach a certain threshold suddenly tax rate goes up.

Personally I think we should gradually increase income tax whilst cutting NICs. Yes this could hurt pensioners, but that could be rectified (if deemed necessary) by increases in state pension. Given NICs are just a tax by a different name, it doesn't make sense to me that you pay lower taxes doing nothing and getting income from savings interest/similar than you do from working. Whilst revenue raising is a key part of taxation, another key part is discouraging/encouraging certain behaviours. Yes some may say that's why we encourage "entrepreneurs" with lower tax rates...but in my opinion if an entrepreneur ends up with more money in their pocket than an employee due primarily to lower taxes, they're pretty poor at entrepreneuring!

Fair enough. I believe a good taxation system should encourage investment, and should encourage entrepreneurship. You are right that a distinction over close companies creates another imbalance, though. My goal was to reduce the huge imbalance between employment income and investment/entrepreneurship to reduce people cheating by recategorising employment as investment/entrepreneurship. You are right that entrepreneurs should do better anyway, but it isn't always the case, obviously. Is it bad if I start a business and don't do great at it but manage to get by? I wouldn't say so, I'd still say that was good for the economy and is something to be encouraged.

You can pass laws like IR35 to prevent it but that will be impossible to consistently enforce because people will come up with a way around it. We will now see permietractors getting their clients to agree a substitution clause that everyone agrees to tel HMRC is real and everyone knows will never be used. You have to reduce the incentive to cheat. Ideally you'd do so without hurting Gran's dividends from BP and BT after she's saved for years for a little something to supplement the state pension. You want her to be investing, and you want Richard Branson to invest large sums in this country rather than someplace where the corp tax is a lot lower. So you don't want to push up investment/corporation taxation much and certainly not for real investors.

Maybe abolish ER NIC and increase corporation tax to make up some of the revenue loss. That would be approximately neutral for Gran's investment, wouldn't discourage big investors, would encourage employment, and would also diminish the incentive for false self-employment. It would end the stupid employment allowance, the stupid apprenticeship tax, eliminate IR35, eliminate lots of red tape, drive economic growth forward, simplify payroll and regulations and stuff for a lot of people, and generally be great for business and the economy. It's too good of an idea for Westminster to countenance.

I'm all for rolling EE NI and Income Tax together. They are just two taxes by different names. It would be good to quit pretending that people are only paying 20% tax. It's 32%, plus the 13.8% their employer has to pay (and which could be passed through to them). The pretense only helps the people who want to increase taxes. If people really knew how much the government is costing them we might actually get politicians with an ounce of fiscal sense. But that's another topic.

I would not protect pensioners by increasing state pension. There are too many who haven't saved, and who shouldn't be rewarded just because you are taxing those who have. I'd handle it with an extra pensioner allowance and rate.

If you abolish EE NI, you'd have a rate of 12% from £8.6K to £12.5K, then 32% above £12.5K. You could give those of state pension age an additional pensioner allowance of £3.9K and a pensioner lower rate of 10% for their first £10K of taxable income. That would pretty much sort it as far as Gran's dividends, unless she's done really, really well.

While I'm laying out my manifesto for Chancellor of the Exchequer, I'll also note I'm not going to be increasing the personal allowance for the next 10 years or so. If you make £8.6K, you'll pay tax, at 12%. I don't want to increase the number of people who don't have to contribute, that's not healthy for a society. If it makes sense to reduce tax on the low-paid, I'll increase the threshold at which the basic rate of 32% kicks in from £12.5K, pushing it up towards £20K. Or I'll reduce that 12% to 10%. I'm happy to reduce how much the low-paid have to contribute, but I don't think it is good for people to be paying nothing and create huge swathes of the electorate who freely vote for ever higher taxes on other people, but are never impacted by it themselves. The more non-contributors you have in a society the sharper the divisions.

I have other ideas too.

[WordIsBond]

Do get real. He's now Leader of the House - so hardly likely to be castigated for anything.

I don't think he's likely to be in that position for long. Gauke, who has also been less than helpful in the past, is probably a backbencher for life, unless he gets deselected or undercut by Farage's gang and voted out.