HSBC bans its consultancies from supplying limited company contractors

[GhostofTarbera]

So how is this not affecting Capita etc?

Because they have lots of ex-civil service executives


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[WordIsBond]

In determining IR35 status, HRMC "look through" whatever commercial arrangement is in place.

They can look through all they want but they can't drag anyone who owns less than 5% inside IR35.

And that's completely ignoring the chance of a new consultancy getting on a clients supplier lists.

Unless it's actually being proposed by a client....

And how would dividends be paid when one person bills @ £500 for 200 days a year but another only bills 50 days that year?

The person who bills @ £500 for 200 days will receive £20K in dividends and a big salary. He'll pay a lot of tax on that salary but his wife will not pay very much on the £20K dividends. The person who bills 50 days will receive £20K in dividends and almost nil salary. The person who bills less than 50 days will be terminated and his shares bought back.

HMRC might not even care that much because most of the income would be inside PAYE.

The biggest issues are 1) client buy-in (but it's now being discussed at least one place) and 2) the issue JB raised, contractor trust and making it work. But if it is client-encouraged, my guess is there are contractors who would go along. It's not close to as good as being outside IR35 but would at least mitigate the pain a little bit.

[AnthonyQuinn]

"skilled people". Not cheap as chips robots. People who can think for themselves and specialize in something

robots will be more skilled than any people within the next 5 years

[SussexSeagull]

They will get offshore the work.

Why haven't they done that already then?

[TwoWolves]

Why haven't they done that already then?

Ironically I worked for a financial institution a year ago where the project had been outsourced to India for two years and produced not a single line of working code.

The project had now been brought home where a team of contractors a fraction of the size had already placed the first drop into production after four months.

Everyone was told that they had to go umbrella or perm - so everyone left (one went perm as he's quite elderly).

Last I heard it's going back to India and management are having kittens as it's a vital regulatory project.

There is no plan, everyone is doing a headless chicken.

[Manic]

I think a fundamental problem with this type of model, regardless of details, is that you have a bunch of contractors and not necessarily much trust or ability to ensure that everyone else pulls their weight. In other words, a lot of risk. I wouldn't even do this with people I did trust. Not worth the hassle.

Initially I did this with a friend. the idea was that we would effectively support each other if either was out of work. The trouble is there are so many variables, perhaps one will be on a higher rate, or only want a short commute/wfh, or take an extra week off, etc etc. Everything has to be split equally and it's tough to accept it if you are at the rough end of the deal.

You'll have 20 contractors in the model you propose, imagine being offered weekend work to support a go live. Extra day rate * 2 in the back pocket thanks very much, even better if negotiated at overtime rates. Now you are splitting that 20 ways.

[pscont]

Initially I did this with a friend. the idea was that we would effectively support each other if either was out of work. The trouble is there are so many variables, perhaps one will be on a higher rate, or only want a short commute/wfh, or take an extra week off, etc etc. Everything has to be split equally and it's tough to accept it if you are at the rough end of the deal.

You'll have 20 contractors in the model you propose, imagine being offered weekend work to support a go live. Extra day rate * 2 in the back pocket thanks very much, even better if negotiated at overtime rates. Now you are splitting that 20 ways.

It is doable with alphabet shares in regards of money. But this whole setup is extremely hard to achieve, so no.

[madame SasGuru]

It is doable with alphabet shares in regards of money. But this whole setup is extremely hard to achieve, so no.

And you’ve just reinvented the MSC or managed service company restricted in 2006 when this was used to get around IR35 first time round

[WordIsBond]

And you’ve just reinvented the MSC or managed service company restricted in 2006 when this was used to get around IR35 first time round

Right. What was discussed with me (proposed is way too strong a word) is two classes of shares, one for the contractors, one for the owner. All the contractors get the same dividends. The difference is in salary.

Basically it's like an umbrella except the umbrella makes a single class of shares available to all contractors bringing in more than £20K / year, and allows them to shift that much from salary to dividends. And they can gift those shares to a spouse.

Doesn't solve the problem but mitigates it for the contractors, and the client gets hopefully better contractors than others who are throwing contractors under the bus.

[madame SasGuru]

Right. What was discussed with me (proposed is way too strong a word) is two classes of shares, one for the contractors, one for the owner. All the contractors get the same dividends. The difference is in salary.

Basically it's like an umbrella except the umbrella makes a single class of shares available to all contractors bringing in more than £20K / year, and allows them to shift that much from salary to dividends. And they can gift those shares to a spouse.

Doesn't solve the problem but mitigates it for the contractors, and the client gets hopefully better contractors than others who are throwing contractors under the bus.

So I bring in £75,000 and you bring in £100,000 how does that work out - and how does the company handle the following year when I bring in £125,000 and you earn £25,000.

It doesn’t really work unless you are looking at EIB or growth share type schemes and they really don’t work in this type of scenario.