Does anyone else feel like they are being financially ripped by the tax-man

[WordIsBond]

As for the rest of your argument - if a contractor is being paid £400 a day (including employer NI) compared to a permanent member of staff being paid £55,000 a year or even £60,000 there is a significant difference in take home pay in return for the flexibility and lack of rights.

Now if the contractor is on £300 a day compared to a member of staff on £55,000 a would accept your argument but that isn't the case - the end client / agency is still paying a premium for the flexibility.

The question is not whether the contractor gets a difference in take home pay, or even whether it is significant. Nor is the question really whether the employee or contractor pays more tax. The question is whether, if as we are continually told it is "fair" for the employee and the contractor to "pay the same tax for the same work", that the employee should get something tax-free that the contractor doesn't.

Those rights that the employee gets have value, right? How much? Well, your distinction between £300 and £400 a day suggests how much you think those rights are worth, but they aren't valueless. Why does the contractor have to pay tax on that value and the employee doesn't?

Your IR35 contractor on £300 / day works 220 days / year, perhaps. So he pulls in £66K, for sake of discussion. His £11K premium is cash-in-lieu of rights. He's probably not a great negotiator if that's all he's getting compared to an equivalent permie but it works for discussion.

That's close to 20% of his fee that is cash-in-lieu of rights. For these two to be taxed equally, he should be able to deduct about 20% of his fee from his deemed payment. That would be "fair", and he'd actually be paying the same tax as the permie.

Now, let's talk about the guy who negotiated better and got £400 day. He's on £88K for the year. If he's inside, too, but got to deduct 20% to reflect cash-in-lieu of rights, he'd be paying tax on £70K. He'd still be paying a lot more than the permie, but that's because he negotiated a better deal.

The permie would still get his rights tax-free, but at least the contractor would get a compensating allowance to reflect that. That's as it should be. Going inside would still be a hit but a lot of people should have been inside anyway. This is an ugly, ill-conceived reform that has done a lot of damage, but a lot of contractors are ending up inside where they should be. The problem going forward, after the upheaval is over, is that "inside" goes too far.

And that's why many contractors will just get out of the game. If you negotiate a premium to compensate you for the lack of rights and the government takes half or more of that premium, for many people it just won't be worth it anymore.

[GummiBear]

Woo-hoo!

Woo-hoo!! - just hearing news that IR35 has been postponed till April 2021!

Just an update, had a chat with Agency earlier, at a more senior level, they are now warming to the idea of doing some sort of contractor swap with another agency - so looks good on this front.

But might all be a moot point, if I can get another 6 months, can then prepare and have time to find another contract elsewhere.

Not had time to catch up with all the comments, will have a read through and respond back.

Thanks for all your support and advice. This forum rocks!

[northernladuk]

Nothing has changed fella. Client now doesn't have to issue SDS and all that but they've already admitted its inside. No changes in the legislation will change that.

All you get to do now is continue to deny the facts of the engagement, stuck your head in the sand and have an even bigger headache when it hits again.

But fill your boots. You weren't going to listen to us anyway.

[WordIsBond]

NLUK is right. You are much more vulnerable as a result of what's happened. An agency swap helps. But you really, really need to get your company closed.

HMRC needs to do something with their time for the next twelve months. They will likely start asking clients who their contractors have been and whether they made determinations. Their promise not to pursue historical stuff just got put on hold.

The change might help a lot of people over the next year but it might put those at historical risk in a worse situation. There's no reason for HMRC to pretend that they aren't going after you now. They don't have to pretend they are only chasing fraud cases. They just have to ratchet up pressure on clients to tell them about any determinations they've made. Why won't they?

[SciaticaSucks]

Is anybody able to answer as to whether a client can inform HMRC of any SDS taken prior to 5 April when it was not their responsibility to do this until after that date?

[northernladuk]

Is anybody able to answer as to whether a client can inform HMRC of any SDS taken prior to 5 April when it was not their responsibility to do this until after that date?

Out of interest.. Why do you want to know this? Isn't the only reason to gauge if you'll get away with staying outside if your SDS was inside?

[mockedguy]

Out of interest.. Why do you want to know this? Isn't the only reason to gauge if you'll get away with staying outside if your SDS was inside?

Out of interest.. you are constantly bashing members with your baseball bat, pushing the govt view, and often in a very condescending/abusive way. Posting constantly throughout business hours, do you have a job? Or is this it? What industry do you work in? And how do you function to meet all these requirements?

[northernladuk]

Out of interest.. you are constantly bashing members with your baseball bat, pushing the govt view, and often in a very condescending/abusive way. Posting constantly throughout business hours, do you have a job? Or is this it? What industry do you work in? And how do you function to meet all these requirements?

I work for HMRC. This is my job.

[SciaticaSucks]

Out of interest.. Why do you want to know this? Isn't the only reason to gauge if you'll get away with staying outside if your SDS was inside?

I'll oblige. Finishing with existing client 3 April. Contract very much outside IR35 and I believe working practices also. Client did SDS for all contractors and engineered inside IR35 determinations for all, based on incorrect working practices. Client very happy to ignore contract and true working practices to give them inside determination they wanted. Removes risk of HMRC from them and more importantly risk of bad publicity. As a consequence I terminated contract.

Have a new contract lined up already which the client has already agreed to being outside IR35. Ironically, the delay of one year makes my position slightly worse in that the risk of an incorrect determination sits with me again rather than the client, however, with the SDS on the new contract stating outside IR35 I am more relaxed about this.

I think a lot depends on the question HMRC might ask of any client. Is it likely to be 'give me a list of all off-payroll employees with an SDS of inside IR35' and if that is the question would I be included as it was not their position to complete a SDS until after 5 April.

[webberg]

If we are talking about inside-IR35 contractors then they will ALWAYS pay more tax than the equivalent employee unless they are so stupid as to work for the same rate as the employee. the way IR35 works.

Can you demonstrate that in numbers?