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

[GummiBear]

About half a GDP is funded by the State. Somebody has got to stump up for that. It sounds a lot but actually it is nowhere near enough which is why we've got less hospital beds, MRI scanners, doctors etc etc than half of the rest of the world.

The rule we live by is poor people pay relatively less so rich people have to pay relatively more. Unfortunately you're in the rich category.

It hurts but schools cost a lot. The NHS costs a lot. State pensions cost a lot. The Police, Army, Navy, Airforce, Border Force etc etc cost a lot. When you voted for Brexit you saddled us all with literally billions of wasted expenditure. These all have to be paid for. It's painful but they're not punishing you now; you were getting away with unfair contributions before. Now they're making you pay as much as a permie.

You can't rant at HMRC. The cause of your financial stress is you. You can't charge a high enough rate to fund the lifestyle you want, the lifestyle you once had. You voted Conservative. That means you voted for rich people to stay rich. The working class like you don't get any freebies. They're just sealing up that hole in the dyke.

Your post is so presumptions, full of prejudice and assumptions - you have absolutely no idea about me or my values!

You don't even know me - yet you totally assumed I voted for Conservative - and worse still Brexit!

Your post says more about your own prejudicial mind of what you think of people who have worked hard and sacrificed a lot!

Your post is quite disgusting!

[northernladuk]

I would very much like to stay with this client as I've built up quite a good reputation, the people are friendly and I have a fair amount of say on what goes on and how things are done, flexibility to work from home or office etc. I would lose all this, if I were to move to another client and would have to start at bottom and work my way back to the top.

That's contracting for you I am afraid. It's exactly what we all do. Those that don't are the permatractors that this is targetting. No time to be playing comfy with the client.

Main way forward is try to mitigate risk as much as possible whilst staying with the same client.

Even WiB and his great advice begs to differ. Read his last line. What you meant to say is 'Most risky way forward'

Closing the company is exactly the advice my accountant was saying as a way to very much mitigate the risk of an investigation - WordIsBond very much in line what you have stated - so even though I might lose any IR35 case - the fact the company is closed - would set a higher bar of HMRC to chase and transfer liability from company to individual - and there are prob easier cases for them to chase.

If that helps you sleep at night...

Though I was thinking of going down the MVL route - try to get one done as fast as possible.
There is a quite a lot of funds in the company as I haven't been taken a lot out in dividends - so the 32.5% would be an eye-watering amount.

It takes awhile. Fast isn't an option.

One possible option I was trying to consider was to go brolly - same client - but try to change agency - I understand, agencies send quarterly data to HMRC with quite a lot of detail of turnover along with personal details. Though Agency, only thinking of their own bottom line, wouldn't release me - had thought they could do some sort of contractor swap with another agency serving the client. It might be possible if I push harder.

Very unlikely you can change agency just to suit your tax position. Sorry, I meant to say, not a chance.

There is an option to go perm with the client - but the salary is significantly lower - I think you were alluding to this being the least riskiest of options.

I think he (and everyone else) said leaving is the least risky of options.. but I'm guessing you don't want to do that because you are nice and comfortable at the client.

The QDOS review is being done with the client, if this does, by some miracle, come back as being outside, and the client is happy to sign off as outside

Good luck with that... and you've got 3 weeks to sort everything out so I wouldn't be waiting for this while making a decision.

The advice that previous posters have given that I should leave as I'm high risk if I stay - isn't this advice based on the old paradigm i.e. where all contractors were operating via PSC - HMRC therefore had reason to go after contractors and try to claw back missing NI/tax.

That's correct. There is still risk even if you go. You were still caught and will lose but they might not find you if you've cut ties with the client.

Under the new paradigm, where all contractors are pretty much brolly/PAYE and paying full whack NI/tax - with HMRC coffer's over-flowing with loot - isn't this job done for HMRC and an end to IR35 - are they really going to put time and effort going after retro - when that effort can now be diverted to perhaps some real serious fraud - or perhaps are we low hanging fruit and easier for the picking.

Not a chance. Time and effort? When a client stuffs a contractor and puts him on the line for 6 figures of back tax. You think they will pass that up? Time to stop kidding yourself fella.

Is the main reason people are saying I'm inside is purely down to the time (~4 years) I've been with the client and everything else is irrelevant?

Nope but that's a very strong indication of what your determination will be for a number or reasons. It's also the exposure you'll have to face in less than three weeks time if you get caught outside/inside. You are almost out of time so not really worth spending a long time discussing all the ins and outs.

So my current thinking is to close down company fast via MVL and go brolly probably with same agency if they won't let me switch. Or if this is still considered high risk, potentially go perm with client.

Very high risk. Top of the tree. You've gone outside to inside with the same client. This is the easiest pick of the bunch and you've a lot of tax you potentially owe so even higher up the tree. All the above does is attempt to hide from HMRC. Reading all this you've still got head in the sand syndrome. The answer to this question has been said by nearly every poster in this thread yet you are still not quite getting it.

If it is better that I should leave now, as previous posters have said, I don't think I've come across articles that reflect the same view. Most seemed to have cited HMRC - twice stated - advice that it won't go after previous years. Is there any tax or ir35 professional articles that suggest the same course of action. While I respect and value your advice and it certainly has me now reviewing my options, the same advice needs to come from a professional source. I'll try and contact a few more ir35 tax professionals to gauge what they think I should do going forward.

Please do but be very quick. Remember, your only mitigation here is to avoid HMRC. Even the tax specialists won't know and they will be very wary of telling you a hard fact in case they are wrong and you can come back and sue them.

[eek]

Closing the company is exactly the advice my accountant was saying as a way to very much mitigate the risk of an investigation - WordIsBond very much in line what you have stated - so even though I might lose any IR35 case - the fact the company is closed - would set a higher bar of HMRC to chase and transfer liability from company to individual - and there are prob easier cases for them to chase.

I'm not sure the bar is actually that high - the bar for pierce the corporate veil is fraud, it's possible that HMRC could argue knowingly claiming to be outside when you were not is fraud.

So my current thinking is to close down company fast via MVL and go brolly probably with same agency if they won't let me switch. Or if this is still considered high risk, potentially go perm with client.

If it is better that I should leave now, as previous posters have said, I don't think I've come across articles that reflect the same view. Most seemed to have cited HMRC - twice stated - advice that it won't go after previous years. Is there any tax or ir35 professional articles that suggest the same course of action. While I respect and value your advice and it certainly has me now reviewing my options, the same advice needs to come from a professional source. I'll try and contact a few more ir35 tax professionals to gauge what they think I should do going forward.

Thanks again for the replies.

Also thanks to Jolie and escapeUK for your input and support - I couldn't understand the attacks and how comparing someone on £15k to those earning more - it wasn't handed to us on a plate and like you've said - we've worked bl**dy hard to get to where we are, a lot of sacrifice is made, esp those of us with families, it gets a lot harder trying to keep up with the latest tech and still maintain a semblance of family life.

If you have to stay (but you really shouldn't) - go permie with a contract that shows you are truly inside. Do not go via an umbrella as that is very likely to be picked up.

HMRC have 4 years to go after money - not the 1 year they have very careful about talking about in all conversations so far. They are now also going to have to go after money from anywhere they can as I think this coronavirus is going to destroy tax revenue for years to come, hence they will be a lot of pressure to collect anything they can.

And yes I'm pessimistic, dealing with HMRC makes you that way inclined.

[webberg]

The average salary in the UK is slightly under £30,000. Like all averages this is both useful and highly misleading.

However, an employee earning £30k a year will pay around £3.5k tax and £2.6k in employee NIC. That is around 20.3% of gross earnings.

At £60k a year, the deductions amount to around 27.6%

At £90k a year, the deductions amount to around 32.4%

At £120k a year, the deductions are around 38.1%

This is progressive taxation in practice. It may not be perfect, is certainly prone to getting things wrong from time to time and can be manipulated if income is taken in a manner that does not attract NIC.

It is however "good" political philosophy in that the more you earn the more you pay.

The cost of getting to work is these days ignored in the political philosophy. The reasoning used to be that self employed people would travel to find work and because they may find work in many different places over a period, they would both reflect that in pricing to the end client and also be entitled to a deduction so that it was just "earnings" that were taxed. That makes sense.

In more modern times however, many "self employed" people are - again for reasons of political philosophy - seen as employees who for reasons of their own or for reasons imposed by an end client, but voluntarily accepted, are more likely to be at one location or job for an extended period.

Those who are genuinely self employed can still enjoy better expenses than those who are not, but the differences are marginal now.

The reasoning used to be that an employee would probably arrange his/her life to suit the job/location of employer, especially at the higher levels of pay which implied a career being pursued.

It id however a matter of personal choice where and how you live and the tax system has been adjusted to ensure that those who choose to live close to or at reasonable cost from their work are not subsidising those who choose to live further away or incur more cost in getting to work.

Whilst you can argue that this is going to throw up oddities and anomalies, it works in perhaps 95% of instances.

An employer paying £30k a year actually has a real cost of close to £33k. The Government takes around 27.4% of that in tax, em'ee and em'er NIC.

At £60k, the employer cost is £67k and the Government gets 35.2%

At £90k, employer cost is £101k and Government is at 38.9%

At £120k employer cost is £135k and Government is at 45.1%

The employer may get some CT relief - depends if they are profitable.

With the change to IR35, the end client who has been paying £30/60/90/120k and leaving you to pay the tax etc is suddenly faced with an extra tax and NIC bill. If you are also looking to maintain "take home" (itself a hopelessly subjective and manipulated measure and hardly reliable) then the end client/employer faces a further increase in cost.

Some will pay. Some may even chose to indulge your choice as to where you live and increase your salary again to allow expenses from net income. I suspect not many though.

I suspect many will say that their budget is £30/60/90/120k and your tax and choice of where to live and therefore the cost of getting to work, is your affair. The fact that the Government has changes the rules should not mean that the end client/employer should pay you more. It is not for the end client/employer to interfere in Government policy.

Whilst I have sympathy for the OP the truth is that he/she is victim of Government policy which has had the unintended(?) consequence of allowing the end client/employer to keep their costs stable at the expense of the individual worker.

Is that reasonable? Depends on your point of view.

If you are perhaps of a leaning which says people in similar situations should be contributing financially to the society we want to live in with similar amounts of tax, then the reforms to IR35, no matter how badly handled and managed, are achieving this.

If you are of a leaning that says that if you have a particular talent/skill that attracts a premium in the market or you have chosen to live a long way from work for personal reasons, but because of that particular talent/skill, you should be permitted to pay a lesser sum, then IR35 reform is a shock.

The equation between end client/employer and contractor/employee will require some time to normalise (perhaps two or three contract cycles) and of course if you genuinely do have a unique or unusual or highly desired skill, your bargaining power is now greater.

In the meantime, I'm afraid that many contractors are going to feel this adjustment to what arguably Government wanted to achieve in 2000, very deeply.

Whether we like it or not, the present Government has chosen to make these changes. In doing so, they are perhaps only advancing what Governments of all colours have done in the last 20 or more years. DO we think another Government would have shied away from this reform.

As with all things political in a democracy, if you don't like the situation, your choices are to wait 5 years and vote for somebody else, get onto the streets (and social media) and campaign for a change, go and get elected and change the policy from within.

I make no judgement on choices made or reactions to the upcoming reform, but if it helps, the facts above may bring things into perspective.

[Jolie]

Also thanks to Jolie and escapeUK for your input and support - I couldn't understand the attacks and how comparing someone on £15k to those earning more - it wasn't handed to us on a plate and like you've said - we've worked bl**dy hard to get to where we are, a lot of sacrifice is made, esp those of us with families, it gets a lot harder trying to keep up with the latest tech and still maintain a semblance of family life.

The majority of the British people see us as tax dodgers and particularly with the more left wing amongst us, they believe in communist values that we should all be at the same level. Hate, jealousy and bitterness. Those earning £15K in a dead end job will be doing so for the rest of their lives, because they know nothing different and have no motivation, desire or energy to do something about it, and they sit there moaning and whining like a banshee that it's not fair, even though many of them smoke, have an iPhone (that they wouldn't have had if it weren't for entrepreneurs prepared to take risk), watch Netflix and eat takeaway, go figure!

If it is better that I should leave now, as previous posters have said, I don't think I've come across articles that reflect the same view. Most seemed to have cited HMRC - twice stated - advice that it won't go after previous years. Is there any tax or ir35 professional articles that suggest the same course of action. While I respect and value your advice and it certainly has me now reviewing my options, the same advice needs to come from a professional source. I'll try and contact a few more ir35 tax professionals to gauge what they think I should do going forward.

The one thing I agree with every other poster on this thread is that it's time to leave, now!

The Loan Charge should give you enough warning signs. Listen to the advice of people who have been caught before and are going through years of pain now.

The short term pain you will experience in finding another position, taking a lower income, adjusting to new working practices etc far outweigh the comfort of continuing and then being hammered with a 6 figure tax claim. Is that a risk you are prepared to take?

[BrilloPad]

The Loan Charge should give you enough warning signs.

2008 was the real warning - the wring was very clearly on the wall then. However LC should have re-inforced that - 7 suicides so far.

HMRC have got much further to go yet though.

[CosmicWave]

The majority of the British people see us as tax dodgers and particularly with the more left wing amongst us, they believe in communist values that we should all be at the same level. Hate, jealousy and bitterness.

You do realise that the IR35 changes and all this mess are all due to the right-wing and so called entrepreneurial-friendly Tories' legislation / laws, right?

[BrilloPad]

You do realise that the IR35 changes and all this mess are all due to the right-wing and so called entrepreneurial-friendly Tories' legislation / laws, right?

You are just so wrong. What is it with posters here?

It does not matter who is in government. They report to HMRC.

Take David Gauke....

Gauke on DTA 2008
-----------------
The retrospective nature of the clause is deeply troubling. We fully share the Government’s concern about the issue that it is trying to address. There is a problem with the arrangements and it is perhaps more than just a kink in the system, as the Economic Secretary put it. Trading profits derived from UK land are being received tax free by UK residents and domiciled individuals because of schemes involving the establishment of offshore trusts, specifically in the Isle of Man.

The existing legislation appears to deal with the issue where the UK residents or domiciled individuals are partners in the relevant offshore funds, but it does not seem to work where the partners are trusts and the UK individuals are benefiting from the arrangement. There is not a problem with trying to address that point, but there is a point of principle here. The proposal essentially states that the amendments contained in the clause are to be treated as always having had effect. Either the law exists or it does not. It is troubling when the Government state that the law in the past is something because that is what they say it is now. That is essentially what subsection (4) states.

This is partly an issue of simple democracy. It raises issues about EU law and legitimate expectations. I shall not pursue that point, but the hon. Member for South-East Cornwall is right to raise it. In part, it cuts to the question of the certainty and stability of the UK tax system. For investors, the idea that UK tax law is likely to be changed retrospectively is unattractive, and the UK is, for various reasons, acquiring a reputation for having an uncertain and unstable tax system, which is bad for the UK economy.

Gauke on DTA 2012
-----------------
Laurence Robertson (Tewkesbury, Conservative)
To ask the Chancellor of the Exchequer how many people had to pay additional tax following the coming into force of section 58(4) of the Finance Act 2008; and if he will make a statement.

Hansard source (Citation: HC Deb, 18 June 2012, c723W)

David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
UK residents are taxable on their worldwide income wherever it arises—including situations where it arises by way of foreign partnerships. Section 58 of Finance Act 2008 was enacted to help put that beyond doubt and in so doing, made clear that a wholly artificial tax avoidance scheme involving a foreign partnership comprised of foreign trustees did not work. As section 58 retrospectively clarified existing legislation, its introduction had no affect on any taxpayers' tax position.

--------------------------------------------------------
When will posters here get this?

[Jolie]

You do realise that the IR35 changes and all this mess are all due to the right-wing and so called entrepreneurial-friendly Tories' legislation / laws, right?

While I do agree with much of what BrilloPad has said, you need to go and look at the history of how IR35 came about.

[webberg]

At the end of the day, the politics matter little. Governments of all colours have seen the contracting world as a potential source of tax revenue and one, moreover, that can be raided with impunity as HMRC's PR machine cranks out the "tax avoider" lies.

The fact that you may earn, 4, 5, 6 or more times the average salary will always be seen by some as the luck of the draw or the fact that you are married to the bosses cousin's auntie or whatever. Again, it doesn't really matter.

The wheel has turned and for a time at least you have to accept a number of changes which include paying more tax and keeping less of what you earn.

The alternative is to be sucked into a situation in which the false promises of those flogging tax saving schemes start to look attractive and you use one of their shoddy products. If you do, I guarantee that the net cost to you will increase. And have an additional dose of emotional rollercoaster.

In your own judgement this may be "wrong" or "unfair" or "penal". You may consider it a deliberate attack on you, your industry, your social class. You may well be right. Equally, there will be others who have bought into the HMRC PR machine message and you may as well spit in the wind for all the good it will do you trying to convince them otherwise.

You will at some time get over this sense of injustice (reasonably held or otherwise) and move on. Why not start now?