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

[webberg]

If he would get £100K as an employee and £120K as a contractor, he's getting an extra £20K as cash-in-lieu. Of that £20K, he's paying 60% in income tax (because of the withdrawal of his allowance). He's paying 2% EENI, right?

That's grossly unfair.

There is no 60% tax rate in this country. Top rate is 45%.

Your assumption on that £20,000 over the £100,000 PA limiter is simply illogical and incorrect.

I agree that the PA falls if you go over £100,000 but to apply the reduction just to that part over £100k makes no sense.

More logical is to calculate the effective rate of tax an every £. In this case £120k has an effective rate of tax of around 38.1% - a long way short of 60%.

[WordIsBond]

I know more about this than most.

Just to clarify, it is HMRC that have conflated avoidance with evasion and for some reason have been allowed to get away with it. They have to be stopped. Many posts I have seen so far on this thread(and elsewhere) just encourage HMRC.

Sorry, but what you said here was idiocy.

You were paid more for your contract than for being permanent. You want to have your cake and eat it.

Tax evaders. Pay your fair share.

There's a reason for contractors to be paid more than for being permanent, and reasons why not all of that extra should be taxed. And if you call it tax evasion to not pay tax on every penny of the extra, you're an idiot.

[WordIsBond]

There is no 60% tax rate in this country. Top rate is 45%.

You're bandying words but accomplishing nothing.

The person who earns £100,100 pays £60 more than the person earning £100,000, correct? So your extra £100 in income buys you an extra £60 tax bill. That's a 60% tax rate in reality no matter how HMRC wants to dress it up.

And by extension, the person who would get £100K as a permie, and gets an extra £100 to be a contractor and not have employment rights, would pay an extra £60. So his cash-in-lieu in such a case is confiscated at the rate of £60.

You may say it is illogical but he's lost his employment rights and all he has to show for it is £40. £38 by the time you factor in EE NI. £25 if he's with a small client and has to pay the ER NI.

You can say it's not logical but he only has £25 more than the permie who has the employment rights. Change that number from £100 to £10K and it changes nothing. The permie earning £100K still gets his employment rights tax free and the contractor pays £7500 of his £10K to HMRC, and only gets £2.5K after tax. There's really no argument here, that's what happens. For an inside IR35 contractor in that band of income, HMRC takes 75% of every additional pound he gets. You'd be a fool to take an inside contract for £120K if you had the option of taking a perm salary at £100K. You get £5K extra after tax for the loss of full employment rights.

If IR35 made any reasonable allowance for the value of employment rights not being taxed, since they aren't taxed on employees, then you could make a case that it is fair. The current situation is in no way "fair." It's punitive.

[eek]

If IR35 made any reasonable allowance for the value of employment rights not being taxed, since they aren't taxed on employees, then you could make a case that it is fair. The current situation is in no way "fair." It's punitive.

That argument leads to the FLC - an idea so insane that I really hoped I would never have to think about it again.

A lot of poorly paid people aren't treated differently in the gig or self employed industry, just because we are well paid doesn't make us any different from others who don't get employment rights (and often don't get paid extra for losing them).

And as I accept myself and spend time telling people - life is unfair, deal with it...

[sadprofessor]

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.

Once again, how is severing good relationship with a client a good business strategy? Have you heard of businesses deliberately pushing away their customers?

Not trying to ignore the increased risk associated with longer contract - just because HMRC sees it as a more profitable case. But getting tired of that "long contract = not a true business" nonsense.

[eek]

Once again, how is severing good relationship with a client a good business strategy? Have you heard of businesses deliberately pushing away their customers?

Not trying to ignore the increased risk associated with longer contract - just because HMRC sees it as a more profitable case. But getting tired of that "long contract = not a true business" nonsense.

long contract = employees any better? - mind you at least IR35 makes it clear now what the client really wants.

[northernladuk]

Once again, how is severing good relationship with a client a good business strategy? Have you heard of businesses deliberately pushing away their customers?

Not trying to ignore the increased risk associated with longer contract - just because HMRC sees it as a more profitable case. But getting tired of that "long contract = not a true business" nonsense.

But on the other hand you could also be in a relationship where the client just wants a flexible perm. Doesn't matter what you think the situation is, good business relationships or whatever. If the client wants an inside contractor then your being in business ideas don't mean anyhring.

[sadprofessor]

But on the other hand you could also be in a relationship where the client just wants a flexible perm. Doesn't matter what you think the situation is, good business relationships or whatever. If the client wants an inside contractor then your being in business ideas don't mean anyhring.

True, hard to argue that.

mind you at least IR35 makes it clear now what the client really wants

Also true. The only problem is that HMRC can challenge even that, if it wants to

[webberg]

You're bandying words but accomplishing nothing.

The current situation is in no way "fair." It's punitive.

Don't think I suggested the present situation was "fair" but equally I think it's not "punitive".

I also confess that I struggle to see the logic in your numbers, but there is little to be gained in pursuing that line.

Employment "rights" come in two forms. There are statutory rights such as sick pay, holiday pay, maternity pay, leave in some circumstances, notice periods, etc.

There are then those benefits that employers choose to offer for various reasons. These might be share/bonus schemes, buying holiday, memberships/discounts, etc.

Some statutory rights are available to all, employees or otherwise, even if the self employed have to wait longer and/or receive slightly less money.

Some are usually priced into a contract, e.g. holiday pay. Some can be insured for.

Employment benefits can be matched in the self employed world if you chose to pay for them. It is very much a personal choice though.

In summary, there some employment "rights" that the self employed will not have unless they pay/insure for them - but not as many as you think. In part however the contractor premium is meant to cater for this.

How many contractors use that premium to acquire the rights they are missing out on is perhaps low (I don't know as I have no data on this). But it is a choice.

The remaining part of the contractor premium (i.e. the additional reward over and above an equivalent employee) is for other matters. Skill, expertise, the ability to be available and unavailable at short notice, niche experience perhaps.

I suggest that the above part of the premium is in reality 70% or more of the reason for the contractor premium and that many perhaps most end clients do not regard the increase as being for lost employment rights. (Indeed following that logic to a conclusion says that the role was inside IR35 anyway).

[mockedguy]

Tax evaders. Pay your fair share.

What a low life elitist comment to make.

Most contractors have worked fully within the laws of the time and honestly pay the taxes that were due, many £10,000s every year, corporation and personal.

If you want to have a poke at tax evaders start with 'businesses' like take-aways and traders who only take cash, and those that sit on the dole all their lives living off the tax we have earned and paid.

Do you work for hmrc?