Public sector contracting

[BolshieBastard]

Because the guidance was to make all contractors "provide assurances (LIKE IBM) that the right tax was applied to the engagement" So if your contract is written as a good framework to work outside IR35 then you would be acting in the spirit of the matter. However through a mix of incompetence and malice that is not how most of the departments have reacted...

I am outside IR35 fact. No question on the matter, I am sat in my own office (I base myself here most days), working to my own rules on my own kit with no single person within the client overseeing deliverables. I am telling them how to do what they have no knowledge of. A simple and enviable position.
I am not a typical contractor for my client and in fact might be the only guy on the site that understands what using your contract as the basis for how you work means....

However having heard that HMRC are in a very destructive mood over this matter even having a cast iron concreate status is not enough because some arse from hector can spend the next two years victimising you just for fun...

And again with respect, your mistake is in thinking paying the right tax means proving one is outside IR35. That, is not the object. The object is to make sure (eventually, imo) that all one man PSC's pay full tax and NI on contract earnings.

The fact you work from your own office, may be the only one who knows what's what or has a contract framework etc is, immaterial in the scheme of things.

This isnt an exercise is 'proving' you are inside \ outside IR35 or pay the right amount of tax like IBM etc, etc.

It is a plain unadulterated attack on one man PSC's to make them pay full tax and NI. The sooner people realise this, the better.

[IR35FanClub]

This isnt an exercise is 'proving' you are inside \ outside IR35 or pay the right amount of tax like IBM etc, etc.

It is a plain unadulterated attack on one man PSC's to make them pay full tax and NI. The sooner people realise this, the better.

Your right - no matter what your contract says it appears HMRC / Treasury are trying to make the rule simpler and simply say if you work for the government and earn £220 or more for 6 months you are inside IR35 and pay your tax and NI. How long will it take for a law to be drafted that says if you work for ANY company on more than £220 a day and 6 months engagement in total (not an individual contract) you are inside IR35. In fact I can't believe they didn't think of this before!

It will have unintended consequences of course - say you want to employ a builder and the build lasts longer than 6 moths. Ooops. He's now an employee. Say The freelance marketing consultant brought in to help the tories win the next election is there for 6 months or more. Ooops he's now an employee.

What MAKES ME ABSOLUTELY LIVID in all of this. They want the tax off us, but are we getting the right to turn up at a job centre and claim benefits after having your contract terminated? Nope, coz you are a company director. Can you claim unfair dismissal and use an employment tribunal? Nope coz you are not an employee. Can you get sick and holiday pay subsidised by the NI funds? Nope coz you are not an employee.

So the taxes that "REAL EMPLOYEES" pay [and I want you to get used to that term REAL EMPLOYESS and use it regularly] don't apply to us. Our companies don't pay the tax and we also get none of the benefits of the taxes. So its seems fair on that basis - I.e we are not REAL EMPLOYESS so we don't get REAL EMPLOYEE benefits. So my proposition is that we are not disguised employees, we are companies offering services to other companies. End of.

If PCG are watching - run a campaign emplaining the difference between a real employee, a disguised employee.

IT has to be all or nothing. If we are disguised employees the government departments need forced to take us on temporary employment contracts with full employee rights and equivalent compensation so that after taxes our nett figure is not affected. That's what I'll be discussing in my current role - as I've just been told after 2x3 months they want to extend me by 6 months. Risky days! Ok, I don’t really want a temporary employment contract, but a rate increase to cover my extra tax/ni cost will suffice. Then I’ll declare myself inside IR35 and stop worrying.

Basically – everyone working in a public sector role should go and do the same. Go to their boss [edit - client] and explain they want a 20% rate rise – because of new government policy. Result – now you have a story for the newspapers – “new government policy has unintended consequence of adding 20% to temporary project staffing costs – which will be passed on to the tax payer”.

[RasputinDude]

“new government policy has unintended consequence of adding 20% to temporary project staffing costs – which will be passed on to the tax payer”.

Rich, avaricious tax dodgers try to extort more money by holding the government to ransom.

Don't fool yourself, the media isn't with us on this.

[DaveB]

As an aside, in the worst case scenario outcome - All Public Sector Contracts have to be treated as employment with full PAYE and NI - Is there any reason not to take the extra money that would push you into the upper tax bracket as salary and stick it into a pension and claim tax relief on it?

Ok you don't get the cash in the Co. account for the warchest, but you dont pay it out as tax either. Ok, you still pay a bit more tax as you end up with higher NI payments on the salary, but it's still better than than 40% IT + NI on it all.

[IR35FanClub]

As an aside, in the worst case scenario outcome - All Public Sector Contracts have to be treated as employment with full PAYE and NI - Is there any reason not to take the extra money that would push you into the upper tax bracket as salary and stick it into a pension and claim tax relief on it?

Ok you don't get the cash in the Co. account for the warchest, but you dont pay it out as tax either. Ok, you still pay a bit more tax as you end up with higher NI payments on the salary, but it's still better than than 40% IT + NI on it all.

Thats not a bad plan - especially since I refused to stick anymore money in a pension after A-Day. I was so livid that I'd been sticking £20 a month in one of my pensions since the age of 19 one the basis I'd get the money when I was 50. Then the gov come along and say - sorry laddy - not till your 55. How am I to know if future governments don't push it all the way out to 67 - or later - to co-incide with my state pension age? Nope. From that point I decided to keep my investments where I can get at them if I need them. Actually - even the state pension age is changing again - I think they are bringing it in sooner, so now I'll not be getting anything till 68. If at all? IF I dump enough on there in this contract, I might have enough to start considering Sipps and commerical property again.

[Scoobos]

It is a plain unadulterated attack on one man PSC's to make them pay full tax and NI. The sooner people realise this, the better.

I agree with you, but really don't see a need to worry quite so much.

The bottom line is , if HMRC want to make everyone subject to PAYE and "employed" then they have to change the law - a law that gives you the right to be self employed, or work as a limited. HMRC cannot do this, so they try scare us all and I suspect, many people go to them voluntarily, or are grassed by a disgruntled employee.

Something I believe to be true, and that people seem to forget is that we were pushed into this, and I don't believe it to be entirely lawful either.

good discussion I bookmarked years ago -> http://forums.contractoruk.com/accou...tml#post251734

[centurian]

Is there any reason not to take the extra money that would push you into the upper tax bracket as salary and stick it into a pension and claim tax relief on it?

Nope - in fact if you are caught by IR35, the relief is roughly 50%. As long as it is a payment made by the company you effectively get relief on both employers and employee's NI. Payments made by the individual don't get any NI relief at all.

The relief is limited to 50K per year - and this relief is constantly under scrutiny every budget time, mostly by LibDems who want to limit it to 20%.

[bobspud]

Some of the animals are more equal than others....

Had an interesting chat with a permie today. He is going contracting and is off to the FCO. I pointed out that he's probably not cut out for it , and its a bad move given his timing. But his response was not if you are in the FCO, because they were granted immunity along with the intelligence lot and cabinet office...

Rumour is that HMRC got it binned as well...

Something to do with not destroying delivery in key departments....

[BolshieBastard]

I agree with you, but really don't see a need to worry quite so much.

The bottom line is , if HMRC want to make everyone subject to PAYE and "employed" then they have to change the law - a law that gives you the right to be self employed, or work as a limited. HMRC cannot do this, so they try scare us all and I suspect, many people go to them voluntarily, or are grassed by a disgruntled employee.

Something I believe to be true, and that people seem to forget is that we were pushed into this, and I don't believe it to be entirely lawful either.

good discussion I bookmarked years ago -> http://forums.contractoruk.com/accou...tml#post251734

If a government want to introduce it and, they have a working majority then, they could very well implement it.

Neither would the Government be preventing people working as self employed. They will be making people working through PSC just liable to full tax and NI. IR35 is primarily directed at contractors although some other one man bands can be caught by it. Its not the employed status that is under threat, its the taxation status.

[bobspud]

If a government want to introduce it and, they have a working majority then, they could very well implement it.

Neither would the Government be preventing people working as self employed. They will be making people working through PSC just liable to full tax and NI. IR35 is primarily directed at contractors although some other one man bands can be caught by it. Its not the employed status that is under threat, its the taxation status.

A few points.

First off I agree with your comment that this was an attack on PSC workers. It has been mismanaged from day one and the whole thing would have been far easier if the Treasury said: Right you lot! as of next year you must make a differentiation between roles you failed to fill with permanent people and now have a contractor in them and Project based roles. For all perm infills you MUST use a temp agency and no one can use a PSC in that situation.
For project based roles PSC are fine on the basis that the company can only be engaged on that role and must leave afterwards... At least there would be clear winners and losers in that situation and the market could then settle itself based on supply or demand..

Second: Radio 4 did a series on making laws and interviewed many home secretaries from the last 20 odd years. The overwhelming point that came out was yes its fine for the government to put something on the statute book but the fun begins once it goes into court and the judiciary start to implement it. as a result of listening to the legal arguments put forward. The quality of the people writing the law is then pitched against the best practicing law chambers in the land and all hell breaks lose. The number of laws that get subverted or destroyed in the first court battles compared to the ones that prove to do what they said on the tin is not an encouraging win rate for the government, and in one home secretaries words sometimes its better not to start the fight...

IR35 is clear providing your client understands what he is buying and the contractor knows what to sell and how they are allowed to sell it...

GAAR has been heralded as the nuclear weapon to stop naughty tax avoiders from beating the government: Really? Who wants a bet that it will be knocked out the park by anyone of the hundred or so top tax firms in the city of London? Is George really thinking that the chief tax partner at Herbert Smith is going to say "Oh well thats allright then...I have spent the last few decades making millions out of tax efficiences for my clients but I had better stop now." No... He will be waiting his time to get the final draft after it has been set in stone, Then he will use a seriously talented team of people that will be payed well in excess of many millions of pounds to punch holes straight through the middle of it.

Last: lets have a show of hands for those of us that would welcome the chance to work without employment protection, pensions, holidays or sick pay and no job security while paying a greater percentage of tax than the permanent members of staff... How long do you think that market of telent will last???