Reply to: Does anyone know...

[jamesbrown]

Which was the ORIGINAL point of IR35, to prevent Friday-Monday incorporation either instigated by employers wanting to do just that or by employees wanting to take advantage of the taxation benefits. It's HMRC that have taken it and tried to apply it beyond the original remit.

I don't think that was the original remit at all. It was always intended to be much broader than that. As I recall, they simply issued a press statement with this as an example (which is more about selling the idea to a broader audience). The original point of IR35 was to minimise the perceived Exchequer risk from individuals incorporating (whether squarely for tax purposes or for a combination of good and "bad" reasons) and this was always best achieved by keeping the remit broad and open to interpretation by the courts, with just enough compliance to maintain the perception that the risk was real. It was never intended to have a narrow remit, otherwise it would've been easily tackled through narrow legislative mechanisms.

[DaveB]

It's not political, it's economic. For the same - or even a slightly lower - cost of employment, moving your chambermaids to self-employment means you are absolved from ERNICs, pension funding, assorted insurance overheads, holiday and sick pay and any kind of notice period when times are hard and you need to lose people. There are an awful lot of people on low wages who are also company directors.

The political motive is to prevent that level of abuse - except the only way our ill-informed and inexperienced-in-business MPs can see to do it is through punitive taxation which then kills off genuine self-employment, rather than putting the load back on to the end client where it belongs..

Which was the ORIGINAL point of IR35, to prevent Friday-Monday incorporation either instigated by employers wanting to do just that or by employees wanting to take advantage of the taxation benefits. It's HMRC that have taken it and tried to apply it beyond the original remit.

[LisaContractorUmbrella]

It's not political, it's economic. For the same - or even a slightly lower - cost of employment, moving your chambermaids to self-employment means you are absolved from ERNICs, pension funding, assorted insurance overheads, holiday and sick pay and any kind of notice period when times are hard and you need to lose people. There are an awful lot of people on low wages who are also company directors.

The political motive is to prevent that level of abuse - except the only way our ill-informed and inexperienced-in-business MPs can see to do it is through punitive taxation which then kills off genuine self-employment, rather than putting the load back on to the end client where it belongs..

So you agree that, by not allowing low paid workers to be paid through an intermediary, this problem could be resolved as the burden of employment would automatically be moved back to the end client.

[MicrosoftBob]

The easy solution and the morale solution is to punish the employers for this, if they had to pay the NI rather than putting the risk on the workers they'd just employ them as permies instead if there was no monetary advantage to forcing cleaners and others onto brollies

Move IR35 up the chain and this would all go away

[malvolio]

Interesting point. What do you think the political motivation is?

It's not political, it's economic. For the same - or even a slightly lower - cost of employment, moving your chambermaids to self-employment means you are absolved from ERNICs, pension funding, assorted insurance overheads, holiday and sick pay and any kind of notice period when times are hard and you need to lose people. There are an awful lot of people on low wages who are also company directors.

The political motive is to prevent that level of abuse - except the only way our ill-informed and inexperienced-in-business MPs can see to do it is through punitive taxation which then kills off genuine self-employment, rather than putting the load back on to the end client where it belongs..

[LisaContractorUmbrella]

Because it is becoming increasingly obvious that the whole tidying up of T&S/IR35/NICs/divvies is intended to create an to exit route from "permanent employment with all the security that that brings" without any loss of tax.

It'll be championed ('demanded', even) as empowerment of the self employed but in reality the effect will be to abolish employment rights, particularly for the low paid.

Interesting point. What do you think the political motivation is?

[Contreras]

What makes you say that?

Because it is becoming increasingly obvious that the whole tidying up of T&S/IR35/NICs/divvies is intended to create an to exit route from "permanent employment with all the security that that brings" without any loss of tax.

It'll be championed ('demanded', even) as empowerment of the self employed but in reality the effect will be to abolish employment rights, particularly for the low paid.

[LisaContractorUmbrella]

Which is also why it won't happen.

What makes you say that?

[LisaContractorUmbrella]

not while you can be "permanently employed" on a zero hours contract

That's another issue entirely but not one that can be effectively solved by putting low paid workers en masse through umbrella companies

[Contreras]

If the rule I suggested was taken on board the low earners wouldn't be punished - they would be better off as they would be in permanent employment with all the security that that brings and they would be financially better off. Although they wouldn't have tax relief on T&S they also wouldn't be having an umbrella company's margin and ERr's NIC's deducted from the contract margin which would have been low to start with.

Which is also why it won't happen.

[pr1]

If the rule I suggested was taken on board the low earners wouldn't be punished - they would be better off as they would be in permanent employment with all the security that that brings and they would be financially better off. Although they wouldn't have tax relief on T&S they also wouldn't be having an umbrella company's margin and ERr's NIC's deducted from the contract margin which would have been low to start with.

not while you can be "permanently employed" on a zero hours contract

[LisaContractorUmbrella]

you shouldn't be punished for earning a low wage

If the rule I suggested was taken on board the low earners wouldn't be punished - they would be better off as they would be in permanent employment with all the security that that brings and they would be financially better off. Although they wouldn't have tax relief on T&S they also wouldn't be having an umbrella company's margin and ERr's NIC's deducted from the contract margin which would have been low to start with.

[pr1]

you shouldn't be punished for earning a low wage

[DaveB]

"tory's approve tax breaks to all except the lowest earners"

And what makes you think they'd have a problem with that? Standard operating procedure for them.

[pr1]

then why not just make a rule which says if you earn less than living wage + 20% you can't be paid through an intermediary - problem solved - simples!

"tory's approve tax breaks to all except the lowest earners"