Reply to: MoD and Public Sector

[eek]

Jump to the private sector? That's 20,000 people with experience in mostly outdated, unsupported technologies moving into a modern and well-populated market in competition with people who understand that market and technological level...? Yeah right...

Put your rate up by 30% or so to compensate...? Good luck with that one too. And expenses are expressly disallowed, remember.

Use alternative frameworks to gain access to PS work...? Now you are being silly. Frameworks exist and are regulated for a reason.


Smell the coffee, please. The only way out is to prove to HMT that their wonderful idea is a compete and utter disaster in the making and will not achieve what they want to achieve.

Smell the coffee - there are a few senior civil servant policy makers whose future careers require this to be implemented so it will be.

[youngguy]

Jump to the private sector? That's 20,000 people with experience in mostly outdated, unsupported technologies moving into a modern and well-populated market in competition with people who understand that market and technological level...? Yeah right...

Put your rate up by 30% or so to, compensate...? Good luck with that one too. And expenses are expressly disallowed, remember.

Use alternative frameworks to gain access to PS work...? Now you are being silly. Frameworks exist and are regulated for a reason.


Smell the coffee, please. The only way out is to prove to HMT that their wonderful idea is a compete and utter disaster in the making and will not achieve what they want to achieve.

Not everyone will be successful in their endeavours that's a given, doesn't mean they won't try though and it doesn't mean some will get traction. I've seen many a procurement framework circumvented for certain golden contractors and I've seen many a contractor on ridiculous rates because they have favour with the right people.

As for your suggestion Gov will change their mind, well that's just as silly. Nothing any of us have done appears to have made a dent in their view. We may get a year or so reprieve but HMRC are not faltering in their belief. I sincerely hope I get proved wrong.

[malvolio]

Jump to the private sector? That's 20,000 people with experience in mostly outdated, unsupported technologies moving into a modern and well-populated market in competition with people who understand that market and technological level...? Yeah right...

Put your rate up by 30% or so to compensate...? Good luck with that one too. And expenses are expressly disallowed, remember.

Use alternative frameworks to gain access to PS work...? Now you are being silly. Frameworks exist and are regulated for a reason.


Smell the coffee, please. The only way out is to prove to HMT that their wonderful idea is a compete and utter disaster in the making and will not achieve what they want to achieve.

[youngguy]

So, based on that, compared to a 500pd, paying £75 hotel and £100 return on the train:

As consultant:
HMG department is billed £6,000 consultancy + £400 expenses
Contractor gets £3200 via PAYE (c £1800ish?)

Result:
£6400 cost to HMG department
£1400 for the treasury in taxes of various kinds via inside IR35 taxation
£2000 for consultancy (lets ignore the money they get from their travel arm)

As contractor
HMG department is billed £3000 including the VAT

Result:
£3000 cost to HM department
£400 Contractor costs taken off top line
Contractor pays appropriate taxes on the residual £2600

Outcome:


Okay, there's some detail missed in there but I don't see how anyone could think that's a good idea, especially when you multiply it by the number of weeks and the number of contractors in the team.

Not sure whether you are agreeing with me or disagreeing 🙂

I can't see the vast proportion of ps contractors accepting this.

Yes, some will lay over and accept it.
A large proportion will jump to private sector.
A fairly large proportion will look at other frameworks, workarounds, expense deals, raising rates etc.

The £400m assumes all PS workers are a) inside and b) will just accept their fate.

Gov will either end up paying more, or getting a whole lot less delivery...or more likely a bit of both.

[youngguy]

Not necessarily, you could currently be charging £500, Cap may still charge you out at £1200.

I was working on the assumption of current contractors direct to an agent now going through one of the big four.

[LondonManc]

Yes, for example.
Current rate: 500pd.
Contractor goes as a subbie to cap (or whoever) and raises rate to 800 pd to cover their extra tax.
Cap puts on site for 1200 pd.

Cost to taxpayer = MORE than before
£400 million saved = false 😉

So, based on that, compared to a 500pd, paying £75 hotel and £100 return on the train:

As consultant:
HMG department is billed £6,000 consultancy + £400 expenses
Contractor gets £3200 via PAYE (c £1800ish?)

Result:
£6400 cost to HMG department
£1400 for the treasury in taxes of various kinds via inside IR35 taxation
£2000 for consultancy (lets ignore the money they get from their travel arm)

As contractor
HMG department is billed £3000 including the VAT

Result:
£3000 cost to HM department
£400 Contractor costs taken off top line
Contractor pays appropriate taxes on the residual £2600

Outcome:


Okay, there's some detail missed in there but I don't see how anyone could think that's a good idea, especially when you multiply it by the number of weeks and the number of contractors in the team.

[MrMarkyMark]

Yes, for example.
Current rate: 500pd.
Contractor goes as a subbie to cap (or whoever) and raises rate to 800 pd to cover their extra tax.
Cap puts on site for 1200 pd.

Cost to taxpayer = MORE than before
£400 million saved = false 😉

Not necessarily, you could currently be charging £500, Cap may still charge you out at £1200.

[youngguy]

CAP may well be if they can resource the requirements, us contractors (if we engage) will be taxed under IR35 so will lose out unless day rates increase but presumably CAP's rate might increase.....

So the ironic thing is that by endeavouring to get more tax revenue from us, the PS might ending up spending more, so I wonder if the net effect for the treasury would be loss?

Yes, for example.
Current rate: 500pd.
Contractor goes as a subbie to cap (or whoever) and raises rate to 800 pd to cover their extra tax.
Cap puts on site for 1200 pd.

Cost to taxpayer = MORE than before
£400 million saved = false 😉

[LondonManc]

Yep which is why you are getting the consultancy to pay those bills not you personally.

Thankfully the larger consultancies are set up to ensure expenses are handled centrally - last time I was with one you called someone up stated you were working at x for 3 weeks and they sent you a paid for hotel reservation.

Exactly what I was alluding to. Thanks for explaining it to him.

[eek]

Correct me if I'm wrong. Under the new PS/IR35 thing won't the expense payments be taxed as salary?

Yep which is why you are getting the consultancy to pay those bills not you personally.

Thankfully the larger consultancies are set up to ensure expenses are handled centrally - last time I was with one you called someone up stated you were working at x for 3 weeks and they sent you a paid for hotel reservation.

[Lance]

Especially if we get the same expenses that CAP Gemini consultants get - hotel + train expensed on a gig that's paying an extra £100/day wouldn't be that bad.

Correct me if I'm wrong. Under the new PS/IR35 thing won't the expense payments be taxed as salary?

[LondonManc]

CAP may well be if they can resource the requirements, us contractors (if we engage) will be taxed under IR35 so will lose out unless day rates increase but presumably CAP's rate might increase.....

So the ironic thing is that by endeavouring to get more tax revenue from us, the PS might ending up spending more, so I wonder if the net effect for the treasury would be loss?

Especially if we get the same expenses that CAP Gemini consultants get - hotel + train expensed on a gig that's paying an extra £100/day wouldn't be that bad.

[Lance]

So the ironic thing is that by endeavouring to get more tax revenue from us, the PS might ending up spending more, so I wonder if the net effect for the treasury would be loss?

If this happens the end net effect will be greater GDP (if measured in £ anyway). Maybe that's the plan - spend more, get more tax.

Net effect for treasury.. Who knows. With dividend tax up by 7% they're gaining anyway.

[gables]

ok so just seen example 3, I was looking at a 3 pager. Probably out of date. still stand by what I said CAP will be rubbing their hands together, making a tidy profit on lots more work coming their way.

I would imagine there is some nice creative sub contracting that could take place.

CAP may well be if they can resource the requirements, us contractors (if we engage) will be taxed under IR35 so will lose out unless day rates increase but presumably CAP's rate might increase.....

So the ironic thing is that by endeavouring to get more tax revenue from us, the PS might ending up spending more, so I wonder if the net effect for the treasury would be loss?

[eek]

ok so just seen example 3, I was looking at a 3 pager. Probably out of date. still stand by what I said CAP will be rubbing their hands together, making a tidy profit on lots more work coming their way.

I would imagine there is some nice creative sub contracting that could take place.

Given that there is no documentation yet beyond the initial consultation document that Example 3 is valid.

Also every consultancy I know would love to find a means to apply pressure on contractors for them to join that consultancy permanently.