Reply to: Government to consult on tax avoidance in the private sector

[Darren at Fox-Bartfield]

Still think this is an urban myth, probably from the agencies. The last medium sized company I worked with (around £50m pa turnover) handled over 12,000 invoices a month without blinking. A couple of hundred either way wouldn't bother them. It certainly won't trouble a big company.

What companies buy from agencies is risk mitigation and the best available staff on their books (ha ha...), not processing efficiencies.

Would tend to agree with the risk mitigation but also add that it's the saving on time sourcing new contractors/staff at the outset, as well as that most individuals go to agencies to source new work. In effect a conduit. We tend to use a max of 3 agencies as most of the decent staff go through them and also saves time advertising then sifting through a load of inappropriate CV's. Not a fan of agents, especially their fee levels but they serve a purpose in the current market.

[malvolio]

Big companies have PSL of agents. The agents get to deal with the contractors 500 invoices and then bell the client. The client may have 500 contractors but has only a handful of invoices from the agents.

Still think this is an urban myth, probably from the agencies. The last medium sized company I worked with (around £50m pa turnover) handled over 12,000 invoices a month without blinking. A couple of hundred either way wouldn't bother them. It certainly won't trouble a big company.

What companies buy from agencies is risk mitigation and the best available staff on their books (ha ha...), not processing efficiencies.

[RobScott]

fair play by the government

why only Public sector contractors affected by this, let all the contractors be under one rule.

[TonyF]

Since the liability lies with the agents, they would have to open an enquiry at that level and not the client?

It won't be an enquiry at all - everyone will be working as an employee via an umbrella company in the ideal HMRC world.

[swamp]

QDOS has opined:

https://www.qdoscontractor.com/news/...5-consultation

...more telling is their boast that they are able to approach a public sector organisation in order to obtain information on a large number of PSCs at once and thereby open a single enquiry covering multiple workers engaged by that end client

Not quite sure what they mean by that. Since the liability lies with the agents, they would have to open an enquiry at that level and not the client?

[PerfectStorm]

QDOS has opined:

https://www.qdoscontractor.com/news/...5-consultation

[BoredBloke]

Perhaps...but why don't big companies use those big consultancies for everything now? Presumably because whilst individual contractors may be a bit more hassle (500 contracts and 500 invoices/month instead of 1), it'll be significantly cheaper for them.

When it comes to corporate tax, the big corps are evidently prepared to sail fairly close to the wind. Presumably at least partly because they're confident their lawyers are better than HMRC's and/or they check the legal small print very carefully to ensure they stay just the right side of the law. So they're happy to take a bit of a risk there to save some money. Why would it be any different for the situation we're talking about?

Big companies have PSL of agents. The agents get to deal with the contractors 500 invoices and then bell the client. The client may have 500 contractors but has only a handful of invoices from the agents.

[fidot]

I think I'd really struggle with an unfettered RoS. The reason my skills are in demand is that almost nobody these days has the specific combination of 40+ years experience and industry knowledge in my particular speciality. Everyone else I know has retired or semi retired and works only when they feel like it. So, I am in demand. But - Who the heck would I sub to?

All fair points. However, as I have posted before, what would the client do if you had decided not to take this role?
They would have taken someone else on. You happened to be the best fit (skill/price/availability etc) in the client's eyes at the time of interviews. Even if the second best fit is half as good as you and twice the price, they would still take him/her on if the alternative is not doing the project at all.
So, they are already open to the idea, in principle, of you not performing the role personally. The trick to substitution is convincing the client that you have a better idea of an appropriate substitute than any agent.

[TonyF]

Do you have a link to that?

Research paper was dropped onto the government pages on Friday - https://assets.publishing.service.go...lic_Sector.pdf

[GreenMirror]

The evidence document that HMRC commissioned has some intersting stats that could be used to help fight the rollout. For example 44% of public sector bodies said that the new rules cost them more than before, 32% of public sector bodies said it was harder to fill vacancies now, 23% of sites said that CEST was not helpful ect ect.

Do you have a link to that?

[b0redom]

It's probably worth also noting that the majority of contracts I've seen in the public sector recently including those at HMRC have declared themselves outside of IR35.

[TonyF]

The evidence document that HMRC commissioned has some intersting stats that could be used to help fight the rollout. For example 44% of public sector bodies said that the new rules cost them more than before, 32% of public sector bodies said it was harder to fill vacancies now, 23% of sites said that CEST was not helpful ect ect.

[WordIsBond]

Notice how his 'PSC' is not registered for VAT. That's just totally unrealistic, unless it's normal for Project Manager roles to pay £230 per day.

Would you register for VAT if your company had £50K a year in revenue?

To be fair, what they were trying to do was create a simplified illustration with as few variables as possible. By leaving VAT out, and by setting the total contract at £50K (so there is no higher rate tax) it keeps it simple. That's really what they should be doing. But Pension AE is mandated by law and affects taxation so it really should be included.

The real problem is not that they set the rate low in their illustration, or failed to include the impact of pension contributions. The real problem is that their preferred solution, while it narrows the "tax gap", means the contractor ends up with less take-home than the employee, even though it is the employee that gets full employment rights.

[swamp]

HMRC regard VAT as revenue neutral so the quickest way of seeing your response is utterly ignored is to talk about VAT. Even charities and public sector contracts have special ways to treat VAT which mean they are not as awkward as you believe they are.

If your client isn't VAT registered -- ie finance or insurance company -- then it definitely isn't "revenue neutral".

Agree that public sector sometimes have some treasury agreement, but investment banks don't!

[madame SasGuru]

Notice how his 'PSC' is not registered for VAT. That's just totally unrealistic, unless it's normal for Project Manager roles to pay £230 per day.

Meanwhile HMRC are very quiet about trousering the extra 20% from all finance, insurance, charity, and public sector contracts.

HMRC regard VAT as revenue neutral so the quickest way of seeing your response is utterly ignored is to talk about VAT. Even charities and public sector contracts have special ways to treat VAT which mean they are not as awkward as you believe they are.