Reply to: Private settlement over IR35 claim

[IR35 Avoider]

I don't disagree that something had to be done about Friday to Monday, but IR35 wasn't it, if only becuase it was so badly framed it also caguht all the people that Friday to Monday was never going to affect, such as all those who were already contractors.

I re-edited my post so many times that I obviously ended up not making the central point I originally intended. I'll try again. It was never the intention of IR35 to specifically target people who actually did a "friday to monday". When the press release spoke about "friday to monday" it was giving the logical reason why "all those who were already contractors" should be targeted. It was irrelevant whether contractors had actually done a "friday to monday", what mattered was that they potentially could have done, which was a logical flaw (loophole) in the tax system. So from day one (the press release) it was always the intention to target everyone, the idea that they only meant to target those who had actually done a "friday to monday" is (in my view) a misinterpretation of the press release.

[tim123]

Fine, don't disagree, and the cost of employing a bloke at £25 is probably not too far away from £40 either - but under IR35 you get 20-odd percent of your £15 taken away again, which the client (or somneone with their own company) won't have. To get real parity between IR35 and outside IR35, the former would have to pay about 15% more on rate. Can't see that happening somehow...

But my point is that the client had no part in taking that 20% away.

So I see no reason why the client should 'automatically' be expected to give it back.

What ought to give it back is market forces, supply and demand. The fact that post IR35 rates haven't gone up to compensate for consultants paying IR35 taxes, means that the market rate is being held down by sufficient supply. That's how a market economy works.

If someone doesn't like to work for the rate that the job pays then the choice is a simple one. I'm seeing my rates held down by offshoring (real or potential). I don't like the rates that I am currently being offered, but I have two choices: accept them or don't work.

tim

[malvolio]

Of course it is.

Work out the hourly rate for a perm based upon expected working hours. This automatically includes holidays, sick etc as these are not worked hours.

For me this figures comes in at around 25ph. For the same job on contract I get 40ph.

What is this extra 15 pounds for?

tim

Fine, don't disagree, and the cost of employing a bloke at £25 is probably not too far away from £40 either - but under IR35 you get 20-odd percent of your £15 taken away again, which the client (or somneone with their own company) won't have. To get real parity between IR35 and outside IR35, the former would have to pay about 15% more on rate. Can't see that happening somehow...

[tim123]

I also do not accept your view that the rate includes the cost of such protection, since that money is taken away again by the tax charged under IR35 - 5% does not cover SSP, health care, 5 weeks leave and everything else the average permie gets,

Of course it is.

Work out the hourly rate for a perm based upon expected working hours. This automatically includes holidays, sick etc as these are not worked hours.

For me this figures comes in at around 25ph. For the same job on contract I get 40ph.

What is this extra 15 pounds for?

tim

[malvolio]

So why do you continue to be agressive towards me simply because I disagree with you over whether the existance of IR35 ought to give contractor a right to claim employment rights from their clients.

tim

I'm not intentionally being agressive with you - I'm agressive with everyone!

My stance is political, not economic - if HMG insist on treating a worker as an employee for taxation purposes, it is a paradox that the same worker is then denied employment rights because he is not an employee of the people paying for him. The end result for the IR35-caught worker - who generally tends to be fairly low on the food chain - winds up in the same situation as 17th Century millworkers, with poor income levels eroded by punitive taxation, no right to a holiday or to be ill and no protections at all. And all that by a nominally Socialist government...

I also do not accept your view that the rate includes the cost of such protection, since that money is taken away again by the tax charged under IR35 - 5% does not cover SSP, health care, 5 weeks leave and everything else the average permie gets, and the rate is not normally inflated to cover the overhead of an IR35 contract.

So I suspect we will just have to disagree on the point...

[tim123]

I don't disagree that something had to be done about Friday to Monday, but IR35 wasn't it, if only becuase it was so badly framed it also caguht all the people that Friday to Monday was never going to affect, such as all those who were already contractors.

It's just another stealthy fund raiser, initially helped into being by HMG's advisors who, surprise surprise, belonged to EDS and PwC, and are thus not exactly disinterested in moving small contractors out of the market. I personally could care less about employment rights, it's simply not a tax I want to pay since it does not apply to how I work.

So why do you continue to be agressive towards me simply because I disagree with you over whether the existance of IR35 ought to give contractor a right to claim employment rights from their clients.

tim

[malvolio]

I agree with Tim's response to this. I read the original IR35 press release very carefully, where the "friday to monday" scenario was mentioned. It can be read as arguing that the mere fact that "friday to monday" was possible is a reason to act, regardless of the extent to which it might actually be going on. It is illogical for the tax system to allow people to halve their tax bill by doing some paperwork, when there is no change in the reality of their relationship with the client. Under this interpretation, the claim by some contractors that they are innocent victims of legislation aimed at some else is wrong.

I don't disagree that something had to be done about Friday to Monday, but IR35 wasn't it, if only becuase it was so badly framed it also caguht all the people that Friday to Monday was never going to affect, such as all those who were already contractors.

It's just another stealthy fund raiser, initially helped into being by HMG's advisors who, surprise surprise, belonged to EDS and PwC, and are thus not exactly disinterested in moving small contractors out of the market. I personally could care less about employment rights, it's simply not a tax I want to pay since it does not apply to how I work.

[IR35 Avoider]

And the point of that argument is to demonstrate that IR35 is not only fundementally unfair, it is totally failing to achieve its objective, which was to prevent employers abdicating their obligations by sacking staff and taking them back as contractors ?.

I read the original IR35 press release very carefully, where the "friday to monday" scenario was mentioned. It can be read as arguing that the mere fact that "friday to monday" was possible was a reason to act, regardless of the extent to which it might actually be going on. It is illogical for the tax system to allow people to halve their tax bill by doing some paperwork, when there is no change in the reality of their relationship with the client. Under this interpretation, the claim by some contractors that they are innocent victims of legislation aimed at some else is wrong.

[tim123]

For a start I am outside IR35 and have never yet been inside. I'm not claiming anything from anyone.

The point I'm making is that if a worker is going to be charged full PAYE and NICs on 95% of his income on the basis that HMG believes him to be a disguised employee, then why should he not also have the benefits accruing to an employee?.

Because there is a law that says there is no connection.

I repeat what I said. The company have discharged the need to give the 'worker' employment rights by paying the worker's company to provide them for him.

The Government then come along and change the taxation regime for small limited companies in a way that the owners of small limited companies don't like.

What on earth has this got to do with the client company? Absolutely nothing.

So why do you think that, because the Government implement a taxation regime that you don't like, there is somehow a right to claim something that you previously weren't entitled to, from a disinterested party to the change?

This make no sense, IMHO morally, logically or legally.

And the point of that argument is to demonstrate that IR35 is not only fundementally unfair, it is totally failing to achieve its objective, which was to prevent employers abdicating their obligations by sacking staff and taking them back as contractors ?.

There isn't an experience contractor who believes this was the reason. The reason was simply to increase the tax take from these people, nothing more.

tim

[malvolio]

mavilo.

{snip}

I'm not saying IR35 is right, I'm just saying that you have no arguement with your client over it.

tim

For a start I am outside IR35 and have never yet been inside. I'm not claiming anything from anyone.

The point I'm making is that if a worker is going to be charged full PAYE and NICs on 95% of his income on the basis that HMG believes him to be a disguised employee, then why should he not also have the benefits accruing to an employee?

And the point of that argument is to demonstrate that IR35 is not only fundementally unfair, it is totally failing to achieve its objective, which was to prevent employers abdicating their obligations by sacking staff and taking them back as contractors - in effect it is doing precisely the opposite by taking away the worker's rights while still charging him tax as an employee.

And going back to the original point, anyone that signs up for IR35 without being very aware of the realities of the situation and being certain that they are in fact caught is not only a fool but a fool paying out 20% too much tax.

[rootsnall]

I presume my accountant fills in the P35 and does not tick the box, I wrote a letter to him yonks ago saying I am outside IR35 blah blah blah. Otherwise, panic panic panic !!!!

Just looked up what a P35 is, I did fill it in online, best check what I put, I very much doubt I ticked a box without knowing what it was on about !? Panic panic panic !

[rootsnall]

Ah. The one on the P35 that asks "Do you consider yourself subject to the requirements of the intermediaries legisation?" - aka the hands-up-I'm-caught box - and that is being extended from this year to cover the changes to the taxation rules aimed at killing off Managed Service companies.

You mean, you've never seen it...?

I presume my accountant fills in the P35 and does not tick the box, I wrote a letter to him yonks ago saying I am outside IR35 blah blah blah. Otherwise, panic panic panic !!!!

[tim123]

What? Does not compute...

Read it again - why should I pay personal taxation on income that is not personal? Where does it say I have to pay more tax than I am legally required to do? What employee like benefits do you think I have received from my client, because I'm buggered if I can see any.

And just to be really pedantic, it is not a law, it's a regulation.

mavilo.

What you are (IMHO wilfully) misunderstanding, is the whole point. The 'law' is one that makes all of the (residual) company's income, your personal income. So that is the part of the process that you have a complaint with.

This has nothing whatsoever to do with, whether you have, or have not, received employee benefits from your company's client.

As I said before, they moved this responsibility onto *your* company by paying it a rate which included those costs. So, it is your company that is expected to provide you with 'employment' rights, and it just so happens that all of the costs that the company is obliged to pay on you behalf are all deductable from the company's income before applying the IR35 rules, so you aren't taxed upon not receiving them.

I'm not saying IR35 is right, I'm just saying that you have no arguement with your client over it.

tim

[Mustang]

I think with all these sorts of things we have to make a stand. If you are outside IR35 fight the investigation - no point in just giving in!

My first contract resulted in me taking the client to Small Claims since they paid my invoices late and I charged them interest. They claimed I wasn't entitled to interest since it wasn't in my contract!! I won the case too!!

The law is there to protect - if we don't use it, we will get pushed around all the time.

OK - rant over!!

[malvolio]

WIth SJD, you tell them if you are IR35ed or not and they tick the box or not accordingly.