Reply to: Is the death knell ringing for IR35

[Little'Old Me]

What I forgot to include in my last post was that 30 years ago, contractors working for agencies were allowed to be sole traders. But too many never declared their income.

So they made the Agencies responsible for "employing" of the contractors. They understandably did not want to do this, so they came up with the Ltd Company idea. This worked reasonably well until the HMRC put in the new computer systems to cope with SA etc...........

[Little'Old Me]

This may be a really daft question, but why can't contractors operate as sole traders? I believe that Class 2 & 4 NIC is similar to employees NIC, so this would put us on a par with employees.

The problem is many sole traders do not declare their income. Just look at what happened to the Sports, Film and the Construction Industry. Most of them either now have "with-holding" tax deducted at source to make them declare it and reclaim overpayment's or are required to be treated as employees.

When I first started doing s/e accounts and tax work, the HMRC had just done the same to the Newspaper industry. I had a client who used to do sub-editing for newspapers (Employee), as well as received payment for freelanced writing. Each year she had up to 15 sub editor posts (changing constantly), year 2 the HMRC confirmed it should all be treated as s/e income in future.

A couple of years later it was s/e teachers - now they are all employees unless they are running a Ltd company and employ others. Then s/e office cleaners. Unless they had several contracts and did s/e accounts they had to be treated as employees. Each case of s/e had to be agreed in writing with HMRC in advance.

The HMRC prefer everyone to be an employee, that way they don't have to rely on people to be honest.

[expat]

I would, I just don't see why I should pay significantly more than an employee who has a pension, holidays, sickness etc. There has to some sort of payoff for the flexibility contractors provide.

If HMRC want to tax me as an employee and an employer then HMRC should provide me with these perks.

If you want to treat yourself as an employee and an employer, then you the employer should provide you the employee with those perks.

If you (the employer) don't get a sufficiently higher rate to cover that, then the client is shafting HMRC by finding a way out of paying NICs, and using you as a mug in that tax fraud.

If you (the employer) do get a sufficiently high rate to cover it, but you would rather keep the money, then you are just greedy enough to want to gain by tax fraud.

... and if you do not want to treat yourself as an employee an an employer, get a job.

[phileds]

You are only looking at court case figures. won vs lost.

How many people do you think own up and are actually paying in?

That is a VERY good point - not to mention all those who gave up contracting when IR35 came on the scene, figuring it was just too much hassle.

Not a problem though. Seems "British" employers can fly in foreign workers with near impunity. Despite this government's purported hatred of local contractors, it seems to have no qualms allowing employers to fly people in who, it turns out, are often as expensive AND less well qualified than the now-unemployed, local talent.

I don't see things getting better, only worse. This current economic mess will take a decade or two to lessen. Unemployment is rising fast, companies are shutting, those that have made losses (banks for example) can offset them for years to come....meanwhile, there are all those top bankers' bonuses you and I have to pay for.

And for those in jobs, you'll be paying via higher taxes, and no doubt an IR35++ law to come into effect, if indeed they don't retrospectively change the law as they did with BN66.

[centurian]

This may be a really daft question, but why can't contractors operate as sole traders? I believe that Class 2 & 4 NIC is similar to employees NIC, so this would put us on a par with employees.

Legally, there's no reason why we can't. But if we are then classified as disguised employees, then the responsibility falls onto agents/clientco's to cough up.

Hence agents/clientco's refuse to business with us as sole traders.

But if you can find a mug of a client prepared to go the sole trader route, then go for it.

[BrilloPad]

I would require retrospective voting if this is the case.

It would be nice to think so. But alas no. After Section58 anything is possible.

[DonkeyRhubarb]

Sole trader?

I would, I just don't see why I should pay significantly more than an employee who has a pension, holidays, sickness etc. There has to some sort of payoff for the flexibility contractors provide.

If HMRC want to tax me as an employee and an employer then HMRC should provide me with these perks.

This may be a really daft question, but why can't contractors operate as sole traders? I believe that Class 2 & 4 NIC is similar to employees NIC, so this would put us on a par with employees.

[centurian]

Anyway, out of interest would people accept being under PAYE if you didn't have to pay employers NI? If I'm right, that would give an extra 12% net.

Probably yes. I don't mind paying the same tax as everyone else (although sole traders pay 8% NI, not 11%).

But I do begrudge having to pay the same tax twice - especially when I don't get any of the benefits of being an employee.

It won't happen though. It will open up a separate loophole to avoid employers NI.

[gingerjedi]

I am no longer contracting anymore, and haven't run a company for a long time. My last contract was through an IoM scheme (no comments please).

Anyway, out of interest would people accept being under PAYE if you didn't have to pay employers NI? If I'm right, that would give an extra 12% net.

I'm not saying it would even be possible to frame legislation to exclude certain groups from Employers NI, but if it were then it could be a reasonable compromise.

I would, I just don't see why I should pay significantly more than an employee who has a pension, holidays, sickness etc. There has to some sort of payoff for the flexibility contractors provide.

If HMRC want to tax me as an employee and an employer then HMRC should provide me with these perks.

[Ruprect]

I heard that IR35 is going to be retrospectively clarified back to 1999.

I would require retrospective voting if this is the case.

[DonkeyRhubarb]

Exempt from Employers NI?

I am no longer contracting anymore, and haven't run a company for a long time. My last contract was through an IoM scheme (no comments please).

Anyway, out of interest would people accept being under PAYE if you didn't have to pay employers NI? If I'm right, that would give an extra 12% net.

I'm not saying it would even be possible to frame legislation to exclude certain groups from Employers NI, but if it were then it could be a reasonable compromise.

[stingman123]

Well ...... this has been much discussed already and this is part of the problem with IR35 - who knows? I had a PAYE (IR35) review a few years back and it was fine. The fear of this stuff is crazy.

I run my business they way I feel is correct. Have I been negligent doing so? No - my contracts are outside of IR35 to the best of my knowledge and to the knowledge of other external professional (lol) advisors.

(IMHO) - If the tax man decides otherwise I suppose a judge would have to decide and Hector would have to prove that I acted negligently as a director. Much harder to prove than just force his opinion on me about a contract or two.

(IMHO) - Hector is trying to collect this revenue by fear and slight of hand, like a lot of the tactics with dubious taxation.

By the way - what has happened in the high profile cases recently Dragonfly and Kingfisher etc?

Consider yourself lucky! Whilst working for Capgemini on the HMRC account, I showed my contract to 2 inspectors in 2 different offices, one said I was OK,the other said I wasn't.
If they cannot decide, how the hell can I?/accountant/ agency?

[Jubber]

Wouldn't it be deemed that the personal Self Assement was incorrect (money claimed as div's rather that paye) and therefore the personal tax will still be due.

i.e. your not off the hook if you close down the company!

Well ...... this has been much discussed already and this is part of the problem with IR35 - who knows? I had a PAYE (IR35) review a few years back and it was fine. The fear of this stuff is crazy.

I run my business they way I feel is correct. Have I been negligent doing so? No - my contracts are outside of IR35 to the best of my knowledge and to the knowledge of other external professional (lol) advisors.

(IMHO) - If the tax man decides otherwise I suppose a judge would have to decide and Hector would have to prove that I acted negligently as a director. Much harder to prove than just force his opinion on me about a contract or two.

(IMHO) - Hector is trying to collect this revenue by fear and slight of hand, like a lot of the tactics with dubious taxation.

By the way - what has happened in the high profile cases recently Dragonfly and Kingfisher etc?

[gingerjedi]

Hasn't IR35 cost them loads more than it reels in?

I've been saying for a long time I would be willing to pay somewhere in between just to be free from the worry, at the moment the difference between being in or out is night and day so I'll take the risk along with the majority.

If they want us to pay they need to give us more carrot and less stick IMO.

[helen7]

your company

Wouldn't it be deemed that the personal Self Assement was incorrect (money claimed as div's rather that paye) and therefore the personal tax will still be due.

i.e. your not off the hook if you close down the company!