Reply to: With the dividend taxation will you continue contracting?

[Zero Liability]

Which actually wouldn't be a bad outcome. So you are right, I've talked myself into agreeing with you. This won't happen because it would make too much sense.

Indeed, it wouldn't be, as finally the end clients would also bear the burden for something they benefit from as well, if they did not exercise due diligence. Not saying the burden is necessarily justified or justifiable, but so far the system has worked such that they can wash their hands of the whole matter. It'd be a good change, if they did go in that direction, because then it would be in everyone's best interest to keep the contract and WP outside, but I'm expecting something like an FLC to materialise instead, in all but name.

[WordIsBond]

Because it will need to be £560 a day to cover the tax required to cover the £100 of expenses (assuming it takes you into the 40% barrier its 1/1-0.325 which means you need to take £160 from the company to cover the £100 in expenses that was taken from the company tax free...

I get that.

If the client pays £400 / day plus £100 / day expenses, YourCo clears £400 / day. If the client pays £500 / day and YourCo pays £100 expenses, YourCo has £400 / day. It makes no difference to how much money YourCo has to reduce your rate and have the client pay the expenses.

If tax treatment is equal (you have tax liability on the expenses either way), it makes no difference, and you'd want to keep paying your expenses so you could save or splurge depending on your preference. If tax treatment is different if client pays them, then it would make sense to have the client pay them and reduce the rate.

[WordIsBond]

And....

Since they are talking about shifting some of the IR35 burden onto end clients, 2) may get a lot easier to accomplish.

Which is why I don't expect it.

I wouldn't be so sure. Right now, if they win an IR35 case, there may not be any money in the ContractorCo to recover. If they can make ClientCo pay some of it when they win a case, they are more likely to recover something. Chase the guy with deep pockets -- in this case, that's the client.

I suspect their review of IR35 will decide client has to pay employers NI, plus penalties. That gives clients incentive to A) declare borderline cases inside IR35 (to avoid penalties later), at which point contractors are stuck or B) help keep working practices and contracts outside IR35 -- which may also mean agents are forced by clients to fully disclose upper and lower contracts.

If they do this, some contracts will be dragged clearly inside, and others will be more clearly outside because clients AND contractors will be working together to keep them outside. And it would mean more money for HMRC, and better clarity for everyone.

Which actually wouldn't be a bad outcome. So you are right, I've talked myself into agreeing with you. This won't happen because it would make too much sense.

[Flashman]

What fooks me off is I consider myself a consultant, as I do the same work now as I did when I worked for a big 4 consultancy. The big 4 though see us little guys as a threat as we do the same job but for 25% of the cost to the client. And what do they do with threats, they pressure the government to get rid of us.

It probably cost the big 4 quite a bit to buy these changes from the tories/HMRC, but they will get that back and more once we are out of the way and they can charge the clients more dosh.

I still work on a lot of projects where big 4 consultants are also involved, and they have to bring in cheap bob-consultants these days as Brits down want to deal with their tulip, and we are too expensive to hire

This ^

The government likes me. The government wants to help me. They'll never come for me. They are my friends.

No need for panic but please don't live in a dream world where you imagine you are anything more than a character on some government officials spreadsheet.

[eek]

Why? If you have costs of £500 / week, what difference does it make whether you make £500 / day or £400 / day with expenses paid?

If the latter means a lower tax bill, I'd agree to it in a heartbeat.

Because it will need to be £560 a day to cover the tax required to cover the £100 of expenses (assuming it takes you into the 40% barrier its 1/1-0.325 which means you need to take £160 from the company to cover the £100 in expenses that was taken from the company tax free...

[stek]

What's the difference between this and a slight drop in rate, or a gig further away so more expenses? Ups and downs, swings and roundabouts, skill up a bit and make up the difference if it's such an issue.

Who knows where one stands, I've just taken a new role on, slightly lower rate, this one 3 miles away, previous 300, shorter working week, but no requirement to be on-call so in reality I don't know if I'm better or worse off because really it doesn't matter, it's a down. And now I need two ups so I can cancel out the down and so I can just have an up....

[SpontaneousOrder]

Utter bollocks a contractor will change rates regularly within a range depending on other factors, and clients offer a wide range of rates. Or do you have your rate tattooed onto your forehead

Recommend for you:

Basic Economics: A Common Sense Guide to the Economy: Amazon.co.uk: Thomas Sowell: 9780465002603: Books

[SpontaneousOrder]

If it were that easy, you'd be charging that rate already

Exactly

[Archangel]

I stopped contracting in 2009 and bought a "proper" business with staff and all that. This affects me too as I use the low salary c/w dividends route. Although it is a little mitigated by the increase in the employment allowance and the reduction in ct rate I'm still out of pocket. I'm sure I'm not the target, but I'm still the victim

Twats

[Zero Liability]

And....

Since they are talking about shifting some of the IR35 burden onto end clients, 2) may get a lot easier to accomplish.

Which is why I don't expect it. I think this may end up being an implicit abolition of it, and replacement of it with something else which will retain the name but effectively amount to a device like the FLC. They have the means now to separate out what they call "PSCs" and charge them a differential rate of dividend taxes relative to other ltds, so that option is open, and is a lot less messy than what they currently do.

I mean it could happen, I just think the government would have to be very charitable or myopic for it to occur. Same goes for simply "beefing" the measure up, it won't accomplish much as its cost-efficiency won't improve, and they have other "tools" at their disposal compared to this archaic, unwieldy measure.

All one can do is wait and see. Hopefully IPSE is going to get very involved in these discussions, but if the government doesn't want to listen, it won't.

[TheLordDave]

Hear, hear. When costs increase, don't you must absorb the increase. Does British gas absorb increases in costs? No, it does not. Just explain to the agent patiently and politely, and let them do the rest. At least they know you aren't making it up.

Who knows, it might even mean clients give more weight to local contractors. So I don't commute to Liverpool while a scouse contractor stays in a Travelodge 2 miles from my house.

That's all well and good but unless it's a blanket increase by all contractors you will just price yourself out of work.

[WordIsBond]

As a contractor-turned-business-owner interviewing me for a permie role once said: "Once a contractor, always a contractor."

I predict two trends over the next couple of years to balance this:

1) Market Rate *= 1.05
2) Contracts have to be IR35-Friendly by default

And....

Since they are talking about shifting some of the IR35 burden onto end clients, 2) may get a lot easier to accomplish.

[WordIsBond]

And with it a drop in rate?

I doubt too many contractors would agree to that

Why? If you have costs of £500 / week, what difference does it make whether you make £500 / day or £400 / day with expenses paid?

If the latter means a lower tax bill, I'd agree to it in a heartbeat.

[Whorty]

What fooks me off is I consider myself a consultant, as I do the same work now as I did when I worked for a big 4 consultancy. The big 4 though see us little guys as a threat as we do the same job but for 25% of the cost to the client. And what do they do with threats, they pressure the government to get rid of us.

It probably cost the big 4 quite a bit to buy these changes from the tories/HMRC, but they will get that back and more once we are out of the way and they can charge the clients more dosh.

I still work on a lot of projects where big 4 consultants are also involved, and they have to bring in cheap bob-consultants these days as Brits down want to deal with their tulip, and we are too expensive to hire

[barrydidit]

So I don't commute to Liverpool while a scouse contractor stays in a Travelodge 2 miles from empties my house.

ftfy