Reply to: Treat contractors like employees - what would you do?

[Jog On]

There was mention somewhere else (can't remember the link sorry) of a distinction between 'career contractors' and those just contracting until they can find a perm role. Could be interesting. Are you a contractor by choice and have opted for the overhead/insecurity or running a business with none of the permanent benefits - or are you a permie in between jobs in a contract until a job turns up?

Don't know if this will make any difference, justa dding it to the mix

[d000hg]

It depends how far you deviate from the typical contractor... if you're actively involved in product development this is different from reading books on .NET while benched. Standing on our rights "as a business" aside, I think each of us knows if they really are a business or a contractor/freelancer... I don't think my plumber would tell me he owns a plumbing business, he'd say he's a plumber unless he hires sub-contractors, etc.

[VectraMan]

I just want to be able to operate as a business, which might mean for example doing a contract, then taking 6 months to work on my own project funded by the previous contract work. I wouldn't mind so much paying the full amount of tax on my personal earnings when I earn something, but IR35 means you can end up paying tax on money you haven't even earned.

As I said elsewhere what I think they ought to do is bring in a new class of small company that can be exempt from CT (and exempt from having to do the returns), and instead the directors pay the full tax and NI on their income from the company. They could write a rule saying something like companies with a turnover less than X, where a director owns more than Y% of the shares has to work this way, and we'd all get the benefit of it being simpler to operate a Ltd. company. No reason to sign up to PAYE either.

I think I wouldn't mind paying a bit more tax overall if it was in exchange for the whole process being much simpler.

[Jog On]

I feel a bit better about this after reading that PCG Chairman Chris Bryce will join the Office of Tax Simplification board.

Even so, I very much doubt we'll just get left alone..

Maybe we should have an official sticky in the Accounting section for Budget 2011/IR35 2.0

[d000hg]

Contractors don't get permie benefits/protections but they do get tax flexibility, this combined with slightly higher rates makes contracting worthwhile, but if they just take out the tax flexibility (most likely) we would all instantly be the equivalent of IR35 caught and it would no longer really be worth contracting

Slightly? Only if you expect to be benched a fair amount. I'd certainly have still earned way more the last 3 years even caught by IR35, than keeping a regular job. If you work 6 months on, 6 off, or 9 on 3 off then maybe, but it genuinely takes you 3+ months of serious searching to find a new gig every time, maybe you're not being flexible enough, or are in the wrong field, or aren't as good as you
think.

[NotAllThere]

It's the same everywhere else. In Switzerland you can't work through a one man co any more....

Where do you get that from? I've been doing it for the past five years, and still going strong.

In answer to the original question. I don't get much in the way of tax advantage. But I remain a contractor because I get paid more, I can take more holidays, I have more flexibility about how I work, and what I do, and I don't have annual appraisal and target setting.

[swamp]

HMRC like limited companies because they and their monies are eminently traceable.

Sole traders can trouser all sorts of things, and often do.

[Not So Wise]

I'd be happy to go sole trader - I believe it's agencies that are the reason we have to form LTDs or go umbrella, is this correct? Something to do with the employer NI liability...

That's the main reason and to be honest don't blame them. Would you want to a receive a demand for payment from the government because someone else did not pay their dues?

That and liability protection are the main reasons to go ltd over sole trader

[Jog On]

It's the same everywhere else. In Switzerland you can't work through a one man co any more.

Australia has a new pretty left wing prime minister.

Taxes going up everywhere.

That's what happens after a credit crunch. I would certainly look before you leap.

I'd be happy to go sole trader - I believe it's agencies that are the reason we have to form LTDs or go umbrella, is this correct? Something to do with the employer NI liability...

[BlasterBates]

The whole Ltd for one man company’s has always been a pretty artificial construct and it would a good thing to see it become a thing of the past but only they if properly balance things out.

Contractors don't get permie benefits/protections but they do get tax flexibility, this combined with slightly higher rates makes contracting worthwhile, but if they just take out the tax flexibility (most likely) we would all instantly be the equivalent of IR35 caught and it would no longer really be worth contracting Actually many cases, after the recession and the rate cuts/freezes that went with it, would be far worse off than permies once you assigned a value to all their benefits

What they would be far better off doing is first fixing the sole trader category (or make a separate one for one man’s) to make that useable/beneficial again and then just have us all move to that, then it would be a pretty straight forward task to clean up and rewrite the rules for Ltd’s.

But in my opinion, as said above, got feeling UK contractors are likely to get the worst possible scenario and can see us all being automatically deemed the equivalent of IR35 caught, especially as the whole one man Ltd thing seems to be spreading again as companies use it everywhere to get around employee benefits/rights costs

If i had not already decided to get the hell out of UK that would defiantly make my mind up for me

It's the same everywhere else. In Switzerland you can't work through a one man co any more.

Australia has a new pretty left wing prime minister.

Taxes going up everywhere.

That's what happens after a credit crunch. I would certainly look before you leap.

[Not So Wise]

The whole Ltd for one man company’s has always been a pretty artificial construct and it would a good thing to see it become a thing of the past but only they if properly balance things out.

Contractors don't get permie benefits/protections but they do get tax flexibility, this combined with slightly higher rates makes contracting worthwhile, but if they just take out the tax flexibility (most likely) we would all instantly be the equivalent of IR35 caught and it would no longer really be worth contracting Actually many cases, after the recession and the rate cuts/freezes that went with it, would be far worse off than permies once you assigned a value to all their benefits

What they would be far better off doing is first fixing the sole trader category (or make a separate one for one man’s) to make that useable/beneficial again and then just have us all move to that, then it would be a pretty straight forward task to clean up and rewrite the rules for Ltd’s.

But in my opinion, as said above, got feeling UK contractors are likely to get the worst possible scenario and can see us all being automatically deemed the equivalent of IR35 caught, especially as the whole one man Ltd thing seems to be spreading again as companies use it everywhere to get around employee benefits/rights costs

If i had not already decided to get the hell out of UK that would defiantly make my mind up for me

[d000hg]

It would be fair enough if they took proper account of all the things the employee gets for free but they never do.

That's covered by a high daily rate.

[xoggoth]

It would be fair enough if they took proper account of all the things the employee gets for free but they never do.

[d000hg]

It's entirely fair if everyone earning money is on the same tax structure. If contractors pay employer NI, employee NI and PAYE that's not the same thing though. Allowing individual contractors to properly work as self-employed wouldn't be such a bad thing (that's what most tradesmen I come across seem to do, rather than form Ltds.

[doodab]

Personally I think paying income tax and employees NI contributions (or self employed ones) on contractor rate income would be a fair deal. It's always seemed to me that the reclaiming of the "lost" employers NI from the contractor and not the hiring company was punitive as it meant contractors within IR35 actually paid more tax than an employee would.