Reply to: Agency up front about IR35 status

[difficulttimes]

Thursday...

So I read on Linkedin that this Thursday HMRC will release the most anticipated tool...

[eek]

I don't know about you, but I'm RonBW. Eek is the only non-sockie in this entire thread....I like talking to myself.... and so do I

Nope I'm Malvolio's sockie - thought everyone knew that...

[jamesbrown]

You are James Brown and I claim my five pounds.

I don't know about you, but I'm RonBW. Eek is the only non-sockie in this entire thread....I like talking to myself.... and so do I

[RonBW]

Or what jb said (again!)

You are James Brown and I claim my five pounds.

[teapot418]

I think that's what eek means. A long and boring (depending on your persuasion) history can be found here:

Do contractors need limited companies? :: Contractor UK

Or what jb said (again!)

[eek]

Good explanation here

Do contractors need limited companies? :: Contractor UK

"Up until the mid 1970s many contractors provided their services as self-employed workers taxed under Schedule D. Then came S38 of the Finance (No 2) Act 1975 which provided that individual contractors who contracted with agencies would, under certain conditions, be subject to PAYE and tax under Schedule E. As a result most contractors who used agencies formed their own limited companies so that it was their company rather than themselves individually which then contracted with the agency, and thus the application of S38 was avoided. Although S38 of the Finance (no 2) Act 1975, which is now S134 of the Income and Corporation Taxes Act 1988, never applied to all individual contractors (i.e. non-limited company contractors) who used agencies, in practice it was in the agencies' interest to assume that it did and to apply PAYE across the board unless a limited company was used. It was also extremely difficult for the contractor to challenge this. Recent legislation has, however, changed the situation so that contracting direct with an agency (without a limited company) and being taxed under Schedule D is now again a practical possibility for some contractors, including for some contractors who, if they contracted using a limited company, would come within IR35."

So not banned as such, but made impractical.

If you're contracting direct, and the client is happy, it is still possible to be SchedD self employed.

You have to remember that contracting for most people (unless and until they have built up their contacts to the point that they no longer use agencies to find work) means using agencies to find contracts. And an agency cannot pay someone via Schedule D... Hence why I stated things the way I did...

True there are exceptions if you go direct but equally its a very limited part of the market and you are usually better off using a limited company...

[teapot418]

Good explanation here

Do contractors need limited companies? :: Contractor UK

"Up until the mid 1970s many contractors provided their services as self-employed workers taxed under Schedule D. Then came S38 of the Finance (No 2) Act 1975 which provided that individual contractors who contracted with agencies would, under certain conditions, be subject to PAYE and tax under Schedule E. As a result most contractors who used agencies formed their own limited companies so that it was their company rather than themselves individually which then contracted with the agency, and thus the application of S38 was avoided. Although S38 of the Finance (no 2) Act 1975, which is now S134 of the Income and Corporation Taxes Act 1988, never applied to all individual contractors (i.e. non-limited company contractors) who used agencies, in practice it was in the agencies' interest to assume that it did and to apply PAYE across the board unless a limited company was used. It was also extremely difficult for the contractor to challenge this. Recent legislation has, however, changed the situation so that contracting direct with an agency (without a limited company) and being taxed under Schedule D is now again a practical possibility for some contractors, including for some contractors who, if they contracted using a limited company, would come within IR35."

So not banned as such, but made impractical.

If you're contracting direct, and the client is happy, it is still possible to be SchedD self employed.

[jamesbrown]

Was it banned? I thought that it was just that legislation was introduced which meant that if you didn't pay the right tax the agency became liable for it and so the agency would generally now by custom refuse to engage a self employed worker.

I think that's what eek means. A long and boring (depending on your persuasion) history can be found here:

Do contractors need limited companies? :: Contractor UK

[RonBW]

That was banned back in the 70's due to Agencies abusing self-employment.

Was it banned? I thought that it was just that legislation was introduced which meant that if you didn't pay the right tax the agency became liable for it and so the agency would generally now by custom refuse to engage a self employed worker.

[jamesbrown]

Somebody really ought to lobby the government to make it possible to contract as self-employed. It is commonplace (and financially beneficial) elsewhere, just not in the UK.

My clients are direct, but I personally wouldn't consider it (barring something more punitive than IR35) for the lack of limited liability and the restricted ability to tender for work. What's more likely is that, over time, all ways of working and sources of payment (wages, dividends, capital gains) will be rendered more equivalent for tax purposes, along the lines of dividend taxation. Read the latest report from the IFS to see the pressures on HMG for reform (directly calls for equivalent treatment of all modes of working), although some of it is politically quite naive.

[eek]

Somebody really ought to lobby the government to make it possible to contract as self-employed. It is commonplace (and financially beneficial) elsewhere, just not in the UK.

That was banned back in the 70's due to Agencies abusing self-employment. The only thing that has changed since then is that agencies and other workers have found other means of simplifying things for themselves at the expense of the worker (supply teachers using Umbrella companies is just a recent example)...

Hence there is no chance we could be self employed....

[SueEllen]

Somebody really ought to lobby the government to make it possible to contract as self-employed. It is commonplace (and financially beneficial) elsewhere, just not in the UK.

We have gone over this many times why it isn't done.

[m0n1k3r]

+1 but it would be interesting to see the end clients view when you point http://forums.contractoruk.com/publi...companies.html at them...

Somebody really ought to lobby the government to make it possible to contract as self-employed. It is commonplace (and financially beneficial) elsewhere, just not in the UK.

[m0n1k3r]

First time I've seen a contract advertised where they are up front about the new PS IR35 stuff:

"Please be aware the client has decided this role is within IR35 legislation so the options are to switch to umbrella or have tax deducted at source and take home NetPay."

for a .net developer, £290-£300 per day, South Manchester, 6 Months

That agency should be commended for their transparency and honesty.

[SlipTheJab]

Hah! For the last couple of weeks, one of the questions from agents has been "Why do you want to leave your current contract?", and my answer has been "Because if my current client decides we're inside, then with the taxes and loss of travel and accomodation expenses I'd be no better off than if I took a permie role somewhere."

Not all newbie posters are created equal

This cat knows his onions!