The future - a personal view

[WordIsBond]

Having found a crystal ball amongst the packing crates of moving home, I had a peek.

I'm going to guess that as the time that the IR35 changes approaches we will see more and more end clients get to grips with their obligations.

Many larger ones will be risk averse because of the cost but more importantly perhaps the reputational matters surrounding a large part of their workforce being engaged on terms painted as "tax avoidance". i therefore expect many to reflect that aversion with a large number of "inside IR35" decisions. This might be for the contract that it the first one post the changes, perhaps the first two.

Once that period is over however and they see how HMRC reacts to what will be along list of potential enquiry candidates, I can see many coming back to considering outside IR35 roles combined with a change in how they consider and offer roles.

We will see a change to "SOW" - statement of work - models where projects have milestones and are staffed with a group of people with (preferably) few long term and non substituted people.

In reality I also expect some of these changes to be surface deep only and many end clients will retain the mindset that they want "john Smith" and nobody but him and they want him 35 hours a week. In other words a non permanent employee, but they don't want an employee or even a fixed term contract. If this is what the client wants, there will be contractors who will be wiling to play along.

This is dangerous territory and will give HMRC yet more targets, this time including large clients.

I can see smaller clients being more flexible as the changeover comes, but only with the help of agencies and intermediaries who reinvent what they are doing from "people suppliers" to "services suppliers". Again, if this real and more than skin deep, it will work and be successful at least until the next reform which may well remove this option as well.

We already see this happening in the market but I predict trouble. Moving from supplying people to supplying a full on service is difficult and requires more than a change in contract. Assessing and managing the risks of project delivery are very different from supplying a warm body. I know this, they know this and HMRC knows this. How long will it take HMRC to investigate? Perhaps a year.

We will see end clients seeking to fragment and reduce the size of delivery vehicles. I know that there are rules here, but they are corporate law and frankly you can drive a bus through them. We will see something like Big Pharma go through the diversification process again (becasue this is part of their usual cycle) and this time be followed by finance, insurance, software, etc.

This will allow many to say that they are outside the size required to make a decision.

We will see new platforms arise.

We will see the rise of intermediaries prepared to "guarantee" outside IR35 working regardless of end client determination. These will be little better than entities set up to take money from the end client, pass on some to contractors and disappear before HMRC comes knocking. End clients will get an initially cheaper deal but ultimately will pay a higher price.

We will see different forms of tax avoidance in which money will be diverted to the unscrupulous.

We will see this abuse of the reformed system lead to more changes and eventually the removal of all forms of contracting to be replaced by a "worker" tax similar to that we saw in the Construction industry in the 70's.

All of the above will require the active participation of contractors who are willing to continue to be led into such arrangements.

Those who are not and who are making their own minds up may struggle for a period, but eventually will be rewarded.

In other words, as I've often said, until something is done to rectify the significant imbalance in taxation between different forms of income, there will always be people who will find and/or create loopholes, and people who will look for ways to get their income transferred into a lower tax category of income, legally or not.

If taxes overall were lower, there would be less incentive to cheat or 'be creative'. Similarly, if the difference between employment income and entrepreneurial income (CT plus dividend tax) were smaller, there would be less incentive.

One big problem, though, is that to reduce the difference reduces the entrepreneurial incentive, which is overall a good thing. Another is the need to protect pensioners who may rely on dividend income. Another is the irresponsible government spending which makes the demand for tax revenue insatiable. Another is the political reality that irresponsible politicians and press will scream about any tax change which can be portrayed as 'helping the rich', no matter how beneficial and even revenue-positive it may be overall. And, the political reality that any attempt to dial back the irresponsible spending generates even louder screams.

So since there is no one in power willing to take on the last two problems sufficiently, the other problems aren't going to be solved, and so the imbalance remains. Corbyn might remove the imbalance but he'd destroy both the pensioners and entrepreneurism in the process. So the best we can hope for is the imbalance to remain, which means more schemes, etc.

[webberg]

I mean the existing consultancies.

Perhaps they will also come under increased scrutiny.

[SussexSeagull]

As I said, that is not easy and will be an HMRC target.

I mean the existing consultancies.

[webberg]

If it goes down a service supply as opposed to a person supplied direction then I suspect a company of any size will go down the consultant firm route.

As I said, that is not easy and will be an HMRC target.

[SussexSeagull]

I think there will be a period - of several years - before things become clearer and the new normal emerges. Problem is people have mortgages to pay and have to eat so I am not sure there will be much of a talent pool left by that stage because - as widely discussed on here at the moment - the market is as bad as it has ever been.

If it goes down a service supply as opposed to a person supplied direction then I suspect a company of any size will go down the consultant firm route.

[Snooky]

they want him 35 hours a week

Well at least there's a ray of sunshine in your doom & gloom, looks like I may be able significantly cut my working week!

[webberg]

Any idea what the winning numbers are for the Euro Millions next week? :-D

I predict that (IR) 35 will not be a winner.

[oliverson]

Having found a crystal ball amongst the packing crates of moving home, I had a peek.

I'm going to guess that as the time that the IR35 changes approaches we will see more and more end clients get to grips with their obligations.

Many larger ones will be risk averse because of the cost but more importantly perhaps the reputational matters surrounding a large part of their workforce being engaged on terms painted as "tax avoidance". i therefore expect many to reflect that aversion with a large number of "inside IR35" decisions. This might be for the contract that it the first one post the changes, perhaps the first two.

Once that period is over however and they see how HMRC reacts to what will be along list of potential enquiry candidates, I can see many coming back to considering outside IR35 roles combined with a change in how they consider and offer roles.

We will see a change to "SOW" - statement of work - models where projects have milestones and are staffed with a group of people with (preferably) few long term and non substituted people.

In reality I also expect some of these changes to be surface deep only and many end clients will retain the mindset that they want "john Smith" and nobody but him and they want him 35 hours a week. In other words a non permanent employee, but they don't want an employee or even a fixed term contract. If this is what the client wants, there will be contractors who will be wiling to play along.

This is dangerous territory and will give HMRC yet more targets, this time including large clients.

I can see smaller clients being more flexible as the changeover comes, but only with the help of agencies and intermediaries who reinvent what they are doing from "people suppliers" to "services suppliers". Again, if this real and more than skin deep, it will work and be successful at least until the next reform which may well remove this option as well.

We already see this happening in the market but I predict trouble. Moving from supplying people to supplying a full on service is difficult and requires more than a change in contract. Assessing and managing the risks of project delivery are very different from supplying a warm body. I know this, they know this and HMRC knows this. How long will it take HMRC to investigate? Perhaps a year.

We will see end clients seeking to fragment and reduce the size of delivery vehicles. I know that there are rules here, but they are corporate law and frankly you can drive a bus through them. We will see something like Big Pharma go through the diversification process again (becasue this is part of their usual cycle) and this time be followed by finance, insurance, software, etc.

This will allow many to say that they are outside the size required to make a decision.

We will see new platforms arise.

We will see the rise of intermediaries prepared to "guarantee" outside IR35 working regardless of end client determination. These will be little better than entities set up to take money from the end client, pass on some to contractors and disappear before HMRC comes knocking. End clients will get an initially cheaper deal but ultimately will pay a higher price.

We will see different forms of tax avoidance in which money will be diverted to the unscrupulous.

We will see this abuse of the reformed system lead to more changes and eventually the removal of all forms of contracting to be replaced by a "worker" tax similar to that we saw in the Construction industry in the 70's.

All of the above will require the active participation of contractors who are willing to continue to be led into such arrangements.

Those who are not and who are making their own minds up may struggle for a period, but eventually will be rewarded.

Any idea what the winning numbers are for the Euro Millions next week? :-D

[webberg]

Having found a crystal ball amongst the packing crates of moving home, I had a peek.

I'm going to guess that as the time that the IR35 changes approaches we will see more and more end clients get to grips with their obligations.

Many larger ones will be risk averse because of the cost but more importantly perhaps the reputational matters surrounding a large part of their workforce being engaged on terms painted as "tax avoidance". i therefore expect many to reflect that aversion with a large number of "inside IR35" decisions. This might be for the contract that it the first one post the changes, perhaps the first two.

Once that period is over however and they see how HMRC reacts to what will be along list of potential enquiry candidates, I can see many coming back to considering outside IR35 roles combined with a change in how they consider and offer roles.

We will see a change to "SOW" - statement of work - models where projects have milestones and are staffed with a group of people with (preferably) few long term and non substituted people.

In reality I also expect some of these changes to be surface deep only and many end clients will retain the mindset that they want "john Smith" and nobody but him and they want him 35 hours a week. In other words a non permanent employee, but they don't want an employee or even a fixed term contract. If this is what the client wants, there will be contractors who will be wiling to play along.

This is dangerous territory and will give HMRC yet more targets, this time including large clients.

I can see smaller clients being more flexible as the changeover comes, but only with the help of agencies and intermediaries who reinvent what they are doing from "people suppliers" to "services suppliers". Again, if this real and more than skin deep, it will work and be successful at least until the next reform which may well remove this option as well.

We already see this happening in the market but I predict trouble. Moving from supplying people to supplying a full on service is difficult and requires more than a change in contract. Assessing and managing the risks of project delivery are very different from supplying a warm body. I know this, they know this and HMRC knows this. How long will it take HMRC to investigate? Perhaps a year.

We will see end clients seeking to fragment and reduce the size of delivery vehicles. I know that there are rules here, but they are corporate law and frankly you can drive a bus through them. We will see something like Big Pharma go through the diversification process again (becasue this is part of their usual cycle) and this time be followed by finance, insurance, software, etc.

This will allow many to say that they are outside the size required to make a decision.

We will see new platforms arise.

We will see the rise of intermediaries prepared to "guarantee" outside IR35 working regardless of end client determination. These will be little better than entities set up to take money from the end client, pass on some to contractors and disappear before HMRC comes knocking. End clients will get an initially cheaper deal but ultimately will pay a higher price.

We will see different forms of tax avoidance in which money will be diverted to the unscrupulous.

We will see this abuse of the reformed system lead to more changes and eventually the removal of all forms of contracting to be replaced by a "worker" tax similar to that we saw in the Construction industry in the 70's.

All of the above will require the active participation of contractors who are willing to continue to be led into such arrangements.

Those who are not and who are making their own minds up may struggle for a period, but eventually will be rewarded.