Reply to: If not IR35, then what?

[Nazaire99]

Almost right with my prediction on how to fix the ir35 situation. Labour plan not only to raise corp tax but also equalise dividend tax to match income tax. Either would fix the broken system. I am yet to hear a convincing argument why the owner of a PSC should be taxed differently to the owner of a 'proper business' with employees and premises.

They may as well scrap the whole of ir35 let alone the April role out.

Labour aren't proposing to align dividend tax with income tax, except superficially. Under their proposals dividends will be double taxed. First profits will be subject to corporation tax and then dividends taxed under income tax rates. There will be no dividend tax credit to account for tax already paid on dividends.

For a small business the "basic" rate becomes 36.8% for dividends (100 profit taxed at 21 CT, then the remainder - 79 - taxed at 20% leaving 63.2). The highest effective rate is around 74%.

PS. Gideon set the scene for this by abolishing the dividend tax credit, but he set lower rates (from 7.5%) and an extra allowance to compensate.

[BlueSharp]

I always thought simplifying the tax system by merging income tax and national insurance into a single tax would solve the issue but that would not be palatable to the masses in the voting box when people see the real tax levels in this country.

The alternative is to get a labour government in who will raise corporation tax and possibly tip the balance that umbrella becomes more tax-effective than a PSC. On that train of thought getting rid of employers national insurance and just increasing corporation tax could fix the system.

Almost right with my prediction on how to fix the ir35 situation. Labour plan not only to raise corp tax but also equalise dividend tax to match income tax. Either would fix the broken system. I am yet to hear a convincing argument why the owner of a PSC should be taxed differently to the owner of a 'proper business' with employees and premises.

They may as well scrap the whole of ir35 let alone the April role out.

[JohntheBike]

Bulgaria also doesn't have income tax from memory.

15 Countries With The Highest Tax Rates In The World | Nomad Capitalist

[eek]

Previously the two tier CT rates prevented this happening. Applying CT uniformally at 25% plus hits small business such as plumbers/builders/shops etc probably disproportionately as not able to move profits off shore. Similarly it stifles investment. I would think the labour party would not be stupid enough to focus on all sizes of business.

The issue for me is the fact that the tax system has not been able to find a solution to the large digital employers such as google, amazon and facebook where the delivery of service is difficult to define. Where Gib/IoM is 0%, Bulgaria 9%, Ireland/Cyprus 12.5%, and so easy to relocate the accounting office to one of those jurisdictions.

France have it right in applying punitive rates for those companies until we have a multi lateral global approach.

Bulgaria also doesn't have income tax from memory.

[JohntheBike]

You pepper your posts with constant references to you, your history, your story and how factors from years ago can influence what will happen in 2020. In the face of pretty much all other posters being of the view that - for this thread at least - we're looking at radical departures from the IR35 approach. Harping backwards to lessons that were dispensed and either ignored or which became irrelevant are not for this thread.

I have no idea what IBOYOA means. I therefore have no view on it.

I don't particularly want to "ward off" IR35. I'm indifferent as to whether IR35 applies to a situation or not. All I really want is that all parties know and understand their risks on day 1.

By all means contribute and suggest ways to resolve the present and future situations but please (really please) no more references to your situation from years ago.

I have no idea what IBOYOA means.

In Business On Your Own Account.

There are those who claim that unless you contract directly to a client, have multiple clients, are continually looking for work, have business premises, have a web site, have business cards etc etc, then you are not IBOYOA and cannot be classed as outside of IR35. HMRC claims that only a very small percentage of contractors work this way. This is rubbish, because there are many factors which decide employment status and these are only some of the criteria which are taken into account.

[SussexSeagull]

The 24 month rule for expenses should be extended to being able to stay outside IR35. I know projects can be multi year and with good working practices you can not behave like an employee but you must become part of the furniture eventually.

[Manic]

I always thought simplifying the tax system by merging income tax and national insurance into a single tax would solve the issue but that would not be palatable to the masses in the voting box when people see the real tax levels in this country.

The alternative is to get a labour government in who will raise corporation tax and possibly tip the balance that umbrella becomes more tax-effective than a PSC. On that train of thought getting rid of employers national insurance and just increasing corporation tax could fix the system.

Previously the two tier CT rates prevented this happening. Applying CT uniformally at 25% plus hits small business such as plumbers/builders/shops etc probably disproportionately as not able to move profits off shore. Similarly it stifles investment. I would think the labour party would not be stupid enough to focus on all sizes of business.

The issue for me is the fact that the tax system has not been able to find a solution to the large digital employers such as google, amazon and facebook where the delivery of service is difficult to define. Where Gib/IoM is 0%, Bulgaria 9%, Ireland/Cyprus 12.5%, and so easy to relocate the accounting office to one of those jurisdictions.

France have it right in applying punitive rates for those companies until we have a multi lateral global approach.

[TwoWolves]

The problem is we don't have any party with the vision or gumption to make any radical changes to anything, let alone the tax system. All they think about is their 4 (or is it 5?) year term and nothing features beyond that.

This means, unless we get a charismatic, driven leader who can unite a broken country, all we will ever get is tinkering around the edges and HMRC acting more and more beyond the law.

More to the point is that we need a party that believes that the free market economy and capitalism can, as they have done in the past deliver the greatest social mobility and fairness in society possible unencumbered by rentiers, cronies and monopolies. Big state thinking is not going to provide useful outcomes but they are wedded to this idea.

[ladymuck]

The problem is we don't have any party with the vision or gumption to make any radical changes to anything, let alone the tax system. All they think about is their 4 (or is it 5?) year term and nothing features beyond that.

This means, unless we get a charismatic, driven leader who can unite a broken country, all we will ever get is tinkering around the edges and HMRC acting more and more beyond the law.

[BlueSharp]

I always thought simplifying the tax system by merging income tax and national insurance into a single tax would solve the issue but that would not be palatable to the masses in the voting box when people see the real tax levels in this country.

The alternative is to get a labour government in who will raise corporation tax and possibly tip the balance that umbrella becomes more tax-effective than a PSC. On that train of thought getting rid of employers national insurance and just increasing corporation tax could fix the system.

[webberg]

I never claimed it was.

You pepper your posts with constant references to you, your history, your story and how factors from years ago can influence what will happen in 2020. In the face of pretty much all other posters being of the view that - for this thread at least - we're looking at radical departures from the IR35 approach. Harping backwards to lessons that were dispensed and either ignored or which became irrelevant are not for this thread.

I have no idea what IBOYOA means. I therefore have no view on it.

I don't particularly want to "ward off" IR35. I'm indifferent as to whether IR35 applies to a situation or not. All I really want is that all parties know and understand their risks on day 1.

By all means contribute and suggest ways to resolve the present and future situations but please (really please) no more references to your situation from years ago.

[JohntheBike]

This thread is not about you, your history, your circumstances or how you dealt with them.

This thread is to discuss what an alternative to IR35 might look like.

We have (I think) reached a point whereby we are agreed that tinkering with what actually happens on the ground, via the tax system, is not a sensible way to proceed. Instead there needs to be a fundamental shift in how businesses and contractors approach, price and undertake the works required and from that there needs to be an objective set of rules developed.

We have therefore no interest in present or past individual circumstances.

If this thread, like many others, descends into another JtB reiteration of the same old, same old, then it will wither and die.

Please help us all by understanding that we have read your posts - we know your view - constant repetition of that view gives it no additional force - many of us disagree - those who do disagree are unlikely to be convinced by saying the same thing over and again.

If you have nothing new to add, please don't keep repeating what we have heard so often before.

This thread is not about you, your history, your circumstances or how you dealt with them.

I never claimed it was. Only you are interpreting it as so. My point is that there are many who would consider a contract like mine to be not IBOYOA, as those would have it that you must contract directly, show financial risk, go out seeking business, have a WEB site, have business cards, have multiple clients, etc etc. I'm just demonstrating that being classed as outside IR35 doesn't depend on those aspects of IBOYOA that others, including you I would suspect, would claim must be present to ward off IR35.

[webberg]

Yes it is. Its all about JTB. Did you not know?

BTW Congrats on your win and nice to meet you.

Thank you and likewise.

[northernladuk]

Yes it is. Its all about JTB. Did you not know?

BTW Congrats on your win and nice to meet you.

[webberg]

None of these apply to me.

This thread is not about you, your history, your circumstances or how you dealt with them.

This thread is to discuss what an alternative to IR35 might look like.

We have (I think) reached a point whereby we are agreed that tinkering with what actually happens on the ground, via the tax system, is not a sensible way to proceed. Instead there needs to be a fundamental shift in how businesses and contractors approach, price and undertake the works required and from that there needs to be an objective set of rules developed.

We have therefore no interest in present or past individual circumstances.

If this thread, like many others, descends into another JtB reiteration of the same old, same old, then it will wither and die.

Please help us all by understanding that we have read your posts - we know your view - constant repetition of that view gives it no additional force - many of us disagree - those who do disagree are unlikely to be convinced by saying the same thing over and again.

If you have nothing new to add, please don't keep repeating what we have heard so often before.