Reply to: Gerry M on VAT & IR35

[drmouse]

This has already happened in the Public Sector. Rates are going up or roles are being declared outside.

However, a part of the reason for this is that public sector contractors could go to the private sector with relative ease when the reforms came in. This left a massive demand from the public sector with limited supply. They had to up the rates and declare the roles outside to attract the resources they needed back.

When this comes into the private sector, the situation is different. There may not be anywhere for contractors dumped by the clients to go. There aren't enough small business contracts to go round.

I have no idea how it will go. If all the big boys dump their contractors, there will be a massive over-supply of skilled contractors. There will also be massive demand for either permies or contractors who are willing to work through brollies. The market will be well and truly shaken up, but where it will all land... who knows?

[DaveB]

The article also fails on the major point that if the banks behaviour is driven by VAT then they would have ditched PSCs years ago. So it clearly isn't just about VAT.


My twopennorth.......
Contract resources are a commodity item in market that is almost perfect (perfect market is an ecomony phrase). In that market nobody pays more than they need to.
The incoming legislation may well (probably) have an impact on the supply side of that market, and it's reasonable to assume that the demand side is unchanged.

The result is a price drop, as piss-taking permietractors all become staff. But that price drop is likely only for the permitractor roles. The highly skilled and rare talent supply side of the market is likely to be unchanged (as long as they refuse to be 'permied').

After 6/12 months market forces will fix the pricing imbalance. I speculate that it will increase the rates of the permi-tractors, and subsequently the rare skilled rates will also increase. This could well be a win-win, as long as you can ride the storm.

CAVEAT: my crystal ball has failed before....

This has already happened in the Public Sector. Rates are going up or roles are being declared outside. Gigs that would have paid £400-500 a day 2 years ago are now being listed at £600-700+ for inside and IR35 status is being explicitly stated in the job specs listed under the Digital Outcomes and Specialists framework.

[LondonManc]

The biggest thing that I think will happen under the new IR35 shake up is that companies will no longer hold on to a contractor past two years. If you're inside IR35, it would be much more likely that you can then behave like a permie and also claim redundancy, etc. after being at the client for over two years - the retrospective tax grab for an outside IR35 contractor makes the whole two-year thing irrelevant (the two year thing being permie rights rules here, rather than anything to do with accounting expenses or IR35). It's quite a sinister side-effect of this tbh.

[swamp]

The article makes no sense. Banks will still pay (unrecoverable) VAT to the umbrella company.

[Patrick@Intouch]

Ah yes, missed that, apologies Patrick.

Haha, no worries

[eek]

Patrick did say "if not engaged through intermediaries"

But the chances of banks putting contractors on their own payroll is very small - they will still come via umbrellas and/or agencies, who will charge VAT.

In short, the article appears to be the usual quality reporting we expect from that particular outlet.

Yes Banks are far more concerned with potential pay claims under equal opportunity legislation than they will be over the cost of VAT to agencies.

[Lance]

The article also fails on the major point that if the banks behaviour is driven by VAT then they would have ditched PSCs years ago. So it clearly isn't just about VAT.


My twopennorth.......
Contract resources are a commodity item in market that is almost perfect (perfect market is an ecomony phrase). In that market nobody pays more than they need to.
The incoming legislation may well (probably) have an impact on the supply side of that market, and it's reasonable to assume that the demand side is unchanged.

The result is a price drop, as piss-taking permietractors all become staff. But that price drop is likely only for the permitractor roles. The highly skilled and rare talent supply side of the market is likely to be unchanged (as long as they refuse to be 'permied').

After 6/12 months market forces will fix the pricing imbalance. I speculate that it will increase the rates of the permi-tractors, and subsequently the rare skilled rates will also increase. This could well be a win-win, as long as you can ride the storm.

CAVEAT: my crystal ball has failed before....

[Amanensia]

Patrick did say "if not engaged through intermediaries"

Ah yes, missed that, apologies Patrick.

[mudskipper]

Why not? The intermediary will charge VAT.

Patrick did say "if not engaged through intermediaries"

But the chances of banks putting contractors on their own payroll is very small - they will still come via umbrellas and/or agencies, who will charge VAT.

In short, the article appears to be the usual quality reporting we expect from that particular outlet.

[malvolio]

Never heard of him. Seems like that's just as well.

Been around for years. Has never posted anything of value, but is very good at generating clickbait. All my opinion, of course, others may disagree.

[Amanensia]

It is true that financial institutions don't charge VAT to their customers and so any VAT charged to them is a cost that they won't have to bear if they cease to engage contingent workers through intermediaries.

Why not? The intermediary will charge VAT.

[Patrick@Intouch]

IR35 Scam on Contractors as Companies Make Off with the VAT Loot

Apologies if posted elsewhere.

It is true that financial institutions don't charge VAT to their customers and so any VAT charged to them is a cost that they won't have to bear if they cease to engage contingent workers through intermediaries. What that article doesn't then consider is that those banks are likely to incur costs for absence through sickness and annual leave, for pension contributions and apprenticeship levy and for training and other staff welfare/development related matters.

The actual net position is not likely to see the banks slinking off into the shadows with a swag bag slung over their shoulders, although they may see some small financial benefit, at least in the short term.

The reality is that banks are extremely risk-averse and are displaying similar behaviours to those exhibited by various government bodies in 2017. We are seeing this behaviour earlier and it is not outside the realms of possibility that this will change with time and a realisation that they can't deliver projects without having access to a contingent workforce.

The article also states that these financial institutions should have contractors sit HMRC status assessment test (CEST) and that this is guaranteed by HMRC.

Firstly, CEST is a biased test and is not fit for purpose. It ignores MOO which through legal precedent is one of the irreducible minimum of three things that must be present to prove an employment status.

Secondly, HMRC will not guarantee to stand by the results of this test. Their statement is caveated with a clause that states they will only stand by the result if the information entered was accurate and true AND they actually tried to have the results disregarded in a case at Tribunal this year when they claimed the CEST outcome was "irrelevant".

Articles like this are unhelpful and misleading. There are plenty of IR35 specialists out there who can help with IR35 advice (pre and post reform) and it would be wise to engage with one of these for help navigating this period of uncertainty.

[ladymuck]

He seems to have found a spellchecker that works this time (admittedly only spent 30 secs scanning the article)

[vas]

This doesn't make any sense. The end client now just pays the VAT to the Umbrella company rather than the LtdCo. The client is still paying unreclaimable VAT, it's just that now it's going to HMRC via the Umbrella, rather than via the LtdCo.

This. Article is total bollox.

[Amanensia]

Never heard of him. Seems like that's just as well.