Reply to: IR35 - Finance Contractors Try to Play Hardball

[mookiemoo]

Because i'm not actually a contractor for the end client but I'm doing a unique stand alone project which they have brought external resources in for. I am not body shopped in to do a bum on seat job.

[BoredBloke]

I'm actually working at a big user of contractors and happen to sit in the same room as the team doing the IR35 assessments. I'm contractually and in practice genuinely outside and have had confirmation of this from my client and the agency. My client is a foreign consultancy (not Indian) who are doing the implementation. The place where I am on site have said even if they have to assess me, I'm clearly outside.

On that web site that is naming and shaming clients, this one gets a bad rating.

HOWEVER

95% of the contractors here ARE just temps. They were taken on by the client to get around a hiring freeze. They have managers, are part of teams and look, walk, and quack like a duck.

Even the PMO (who likes to call themselves a PM) who is moaning about being caught after April would probably look good with a pancake and Hoisin sauce. They are even talking about the client finding them another role after the project in employee like terms.

The naivety of some of the response to the IR35 questionnaire the contractors have returned is ridiculous. One said they weren't caught because they paid themselves dividends!

Funnily enough, if the contractor comes back with reasonable arguments as to why they are outside, the answers ARE being considered and some (not many) have been found outside.

The fact is, the vast majority should have been inside all along.

It is the bending of the rules in this manner that has gotten us all into the current mess.

I used to, prior to the last few months, be a defender of the contractor however more and more i'm beginning to think we, as in the royal we, have brought this on ourselves. And I am probably equally as guilty. I've hired contractors in the past knowing that the role they were doing was more than likely caught but having them work through their PSC without really caring as it was their problem. I've done roles that in all honesty were caught that I've operated outside - complete with QDOS working practice and contract review saying its outside (its amazing how you can spin things by answering truthfully with different words).

what I have come to realis is that,for thing that matter, a 500 per day IR35 caught contract is the equivalent of an 85K salary. And there aren't many of them around outside of the city and in my area. Therefore, being caught, as long as you don't have expenses, is not the end of the world.

I don't think the contract work will dry up completely - the work still needs to be done - its just more might be inside than outside.

That has turned into a bit of a rant but being where I am has been something of an eye opener.

So why are you so clearly outside when the majority are inside?

[mookiemoo]

I'm actually working at a big user of contractors and happen to sit in the same room as the team doing the IR35 assessments. I'm contractually and in practice genuinely outside and have had confirmation of this from my client and the agency. My client is a foreign consultancy (not Indian) who are doing the implementation. The place where I am on site have said even if they have to assess me, I'm clearly outside.

On that web site that is naming and shaming clients, this one gets a bad rating.

HOWEVER

95% of the contractors here ARE just temps. They were taken on by the client to get around a hiring freeze. They have managers, are part of teams and look, walk, and quack like a duck.

Even the PMO (who likes to call themselves a PM) who is moaning about being caught after April would probably look good with a pancake and Hoisin sauce. They are even talking about the client finding them another role after the project in employee like terms.

The naivety of some of the response to the IR35 questionnaire the contractors have returned is ridiculous. One said they weren't caught because they paid themselves dividends!

Funnily enough, if the contractor comes back with reasonable arguments as to why they are outside, the answers ARE being considered and some (not many) have been found outside.

The fact is, the vast majority should have been inside all along.

It is the bending of the rules in this manner that has gotten us all into the current mess.

I used to, prior to the last few months, be a defender of the contractor however more and more i'm beginning to think we, as in the royal we, have brought this on ourselves. And I am probably equally as guilty. I've hired contractors in the past knowing that the role they were doing was more than likely caught but having them work through their PSC without really caring as it was their problem. I've done roles that in all honesty were caught that I've operated outside - complete with QDOS working practice and contract review saying its outside (its amazing how you can spin things by answering truthfully with different words).

what I have come to realis is that,for thing that matter, a 500 per day IR35 caught contract is the equivalent of an 85K salary. And there aren't many of them around outside of the city and in my area. Therefore, being caught, as long as you don't have expenses, is not the end of the world.

I don't think the contract work will dry up completely - the work still needs to be done - its just more might be inside than outside.

That has turned into a bit of a rant but being where I am has been something of an eye opener.

[eek]

I think the FLC is a bad idea but I wonder if it may get resurrected in some form...

By those who wish to be seen as special - no it's as dead as a door nail - the only time it could have been introduced was as IR35 was implemented and that horse has well and truly bolted

[ladymuck]

And I will happily destroy it - you can't expect HMRC to treat some people different to others -

our tax system is unfair but as with democracy - it's better than the other options..

I think the FLC is a bad idea but I wonder if it may get resurrected in some form...

[eek]

There was the FLC concept bandied about for a while, back in 2014/15 but it never took off

Freelancer Limited Company | IPSE

Complicated tax systems have benefits for both HMRC and companies as each try to use convoluted means to pay less / collect more. There is no will to make things simple and clear.

And I will happily destroy it - you can't expect HMRC to treat some people different to others -

our tax system is unfair but as with democracy - it's better than the other options..

[ladymuck]

There was the FLC concept bandied about for a while, back in 2014/15 but it never took off

Freelancer Limited Company | IPSE

Complicated tax systems have benefits for both HMRC and companies as each try to use convoluted means to pay less / collect more. There is no will to make things simple and clear.

[eek]

Any change would be abused to the nth degree so HMRC aren't going to do that, nor are they going to treat people differently.

And Mookiemoo is right - why should anyone treat us as any better than your agency temp...

[LondonManc]

I think fair taxation could be achieved without IR35 existing - scrap it and put a simple formula in place:

End of year assessment:
Revenue - Costs = Profit

Don't class contractors as having salaries. Call it take home pay.
Revenue is all Ex VAT paid invoices in that year
Costs are all legitimate business expenses - kit, travel, accommodation, accountant fees, insurance, office rental, whatever it may be
Profit is what is left before anything else is taken, salary, pension, etc.
Say this is 80k.
12% must go into a pension
x% must go to the gonverment as some sort of small business tax
y% must be retained to cover ongoing costs
z% is a take home for the shareholders (max 2) of the company.
Where x and y are to be determined and reflect the transient nature of contracting; expense claims can continue past two years, but perhaps increase x by 1 or 2 for every year that you're at the same client to discourage "permietracting".

This still means that Customs & Excise get a nice wedge of VAT revenue, HMRC don't have to worry about assessments and contractors must enter their monthly figures online. In theory, contractors could save by not needing an accountant because they are entering everything into a government portal, with fully-receipted expenses being a requirement for claiming them. Each month, then, government tells you what you can take out, what needs to be sent to your pension provider, what needs to be paid to them, etc.

Seems far easier to automate it until people have the ambition to go beyond the one-man-band model. Recruitment agency/client co log your details on the government portal as part of the contract kick off and the link is sent to you.

[Paralytic]

I honestly think these firms have got their heads up their arses over this and I don't think they've quite considered the implications should a great many contractors pull the plug and walk in the next few weeks.

I don't think a great many contractors realise that if they pull the plug then the client may suffer a little pain in projects being delayed, but they'll find someone to fill the void and the world will continue to revolve.

[mookiemoo]

Where they'll get no support from the public is if the public find out about the PAYE + divi "avoidance" that contractors do, especially where the spouse is in on it, even if their opponent is a bank.

Which is why we've lost the argument before we even start.

Brown started it with banging on about people paying fair share. It became an argument away from paying what you legally have to and towards being expected to pay what you morally should.

Pre 2008, when I used to have discussions about IR35 outside of the industry, people were at least superficially sympathetic.

in 2020, people just see us as high paid individuals using tax avoidance schemes. They don't see how we are different to 0 hours workers or agency temps.

I don't agree, obviously, but I think its the main reason we have had no traction. And actually, I think the Tories are in an invidious position. If they back down, they'll be seen as giving tax breaks to the well paid by letting them continue with avoidance.

It does not matter what the reality is, that is how the red tops and the chav fodder media will play it and we have no sympathy out there.

[messymess]

Where they'll get no support from the public is if the public find out about the PAYE + divi "avoidance" that contractors do, especially where the spouse is in on it, even if their opponent is a bank.

you've hit the nail

[juckky]

Excellent.

This is exactly the sort of action all seasoned contractors should be taking if adversely affected by all large clients.

And in 2-3 months (wild guess), there would be, by necessity, a reversal of client thinking.

Damn right. Contractors by their very nature tend to be lone wolfs, but over IR35 I think we should all adopt a code of conduct and walk out on mass from clients that are doing this. In fact every major PLC has gone down the blanket approach. My current end client is QinetiQ and out of 100 contracts they deemed 98 inside.

I honestly think these firms have got their heads up their arses over this and I don't think they've quite considered the implications should a great many contractors pull the plug and walk in the next few weeks.

[LondonManc]

£100 extra on their day rate would shut them up for now.

Quite a lot of people with significant expenses work in banking - typically you can look at £120 train + £250 hotel for a week suddenly having to be found out of take home, which in itself is reduced via PAYE taxation rather than tax/divi split. Where they'll get no support from the public is if the public find out about the PAYE + divi "avoidance" that contractors do, especially where the spouse is in on it, even if their opponent is a bank.

[KinooOrKinog]

Either that or when push comes to shove some of those 50 out of 53 contractors will cave in. The market out there isn't great. Contractors aren't known for sticking together union style. Or DB will give a rate uplift to some of the contractors that they really value and the rest can take it or leave it. Divide and conquer.

Exactly. Article says 50/53 are 'considering' leaving. Once they've considered it, they'll just roll over.