Reply to: What is everyone going to do assuming HMR&C and Osborne get their way?

[WordIsBond]

Not necessarily. My prediction is that it will drive outsourcing and offshoring.

And then the always-thoughtful British press will run stories about the evil corporations offshoring work and putting British people out of work, with never a consideration that it is in response to government actions which they encourage and applaud.

And after a few get horrible publicity and their non-exec directors lose their knighthoods and peerages, the rest will make sure they keep a quota of British contractors engaged.

And so a new set of business villains will be created, uncovered, and pilloried, and damage will have been done to British business again, and the ever-vigilant opposition will scream about employment rates and pay but never, ever say anything about the government stupidity of these tax changes.

And an economic equilibrium will be achieved, once again, and good contractors will still do well for themselves on both a before and after tax basis. And in 2020, a government will achieve or retain power based not on sound economic management but on who is best at presenting a narrative which the masses will buy.

Lather, rinse, repeat.

And then at some future date I will go retire in the South Pacific and find it hard to care overmuch when the house of cards finally collapses.

The end.

[m0n1k3r]

Yea ... bla, bla,bla ... Like most companies wouldn't be allover something that reduces costs.

Ok, so it all comes to pass ... It will be quite amusing to see what Crapita starts quoting for these "run of the mill" contractors. 1K a day for Linux/Unix contractors will soon change a companies mind.

I think we will just see people doing less for less. Why knock yourself out traveling or taking on a difficult contract if you are paying more than 50% tax? Also there will be no fresh supply of permies to keep rates down.

This is going to be an expensive year for a lot of companies. I fully agree that if you go back to a company and ask for more you will not get it. But when they need to replace you or get more resource in, that will be when it hits home. -- Around June next year is my prediction.

Not necessarily. My prediction is that it will drive outsourcing and offshoring. Those companies are eager for more business, and many companies will probably re-think whether they really need people on site.

[JB3000]

Might be good for us all to remember one central truth -- contracting doesn't exist for our benefit, to make us rich.

It exists for the benefit of the clients, because it allows them to complete projects efficiently and in a cost-effective way relative to hiring permies. If it didn't do that, there would be no contracting no matter how much we wanted to do it.

The need for clients to complete those projects isn't going away. The extra expense involved in hiring permies isn't going away. They keep giving employees more rights, not fewer.

As long as government keeps insisting that employers have to do A, B, C and can't do X, Y, Z, and those lists keep getting longer, contracting is going to exist, and is going to be pretty lucrative. It may change, taxation and other regulations may make us pay more tax, but the demand is always going to be there. And if some go to Spain or somewhere else, there will be less supply and more demand, and we know where that leads.

Every additional employment regulation that government comes up with means more demand for contractors.

So off you go to Spain. Just means higher fees for everyone else to help mitigate the nasty tax grab.

+1

[MarkT]

You would just continue to be on the agency payroll, umbrella payroll or your own company payroll inside of IR35 for the remaining 11 months. The choice is yours. HMRC would know which payroll you were on via the employers intermediary report from the agency.

Well if I can't go in with a few other contractors and take dividends on that company, I'll just go it alone, go onto my own payroll via my Ltd and await a change. I'm not going onto anyones payroll, not without the full benefits. Salary, Bonus, holiday, the lot.

My contracts are usually 6 months or so, I'd imagine the 1 month is extended to a time limit nearer that anyway.

[WordIsBond]

the writing is on the wall, and the ceiling and the floor, that contracting is dead and buried.

Might be good for us all to remember one central truth -- contracting doesn't exist for our benefit, to make us rich.

It exists for the benefit of the clients, because it allows them to complete projects efficiently and in a cost-effective way relative to hiring permies. If it didn't do that, there would be no contracting no matter how much we wanted to do it.

The need for clients to complete those projects isn't going away. The extra expense involved in hiring permies isn't going away. They keep giving employees more rights, not fewer.

As long as government keeps insisting that employers have to do A, B, C and can't do X, Y, Z, and those lists keep getting longer, contracting is going to exist, and is going to be pretty lucrative. It may change, taxation and other regulations may make us pay more tax, but the demand is always going to be there. And if some go to Spain or somewhere else, there will be less supply and more demand, and we know where that leads.

Every additional employment regulation that government comes up with means more demand for contractors.

So off you go to Spain. Just means higher fees for everyone else to help mitigate the nasty tax grab.

[JB3000]

There's far too much speculation and wishful thinking going on. No one has a clue.

But, the writing was on the wall since the Goverment brought these off payroll rules into the Public Sector. Its just a question of when they bringit in to the Private Sector as they surely will unless big business kicks up tulip.

Personally, I dont see how the one month thing will work if they bring it in. What 'employment' vehicle are you supposed to use, a limited? So you have a contract for 13 weeks and for 4 and a bit you work via your limited and the rest including extensions taking you to a year is on payroll? Who's going to run a limited for 1 month in a 12 month period?

You would just continue to be on the agency payroll, umbrella payroll or your own company payroll inside of IR35 for the remaining 11 months. The choice is yours. HMRC would know which payroll you were on via the employers intermediary report from the agency.

[BolshieBastard]

Contractors will not necessarily need to go onto the client's payroll.

They could go onto the agency payroll, or umbrella payroll or their own ltd company payroll and tick the ir35 box when they do their ltd company year end payroll submission.

There's far too much speculation and wishful thinking going on. No one has a clue.

But, the writing was on the wall since the Goverment brought these off payroll rules into the Public Sector. Its just a question of when they bringit in to the Private Sector as they surely will unless big business kicks up tulip.

Personally, I dont see how the one month thing will work if they bring it in. What 'employment' vehicle are you supposed to use, a limited? So you have a contract for 13 weeks and for 4 and a bit you work via your limited and the rest including extensions taking you to a year is on payroll? Who's going to run a limited for 1 month in a 12 month period?

[JB3000]

I don't see that going through. I could be wrong, but certainly engagers do not want contractors on payroll, and will fight it. They might be willing to pay an additional tax, if it isn't too high, but they don't want contractors on payroll. And I think they have enough power to stop that.

Contractors will not necessarily need to go onto the client's payroll.

They could go onto the agency payroll, or umbrella payroll or their own ltd company payroll and tick the ir35 box when they do their ltd company year end payroll submission.

[Contreras]

Nobody will be on the client's payroll. That's a nonsense. But it'll probably mean having to give in on IR35, or maybe even being forced to use an approved umbrella rather than our own Limiteds.

...or a new corporate entity, taxed differently to Ltds.

[oliverson]

Well, that "confirmation" is interesting.

One month (big business may succeed in pushing it out to 3 months) before you have to do the ESI. If you fail it, you go on payroll.

I don't see that going through. I could be wrong, but certainly engagers do not want contractors on payroll, and will fight it. They might be willing to pay an additional tax, if it isn't too high, but they don't want contractors on payroll. And I think they have enough power to stop that.

I think they've sort of taken on board that it is an injustice for the worker to pay employer NI. Employer NI is the elephant in the room, the big difference in taxation between contractors and employees, and by any just measure the engager should pay it if the engagement is deemed to be employment.

I wonder if this ends up with something I floated a while back, with a new class of NI.
1. After 1-3 months, engager must check the ESI.
2. If the ESI fails, the contractor is assumed to be under IR35.
3. If the contractor is under IR35, the engager must pay the new class of NI, "engagers NI", say 8%.
4. The contractor has to operate IR35, but IR35 no longer includes employers NI, it's been covered by the engager's NI.

For the engagers, that's not a horrible compromise. They get hit with an additional 8% tax but don't have to put contractors on payroll, with all the employment rights and other hassles involved.

For the contractors, it's yet another hit, it means you can't operate as a normal business with cash management planning, etc. If your fees one year put you in higher rate tax and the next year you're on the bench, you are going to get hammered by higher rate tax anyway, and that's not right that it should be that way. It's still unfair tax treatment, and it will drive some out of contracting. But at least contractors wouldn't be hit with employers NI as well.

Engagers might want to cut prices to recoup their 8%, but it won't work. If almost everyone is under IR35, even if exempt from employers NI, enough will get out of contracting to trigger supply/demand dynamics. Costs will go up, not down. They won't go up enough to make up for the hit on contractors, but they'll go up. Engagers won't be happy.

That's what the economic-illiterates making the decisions can't seem to grasp. They hit contractors with the dividend tax and they are looking to hammer us even more. The hit on dividend tax brings in most of the money they think they are missing while still letting us run our businesses as a business. It doesn't skew the market. But these other proposals are all devastating to the market. They will drive a lot of people out of it or force them to change behaviour. The result is that supply and demand means UK plc is going to have to pay a LOT of money for contractors, and it will hurt the economy.

Idiots.

The whole thing is so ****ed up and the writing is on the wall, and the ceiling and the floor, that contracting is dead and buried. Thanks you tory cnuts. Spain here I come. Bye bye 'great' Britain. That's £ 50k less per annum for the chancellor.

[WordIsBond]

Well, that "confirmation" is interesting.

One month (big business may succeed in pushing it out to 3 months) before you have to do the ESI. If you fail it, you go on payroll.

I don't see that going through. I could be wrong, but certainly engagers do not want contractors on payroll, and will fight it. They might be willing to pay an additional tax, if it isn't too high, but they don't want contractors on payroll. And I think they have enough power to stop that.

I think they've sort of taken on board that it is an injustice for the worker to pay employer NI. Employer NI is the elephant in the room, the big difference in taxation between contractors and employees, and by any just measure the engager should pay it if the engagement is deemed to be employment.

I wonder if this ends up with something I floated a while back, with a new class of NI.
1. After 1-3 months, engager must check the ESI.
2. If the ESI fails, the contractor is assumed to be under IR35.
3. If the contractor is under IR35, the engager must pay the new class of NI, "engagers NI", say 8%.
4. The contractor has to operate IR35, but IR35 no longer includes employers NI, it's been covered by the engager's NI.

For the engagers, that's not a horrible compromise. They get hit with an additional 8% tax but don't have to put contractors on payroll, with all the employment rights and other hassles involved.

For the contractors, it's yet another hit, it means you can't operate as a normal business with cash management planning, etc. If your fees one year put you in higher rate tax and the next year you're on the bench, you are going to get hammered by higher rate tax anyway, and that's not right that it should be that way. It's still unfair tax treatment, and it will drive some out of contracting. But at least contractors wouldn't be hit with employers NI as well.

Engagers might want to cut prices to recoup their 8%, but it won't work. If almost everyone is under IR35, even if exempt from employers NI, enough will get out of contracting to trigger supply/demand dynamics. Costs will go up, not down. They won't go up enough to make up for the hit on contractors, but they'll go up. Engagers won't be happy.

That's what the economic-illiterates making the decisions can't seem to grasp. They hit contractors with the dividend tax and they are looking to hammer us even more. The hit on dividend tax brings in most of the money they think they are missing while still letting us run our businesses as a business. It doesn't skew the market. But these other proposals are all devastating to the market. They will drive a lot of people out of it or force them to change behaviour. The result is that supply and demand means UK plc is going to have to pay a LOT of money for contractors, and it will hurt the economy.

Idiots.

[pjt]

We don't know yet, do we?

We don't but the harding stance on IR35 etc certainly suggests they're not looking to give us any relief.

[MarkT]

We don't know yet, do we?

And to be honest - that is no skin off of the CBI and others noses. We are too small to worry about on our own.

If IR35 makes them liable for any taxes, they'll be all over it like a rash.

[WordIsBond]

How successful has anyone been in stopping the T&S changes after that consultation.

We don't know yet, do we?

[pjt]

I'd be okay with that - on the basis that nothing happens until April 17 and that the CBI, IPSE & APSCo all fight it alongside us, tooth and nail.

How successful has anyone been in stopping the T&S changes after that consultation. I have a feeling whatever's in that document will come to pass with very few changes.