Reply to: PSC - view for the bar

[MPwannadecentincome]

PSC - what's that?

Only you and HMRC use it - it's a nonsense term that has been ignored by the rest of us.

Give it some legal standing, until that happens we'll continue to ignore it. Otherwise on tax forms it's a DOTAS like question that many of us refuse to answer.

Sorry, how do you "refuse to answer"? the question is how much of your income was derived from a PSC (they stopped using a tick box last year or the year before?). By not filling it in are you refusing to answer or misleading HMRC?

Regarding a definition, I think if they really wanted to define it they would do it in a flash, even if they get it "wrong" and mistakenly include real companies who are not PSCs they will not really care. I can only guess that no definition exists to further the Fear, Uncertainty and Doubt.

[TheFaQQer]

My forecast is tax will progressively get higher (7%+ on dividends already pencilled in for next year) and rates will get lower (except for scarce/niche skills). Contractors will be a lot less well off but there will still be a steady increase in the numbers, although those people who don't mind whether they are permanent or contract will be less drawn to contracting. I predict (despite the increase in contractors) there will be a continual fall-off in the number of contract roles with more and more positions being filled with foreigners on inter-country visas, offshoring and crowdsourcing.

If rates get lower, there will be less inclination to use ICTs and off-shoring (unless their rates get lower too).

[DotasScandal]

and crowdsourcing.

Guess you meant "outsourcing"?

[Cirrus]

I'm afraid it's all downhill from now on.

My forecast is tax will progressively get higher (7%+ on dividends already pencilled in for next year) and rates will get lower (except for scarce/niche skills). Contractors will be a lot less well off but there will still be a steady increase in the numbers, although those people who don't mind whether they are permanent or contract will be less drawn to contracting. I predict (despite the increase in contractors) there will be a continual fall-off in the number of contract roles with more and more positions being filled with foreigners on inter-country visas, offshoring and crowdsourcing.

[Zero Liability]

There is a limit on the total amount of tax revenue that can be extracted. Increase taxes in one area, and you just reduce the amount collected in other areas. Historically, I think it's been an almost constant % of GDP.

Labour didn't get that in the 1970s and it seems none of them still get it.

That limit is probably going to decrease over time, as well, as both capital and labour become more globally mobile, and blurred.

[Fred Bloggs]

There is a limit on the total amount of tax revenue that can be extracted. Increase taxes in one area, and you just reduce the amount collected in other areas. Historically, I think it's been an almost constant % of GDP.

Labour didn't get that in the 1970s and it seems none of them still get it.

Ah, the much talked about Laffer curve, I believe.

[Zero Liability]

Another person given to fabricating figures. His understanding of the area is abysmal. Why bother commenting? Especially this load of tripe:

However, it should also be noted that the creation of a new £5,000 tax free band for dividends could open up further and much more substantial opportunities for avoidance which exceed this £500m in scale.

If anything, this reduces the £400m pseudo-figure bandied about so often.

I mean you can go to the Daily Fail for this sort of shallow "analysis".

[ASB]

There is a limit on the total amount of tax revenue that can be extracted. Increase taxes in one area, and you just reduce the amount collected in other areas. Historically, I think it's been an almost constant % of GDP.

Labour didn't get that in the 1970s and it seems none of them still get it.

very true. let us assume that rates go up to compensate. then this reduces profit by a commensurate amount and loses a broadly equivalent amount in ct.

it is difficult to increase costs on one sector without that eventually flowing through in same way to the consumers of that sectors output.

[DonkeyRhubarb]

This is the same basis Corbyn's lot think about taxing the higher paid. They think that if there are 100,000 people earning £1 million a year, taxing them an extra 10% (or more) will raise £10 billion, not realising that people change their behaviour and so will depress enterprise and the government ends up losing money rather than raiding extra tax.

There is a limit on the total amount of tax revenue that can be extracted. Increase taxes in one area, and you just reduce the amount collected in other areas. Historically, I think it's been an almost constant % of GDP.

Labour didn't get that in the 1970s and it seems none of them still get it.

[DotasScandal]

For them the simple answer (he's says reaching for tin hat) is to increase rates.

[Fred Bloggs]

For sure, the 90% crowd are having a field day and it will only get them more customers. For me, I've been contracting since 2003, rates have barely moved in that time. I can't see it happening now. For me, it depends, but semi retirement is looking favourite for me with perhaps some overseas work if I can get a decent enough rate (doubtful).

[Waldorf]

Personally, I find all this talk of "lost tax revenue" hilarious. It reminds me of the case the music industry was trying to make for itself in the heydey of P2P networks (Napster, etc.). They would come to governments begging for tougher laws, quoting a figure of $1295908695989008 in "lost" revenue (based on the price of a CD x the number of people that pirated it) - completely ignoring the fact that 90% of the pirates never would have / never could have purchased the item anyway had it not been available for free, and thus that 90% of the "revenue" would never have materialized under any circumstances.
Many tax specialists seem to think that contractors will just keep contracting, even as they are hammered with PAYE-level taxes & more. Keep dreaming! The second it is REALLY not worth the bother anymore, all but the most hardcore freelancers will occupy themselves with other, less risky ventures.
Or simply go practice their craft under friendlier skies. It's a vast world out there, and contractors are not irrational beings.

This is the same basis Corbyn's lot think about taxing the higher paid. They think that if there are 100,000 people earning £1 million a year, taxing them an extra 10% (or more) will raise £10 billion, not realising that people change their behaviour and so will depress enterprise and the government ends up losing money rather than raiding extra tax.

[webberg]

As is the theme of many of the threads here, the world of contracting is going to be different from April 2016. That process will accelerate when the IR35 "reforms" arrive (consensus is April 2017?).

The present business models are unlikely to survive. Or if they continue to be used, will result in higher tax bills for contractors and presumably higher contracting bills for clients.

The effect on tax revenues is an increase for HMG although perhaps not as much as predicted.

New business models will arise. I hear tales of the IPSE suggested FLC. From what I can see, that looks like a variant of the Family Limited Company/Partnership that a lot of wealthy families use to hold and trade business interests. (Forgive me if that is incorrect as I've not really focussed there as yet).

I fear that some sharks are already circling. I can see claims that a client paying an offshore entity which pays your offshore company will avoid the rules. No. I can see claims that payment in kind/shares/credit will avoid tax. No. I can see claims that Elvis has been spotted in Sainsbury's means no tax is due. No.

The more I think about this, the more I become convinced that some form of time based test will be used to determine whether, for tax purposes only, your income should be treated as business receipts or salary. I just feel that the S,D or C tests are just to flaky to be operated consistently.

I've already been asked to look at a partnership scheme where some profits are stored in a corporate member. I shared some of that and it got comprehensively shot to pieces based on practical operation.

There are perhaps other models waiting to launch. I'm sure a lot of tax advisers have their favourites.

Contractors may leave the UK but that probably means no longer working for UK resident companies. I suspect many contractors who have family and settled connections in the UK will not wish to leave. For them the simple answer (he's says reaching for tin hat) is to increase rates.

[DotasScandal]

Personally, I find all this talk of "lost tax revenue" hilarious. It reminds me of the case the music industry was trying to make for itself in the heydey of P2P networks (Napster, etc.). They would come to governments begging for tougher laws, quoting a figure of $1295908695989008 in "lost" revenue (based on the price of a CD x the number of people that pirated it) - completely ignoring the fact that 90% of the pirates never would have / never could have purchased the item anyway had it not been available for free, and thus that 90% of the "revenue" would never have materialized under any circumstances.
Many tax specialists seem to think that contractors will just keep contracting, even as they are hammered with PAYE-level taxes & more. Keep dreaming! The second it is REALLY not worth the bother anymore, all but the most hardcore freelancers will occupy themselves with other, less risky ventures.
Or simply go practice their craft under friendlier skies. It's a vast world out there, and contractors are not irrational beings.

[eek]

Have you read what she posted at the end of her piece? If she is regarded as a sensible, moderate commentator, I don't want to read the extremists.

It's her viewpoint. Mine would be that as the only way we can work the way we do and not be utterly reliant on 3rd parties that we may or may not trust (remember umbrella's had a habit of going bankrupt last decade) is via a limited company then you need to resolve employment laws before you start complaining about the tax we pay.