Discussion document on IR35 published

[jamesbrown]

Yes but an individual client is not going to sit there and think "hmmm if I do this Im helping to kill contracting and I might be stuffed in 12 months time".

No they're going to think. Need someone now. Bugger that IR35 thing - well they'll have to sign because I can't be bothered with the hassle.

Indeed, they won't, and this will only be exacerbated by an act first, mitigate later, approach to laws that target PSCs specifically (aka an FLC). In other words, if the worst happens, the damage could be immediate and mitigated only in the medium-term.

[eek]

You are assuming that everyone is the same as you and that we are all contracting with a business that can pass the VAT, I work a lot (not always) supporting the public sector with temporary projects using temporary funding - they can't pass the VAT on anywhere.

So I am 100% correct to state that I generate ~14% extra income in the form of VAT.

You might but that's actually worse. For most of the public sector VAT is just an accounting feature. The fact you charge the Government 20% and don't return all of it straight back to HMRC isn't a argument that you pay extra, more one for you actually costing HMRC money, they contribute the 20% but only get 17.4% back....

[Contreras]

From 6 April 2015 all employment intermediaries are required to submit a quarterly report detailing all payments made to workers (Ltd Co or soletrader) where they are not operating PAYE.

By the time changes to T&S and IR35 changes are introduced next April HMRC will have (in theory) data on all PSC's engaged through an intermediary.

Yes but not direct to client. And not with an implied "inside IR35" flag.

[TheFaQQer]

Out of curiosity, how would you respond if they did?

If there is no choice but to take inside IR35 work, then I'd do the sums and consider very carefully whether it's worth continuing as a contractor or not.

[TheFaQQer]

So does the panel think that the end client (if held liable under debt transfer) would just say, without consideration of circumstances, that everyone was under SDC just to mitigate risk??

I think the majority would - even on the basis that it's easier to say that than to have to learn what it's all about anyway.

If many do, then there is no differentiating factor between clients, so it won't affect the client's ability to engage a contractor. If only a handful do then they will get the few contractors who are willing / able to take the work inside IR35 - the outcome of that being that they probably won't get the best people that the really want (because they tend to operate outside IR35), and there will be more increased competition for outside IR35 roles (thereby driving rates down).

[WordIsBond]

So does the panel think that the end client (if held liable under debt transfer) would just say, without consideration of circumstances, that everyone was under SDC just to mitigate risk??

It's a supply and demand question, isn't it? If enough contractors just decide to eat the extra tax cost, then end clients will do that. If they don't, if they insist that inside IR35 contracts are going to cost more, then clients will make a decision whether to pay the extra cost or not. It's really up to the contractors whether we will insist on passing along the costs. If we do, then the client has to make a cost benefit analysis, and some will just pay the extra cost to mitigate risk. Others will decide differently.

For me, it would make no difference. If a client decides they don't want the risk and want to declare a contract as under IR35, and they want to pay an extra 15% or so, that's ok with me. Saves me the hassle of having to be sure to keep good IR35 records. That would be the contract out of which I'd make a big pension contribution, presumably, anyway.

It's hard to justify to a client raising my rates to pass along the dividend tax. It's not hard to justify giving them two different prices depending on whether they are going to declare the contract as inside IR35. The dividend tax is something George Osborne did. Declaring a contract under IR35 when it doesn't have to be would be something the client would do, it would directly impact my compensation, and I would expect them to pay if they want to do that.

Of course, if contractors can't afford to walk away, they can't insist a client pay extra for this. But I think where this is going is most clients will declare all contracts inside IR35, contractors will get hammered on expenses, and a lot of contractors will get out of the game. When that happens, those who are left and are good at what they do will be in high demand.

[WordIsBond]

No they're going to think. Need someone now. Bugger that IR35 thing - well they'll have to sign because I can't be bothered with the hassle.

And "need someone now" means the contractor can say, "Fine, but it will cost an extra 15%" (or whatever). And a lot of end clients will say, "I'll find someone cheaper." And others will say, "15% for no risk? No brainer."

[TheFaQQer]

Of course, if contractors can't afford to walk away, they can't insist a client pay extra for this. But I think where this is going is most clients will declare all contracts inside IR35, contractors will get hammered on expenses, and a lot of contractors will get out of the game. When that happens, those who are left and are good at what they do will be in high demand.

Alternatively, clients are left with the cheap, local ones who don't want to run a business and are content to be inside IR35.

[WordIsBond]

Alternatively, clients are left with the cheap, local ones who don't want to run a business and are content to be inside IR35.

Yeah, some clients will go that way.

[expat]

Alternatively, clients are left with the cheap, local ones who don't want to run a business and are content to be inside IR35.

I think that that is false, and actually I resent the easy insult. I am good and I am not cheap, but I don't want to run a business and I will work inside IR35; obviously I prefer to be outside but I don't have explicitly different rates for in and out.