Discussion document on IR35 published

[OrangeSquash]

Employing permanent staff has become so, potentially, expensive in terms of employee entitlements and litigation that skilled contractors will always be in demand and net rates (so disregarding tax position) will have to be maintained for the supply to continue. What may stop is the forced move of low paid workers to umbrella companies and PSC's and I can't help thinking that's a good thing.

^^^ This.
Except it will take several years for the dust to settle. For anyone wanting to continue contracting it looks like these will be several painful and uncertain years.

[northernladuk]

Again with the risk. Contractors don't take on any risk, other than not finding work, and that's no different than temps. But unlike temps you get paid a lot more than the equivalent permie, and you get to avoid tax to boot.

Well that's a risk not to be sniffed at. There is also all the other things we've seen people struggle with on here. No notice paid, no come back on instant termination, getting paid through an intermediary who don't always want to pay an so on..

Anyway, wasn't really a post that to create a discussion on the details lol.

[Zero Liability]

Any responses to this document are a complete waste of time with regards to making any IR35 changes more effective. From P5.



Until they determine unequivocally what the conditions for being 'properly regarded as self employed' any legislation can simply not be complied with. This has been their problem all along. This is why they introduced BETs and this is also why they scrapped them.

Of course, they will never, ever make that definition because in doing so, the hoops become clear and most people will be able to jump through them.

This is why it is a sham.

What I wonder is, how do they estimate that 90k contractors should have paid more tax? This is the sort of thing it takes a court case to determine, so without having undergone the whole investigation/review process, how on earth would they know that (and again, isn't this still a fraction of the 200k in total they estimate operating via "PSCs"; so how do they differentiate)? But they have a history of making baseless guesstimates, so nothing new here I guess.

[Bluenose]

zero: for those contractors that have been in the game long enough we know the two types of contractor Hmrc was trying to go after with ir35. of the first type, every company of a decent size has at least one or more.

these are the guys in their mid to late forties and over who started contracting in the mid to late 90s and tend to fly under the radar.

they earn crap money but seem to be endlessly re.extended on gigs and may have been there for many years.

and at the risk of a sweeping generalisation, in my experience they are at higher likelyhood of using an EBT scheme, because they are chasing the lifestyle they had during the golden years of contracting.

second type came of age during the recent recession and are usually outside of IT and are nothing more than permies on reduced rights.

instead of targeting these people directly Hmrc failed because they tried to cast the net too wide and try to catch real freelancers. end result was they ended up being able to catch far fewer of what I would class as the real Dodgers.

as posted earlier, Hmrc are making same mistake again as they are trying to cast the net even wider.

[tractor]

...

What I wonder is, how do they estimate that 90k contractors should have paid more tax? This is the sort of thing it takes a court case to determine, so without having undergone the whole investigation/review process, how on earth would they know that (and again, isn't this still a fraction of the 200k in total they estimate operating via "PSCs"; so how do they differentiate)? But they have a history of making baseless guesstimates, so nothing new here I guess.

They work out a number that would be tempting for the government to get behind them and support them with legislation. Coincidentally, they make sure the gp know so they can create a good deal of antipathy. They didn't fool the select committee but hey it doesn't matter. They fooled everyone else.

When 'estimating' their sole aim is to tempt the government, who will always go for it because it means revenue.

[Zero Liability]

zero: for those contractors that have been in the game long enough we know the two types of contractor Hmrc was trying to go after with ir35. of the first type, every company of a decent size has at least one or more.

these are the guys in their mid to late forties and over who started contracting in the mid to late 90s and tend to fly under the radar.

they earn crap money but seem to be endlessly re.extended on gigs and may have been there for many years.

and at the risk of a sweeping generalisation, in my experience they are at higher likelyhood of using an EBT scheme, because they are chasing the lifestyle they had during the golden years of contracting.

second type came of age during the recent recession and are usually outside of IT and are nothing more than permies on reduced rights.

instead of targeting these people directly Hmrc failed because they tried to cast the net too wide and try to catch real freelancers. end result was they ended up being able to catch far fewer of what I would class as the real Dodgers.

as posted earlier, Hmrc are making same mistake again as they are trying to cast the net even wider.

Even in the above scenarios, unless they can satisfactorily demonstrate that none of the three pillars apply, the conclusion that individuals are not paying as much tax as they would like under IR35 is premature - this also applies for their guesstimates on how much the measure 'protects'. They may not like this and they may think everyone should be a permie, but the reality is they're just making figures up out of thin air, for reasons I think tractor has hit upon.

Anyway, my guess is as of next year's budget or maybe a bit later, end clients will also be taking a hit on this, which may have unintended consequences, because like jamesbrown said, they're going to have an uphill battle trying to introduce (even more) arbitrary measures like time spent on a particular engagement.

[unixman]

Again with the risk. Contractors don't take on any risk, other than not finding work, and that's no different than temps. But unlike temps you get paid a lot more than the equivalent permie, and you get to avoid tax to boot.

Risk of not finding work = potential bankruptcy for you and homelessness for your family.

Contractors take the risk by contracting through choice, when they could get a permanent job. Temps usually do not have a choice of a perm job, and are therefore not taking the risk, just facing it.

In contracting, it is impossible to pay the same tax as your permy neighbour. You either pay more (umbrella, 2 sets of NICS) or less (Ltd/dividends).

[Darkling]

Under such an arrangement, those who engage a worker through a PSC would need to
consider whether or not IR35 applies (in the same way as they would need to consider
whether a worker should be self-employed or actually be an employee), and, if so, deduct the
correct amounts of income tax and NICs as they would for direct employees

So the proposal is that the 'engager' deducts the IC and NICs and pays what's left to the 'PSC'? Isn't the net payment then subject to double taxation (corporation tax if retained by the PSC, dividend or further employment taxes if distributed to the 'worker')?

[Brussels Slumdog]

I think it ought to be a two phased approach to contracting.

Phase 1
Every new 'contractor' has to do a 1 year probation whereby they have to either go umbrella or be inside IR35 by default. 99.9% of new contractors are just doing it for the money and have no idea about being a business so how can they be a business in their own right and not a disguised employee? It will also make people think twice about taking what they see as an easy option to contracting so keeping more permies at clients and stops every idiot going contracting.

Phase 2
After the 1 year probation they are interviewed to find out what they know about their company finances and their attitudes towards their clients. If they can't distinguish between their money and company money and still have the mindset their client is their employer then they go back on probation. Instant fail if they don't use terms such as client, pimp, gig, warchest, boomed etc and fail a practical test to bleed a radiator. Not licking the chutney spoon and their view on gladiators will be a pointer but not absolute at this point. Those that can show some understanding of being a business and stand a chance of proving they can work outside IR35 then they can join the fray but still have to continue to prove they are outside on a contract by contract basis.

Dunno why it takes the government so long to do this. Piece of piss.

Employee or Contractor .
In order to be independent the contractor should be able to prove at least two conditions :-
The nature of the work is irregular. Implementing a significant system change is irregular whereas providing help desk support is regular employee work.
At least two clients in 3 years , three clients in 5 years .
Notice period less than one month
Commuting more than 90 min a day

There are contractors on my current site in London who would not even meet one condition

[SueEllen]

Employee or Contractor .
In order to be independent the contractor should be able to prove at least two conditions :-
The nature of the work is irregular. Implementing a significant system change is irregular whereas providing help desk support is regular employee work.
At least two clients in 3 years , three clients in 5 years .
Notice period less than one month
Commuting more than 90 min a day

There are contractors on my current site in London who would not even meet one condition

The commute would be arguable as some of us have had clients where some or all of the work is done at home.