Freelance Limited Company (FLC) offering from IPSE

[jamesbrown]

OK.

Then if we are looking to target multiple problems, it is in most cases going to be a lot easier to solve them while avoiding unpleasant unintended consequences by formulating separate solutions. And that's a big part of the problem with IR35 as it stands right now, it is supposed to be solving multiple problems.

So, they want more money from contractors? Fine. They've hit us with the dividend tax, and taken away the employment allowance.

So here's something that is easy to enforce, easy to comply with, easy all around, on IR35.
1. Abolish IR35 except for the low paid, where (as I suggested above, the liability falls on the engager).
2. Increase the dividend tax another 2.5%. (Increase the dividend allowance to £10K for pensioners, this isn't about hitting them.)

Done and dusted. Dividend tax plus CT isn't that much less than employer NI, employee NI, and income tax combined. The amount of money we're talking about here is negligible. It probably tips the balance to self-employment rather than incorporation for anyone who can get away with that, but not enough to make incorporation punitive.

Everything is simpler, most contractors would be happy to pay another 2.5% on dividends if IR35 were completely gone, HMG gets more money and less hassle trying to collect it. The only people who really lose out are IPSE and QDOS who will lose a lot of their clients (yes, I just called IPSE "members" clients).

Expenses? They want more money? Change the 24 months to 18. Don't make it about SDC, which is a complex and subjective question. That just causes more angst, FUD. Just use a simple threshold.

Two issues here, I think. One is that the dividend tax and IR35 are not aligned, although the former obviously has implications for the Exchequer risk with the latter. We need to look forward to 2020 when the CT rates are lower and the basic and higher rate bands are higher (and the additional band is probably gone). It may well be that the dividend tax is increased with CT, but that doesn't address many of the problems that IR35 is aiming to solve. Moreover, HMG have a very clear position on IR35 now. That isn't to say Osborne couldn't be convinced otherwise (he's changed his position before now), but I seriously doubt it. Also, the optics of having one rule for the low paid and another for us would be terrible. However, I do agree that the solutions to these two things (T&S and IR35) aren't necessarily the same. Where possible, it would be good to propose things that have a degree of symmetry though, because that's where they're heading with SDC and it scores "simplification" points, if only superficially.

[WordIsBond]

+1.

T&S

we can show that its unfair and produces situations that are likely to fail a judicial review. We can also suggest variations on this that solves most of the problems..

IR35

We need to give HMRC something that puts the examples in the document firmly in scope. They are a £70k lawyer and a £30k nurse. Neither of those are low paid...

Or demonstrate, as with the lawyer, why it shouldn't be in scope at all, or at least that completely equal treatment isn't right because compensation isn't equal. The examples was one of the reasons I never thought this was about the low-paid, but I'm willing to concede that might be part of it.

I think, with the work you are doing, that you'll actually win major concessions on T&S. You should, anyway. What they proposed is so wrong-headed.

[WordIsBond]

This was why we came up with the idea of anyone on living wage plus 20%, for example, can't be paid through an intermediary - it takes all the low paid workers out of the equation and leaves them in permanent employment - HMRC's problem solved, political fallout averted

Yes, but the problem is, it is too broad. It would be fine for long-term engagements but doesn't make sense for someone starting their own business and offering their services to multiple clients at cheap rates to build a client base. It's a sledgehammer where a scalpel is needed.

My proposal on the low-paid accomplishes most of the same thing but without the absolute prohibition, and absolute prohibitions usually bring unintended consequences and collateral damage.

[jamesbrown]

I think, with the work you are doing, that you'll actually win major concessions on T&S. You should, anyway. What they proposed is so wrong-headed.

Even though the T&S is in consultation, and the IR35 is only in discussion, I'm actually much more optimistic about achieving something with the T&S. It's a simpler problem and the solutions should be simpler too. The IR35 question is essentially unanswerable and it's about damage limitation and shifting liabilities.

[WordIsBond]

One is that the dividend tax and IR35 are not aligned

So? Who cares? IR35 is a mess, everyone knows it. So kill it and accomplish the purpose another way. If the purpose is to get more money out of us, do it in a simple way rather than the IR35 mess.

If the purpose is to protect the low-paid, fine, use IR35 in that case, but make it a weapon against the engager rather than the worker. There's no bad optics in that.

If you just start over and say, "Why should we keep something that GORDON BROWN invented and doesn't work?" you can actually come up with clean solutions to the problems you want to solve....

[jamesbrown]

So? Who cares? IR35 is a mess, everyone knows it. So kill it and accomplish the purpose another way. If the purpose is to get more money out of us, do it in a simple way rather than the IR35 mess.

If the purpose is to protect the low-paid, fine, use IR35 in that case, but make it a weapon against the engager rather than the worker. There's no bad optics in that.

If you just start over and say, "Why should we keep something that GORDON BROWN invented and doesn't work?" you can actually come up with clean solutions to the problems you want to solve....

You're preaching to the choir here, honestly However, I'm just trying to deal with the problems as presented, and IR35 is here to stay, I'm afraid. In other words, if our representation is that IR35 should go, I don't believe that will achieve anything.

[WordIsBond]

Even though the T&S is in consultation, and the IR35 is only in discussion, I'm actually much more optimistic about achieving something with the T&S. It's a simpler problem and the solutions should be simpler too. The IR35 question is essentially unanswerable and it's about damage limitation and shifting liabilities.

Agreed. The IR35 question is unanswerable. So what are the goals?

Protect the Exchequer. Level the playing field. And implicitly, get something that actually works, which means it needs to be simpler.

So throw the thing out and solve its problems with simple means rather than this monstrosity.

[WordIsBond]

In other words, if our representation is that IR35 should go, I don't believe that will achieve anything.

If that is the only representation we make, sure. You have to suggest something to replace it. A marginal increase to the dividend tax would be one option.

[WordIsBond]

Ok, I have to actually go work now.

[jamesbrown]

Yeah, me too. Even this discussion of IR35 is starting to cost me money