Freelance Limited Company (FLC) offering from IPSE

[eek]

Except that is rather the point.

If you qualify to use the option of an FLC, it demonstrates that you are very low risk for IR35 so you are left alone while HMRC focus on the target rich environment. If it can be made to work like that of course, which is the tricky bit, but nobody can force you to use an FLC if you don't qualify for one, which is why it will be optional.

Can I take it by your lack of an on-topic response to my questions that you accept, that, in reality, an FLC won't be optional and people will be forced to use them?

[malvolio]

Can I take it by your lack of an on-topic response to my questions that you accept, that, in reality, an FLC won't be optional and people will be forced to use them?

How in God's name do you come to that conclusion? Jesus...

[eek]

How in God's name do you come to that conclusion? Jesus...

The fact you haven't come up with any statement that disproves the 3 logically steps that result in everyone having to use an FLC instead of their existing limited companies....

It's a very short simple example, lets hear your short simple rebuttal....

Agency (or end client) advertises contract.

First 3 FLC candidates are put forward, anyone using a limited company instantly rejected (due to perceived additional risk)..

Eventually those people still using a limited company will have to move to an FLC before an agency puts them forward for any role or starve....

[FK1]

I am writing my business plan right now and I removed all agents from LinkedIn

How does removing the agent fix the problem????

It may solve the expenses bit, it doesn't solve the IR35 bit.....

It is scientifically proved clean car drives better.

Business plan is a must to do thing for a start-up business. I found that very helpful rather than formal.

Agents in a LinkedIn profile is a very mistake I believe and garbaging them out is a part of my survival plan.

I am also closing down my 7 years old LTD and have opened a new one for a genius commercial reason if you ask.

FLC will not fit me in any way as I do not like an idea to use LTD for one shareholder only. It is designed to be shared. The restriction to one person seems to be artificial and transform LTD to kinda of "Limited Liability Sole Trader" like a way to engage one specific person.

To fix the problem we should not pretend to be a business but think and act as a business. Simple Then "IR35" and "income shifting" become not worrying things as a mindset was changed as well as business practices. Less money of course, more risks, but much better for your entrepreneur soul if you have one

[WordIsBond]

OK, I'm persuaded. It's all hopeless

It is. You know why? No matter what, we'll all be paying tax, within three years, FLC or not, at the same rate as permies. We'll all be inside IR35, except for a few very fortunate ones like me who aren't under SDC and/or so niche that we can pretty much set our own terms with clients. Everyone else is IR35 bound.

You know why? Because no one has destroyed this for HMG:

Case study 1:
A legal company hires two lawyers in 2015-16 who do the same job and work on the same cases.
The company pays the lawyers gross payments of £70,000 per year.
Jo works as a direct employee. The company deducts income tax and employee NICs from her salary and pays
employer NICs on top. The total tax and NICs paid on Jo’s salary is £30,612 (£22,071 by Jo and £8,541 by the
company).
Ben works through a PSC and does not operate IR35. He pays himself the most tax advantageous remuneration
strategy combining a low salary and dividends. His total tax and NICs liability is £16,900.

It's easy to destroy. Jo gets a lot more than Ben.

Jo's employer pays £78,541 for her services (pay plus NI) and only £70K for Ben's. For Ben and Jo to be equal, even if everything else was equal, they would have to pay Ben's company £78,541 so he could pay the employer NI. Since THEY aren't paying employer NI, right there Ben is underpaid relative to Jo by over £8K. So maybe he SHOULD pay less tax. But everything else isn't even close to equal.

Jo gets employment rights, Ben doesn't. What are employment rights worth? £3K? £5K? Hard to say, but they aren't nothing, they are quite valuable. Sure, a lot of people never need them, but if you do need them, they are worth a lot.

Jo's employer pays PII to cover her. Ben has to pay his out of his £70K. What's that for a lawyer, £1K a year? Not a lot, maybe, but it widens the gap between what they earn, doesn't it?

Jo doesn't have to pay accountancy fees. Ben does, it comes out if his £70K. Another £1-2K a year.

Jo doesn't have to set money aside for down time between contracts. Ben does, so he can't pay himself the full £70K, or if he does, he's on no pay at all for any time between contracts. Even if that is only a week every six months, that's £3K out of his gross.

Jo's employer gives her access to the company canteen, a mobile phone, and any other tax efficient benefits they offer. Ben doesn't get any of that.

Jo doesn't need to pay for company stationery. Ben surely will. Not a lot, but it comes out of his £70K.

I'm sure that's not a complete list, but it gives the picture. Ben earns a lot less than Jo. We all know it, but HMRC is using it. That example still lives. It's rubbish, it should be blasted out of existence.

IPSE claims to be a representative body, with contacts at the seat of power. IPSE made a lot of noise about their relationship with the self-employment czar. If they want to be a representative trade group, they should have some contact somewhere who can go to decision makers and say, "We can't make decisions based on that case study. It's all wrong."

If somebody can't blow the Ben-Jo travesty out of existence, we'll all be IR35. Ben is paid many thousands less than Jo, all things considered. And if IPSE can't find at least one of their lobbying contacts to communicate that this example is a gross injustice, then you can just quit talking about being a representative body and be a provider of insurance.

It really doesn't matter if Ben and Jo do the same job. Their total compensation isn't close, and it is perverse for HMRC to argue they should pay the same tax.

[eek]

It is. You know why? No matter what, we'll all be paying tax, within three years, FLC or not, at the same rate as permies. We'll all be inside IR35, except for a few very fortunate ones like me who aren't under SDC and/or so niche that we can pretty much set our own terms with clients. Everyone else is IR35 bound.

You know why? Because no one has destroyed this for HMG:

It's easy to destroy. Jo gets a lot more than Ben.

Jo's employer pays £78,541 for her services (pay plus NI) and only £70K for Ben's. For Ben and Jo to be equal, even if everything else was equal, they would have to pay Ben's company £78,541 so he could pay the employer NI. Since THEY aren't paying employer NI, right there Ben is underpaid relative to Jo by over £8K. So maybe he SHOULD pay less tax. But everything else isn't even close to equal.

Jo gets employment rights, Ben doesn't. What are employment rights worth? £3K? £5K? Hard to say, but they aren't nothing, they are quite valuable. Sure, a lot of people never need them, but if you do need them, they are worth a lot.

Jo's employer pays PII to cover her. Ben has to pay his out of his £70K. What's that for a lawyer, £1K a year? Not a lot, maybe, but it widens the gap between what they earn, doesn't it?

Jo doesn't have to pay accountancy fees. Ben does, it comes out if his £70K. Another £1-2K a year.

Jo doesn't have to set money aside for down time between contracts. Ben does, so he can't pay himself the full £70K, or if he does, he's on no pay at all for any time between contracts. Even if that is only a week every six months, that's £3K out of his gross.

Jo's employer gives her access to the company canteen, a mobile phone, and any other tax efficient benefits they offer. Ben doesn't get any of that.

Jo doesn't need to pay for company stationery. Ben surely will. Not a lot, but it comes out of his £70K.

I'm sure that's not a complete list, but it gives the picture. Ben earns a lot less than Jo. We all know it, but HMRC is using it. That example still lives. It's rubbish, it should be blasted out of existence.

IPSE claims to be a representative body, with contacts at the seat of power. IPSE made a lot of noise about their relationship with the self-employment czar. If they want to be a representative trade group, they should have some contact somewhere who can go to decision makers and say, "We can't make decisions based on that case study. It's all wrong."

If somebody can't blow the Ben-Jo travesty out of existence, we'll all be IR35. Ben is paid many thousands less than Jo, all things considered. And if IPSE can't find at least one of their lobbying contacts to communicate that this example is a gross injustice, then you can just quit talking about being a representative body and be a provider of insurance.

It really doesn't matter if Ben and Jo do the same job. Their total compensation isn't close, and it is perverse for HMRC to argue they should pay the same tax.

Don't forget the second case study uses the other approach with Mark's salary reduced to account for the employers NI while Sarah's company received all £30,000....

The thing is that it can't be hard to destroy. The existing IR35 system allowed 5% outside PAYE to support the costs involved in running a business...

Actually you might be being a bit unfair...

I remember someone on the IPSE forum trying to attack the case study on the Wednesday evening of the last tube strike. The argument they planned to use was that they paid more tax than under PAYE... once you included VAT. When that was attacked he reiterated the argument as they worked in banking.... It may be true but I think its called an edge case...

I really don't think it helps....

[yakitoo]

And if IPSE can't find at least one of their lobbying contacts to communicate that this example is a gross injustice, then you can just quit talking about being a representative body and be a provider of insurance.

Assuming that their contacts still have contact with anything useful.

[jamesbrown]

Except that is rather the point.

If you qualify to use the option of an FLC, it demonstrates that you are very low risk for IR35 so you are left alone while HMRC focus on the target rich environment. If it can be made to work like that of course, which is the tricky bit, but nobody can force you to use an FLC if you don't qualify for one, which is why it will be optional.

Can you explain to me why the FLC is necessary in this context? It defines a set of entry and ongoing requirements. It is then subject to a particular regulatory and tax regime. The FLC does not propose to eliminate IR35, which is (and will continue to be) determined on a contract-by-contract basis. Thus, by definition, the entry and ongoing requirements for the FLC must comprise deeming criteria that are, to some extent, contract-by-contract. If the deeming criteria of the FLC are significantly weaker, it will - without question - become an avoidance vehicle; that is, a way to save some of the tax that would not be saved through a straightforward application of IR35 outside of the FLC.

Can you explain to me how the FLC achieves anything that is not currently achievable through the existing application of IR35? Put differently (because this is not a question about the status quo disappearing; clearly, it is disappearing): when IR35 is updated, can you explain to me how any acceptable version of the FLC will be able to achieve something that IR35 will not be able to achieve in distinguishing employment from self-employment?

Is the argument that the FLC creates a "passport" or "badge" that the company is a "real business" in some sense and should be left alone? If so, why is a corporate structure necessary to achieve this? Surely it's the deeming criteria that matter, and not the corporate structure? If we've learned anything from IR35, it's that the corporate structure should be cast aside and the reality of the working relationship examined. It's the deeming criteria that distinguish "real businesses" from "sham businesses" and "real contracts" from "disguised employments". We can (must) achieve that without any particular corporate structure in mind. The question posed is this: can you suggest ways to better implement IR35 so that the tax take is increased? Answering another question or proposing an over-arching solution to something other than IR35 is pure fantasy.

[WordIsBond]

I remember someone on the IPSE forum trying to attack the case study on the Wednesday evening of the last tube strike. The argument they planned to use was that they paid more tax than under PAYE... once you included VAT. When that was attacked he reiterated the argument as they worked in banking.... It may be true but I think its called an edge case...

I really don't think it helps....

The VAT argument certainly doesn't help, because HMRC will reasonably say it isn't included in the £70K and is recovered by the engager, so it is null as far as how much total tax is actually paid.

Is IPSE telling us they've made representations about how unfair / skewed that case study is? I missed it if they are.

[mudskipper]

It is. You know why? No matter what, we'll all be paying tax, within three years, FLC or not, at the same rate as permies. We'll all be inside IR35, except for a few very fortunate ones like me who aren't under SDC and/or so niche that we can pretty much set our own terms with clients. Everyone else is IR35 bound.

You know why? Because no one has destroyed this for HMG:

It's easy to destroy. Jo gets a lot more than Ben.

Jo's employer pays £78,541 for her services (pay plus NI) and only £70K for Ben's. For Ben and Jo to be equal, even if everything else was equal, they would have to pay Ben's company £78,541 so he could pay the employer NI. Since THEY aren't paying employer NI, right there Ben is underpaid relative to Jo by over £8K. So maybe he SHOULD pay less tax. But everything else isn't even close to equal.

Maybe part of HMRC's argument is also that the "employer" is dodging tax, by not having to pay NI for Ben - as in the AccountingWeb article earlier. If he was employed, then both LawCo and Ben would have to pay more (everything else being equal).

Why IR35 should be scrapped now | AccountingWEB