Will IT contractors be considered permanent employees after one month on site?

[topgazza]

DOH!

Indeed... of course its about expenses and claiming them after a period of time.... double DOH!.... thanks for your patience

[Maslins]

Good point, and to reiterate another couple of good points I have read, possibly also in this thread but maybe in the related one in General :

* Some clients take a month or more just to set up desks and logins etc to get IT contractors started, not to mention security clearance.

* Most IT contractors charge VAT. So the derisory (for all this hoo hah) £400M tax gain will be more than offset by the huge loss in VAT payments.

Presumably purpose is to get people onto PAYE, rather than stop the work being done...and re your final VAT point, the corporates will typically be reclaiming that VAT (which wouldn't happen with employees), B2B VAT typically = no net gain to HMRC.

[MrMarkyMark]

re your final VAT point, the corporates will typically be reclaiming that VAT (which wouldn't happen with employees), B2B VAT typically = no net gain to HMRC.

Not in finance, bud.

VAT goes to HMRC, cannot be claimed back.
Could cost the treasury around a billion a year.

[eek]

Not in finance, bud.

VAT goes to HMRC, cannot be claimed back.
Could cost the treasury around a billion a year.

only if the contractor is moved onto payroll. If you used an agency or umbrella to pay the person its tax neutral on the VAT front with more tax received than via limited companies..

[MrMarkyMark]

only if the contractor is moved onto payroll. If you used an agency or umbrella to pay the person its tax neutral on the VAT front with more tax received than via limited companies..

Good point .
However, as someone pointed out in another thread, it could be difficult for agencies to have us all on pay roll.

[Zero Liability]

Ministers discuss £400m IR35 crackdown
Ministers discuss £400m IR35 crackdown | AccountingWEB

Pretty good comments on there, too.

[jpdw]

This one month business is so dumb it really can't be more than a daft brainstorming idea. One to allow to 'leak' out and see what the reaction is....

A couple of points:

1/
If there's a 1 month limit, you just have a 1 month contract then renew for another month!!! Of course, even HMT/HMRC would have thought of that and would impose a 'no return before' period. How long would that be? 6 months or 12 months or 24 months? How many undoubtedly-real-businesses would now fall foul of this by not being about to do repeat business within an artificial period of time.

2/
So this would apply to people working for PSCs. Let me check my certificate of incorporation. No, it's for Ltd company. Something as significant to business both small (contractors) and large (client co's) would surely require a 'PSC' to be actually defined somewhere proper for it to be the lynchpin of significant legislation.

3/
What would the average medium/large business' reaction be to being TOLD by HMG that they MUST move their 100, 200 or 500 (whatever) contractors doing projects lasting anything more than 31 days onto a PERMIE payroll....

4/
Builders singled out to be an exception? How & Why would that be? Justify that.... erm, because it takes more than 1 month to build 'a house'. Yeah but it also takes more than 1 month to build (!!!) a software project, a government-enforced-website-tracking-and-storing-system. Yeah but (they might say) there are plenty of large IT companies that could fill the gap left by IT contractors.... Maybe, but there are also lots of large building companies that could fill the gap of the 1 man building firms. (As an aside .. I bet IT Contractors dodge less tax/vat by doing 'cash in hand' jobs too)

The timings daft too... Announce it all this autumn and people can decide they are going to go back to permie-don so (having decided that) they'll cash out their divis in this tax year before the 7.5% sorry 15% or 20% comes in.....

[darrylmg]

This one month business is so dumb it really can't be more than a daft brainstorming idea. One to allow to 'leak' out and see what the reaction is....

A couple of points:

1/
If there's a 1 month limit, you just have a 1 month contract then renew for another month!!! Of course, even HMT/HMRC would have thought of that and would impose a 'no return before' period. How long would that be? 6 months or 12 months or 24 months? How many undoubtedly-real-businesses would now fall foul of this by not being about to do repeat business within an artificial period of time.

2/
So this would apply to people working for PSCs. Let me check my certificate of incorporation. No, it's for Ltd company. Something as significant to business both small (contractors) and large (client co's) would surely require a 'PSC' to be actually defined somewhere proper for it to be the lynchpin of significant legislation.

3/
What would the average medium/large business' reaction be to being TOLD by HMG that they MUST move their 100, 200 or 500 (whatever) contractors doing projects lasting anything more than 31 days onto a PERMIE payroll....

4/
Builders singled out to be an exception? How & Why would that be? Justify that.... erm, because it takes more than 1 month to build 'a house'. Yeah but it also takes more than 1 month to build (!!!) a software project, a government-enforced-website-tracking-and-storing-system. Yeah but (they might say) there are plenty of large IT companies that could fill the gap left by IT contractors.... Maybe, but there are also lots of large building companies that could fill the gap of the 1 man building firms. (As an aside .. I bet IT Contractors dodge less tax/vat by doing 'cash in hand' jobs too)

The timings daft too... Announce it all this autumn and people can decide they are going to go back to permie-don so (having decided that) they'll cash out their divis in this tax year before the 7.5% sorry 15% or 20% comes in.....

Some good points.
I'd like to know who in their right mind would want to run a ltd company with all the yearly expenditure and accountabilities, for just 1 month of work. Absolutely no way this is a genuine course of action. No way. Just fluff invented by the media to fill a page.

[IR35 Avoider]

This will be trivial for government to implement, and will have no impact on clients or agencies, and will have no effect on the existence or extent of contracting, other than knock-on effects stemming from net-of-tax pay being considerably lower.

I am a bit mystified that only I can see this, and that every other contractor here seems to be pontificating about how impossible this is, or that it is the end of contracting as we know it.

All they have to do is add a criterion to the current IR35 legislation, that any time with a client after the first month counts as caught.

The bit about clients having to take people on payroll is I presume just journalists (or whoever is briefing them) being a bit clueless.

[IR35 Avoider]

Contractors will still run companies even if 100% of income is IR35-caught, as in that scenario it's still a better option than using a brolly.