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

[Pondlife]

It depends what you mean by "IR35 caught". Whatever they do, I'd bet your house () that clients will need to enforce it, either by having contractors legally employed (i.e. no longer a contractor in fact) or of questionable status (i.e. no longer a contractor in practice; for example, SDC intended for tax status only would lead to employment claims).

As things stand, my best guess, reading between the lines of various sources, concurs with what Lisa pointed out elsewhere, i.e. the one month as a lower bound for a status check by the engager (eliminating some admin for them), rather than an upper bound beyond which everyone is definitively caught, but the engager will be at the heart of this. Anyway, at this point, we're largely in the dark and will need to wait.

Exactly this. SDC will still be the determining factor rumoured to be decided via an online assessment.

[Waldorf]

If this does come to pass then it seems the aim of HMRC would be to have PAYE & NIC applied to contractors income.

If so, the easiest way would be to revert to contractors being employed as 'temps' by the agency, this avoids the end client having to bother with employing short term contractors, it also ensures that full tax & NIC are deducted from the contractor.

The role of the agency remains, the client will see no change, just the contractor paying more tax. The rates would probably remain the same apart from the fact that they will be paying more tax.

If T&S goes, then this could be made up in cases of major commuting by a higher rate.

Hopefully this won't happen but if HMRC wish to raise extra cash without upsetting business then this could be the way they do it.

[yakitoo]

Hopefully this won't happen but if HMRC wish to raise extra cash without upsetting business then this could be the way they do it.

Pretty well sums it up.

[LondonManc]

If this does come to pass then it seems the aim of HMRC would be to have PAYE & NIC applied to contractors income.

If so, the easiest way would be to revert to contractors being employed as 'temps' by the agency, this avoids the end client having to bother with employing short term contractors, it also ensures that full tax & NIC are deducted from the contractor.

The role of the agency remains, the client will see no change, just the contractor paying more tax. The rates would probably remain the same apart from the fact that they will be paying more tax.

If T&S goes, then this could be made up in cases of major commuting by a higher rate.

Hopefully this won't happen but if HMRC wish to raise extra cash without upsetting business then this could be the way they do it.

If they do that, they'll kill contracting. While you'll still earn more take home, I may as well move into consultancy and get training, holidays, sick pay, car allowance, etc

[unixman]

Whatever they do, they won't simply hit contracting over the head with a huge mallet, which is what the 1 month idea would be. Industry and the govt needs contractors. Even more so these days, with the laws governing permanent employment becoming ever more strict and onerous for employers.

[Zero Liability]

Exactly this. SDC will still be the determining factor rumoured to be decided via an online assessment.

If so, those news articles on it got it completely wrong. Whether due to the source (for a bit of FUD-related amusement) or just bad writing. Which just means we're still stuck with the bad ideas put forward for the consultation/discussion docs, respectively, which isn't a huge relief. I do wonder if they will stick to a FB2016 deadline for the T&S stuff and FB2017 for IR35 stuff. I guess we'll know in a couple of weeks.

If this does come to pass then it seems the aim of HMRC would be to have PAYE & NIC applied to contractors income.

If so, the easiest way would be to revert to contractors being employed as 'temps' by the agency, this avoids the end client having to bother with employing short term contractors, it also ensures that full tax & NIC are deducted from the contractor.

The role of the agency remains, the client will see no change, just the contractor paying more tax. The rates would probably remain the same apart from the fact that they will be paying more tax.

If T&S goes, then this could be made up in cases of major commuting by a higher rate.

Hopefully this won't happen but if HMRC wish to raise extra cash without upsetting business then this could be the way they do it.

Or they could just tweak their newest toy, the dividend tax.

[Waldorf]

Or they could just tweak their newest toy, the dividend tax.

The problem with that is that it hits pensioners and non-contractors with higher taxes.

However I do believe that this tax will rise in the future, chancellors will not be able to resist it.

[BolshieBastard]

The problem with that is that it hits pensioners and non-contractors with higher taxes.

However I do believe that this tax will rise in the future, chancellors will not be able to resist it.

Or it could be abolished in the future when the blue rinse brigade find they're paying extra tax on their investment.

I think this 1 month thing is being floated to test the idea of a workable 'limit' say 6 to 12 months and so when the anouncement is made in the November statement, everyone will go 'could have been worse, could have been 1 month as originally suggested.'

[jamesbrown]

The problem with that is that it hits pensioners and non-contractors with higher taxes.

However I do believe that this tax will rise in the future, chancellors will not be able to resist it.

It would be quite straightforward to allow a higher tax-free allowance for pensioners or to remove it for directors of close companies (or any companies for that matter). They can accentuate and mitigate as they see fit.

[Gordon Ice]

It depends what you mean by "IR35 caught". Whatever they do, I'd bet your house () that clients will need to enforce it, either by having contractors legally employed (i.e. no longer a contractor in fact) or of questionable status (i.e. no longer a contractor in practice; for example, SDC intended for tax status only would lead to employment claims).

As things stand, my best guess, reading between the lines of various sources, concurs with what Lisa pointed out elsewhere, i.e. the one month as a lower bound for a status check by the engager (eliminating some admin for them), rather than an upper bound beyond which everyone is definitively caught, but the engager will be at the heart of this. Anyway, at this point, we're largely in the dark and will need to wait.

Exactly right, it depends on what you mean by "IR35 caught" and once again we're into the realms of "who" this applies to and whether the "who" can be defined and enforced. Last I looked PSC was still not enshrined in anything remotely close to law, and attempts to separate Ltd's from Ltd's engaged via an "intermediary" (a.k.a. Agencies) will serve only to drive contractors to reinvent themselves so they are not caught by IR35. And so the cycle repeats..

Personally I think we have a case of lazy headline grabbing news tapping into an already concerned contractor community worrying/struggling to understand where HMRC is going with SDC potentially for both T&S and IR35. It's already evident from SDC proposals that it will be possible for a contractor to be considered "employed" for T&S purposes and at the same time be able to demonstrate being outside IR35 (using the typical IR35 tests and of course calling on the now substantial IR35 case law) and thus be considered "self employed".. yeah right, that's logical.

There are limitless ways this can go because collectively HMRC and HMT are a collection of hatstands without the intellectual capacity to grasp the problem they are trying to solve.. let alone find a workable solution for UK plc.

Whatever happens Darwinian law will still apply - some will evolve and flourish, some will fail to evolve and die.. good luck to all.