So what now?

[MarkT]

when they see that new talent stops wanting to come for interviews and their day rates for roles have to increase like HMRC's have, they will either ask why this is happening and adjust their attitude or they will swallow the change in price as a cost of business. Etherway it will no longer be the contractor that is owning that risk. .

Not so fast

If the rules are in the Public and the Private sector then there is no chance rates will increase. Why would they? Maybe if there is a huge drop in people willing to be contractors, but I think most roles will get filled with FTCs.

Rates may go up by £50 on a £500pd role.

There is always someone willing to do the job for 3-6 months for a low rate, inside IR35.

[bobspud]

Not so fast
If the rules are in the Public and the Private sector then there is no chance rates will increase. Why would they?

As lots of departments suddenly found out. We are a very in demand profession. TFL and the National Hydrographic Agency had almost 100% of their specialists tell them to get f%cked. When they started blustering about all being caught.

Clients will quickly see that their choice for getting the freelancers that they need is either: declare the role outside and get a choice of skilled contractors or up the rate until one will swallow the 44% taxes.

Maybe if there is a huge drop in people willing to be contractors, but I think most roles will get filled with FTCs.

I think a hell of a lot of contractors are only doing well because they are wrongly declaring themselves outside IR35 those ones will pack up and go permanent. Some may even go bust as they have not been properly pricing the work to take downtime into account.

Rates may go up by £50 on a £500pd role.

Nope rates in government are going up like a Tesla rocket. After yesterdays 3 billion preparation statement I think they are going to be fighting each other like mad for contractors as most of them have not started the work yet...

There is always someone willing to do the job for 3-6 months for a low rate, inside IR35.

That only happens today because lots of permanent staff jump to contracting without having any idea about rate. I don't think so many will be doing that in future.

[BoredBloke]

But these public sector bodies found that their contractors upped and left because their contractors didn't face the same rules in the private sector. If that escape route is shut down then what? The more our rates go up, the greater the likelihood they put the roles out to Wipro and the like who don't have all this baggage.

[bobspud]

But these public sector bodies found that their contractors upped and left because their contractors didn't face the same rules in the private sector. If that escape route is shut down then what? The more our rates go up, the greater the likelihood they put the roles out to Wipro and the like who don't have all this baggage.

If you are private sector client A and you decide that your contractor is in scope. All of a sudden private sector client B has an opportunity to benefit by stating they want out of scope professionals for their organisation and you just lost your contractor. Thats just how competition works.

Contractors will need to hike their rates an awful lot before Wipro or Infosys start to look attractive.

*EDIT*

Thinking about it some more it has also occurred to me that If I was an agency I would be tulipting bricks. One of the only reasons for their prevalence has been to act as a barrier for end clients that were frightened about employment rights and other such issues.

Putting the responsibility for owning the choice of hiring a temp vs freelancer allows them lots more control and should rates need to go up I can see a middle man that will be far easier to remove from the equation.

[BoredBloke]

If you are private sector client A and you decide that your contractor is in scope. All of a sudden private sector client B has an opportunity to benefit by stating they want out of scope professionals for their organisation and you just lost your contractor. Thats just how competition works.

Contractors will need to hike their rates an awful lot before Wipro or Infosys start to look attractive.

Not if they take the risk averse approach when A through to Z only offer inside roles. I simply don't see why a company would open itself to the risk of classifying a contractor as Outside only to have HMRC come knocking a few years down the line because HMRC reckons they got the determination wrong. The simple and safe option would be to only offer contracts on an inside basis and let the contractor deal with it.

[eek]

Not if they take the risk averse approach when A through to Z only offer inside roles. I simply don't see why a company would open itself to the risk of classifying a contractor as Outside only to have HMRC come knocking a few years down the line because HMRC reckons they got the determination wrong. The simple and safe option would be to only offer contracts on an inside basis and let the contractor deal with it.

I can - its called profit. And the paperwork required for a project or even maternity support wouldn't be that difficult to keep. Here is the contract, here is the statement of work - the person started then and the last invoice was paid on.....

[eek]

If you are private sector client A and you decide that your contractor is in scope. All of a sudden private sector client B has an opportunity to benefit by stating they want out of scope professionals for their organisation and you just lost your contractor. Thats just how competition works.

Contractors will need to hike their rates an awful lot before Wipro or Infosys start to look attractive.

*EDIT*

Thinking about it some more it has also occurred to me that If I was an agency I would be tulipting bricks. One of the only reasons for their prevalence has been to act as a barrier for end clients that were frightened about employment rights and other such issues.

Putting the responsibility for owning the choice of hiring a temp vs freelancer allows them lots more control and should rates need to go up I can see a middle man that will be far easier to remove from the equation.

Agent's do provide a filtering service - what I suspect could happen is that that filtering service could be done on a fixed fee rather than a percentage basis....

[bobspud]

Not if they take the risk averse approach when A through to Z only offer inside roles. I simply don't see why a company would open itself to the risk of classifying a contractor as Outside only to have HMRC come knocking a few years down the line because HMRC reckons they got the determination wrong. The simple and safe option would be to only offer contracts on an inside basis and let the contractor deal with it.

Do you mean risk adverse like heavily loading debt onto the balance sheet to reduce corporation taxes or bouncing your profits accross several principalities to create 0% tax structure?

Yeah our private sector is very risk adverse. Don’t forget that everyone is watching Uber flail around trying to defend itself from having to grant taxi drivers holiday and sick pay...

There is not a company in the world that is going to go out of its way to purposely end up in that seat.

[fidot]

I can - its called profit. And the paperwork required for a project or even maternity support wouldn't be that difficult to keep. Here is the contract, here is the statement of work - the person started then and the last invoice was paid on.....

Agreed. How are HMRC going to prove a contract is caught if both the client and contractor don't want it to be and have all the correct paperwork and answers prepared? Contractors get caught these days because clients don't have a vested interest in the outcome, so are sloppy with the terminology and/or approach.

[Maslins]

Agreed. How are HMRC going to prove a contract is caught if both the client and contractor don't want it to be and have all the correct paperwork and answers prepared? Contractors get caught these days because clients don't have a vested interest in the outcome, so are sloppy with the terminology and/or approach.

This is my view.

To date, I don't think many people have taken IR35 seriously:
- end client doesn't care,
- individual has it as a little worry in the back of their mind, but reality is the number of IR35 enquiries vs number of contractors means chances of being pulled up was trivial.

Assuming the rules do get spread to private sector, the end client will suddenly need to care. I imagine there will be more general guidance that will become the norm, perhaps coming from the likes of QDOS/Bauer & Cottrell. End clients will have a more clear cut choice from two options, with very different contracts (and hopefully working practices) accordingly. Are they prepared to accept the "downsides" that come with a legitimate contractor. Things like right of substitution, and the contractor deciding how they're going to do the task. If they accept that, it can be outside IR35, meaning less hassle for them, and contractor wins (so perhaps opens up a better calibre of worker, and/or lower headline rate). Or, they'll decide they're not prepared to put up with that, they want to "control" the person, in which case they, and the worker, will need to accept it's inside (or more likely either contract via an umbrella or go permie).

I don't see it being as cataclysmic for the contractor market as some predict.