Hammond plans tax crackdown on 'synthetic self-employed'

[jamesbrown]

IR35 in 2020.

Anyone know what " for large and medium sized businesses" means? i.e only large/medium firms need to implement IR35?

From the consultation response:

The government intends to use similar criteria to define small businesses as is found in the Companies Act 2006.

And, no, IR35 is applicable in all cases, only the PSC will be responsible for applying the rules when the client is a small business, i.e. the current system applies in that scenario.

[Waldorf]

IR35 in 2020.

Anyone know what " for large and medium sized businesses" means? i.e only large/medium firms need to implement IR35?

For accounting periods beginning on or after 01/01/2016 a small company must meet at least two of the following conditions:

* annual turnover must be not more than £10.2 million
* the balance sheet total must be not more than £5.1 million
* the average number of employees must be not more than 50

Therefore any company exceeding two or more of the above criteria will be a medium/large business. I would suggest that most contractor’s end client will be a medium or large enterprise.

[jamesbrown]

I would suggest that most contractor’s end client will be a medium or large enterprise.

That's the general idea. They can say that 95% of clients won't apply the rules. What they won't tell you is that 95% of contractors will be impacted.

[AtW]

For accounting periods beginning on or after 01/01/2016 a small company must meet at least two of the following conditions:

* annual turnover must be not more than £10.2 million
* the balance sheet total must be not more than £5.1 million
* the average number of employees must be not more than 50

Therefore any company exceeding two or more of the above criteria will be a medium/large business. I would suggest that most contractor’s end client will be a medium or large enterprise.

How do you feel about Torys now?

[Hobosapien]

In most cases it will be the agency that is liable for IR35, not the client. But in many cases they will take the risk, just as they are taking that risk today in the public sector.

In that case agencies will move to only accepting applicants that are or will be using a brolly (or agency's own payroll), no more Ltd PSCs. Just like how currently they don't accept any self-employed non-incorporated applicant.

[Waldorf]

How do you feel about Torys now?

Still prefer them to the Marxist Labour Party.

Truth is this crackdown would have been presented to any chancellor as a leakage of tax revenues and so this move was inevitable.

It is always going to hard to argue why a contractor on say £100K can choose to pay a very low salary, benefit from expenses, split the shares with a spouse etc and pay little tax, plus the option to build up cash and only pay 10% at the end.

[AtW]

Still prefer them to the Marxist Labour Party.

Truth is this crackdown would have been presented to any chancellor as a leakage of tax revenues and so this move was inevitable.

It is always going to hard to argue why a contractor on say £100K can choose to pay a very low salary, benefit from expenses, split the shares with a spouse etc and pay little tax, plus the option to build up cash and only pay 10% at the end.

With current Toris you will get Korbyn too, enjoy!

[WordIsBond]

With current Toris you will get Korbyn too, enjoy!

We'd have him now if a few more people had done what you advocated and voted Lib Dem at the last election.

At least they are increasing the higher rate threshold. The Lib Dems and Labour would never have done that.

Instead of sniping at the least worst of the entire pack of fools, why don't you come up with a decent alternative.

[Hobosapien]

It is always going to hard to argue why a contractor on say £100K can choose to pay a very low salary, benefit from expenses, split the shares with a spouse etc and pay little tax, plus the option to build up cash and only pay 10% at the end.

It's just a different way of accounting, similar to why clients like to use contractors as a different way of accounting for short term resource rather than body count on their payroll. Some at client may not understand that and see a contractor earning 'a lot' in terms of pure rate, when really they need to compare it to a permie of equivalent level with all the employer tax and benefits they pay out. Then there's the extra on top for being able to get rid of a contractor at short notice without all the permie red tape.

Even traditional contracting meant paying corp tax (20%) and higher rate income tax if needing to withdraw divis over the lower tax threshold to cover typical cost of living. Now there's the divi tax to squeeze that even further. Expenses have always been legitimate when working away during the week for a short term contract. So by trying to 'level the playing field'' they've just made it unfair the other way when contractor is deemed to be caught inside IR35.

At least with the move to make clients decide on the IR35 status it moves the liability and onus onto them to decide what sort of resource they really need and want, a permie style bum on seat or a specialist that can deliver a service for a particular need (usually project driven but could be a one off deliverable).

True contracting not temp employee should always command a premium as by nature the client is wanting something different and more specialised that they'd otherwise have to get fleeced by a consultancy for.

[RobScott]

Good for genuine contractors

for contractors who follow the rules and pay the tax that is due and respect IR35 , there is no need to worry.

I welcome it ..seen many blatantly abuse the system and pay little tax while the rest prop up the NI for them!