Ir35 2020

[Scotslaw]

You do realise that the deemed payment under IR35 is based on what comes through to the PSC, not what the client pays the agency, right? Consultancy employees would never be liable for taxes on the amount paid to their employer. That would be like contractors being liable for taxes on the amount paid to the agency.

Not even Korbyn & Kompany would be stupid enough to do that.

In principle, the question is of payment received by an employer of an employee working within IR35 (whether PSC or consultancy) for services provided as a part of an arrangement deemed within IR35.
But to explore this point further, let's consider a case where the PSC contracts directly with the client rather than through an agency. Would identical IR35 treatment be warranted in such cases?

For cases where a PSC contracts through an agency acting as an intermediary, HMRC effectively ignore the agency and their fees for the purpose of IR35 assessment. So the agency involvement is a red herring in this scenario.

[WordIsBond]

PSC revenue is used for deemed payment because the disguised employee owns and controls the PSC.

If they don't own and control the consultancy, the amount of consultancy revenue over and above their salary is not theirs and so they won't be taxed on it. In that respect, the agency revenue over and above the PSC revenue is a very good comparison. You don't get taxed on money which is paid by the end client but does not come under your control. It's an absurd idea.

[Scotslaw]

PSC revenue is used for deemed payment because the disguised employee owns and controls the PSC.

If they don't own and control the consultancy, the amount of consultancy revenue over and above their salary is not theirs and so they won't be taxed on it. In that respect, the agency revenue over and above the PSC revenue is a very good comparison. You don't get taxed on money which is paid by the end client but does not come under your control. It's an absurd idea.

Ah - hadn't thought about how much of the employer's earnings makes its way back to the employee. That makes sense.
That being the case, I guess in the worst case scenario, flexible workforce will have a backstop in the form of consultancies.

[WordIsBond]

That being the case, I guess in the worst case scenario, flexible workforce will have a backstop in the form of consultancies.

Three backstops:
1. Consultancies.
2. Contractors using umbrellas.
3. Contractors operating through a PSC inside IR35.

If everyone were inside IR35, I'd still want to be independent. I don't do what I do for the tax benefits. I only want to fight to keep the tax benefits as a matter of fairness. I totally reject the nonsense that contractors who don't have employment rights should be taxed the same as employees. That's not fair even if we do the exact same job, whatever HMRC might claim.

But even if I had to pay that extra tax, I'd keep doing what I'm doing. In my case, though, I'd also probably mostly refuse to take on UK clients and just stick to foreign clients, unless the UK clients were going to eat at least part of the tax hit. If they want to put me inside IR35, they can pay for the privilege.

[amrhady]

The demand for contractors should still be there when the new rules apply. Business are always trying to grow and the corresponding work exists, will be created, and will need to get done.

One scenario being mentioned is that businesses find it too much of a hassle to hire a contractor - apparently the reason being they need to do IR35 assessment and potentially PAYE. This point doesn't seem valid as by this logic, it would be much more hassle and less cost effective to hire a permie. Also it doesn't make sense to hire a permanent employee if you only need a resource/skill for a few month. Even with the new rules, business are better off hiring a contractor if that's what the work/project requires.

A more optimistic scenario is for rates to go up to accommodate - to some extent - for the extra taxes. The reasoning here is that, if those companies assessing their contractors inside-IR35, whether lawfully or unlawfully, do not push their rates up, contractor will be financially better off doing a cheaper outside-ir35 contract. So should some companies assess/offer mostly inside-IR35 contracts, they would have to increase their rates if they are keen on maintaining the same skill and talent level.

The former is obviously based on the assumption that there will exist a reasonable amount of outside-IR35 work to give contractors an alternative. Small companies will make up reasonable amount of that outside-IR35 work.

A more pessimistic scenario is that most contract work ends up being inside-IR35, which ends up being less income for contractors - yet still no institutionalisation, and we would still maintain the same style of gig work.

I also think that in the previous scenario, a considerable number of contractors will try and switch to permanent employment . If successful, this will obviously decrease the contractor supply and might end up being a good thing for those of us who want to keep contracting.

Bottomline, business as usual.

[mudskipper]

From Anne Redstone's budget analysis (worth a read if you're an IPSE member) the definition of small business from the Companies Act will be used - broadly speaking, this is a company which meets two or more of the following conditions:

• Its turnover must be no more than £10.2m
• Its balance sheet assets must be no more than 5.1m
• It must have no more than 50 employees

[edison]

also think that in the previous scenario, a considerable number of contractors will try and switch to permanent employment . If successful, this will obviously decrease the contractor supply and might end up being a good thing for those of us who want to keep contracting.

I think a significant proportion of contractors could struggle to convert to permie. On the supply side, adapting to a permie employee culture may be challenging.

The demand for skills seems to be becoming ever more polarised. Skills like architecture and security seem to be perennially in demand and command very good day rates/salaries. Alongside growing areas like cloud, big data, AI etc, these are likely to have more more permanent opportunities. I fear longer term for more commoditised roles such as testing.

Also, IT organisations are looking for more than just technical skills, inter-personal skills are becoming more important. Lots of organisations are struggling to find good people with both sets of skills. Permie recruiters are also becoming more demanding in terms of overall skills and experience.

The associate consulting model seems to be growing and I suspect this is where a good proportion of the better more experienced contractors will end up if PSC outside IR35 contracts start dwindling.

[d000hg]

My god the comments on here! most will be in an ir35 contract even though they are not.. just look at the public sector. They will not raise rates as most are penny a pound.

It doesn't matter if your contract is out. When it rolls through most will be passed as in due to risk so it's out of your hand.

If you're a "penny a pound" contractor then you're nothing special. Take the hit or get a job.

Personally I think 90% of current IT contractors will be classified as inside IR35 by big clients (forced by their risk / human remains depts).

To me this marks the effective end of meaningful IT contracting in the UK.

Thankfully I should be retired by then.

Maybe there are 90% more contractors then there should be. Lots of contractors on multi-year contracts could just be employees. It's probably very naive but maybe if companies can't rely on lazily hiring contractors they'll have to actually value their employees.

[Hobosapien]

Those over 40 (or soon will be) thinking of sucking it up and working inside IR35, look forward to higher NI payments as you cover both the employer and employee portions of a highly likely 'age tax'.

https://www.dailymail.co.uk/news/art...e-tax-40s.html

The middle-aged and over 65s may soon be taxed to cover the cost of their later life care if proposals are given the go ahead.

It has been proposed by two Commons committees, the chair of one has said the premium must be compulsory otherwise 'it wouldn't be done'.

Under the committees' proposals for a 'social care premium' employees and employers would split contributions, with tax levied through a new mechanism or added to the existing National Insurance scheme.

In Germany, an adult earning a £27,000 salary pays about £675 a year, while those on £50,000 pay up to £1,250 according to The Sunday Times.

Will soon pay more to become full permie with all the genuine employee benefits factored in, not fake permie where they offload the employer taxes onto you but none of the benefits.

[JohntheBike]

"nor the law on the status"

HMRC are ignoring case law on employment status by assuming there is MOO for every engagement.