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cojak
6th October 2015, 16:35
...or are things rarely as good or as bad as they first appear?

I'm just wondering about the consequences of the April tax changes going though virtually as-is. Let's face it - all of this consultation is so much window-dressing fluff. Lobbying by non-party-donating stakeholders in the recent past has been completely ignored.

What will happen to contractors, accountants, legitimate umbrellas, agencies and clients? And will those consequences happen over night or will it take a year or 2 to have an effect?

Or will things generally stay as they are?

I think that many contractors will go back to permiedom. Those in contracting will restrict themselves to contracts within commuting distance, or the day rate will be such that they'll take the hit but with a much depleted day rate.

Draco
6th October 2015, 17:05
It's an unknown frankly. Too many variables to think about. Consider:

1. Hotness of contracting disappears => contractor supply falls, permie supply increases.
2. Permie supply increases => permie wages fall.
3. Contractor supply falls => contractor rates rise.
4. Contractor rates rise => new contractors will enter the market.
5. Contractor rates rise => companies more keen to hire permies.
6. Companies keen to hire permies => permie wages rise again.
7. Those switching contractor to permanent will more likely have been inside IR35 in past contracts => gov't likely to investigate them.

My suspicion is that while contracting will not disappear completely, the nature of what contracting is will change.
I'd expect contracting to split into two - a portion going into full time permanent positions, a portion going into real consultancy fee-driven work as their own business, a portion going into larger consultancies, a portion looking at more business friendly pastures.

Could begin with a whimper in March followed by turmoil in May/June.

tl;dr Heaven knows.

BolshieBastard
6th October 2015, 17:31
...or are things rarely as good or as bad as they first appear?

I'm just wondering about the consequences of the April tax changes going though virtually as-is. Let's face it - all of this consultation is so much window-dressing fluff. Lobbying by non-party-donating stakeholders in the recent past has been completely ignored.

What will happen to contractors, accountants, legitimate umbrellas, agencies and clients? And will those consequences happen over night or will it take a year or 2 to have an effect?

Or will things generally stay as they are?

I think that many contractors will go back to permiedom. Those in contracting will restrict themselves to contracts within commuting distance, or the day rate will be such that they'll take the hit but with a much depleted day rate.

In my experience, many contractors live a short distance from where they work. Wherever Ive worked, Ive been in the minority of contractors who travelled more than 30 minutes to their work site.

At my current client, less than 5 out of 50 live more than 30 minutes away. The loss of expenses wont affect these people and they'll stay contracting unless they start finding 'local' roles hard to find.

if they work through a hubbie \ wife limited with a 50 / 50 split, they'll claim the 5000 tax free each a total of 10g's so I doubt that would greatly affect them either.

northernladuk
6th October 2015, 17:36
In my experience, many contractors live a short distance from where they work. Wherever Ive worked, Ive been in the minority of contractors who travelled more than 30 minutes to their work site.

At my current client, less than 5 out of 50 live more than 30 minutes away. The loss of expenses wont affect these people and they'll stay contracting unless they start finding 'local' roles hard to find.

if they work through a hubbie \ wife limited with a 50 / 50 split, they'll claim the 5000 tax free each a total of 10g's so I doubt that would greatly affect them either.

This. I'll bet most of those don't know what is happening anyway.

There are going to be some real wake up calls post April and same again April after when these head in the sand people suddenly hit reality.

ShandyDrinker
6th October 2015, 18:02
What will happen to contractors, accountants, legitimate umbrellas, agencies and clients? And will those consequences happen over night or will it take a year or 2 to have an effect?

Or will things generally stay as they are?

I think that many contractors will go back to permiedom. Those in contracting will restrict themselves to contracts within commuting distance, or the day rate will be such that they'll take the hit but with a much depleted day rate.

I think many will go back to permiedom once reality bites and contracting becomes more of a lifestyle choice than having any financial benefit. The work away from home for the week crowd will also reduce significantly as that will become something only the wealthy can afford to do.


In my experience, many contractors live a short distance from where they work. Wherever Ive worked, Ive been in the minority of contractors who travelled more than 30 minutes to their work site.

At my current client, less than 5 out of 50 live more than 30 minutes away. The loss of expenses wont affect these people and they'll stay contracting unless they start finding 'local' roles hard to find.

if they work through a hubbie \ wife limited with a 50 / 50 split, they'll claim the 5000 tax free each a total of 10g's so I doubt that would greatly affect them either.

I think it depends where you are. I've worked in a number of places where the majority of contractors aren't local. Certainly for London based contractors I imagine you could work your entire contracting career without having to travel outside of the M25 or probably even within a smaller radius of central London. The last time I was in Canary Wharf I was the exception where I was doing a 2 hour (90 mile) commute each way every day.


This. I'll bet most of those don't know what is happening anyway.

There are going to be some real wake up calls post April and same again April after when these head in the sand people suddenly hit reality.

Too right!

BrilloPad
6th October 2015, 18:14
In the city people come from all sorts of far flung places. Enfield. Chelmsford. Sevenoaks.

Apparently some even come from North of Watford. :eek:

I hope they go go back to under the rock from where they crawled.

Fred Bloggs
6th October 2015, 20:51
It's a good question to raise and one I've been asking myself.

For my own situation, I think it's about as bad as it gets. I've been on the bench for the last 11 months so I've missed a big opportunity to earn a last tranche good money as the end of contracting as we know it is now only 6 months away for me, or so it seems. I live in the North West of England but have rarely worked locally in the last 20 years. Even as a permie, I was traveling Europe and further afield. Typically, the last few years, I've incurred about £2k per month traveling and subsistence, to pay this from taxed income is going to be extremely painful, I doubt it's do-able. As I now receive a private pension from a former employer, I don't pay myself any salary, just divis, that's going to be a whole lot more expensive soon. And when we are all declared inside IR35 as seems likely by default in 18 months time, it will be grim.

The Petrochemical industry that sustained me for the first 20 years of my career has virtually vanished from the North West and is in desperate straights elsewhere in the UK. The UK oil and gas industry has collapsed with a reported ~60,000 jobs lost in the North Sea and Aberdeen area alone during the past year.

For me in my late 50's the perm market seems closed anyway. It's (ageism) never been an issue in contracting but it certainly is in the perm market (recently lost a role because I was considered too experienced). There's nothing in the North West anyway and very little in the traditionally very busy South East. I've turned to applying for roles in the Middle East as a last resort, salaries are no better than the UK (lower in many cases) over there but there are jobs available. So far I've had no response at all to dozens of applications both direct and via agencies. I think my age is against me again for roles out there.

What am I going to do? I don't know. I don't want to leave Engineering and I have a lot to offer clients/employers in my own niche/specialism. But I'm just not finding work. I might have to just cut my cloth and live (survive) off my pension. I suppose I'm lucky to have that at least.

jamesbrown
6th October 2015, 21:36
I'm lucky in that the T&S won't affect me (100% WFH; the only journeys I make are not "ordinary commuting"). If the courts interpret SDC as I'd anticipate (as the "how" element of control, considered in the round), that specific change is also unlikely to affect me.

I have no idea how most of my clients could be dragged into this, as they are mainly overseas, with no UK presence, so I'll have to wait for the details on that. That could put me out of business, though, as there's no way overseas clients are going to get involved in this crap and my services are so specialized that I couldn't survive on local clients.

I'll do my utmost to stay contracting, even if it's less financially viable than becoming a permie. For those that are hardest hit by T&S, that will be the practical reality. The only point I'd make is that, subject to what happens with clients determining status, I'd ignore any spin that HMRC put on SDC, as I think there's a solid case to be made for anyone offering expertise on which the client cannot control the working methods (i.e. the "how" element of control).

ShandyDrinker
7th October 2015, 05:58
For my own situation, I think it's about as bad as it gets. I've been on the bench for the last 11 months so I've missed a big opportunity to earn a last tranche good money as the end of contracting as we know it is now only 6 months away for me, or so it seems.
This is the situation that concerns me the most about the T&S and IR35 (in particular) consultations. One aspect that seems to have been missed in the case studies is the inherent risk of having to find a new role every X months. While some seem able to finish a contract on a Friday and another one lined up to start immediately the following week, for many it is just not the case.

I've been lucky in that I've only been out of contract for up to 2 months in the last 8 years of contracting but I know there's the chance that it could be 6-12 months if the market is bad.

Fingers crossed you manage to find something.

The Spartan
7th October 2015, 06:50
Like NLUK said there are going to be a lot of people in for a shock come April, two of the contractors here had no idea about the T&S situation and they're commuting from Bristol at the moment.

For me I'm lucky at present as this is my first gig near home (30 mins drive), other than that I've had to work away near or in London. This won't be viable anymore and there's very little chance of the work being remote, my only option is to look for contracts that are commutable within the area and again there are very few.

It may be that I end up going back to permiedom but it's the last thing I want to do :(

meridian
7th October 2015, 07:39
I asked one chap I contract with about what he would do if (once) T&S came in, and his response was "I'll just carry on claiming and wait until they maybe investigate me". Which is a big risk - it's the easiest thing in the world for HMRC to filter their search results on small companies with large enough travel expenses to make an investigation worthwhile - but one that I expect a lot of people will be taking.

My own T&S isn't a lot, but I'm easily a higher rate taxpayer so the dividends will hurt a bit. At the end of the day, though, I was recently offered a permie role with a "fantastic rate at a blue chip client" that was a third of my annual turnover, so I'll be sucking it up, maybe indulging in a bit more aggressive tax planning to minimise the hit.

Pherlopolus
7th October 2015, 08:20
Having recently changed from Perm to Contract (for 2nd time) primarily due to way of working (money a happy side effect) I am going to ride it out and see how things settle. My contract rate is about 2.5x what I was getting as a permie, so even converting to 100% paye I will be better off than a year ago.

Realistically I want to be thinking about plan B in 10 years and maybe just part time.

LisaContractorUmbrella
9th October 2015, 07:41
I may be being overly optimistic (or deranged depending on your point of view) but I think the original proposal will be moderated in some way to effect a clear division between 'proper' contractors and temps who've been turned into contractors because their employers wanted to save money. HMRC's (and presumably HMG's) whole beef has been that far more people than they originally intended have received tax relief on T&S - if that's true then that's should be the problem that's addressed. From the 700+ responses we received from the survey we ran, it's clear that the reality of the situation is not HMRC's perception - now that they have genuine accounts of life as a contractor (assuming they read them), my hope is that they will have a rethink. If they don't then I think that there will ultimately be quite a big backlash from business - not immediately but certainly within a few months

pjt
9th October 2015, 07:59
Having recently changed from Perm to Contract (for 2nd time) primarily due to way of working (money a happy side effect) I am going to ride it out and see how things settle. My contract rate is about 2.5x what I was getting as a permie, so even converting to 100% paye I will be better off than a year ago.

Realistically I want to be thinking about plan B in 10 years and maybe just part time.

Pherlopolus I'm somewhat in the same shoes as you. The dividend tax and even IR35 inclusion painful as it may seem would not push me out of contracting. My take home would be reduced by a painful amount but I'd still earn more than I ever could permie.

For me though the T&S could tip me over the edge. Currently my contracts take me all over and loosing tax relief on this along with the other changes would force me to rethink working away. So either I suddenly find loads of local work (which to be honest would be fantastic) or I can persuade my clients to up my rate (not likely) or its game over for me. I doubt I could face going back permie though so plan B would need to ramp up significantly for me to avoid that.

DaveyDavesson
9th October 2015, 08:36
I thought this would not apply to LTDs / directors outside of IR35?

"Limited company contractors who are contracting outside of IR35 will not be affected by the government’s proposed changes to travel and subsistence expenses. However, contractors who work as directors of their own Limited company and are classed as inside IR35 will also find that they will not be able to claim tax relief on their travel and subsistence costs in the same way as they used to."
ref: Changes to travel and subsistence expenses for contractors - Accountants UK - SJD Accountancy (http://www.sjdaccountancy.com/our-services/umbrella-companies/budget-2015-travel-expenses)

cojak
9th October 2015, 08:39
I thought this would not apply to LTDs / directors outside of IR35?

"Limited company contractors who are contracting outside of IR35 will not be affected by the government’s proposed changes to travel and subsistence expenses. However, contractors who work as directors of their own Limited company and are classed as inside IR35 will also find that they will not be able to claim tax relief on their travel and subsistence costs in the same way as they used to."
ref: Changes to travel and subsistence expenses for contractors - Accountants UK - SJD Accountancy (http://www.sjdaccountancy.com/our-services/umbrella-companies/budget-2015-travel-expenses)

You've missed at bit. They are talking about changing the rules of IR35 to make sure that everyone is inside IR35. And if you're inside IR35...

DaveyDavesson
9th October 2015, 08:41
You've missed at bit. They are talking about changing the rules of IR35 to make sure that everyone is inside IR35. And if you're inside IR35...

Agreed... but when IR35 first came in there were similar discussions. The accountants that consult to HMRC will be back at their day jobs after the changes are complete advising clients on how to stay legal and outside IR35 surely :)

northernladuk
9th October 2015, 08:49
Agreed... but when IR35 first came in there were similar discussions. The accountants that consult to HMRC will be back at their day jobs after the changes are complete advising clients on how to stay legal and outside IR35 surely :)

Not quite. Back in the day it came in with the rules that were in place so there were options to be outside so it was inconvenient rather than a catchall.

pjt
9th October 2015, 08:50
Agreed... but when IR35 first came in there were similar discussions. The accountants that consult to HMRC will be back at their day jobs after the changes are complete advising clients on how to stay legal and outside IR35 surely :)

Davey I do hope your right but the current proposals look fairly solid and would be difficult to navigate out of.

Pherlopolus
9th October 2015, 08:56
Pherlopolus I'm somewhat in the same shoes as you. The dividend tax and even IR35 inclusion painful as it may seem would not push me out of contracting. My take home would be reduced by a painful amount but I'd still earn more than I ever could permie.

For me though the T&S could tip me over the edge. Currently my contracts take me all over and loosing tax relief on this along with the other changes would force me to rethink working away. So either I suddenly find loads of local work (which to be honest would be fantastic) or I can persuade my clients to up my rate (not likely) or its game over for me. I doubt I could face going back permie though so plan B would need to ramp up significantly for me to avoid that.

My T + S is between 600 and 1500 a month, I wfh and spend between 0 and 4 days a week in the city (under my own control, depending on meetings I set up) so my Tax exposure is about 600 a month at worst, bad but not crippling, the dividends tax is about another couple of hundred a month. My big worry is the IR35 issues.

BlasterBates
9th October 2015, 10:34
IR35 Mk II means it's up to the client to determine whether contractors are inside or outside IR35.

It seems highly unlikely that a client will comfortable with an army of contractors outside IR35, because potentially it'll cost them a lot of money.

Probably there will be at most a handful of contractors outside IR35 at each client.

i.e. this is the death of mass outside IR35 contracting, but not the death of contracting.

This is what happened in Switzerland a few years ago, seems like a very similar approach.

cojak
9th October 2015, 10:37
IR35 Mk II means it's up to the client to determine whether contractors are inside or outside IR35.

It seems highly unlikely that a client will comfortable with an army of contractors outside IR35, because potentially it'll cost them a lot of money.

Probably there will be at most a handful of contractors outside IR35 at each client.

i.e. this is the death of mass outside IR35 contracting, but not the death of contracting.

This is what happened in Switzerland a few years ago, seems like a very similar approach.

Bizarrely, this is the most reassuring post I've come across. :)

pjt
9th October 2015, 10:45
IR35 Mk II means it's up to the client to determine whether contractors are inside or outside IR35.

It seems highly unlikely that a client will comfortable with an army of contractors outside IR35, because potentially it'll cost them a lot of money.

Probably there will be at most a handful of contractors outside IR35 at each client.

i.e. this is the death of mass outside IR35 contracting, but not the death of contracting.

This is what happened in Switzerland a few years ago, seems like a very similar approach.

How did this affect the contracting market in Switzerland do you know?
I do think contracting will continue it just wont be as lucrative.

Pherlopolus
9th October 2015, 10:56
The contracts I have seen and been approached about have been fairly high rate, even taking into account the forced umbrella and normal payroll factors.

I think it would be a fair split if the BAU contracts were classed as Inside, and the specific project/programme roles with a specific programme duration (even if that was multiyear) contracts were outside. Fairly sure this is too simple though.

pjt
9th October 2015, 11:03
The contracts I have seen and been approached about have been fairly high rate, even taking into account the forced umbrella and normal payroll factors.

I think it would be a fair split if the BAU contracts were classed as Inside, and the specific project/programme roles with a specific programme duration (even if that was multiyear) contracts were outside. Fairly sure this is too simple though.

Fingers crossed then if this all comes in the rates go the same way here :happy
We can only hope!

BlasterBates
9th October 2015, 11:24
How did this affect the contracting market in Switzerland do you know?
I do think contracting will continue it just wont be as lucrative.

Exactly. A lot of UK contractors were in any case temporary employees, but after a lot of wailing and gnashing of teeth the Swiss contractors running their own companies switched to temp contracts. Didn't really affect the market as such just a bit more grumpiness. Everyone had to take their "20 days holiday", which was deducted from the rate and then paid out when you took "holiday".

DonkeyRhubarb
9th October 2015, 11:31
You could always join a 90% scheme.

Sorry, I'll get my coat. :emb

Gaz_M
9th October 2015, 12:20
Has anybody had any direct corresponsance from their accountants yet?

It's all very well people saying that 'contractors have got their heads in the sand' but surely we need to hear something concrete & not just predict the end is nigh.

I'm with SJD & have heard nothing at all from them. I'd hope they'd be on the ball as much as anybody else.

jamesbrown
9th October 2015, 12:42
Exactly. A lot of UK contractors were in any case temporary employees, but after a lot of wailing and gnashing of teeth the Swiss contractors running their own companies switched to temp contracts. Didn't really affect the market as such just a bit more grumpiness. Everyone had to take their "20 days holiday", which was deducted from the rate and then paid out when you took "holiday".

I thought employment taxes in Switzerland were much lower overall (esp. higher rates) and taxation of dividends much higher relative to the UK(?) Unless there's a material difference in tax positions, you're unlikely to get people incorporating primarily for tax purposes. Other points of comparison are Canada and Oz in that they both introduced strict deeming criteria to discourage incorporation for tax purposes (due to a large tax gap)...

LisaContractorUmbrella
9th October 2015, 12:46
Has anybody had any direct corresponsance from their accountants yet?

It's all very well people saying that 'contractors have got their heads in the sand' but surely we need to hear something concrete & not just predict the end is nigh.

I'm with SJD & have heard nothing at all from them. I'd hope they'd be on the ball as much as anybody else.

There isn't anything concrete for anyone to get their head around - son of IR35 is currently under discussion at HMRC and, although the consultation on T&S is finished we won't know anything for certain until the Autumn statement on 25th November

northernladuk
9th October 2015, 12:55
Has anybody had any direct corresponsance from their accountants yet?

It's all very well people saying that 'contractors have got their heads in the sand' but surely we need to hear something concrete & not just predict the end is nigh.

I'm with SJD & have heard nothing at all from them. I'd hope they'd be on the ball as much as anybody else.

Well it's all still up in the air and in consultation so communication from accountant could just look like scare mongering and not be very helpful. When there is something concrete I am sure we will be hearing from them.

BigRed
9th October 2015, 13:03
I think it would be a fair split if the BAU contracts were classed as Inside, and the specific project/programme roles with a specific programme duration (even if that was multiyear) contracts were outside. Fairly sure this is too simple though.

So the developers are ok then :happy I'm production support DBA which is superficially BAU, but are upgrades BAU, performance tuning, implementing best practices, revamping the DR strategy? Most of my roles are BAU plus something extra. Isn't development BAU, especially in an Agile environment, so is fixing bugs.

I'm sure my contracts can be reworded to make them more project oriented, there is no easy answer.

northernladuk
9th October 2015, 13:05
So the developers are ok then :happy I'm production support DBA which is superficially BAU, but are upgrades BAU, performance tuning, implementing best practices, revamping the DR strategy? Most of my roles are BAU plus something extra. Isn't development BAU, especially in an Agile environment, so is fixing bugs.

I'm sure my contracts can be reworded to make them more project oriented, there is no easy answer.

I think the answer here is easier that most other cases IMO.

cojak
9th October 2015, 13:08
You could always join a 90% scheme.

Sorry, I'll get my coat. :emb

Oh I'm sure some will DR, that's much more rewarding from a HMRC pov.

pjt
9th October 2015, 13:11
There isn't anything concrete for anyone to get their head around - son of IR35 is currently under discussion at HMRC and, although the consultation on T&S is finished we won't know anything for certain until the Autumn statement on 25th November

Does anyone have any idea what the normal outcome of these consultations are? I'm assuming most go through as planned. Or do HMRC actually take any notice and drop\amend some depending on the feedback they receive?

Basically what are peoples thoughts on the proposals being rubber stamped? I'm assuming the chances must be pretty high!

cojak
9th October 2015, 13:18
..and we return full circle by going back to my first post


...or are things rarely as good or as bad as they first appear?

I'm just wondering about the consequences of the April tax changes going though virtually as-is. Let's face it - all of this consultation is so much window-dressing fluff. Lobbying by non-party-donating stakeholders in the recent past has been completely ignored.

What will happen to contractors, accountants, legitimate umbrellas, agencies and clients? And will those consequences happen over night or will it take a year or 2 to have an effect?

Or will things generally stay as they are?

I think that many contractors will go back to permiedom. Those in contracting will restrict themselves to contracts within commuting distance, or the day rate will be such that they'll take the hit but with a much depleted day rate.

BlasterBates
9th October 2015, 13:37
I thought employment taxes in Switzerland were much lower overall (esp. higher rates) and taxation of dividends much higher relative to the UK(?) Unless there's a material difference in tax positions, you're unlikely to get people incorporating primarily for tax purposes. Other points of comparison are Canada and Oz in that they both introduced strict deeming criteria to discourage incorporation for tax purposes (due to a large tax gap)...

It's not tax it's "Insurance", actually the deductions are pretty hefty indeed. It includes, unemployment, state public pension and state "private pension".

You used to be able to extract the "state private pension" relatively easily but the rules have changed, and it now stays in Switzerland until you're almost dead, attracting a pitiful amount of interest.

There is however a loophole, which I successfully exploited :smile you leave Switzerland and take 3 months off, you then get the authorities to send a letter that you're not paying National Insurance, and then they pay it out.....:music:

Taxes do depend on where you live and work so they can vary.

Pherlopolus
9th October 2015, 13:48
So the developers are ok then :happy I'm production support DBA which is superficially BAU, but are upgrades BAU, performance tuning, implementing best practices, revamping the DR strategy? Most of my roles are BAU plus something extra. Isn't development BAU, especially in an Agile environment, so is fixing bugs.

I'm sure my contracts can be reworded to make them more project oriented, there is no easy answer.

Is it a three year programme to implement a new solution following an acquisition or pursuit? 12 months to gather requirements for a new solution? 6 months of coding for a new solution?

My thoughts would be unless you are Architecting/designing/implementing the Database solution it is BAU. I would include a contract to support a 5 yearly technology refresh as NOT BAU, but the intervening support of the live system (revamping, best practices etc) would be BAU.

jamesbrown
9th October 2015, 13:50
Does anyone have any idea what the normal outcome of these consultations are?

They listen to stuff that might help them increase their tax take and ignore everything else :D Take the omission of PSCs from the original T&S discussion document, for example...

jamesbrown
9th October 2015, 13:54
It's not tax it's "Insurance", actually the deductions are pretty hefty indeed. It includes, unemployment, state public pension and state "private pension".

You used to be able to extract the "state private pension" relatively easily but the rules have changed, and it now stays in Switzerland until you're almost dead, attracting a pitiful amount of interest.

There is however a loophole, which I successfully exploited :smile you leave Switzerland and take 3 months off, you then get the authorities to send a letter that you're not paying National Insurance, and then they pay it out.....:music:

Taxes do depend on where you live and work so they can vary.

What was the change exactly (e.g. a link or something to Google)?

LisaContractorUmbrella
9th October 2015, 13:59
Does anyone have any idea what the normal outcome of these consultations are? I'm assuming most go through as planned. Or do HMRC actually take any notice and drop\amend some depending on the feedback they receive?

Basically what are peoples thoughts on the proposals being rubber stamped? I'm assuming the chances must be pretty high!

Sometimes they go through as they're originally proposed and sometimes they are modified to some degree - my feeling is that this one will be modified in some way

pjt
9th October 2015, 14:26
Sometimes they go through as they're originally proposed and sometimes they are modified to some degree - my feeling is that this one will be modified in some way

Lisa reading over the IPSE response they appear to have raised an alternative which would result in the relief only kicking in after we traveled a defined number of miles. If any changes where made I'd think this would be a sensible approach. Though the report then states the government have made it clear they intend to proceed with the changes. We can only wait until the Autumn budget I suppose.

ELBBUBKUNPS
9th October 2015, 14:47
You've missed at bit. They are talking about changing the rules of IR35 to make sure that everyone is inside IR35. And if you're inside IR35...

This being the case do you think they will try and retro apply the changing of the rules ?

thanks

jamesbrown
9th October 2015, 14:59
This being the case do you think they will try and retro apply the changing of the rules ?

thanks

No, it isn't a "clarification" of the existing rules. That being said, if they opt for SDC, I don't know how they intend to apply it in legislation (they can't just "ignore" case law on MoO and RoS).

BlasterBates
9th October 2015, 15:08
What was the change exactly (e.g. a link or something to Google)?

This was when they started clamping down on contractors:

Foreign workers concerned over pension changes - SWI swissinfo.ch (http://www.swissinfo.ch/eng/foreign-workers-concerned-over-pension-changes/5674956)

WordIsBond
9th October 2015, 15:58
(they can't just "ignore" case law on MoO and RoS).
Why not? This is a taxation matter, not an employment law matter. They can abolish IR35 and legislate a tax that doesn't mention employment at all, and MoO and RoS become irrelevant.

jamesbrown
9th October 2015, 16:34
Why not? This is a taxation matter, not an employment law matter. They can abolish IR35 and legislate a tax that doesn't mention employment at all, and MoO and RoS become irrelevant.

Er, yes, notice your use of the word legislate. I didn't say they couldn't legislate, on the contrary, they would need to legislate. If and when it gets to consultation stage, that will need to be clarified, because they aren't going to achieve their aims by simply declaring that IR35 is now about SDC.

supersteamer
9th October 2015, 18:44
Is it a three year programme to implement a new solution following an acquisition or pursuit? 12 months to gather requirements for a new solution? 6 months of coding for a new solution?

My thoughts would be unless you are Architecting/designing/implementing the Database solution it is BAU. I would include a contract to support a 5 yearly technology refresh as NOT BAU, but the intervening support of the live system (revamping, best practices etc) would be BAU.

BAU is not necessarily IR35

There are 3 tests for IR35 as it currently stands: MOO, ROS and SDC.

MOO & ROS are contractual and have very little to do with whatever the work is.
For SDC, if somebody is independently checking XYZ database logs/monitoring systems, fixing any errors, recommending and/or applying capacity/security/performance patches and enhancements at their own discretion or in order to progress vendor-mandated updates then they are not being supervised, directed or controlled by the client.

Many places (mostly the smaller clients) I have worked management tended to have very little interest in BAU work, provided the wheels kept turning and the lights stayed on (if done well BAU work is almost invisible, whether done by a permie, a contractor, an outsourcer etc.). They were far more interested in supervising, directing and controlling the shiny new projects. In this scenario it's actually project work, not BAU, that is more in danger of failing the IR35 tests as currently defined.

WordIsBond
10th October 2015, 07:43
Er, yes, notice your use of the word legislate. I didn't say they couldn't legislate, on the contrary, they would need to legislate. If and when it gets to consultation stage, that will need to be clarified, because they aren't going to achieve their aims by simply declaring that IR35 is now about SDC.
I've always assumed the intent to legislate is on the cards. I don't think there is any way they can put any liability on engagers without legislating, and since that has been part of the discussion, I think we can safely conclude that they are quite prepared to legislate, if needed, to get what they want.

BolshieBastard
10th October 2015, 09:35
BAU is not necessarily IR35

There are 3 tests for IR35 as it currently stands: MOO, ROS and SDC.

MOO & ROS are contractual and have very little to do with whatever the work is.
For SDC, if somebody is independently checking XYZ database logs/monitoring systems, fixing any errors, recommending and/or applying capacity/security/performance patches and enhancements at their own discretion or in order to progress vendor-mandated updates then they are not being supervised, directed or controlled by the client.

Many places (mostly the smaller clients) I have worked management tended to have very little interest in BAU work, provided the wheels kept turning and the lights stayed on (if done well BAU work is almost invisible, whether done by a permie, a contractor, an outsourcer etc.). They were far more interested in supervising, directing and controlling the shiny new projects. In this scenario it's actually project work, not BAU, that is more in danger of failing the IR35 tests as currently defined.

Supervision isnt currently part of the IR35 tests, direction & control is.

If they get their way supervision will become a very dangerous element for contractors.

LisaContractorUmbrella
12th October 2015, 06:38
Lisa reading over the IPSE response they appear to have raised an alternative which would result in the relief only kicking in after we traveled a defined number of miles. If any changes where made I'd think this would be a sensible approach. Though the report then states the government have made it clear they intend to proceed with the changes. We can only wait until the Autumn budget I suppose.

According to ONS figures the average permie commutes 11km each day whereas, according to the recent survey we did, the average contractor is travelling at least 3 times that distance so maybe aligning the threshold to the average permie commute would be fair

pjt
12th October 2015, 08:07
According to ONS figures the average permie commutes 11km each day whereas, according to the recent survey we did, the average contractor is travelling at least 3 times that distance so maybe aligning the threshold to the average permie commute would be fair

30km is probably a bit low if you ask me. If they set it at a level where daily commuting was unlikely say 50 miles+ this would kill off most daily commuting expense claims leaving the true Monday - Friday roles with tax relief. That would seem fair to me. I never could understand the reason why anyone would get away claiming expenses for a local contract anyway that really is unfair.

fool
12th October 2015, 08:38
30km is probably a bit low if you ask me. If they set it at a level where daily commuting was unlikely say 50 miles+ this would kill off most daily commuting expense claims leaving the true Monday - Friday roles with tax relief. That would seem fair to me. I never could understand the reason why anyone would get away claiming expenses for a local contract anyway that really is unfair.

I could live with not being able to claim travel but you shouldn't really make it about fairness.

I have a house in Scotland a reasonable distance from the major airports and train links. The mortgage costs about 300 a month to maintain and I could happily live there and do the Monday to Friday thing while expensing all the way.

Instead I moved to the London commuter belt where a monthly travelcard costs more than that, the commute is longer than the flight to Edinburgh and my mortgage is closer to 2k a Month.

You can compare me to the permies and suggest the tax relief isn't fair but you can't compare me to myself living in Scotland as I'd be expensing all that and would thus have far more money in my own pocket.

LisaContractorUmbrella
12th October 2015, 08:45
30km is probably a bit low if you ask me. If they set it at a level where daily commuting was unlikely say 50 miles+ this would kill off most daily commuting expense claims leaving the true Monday - Friday roles with tax relief. That would seem fair to me. I never could understand the reason why anyone would get away claiming expenses for a local contract anyway that really is unfair.

Whatever threshold you set I could still see there being problems with this idea - a 30km journey in and around London and the home counties would take far longer than travelling the same distance in other areas so is it then a 'fair' determinant? Would people who lived 45 miles away from their workplace (to use your example) take a longer route just to make sure that they could claim tax relief?

pjt
12th October 2015, 09:19
I could live with not being able to claim travel but you shouldn't really make it about fairness.

I have a house in Scotland a reasonable distance from the major airports and train links. The mortgage costs about 300 a month to maintain and I could happily live there and do the Monday to Friday thing while expensing all the way.

Instead I moved to the London commuter belt where a monthly travelcard costs more than that, the commute is longer than the flight to Edinburgh and my mortgage is closer to 2k a Month.

You can compare me to the permies and suggest the tax relief isn't fair but you can't compare me to myself living in Scotland as I'd be expensing all that and would thus have far more money in my own pocket.

But if your doing a daily commute from your home to the center of London from a commutable town then why should you get tax relief on that journey? Its slightly different from spending four nights a week in a hotel etc The 2 are totally separate and the difference in house prices has zero to do with your travel costs surely.

dynamicsaxcontractor
12th October 2015, 09:30
But if your doing a daily commute from your home to the center of London from a commutable town then why should you get tax relief on that journey? Its slightly different from spending four nights a week in a hotel etc The 2 are totally separate and the difference in house prices has zero to do with your travel costs surely.
Why would it make any difference if I decide to travel home or stay near the client? If you run your business it should surely be up to you. Some people might not want to commute more than 30 minutes a day and some are happy to do 2 hours each way. How would you define what's ok or not? The whole thing is a farce and should just be put to bed before going any further, we have the 24 month rule for this.

pjt
12th October 2015, 09:37
Why would it make any difference if I decide to travel home or stay near the client? If you run your business it should surely be up to you. Some people might not want to commute more than 30 minutes a day and some are happy to do 2 hours each way. How would you define what's ok or not? The whole thing is a farce and should just be put to bed before going any further, we have the 24 month rule for this.

From what I understand the main reason the proposals have been raised are down to the number of employers forcing staff to go self employed so they can then be employed through umbrellas so they can then among other things claim for travel to their cleaning jobs etc. Theirs no getting away from the fact this is wrong and it looks like the changes being brought in will take us down with the rest. In my eyes at least having a miles from base rule would allow the people truly working away from home to continue claiming tax relief. The affects to us that do the Monday to Friday work are going to be felt a lot worse than someone claiming an annual rail ticket to London from one of the commuter belts.

fool
12th October 2015, 11:27
From what I understand the main reason the proposals have been raised are down to the number of employers forcing staff to go self employed so they can then be employed through umbrellas so they can then among other things claim for travel to their cleaning jobs etc. Theirs no getting away from the fact this is wrong and it looks like the changes being brought in will take us down with the rest. In my eyes at least having a miles from base rule would allow the people truly working away from home to continue claiming tax relief. The affects to us that do the Monday to Friday work are going to be felt a lot worse than someone claiming an annual rail ticket to London from one of the commuter belts.

Why should you be able to claim tax relief, period? It's a simple question but the answer is revealing. You want more money in your pocket. If you'd be unhappy if you had to pay your high T&S costs from your regular income.

You want to make that about fairness? Then we'll remove both ours T&S and we'll both have a similar cost of living. You may wail that is unfair but if your idea of fairness is drawning a line between us and you and making sure you're on the better side you won't get a lot of sympathy from us who are generally forced to accept this as a sunk cost.

Bare in my I'm only actually claiming a £400 travelcard but the point is, you'll lose this argument citing "fairness".

pjt
12th October 2015, 11:47
Why should you be able to claim tax relief, period? It's a simple question but the answer is revealing. You want more money in your pocket. If you'd be unhappy if you had to pay your high T&S costs from your regular income.

You want to make that about fairness? Then we'll remove both ours T&S and we'll both have a similar cost of living. You may wail that is unfair but if your idea of fairness is drawing a line between us and you and making sure you're on the better side you won't get a lot of sympathy from us who are generally forced to accept this as a sunk cost.

Bare in my I'm only actually claiming a £400 travelcard but the point is, you'll lose this argument citing "fairness".

The difference is you are doing a daily commute, I'm not. Most people would agree your commute is slightly different to someone working away. You may have a business cost but someone needs to draw a line somewhere and daily commutes would weed out the real issue HRMC are trying to target.

fool
12th October 2015, 12:18
The difference is you are doing a daily commute, I'm not. Most people would agree your commute is slightly different to someone working away. You may have a business cost but someone needs to draw a line somewhere and daily commutes would weed out the real issue HRMC are trying to target.

I agree that you need to draw the line somewhere. You can draw the line in 3 places:-

a) You're incoperated and thus can expense the travel.
b) Some vague middle groud
c) T&S isn't something you can expense anymore.

The problem is, when you pick the middle ground you're splitting us up and weakning your own position and this is the argument you're going to get back.

"Yep, it is different but it's your choice to live away and travel to presumbly better paid contracts. You can't expect HRMC and the rest of us to subsidized your choice so you can be better off than the rest of us." ;)

LondonManc
12th October 2015, 12:29
If you live away from home during the week, then you should be able to claim travel and stay (hotel/room rent). I wouldn't expect to be able to claim daily travel on top of that.

I'd personally say that you can EITHER claim daily commute OR claim accommodation and cost of getting to and from accommodation.

Also, claiming subsistence is garbage; unless you're on hunger strike when you work from home. :laugh

It's quite the moot point if we all end up inside IR35 though.

I must admit, if we're found to be inside IR35, I'd probably end up going through an umbrella and staying contracting. I enjoy the project-based work but cannot be mithered with the hassle for what is probably going to be a minimal difference in bottom line profit.

b0redom
12th October 2015, 12:46
Does this mean that there'll be a massive BOOM between now and end of March as contractors buy a load of assets like laptops, bikes etc which are legitimate expenses, use for a bit and then sell to themselves at a hefty discount as they close down their firms?

jamesbrown
12th October 2015, 12:51
Does this mean that there'll be a massive BOOM between now and end of March as contractors buy a load of assets like laptops, bikes etc which are legitimate expenses, use for a bit and then sell to themselves at a hefty discount as they close down their firms?

Unless an asset is "ordinary commuting", I'd say no, probably not. I suppose you could buy a lifetime, universal, rail ticket for corporate travel before the new rules kick in :laugh

PurpleGorilla
12th October 2015, 12:51
This is what it means...

Employee based in London is sent to Manchester office for 3 months and has expenses paid by the business

Ltd company employee/consultant/scum/whatever based in London works at client site in Manchester for 3 months and can claim no expenses but pays for costs out of own personal pay packet.

Employee has sick, holiday, parental, grievance, pension, etc etc

Ltd co entrepreneur gets none of that unless they pay for it out the business. Which also pays accountant, insurance, business overheads etc

b0redom
12th October 2015, 12:54
Unless an asset is "ordinary commuting", I'd say no, probably not. I suppose you could buy a lifetime, universal, rail ticket for corporate travel before the new rules kick in :laugh

I'm assuming a bunch of contractors will move inside IR35 here. Inside IR35=5% as expenses. 5% isn't a great amount for gadgetary per year. :eek

jamesbrown
12th October 2015, 13:11
I'm assuming a bunch of contractors will move inside IR35 here. Inside IR35=5% as expenses. 5% isn't a great amount for gadgetary per year. :eek

Possibly, but that is more than a year away and, more importantly, the 5% allowance is for administration specifically, not other legitimate expenses, which are still allowable outside of the 5%. The T&S changes would be implemented in the next finance bill, i.e. April 2016. However, in one of the technical documents that accompanied the summer budget, the timetable for any IR35 revision was mooted as a later finance bill, i.e. April 2017.

fidot
12th October 2015, 17:06
Comparing a freelancer's travel expenses with those of a generic permanent employee is comparing apples with oranges. The comparison that should be made is with the employees of the big consultancy firms, who, if I understand correctly, are somehow miraculously out of scope of this legislation.

PurpleGorilla
12th October 2015, 17:11
Comparing a freelancer's travel expenses with those of a generic permanent employee is comparing apples with oranges. The comparison that should be made is with the employees of the big consultancy firms, who, if I understand correctly, are somehow miraculously out of scope of this legislation.

Once again in that scenario the risk taker, entrepreneur, and independent businessman (a.k.a. The Ltd Co Contractor) loses out.

LondonManc
12th October 2015, 17:23
Comparing a freelancer's travel expenses with those of a generic permanent employee is comparing apples with oranges. The comparison that should be made is with the employees of the big consultancy firms, who, if I understand correctly, are somehow miraculously out of scope of this legislation.

Again, a less than ideal comparison. Those employees/consultants are afforded sick pay, paid leave, pension, bonuses, maternity/paternity leave, fully-reimbursed expenses, etc.

Keep it simple.

Can claim:
1 Travel from normal residential address to place of work
2 Accommodation when staying away from residential address for purpose of work
3 Travel to and from above accommodation

So, either item 1 or items 2 & 3 accordingly.

Cannot claim:
Subsistence
Daily commute if claiming for accommodation

Of course, this all changes if we're all inside IR35. Having read the other article, it looks like umbrella companies will be dead if it goes through, so sole trader with higher insurance may be an option that would need looking into. Or window-cleaning.

jamesbrown
13th October 2015, 17:52
An international parallel (http://www.practicalecommerce.com/articles/92272-U-S-Puts-Short-Leash-on-Independent-Contractor-Status), of sorts, for anyone interested (although heading in the opposite direction).

LondonManc
13th October 2015, 18:11
An international parallel (http://www.practicalecommerce.com/articles/92272-U-S-Puts-Short-Leash-on-Independent-Contractor-Status), of sorts, for anyone interested (although heading in the opposite direction).

While D&C are used as barometers of employeedom, why not use the far more obvious differeniators? By that I mean:
Paid holidays
Paid sick leave
Paid training
No insurance costs

There are obviously others that could be used, but HMRC don't ever stop to look at the financial risks we face.

cc111070
13th October 2015, 18:47
Just a thought.. if because of asc u couldnt claim tax relief on t and s could you put as bik??

cc111070
13th October 2015, 18:48
Not asc but sdc

cojak
13th October 2015, 19:25
Eh?

asc/sdc?

BrilloPad
13th October 2015, 19:56
Not asc but sdc

Anti-Singer-Campaign? Sit-Down-Clown?

jamesbrown
13th October 2015, 19:59
AC/DC.

cc111070
13th October 2015, 20:03
Sdc ... supervision.. direction control.. bla bla lols

Contreras
13th October 2015, 21:14
From what I understand the main reason the proposals have been raised are down to the number of employers forcing staff to go self employed so they can then be employed through umbrellas so they can then among other things claim for travel to their cleaning jobs etc.

The "among other things" is loss of employment rights, the tax advantage for most will be minor and incidental.

TykeMerc
13th October 2015, 21:31
Sdc ... supervision.. direction control.. bla bla lols

Try typing without the U/Ur/lol type txtspk and then people will not only understand you better, but will not immediately jump to the conclusion that you're a juvenile moron.
Especially in the professional forums having the basic good manners to write in legible English is appreciated. Explaining the acronyms you're trying to use won't go amiss either.

The whole concern about the travel and subsistence changes possibly in the works is that the expenses will become liable for tax which (assuming I decoded your post correctly) is the point you missed totally, putting something as a bik (benefit in kind) is hardly an improvement, in fact it's exactly the problem.

cc111070
13th October 2015, 21:45
Yes of course a full corporation tax at 20% relief is the best, however rather then paying in lower band dividend allowance, you get some relief through BIK albeit 13.9% NI rape.. And take a chill pill man..

LisaContractorUmbrella
14th October 2015, 06:33
An international parallel (http://www.practicalecommerce.com/articles/92272-U-S-Puts-Short-Leash-on-Independent-Contractor-Status), of sorts, for anyone interested (although heading in the opposite direction).

So the Americans decided that the direction and control tests didn't work and moved onto something more sensible..........hello!! HMRC........anyone reading this??????

LondonManc
14th October 2015, 07:44
The "among other things" is loss of employment rights, the tax advantage for most will be minor and incidental.

Might seem minor but cleaners living in zone 3 in London and working in zone 1 would disagree. If you're not earning a lot, every penny makes a difference. #usedtohaveatulipjob

jamesbrown
14th October 2015, 11:04
So the Americans decided that the direction and control tests didn't work and moved onto something more sensible..........hello!! HMRC........anyone reading this??????

As I understand it, these changes are primarily seeking to target the lower end of the spectrum, with Uber being a classic example of the limitations of existing approaches. The tests on direction and control work fine for highly skilled workers (in the sense that it's relatively easy to demonstrate that they don't apply :D).

rapid
14th October 2015, 15:22
I've been reading through various threats on the new proposed changes to IR35 and have a question around those with multiple clients.. e.g. I am a 1 person LTD and I have 5 local clients that I provide IT support/services for, mostly BAU but also some architecture/project work as and when, would this change affect me? would I be inside IR35?

Thanks

gables
14th October 2015, 15:47
While D&C are used as barometers of employeedom, why not use the far more obvious differeniators? By that I mean:
Paid holidays
Paid sick leave
Paid training
No insurance costs

There are obviously others that could be used, but HMRC don't ever stop to look at the financial risks we face.

I agree, but surely the easiest question would be to ask HR\payroll if I am on their PAYE system as a PAYE employee - but then the answer would be no which they don't want as that would the same answer they'd get from those dubious employers forcing their staff on this route. So they come up with the insulting term 'disguised employee' measured by a small set of loose and ambiguous terms.

jamesbrown
14th October 2015, 15:48
I've been reading through various threats on the new proposed changes to IR35 and have a question around those with multiple clients.. e.g. I am a 1 person LTD and I have 5 local clients that I provide IT support/services for, mostly BAU but also some architecture/project work as and when, would this change affect me? would I be inside IR35?

Thanks

No one knows, because there are no changes, only a discussion document. Currently, IR35 applies on a contract by contract basis. If this persists, and the rules on SDC go through with assessment by the end-client (and some form of liability on them), the real question is: would each of those end clients agree to your working practices being not subject to the right of SDC?

LisaContractorUmbrella
15th October 2015, 06:39
As I understand it, these changes are primarily seeking to target the lower end of the spectrum, with Uber being a classic example of the limitations of existing approaches. The tests on direction and control work fine for highly skilled workers (in the sense that it's relatively easy to demonstrate that they don't apply :D).

I agree that this is the intention but I think it will have unintended consequences. How would you demonstrate that the end client has no right to supervision or direction or control?

gables
15th October 2015, 09:26
I agree that this is the intention but I think it will have unintended consequences. How would you demonstrate that the end client has no right to supervision or direction or control?

Wouldn't it have to be written in the contract that they waive the right to supervision or direction or control?

northernladuk
15th October 2015, 09:32
Wouldn't it have to be written in the contract that they waive the right to supervision or direction or control?

a) It's highly unlikely an client will have this in the contract. We have a thread on the board right now where a client is refusing to that this put in for good reason.
b) Working practices are highly unlikely to match the contract and working practices win.

jamesbrown
15th October 2015, 09:43
I agree that this is the intention but I think it will have unintended consequences. How would you demonstrate that the end client has no right to supervision or direction or control?

How do you currently demonstrate that a client has no right to control (or, specifically, to dictate the manner in which the services are performed)? It needs to be demonstrated via the contract and the working practices. For example, my contracts will state that MyCo has complete discretion over the manner in which the services are performed; this isn't a problem for me, because I provide specialist services and the client has no capacity to control the manner in which those services are performed (i.e. backed by actuality). In any scenario where the services are highly specialized, it's unlikely that the right to SDC will exist and this should be stated in the contract.

However, two things give me serious cause for concern. First, depending on how a client reacts to this legislation and any associated liability (i.e. badly in many cases), there's a good chance that they won't entertain a contract that reflects reality, i.e. there will be wrongful employment (disguised unemployment? undisguised employment? :D). It would be a brave contractor that decided to fight an IR35 case with a contract that explicitly stated a right to SDC. Second, many legitimate contractors do not provide highly specialized services and are subject to some degree of SDC or a right thereof. In these circumstances, the courts will need to decide whether the degree of SDC (or the right thereof) is sufficient to demonstrate employment. My concern is that many contractors will not accept this risk and instead move out of contracting or, much worse, consider aggressive avoidance schemes (as in IR35 Mk I).

In short, I wouldn't have any concerns about the right to SDC if the determination remained with MyCo or if the client were encouraged to produce a contract that reflected reality, but there's a good chance that neither of those two things will happen.

LisaContractorUmbrella
15th October 2015, 09:45
Wouldn't it have to be written in the contract that they waive the right to supervision or direction or control?

It would have to be in the contract yes and it would have to be in fact i.e. the contract would have to be representative of the reality

LisaContractorUmbrella
15th October 2015, 09:54
How do you currently demonstrate that a client has no right to control (or, specifically, to dictate the manner in which the services are performed)? It needs to be demonstrated via the contract and the working practices. For example, my contracts will state that MyCo has complete discretion over the manner in which the services are performed; this isn't a problem for me, because I provide specialist services and the client has no capacity to control the manner in which those services are performed (i.e. backed by actuality). In any scenario where the services are highly specialized, it's unlikely that the right to SDC will exist and this should be stated in the contract.

However, two things give me serious cause for concern. First, depending on how a client reacts to this legislation and any associated liability (i.e. badly in many cases), there's a good chance that they won't entertain a contract that reflects reality, i.e. there will be wrongful employment (disguised unemployment? undisguised employment? :D). It would be a brave contractor that decided to fight an IR35 case with a contract that explicitly stated a right to SDC. Second, many legitimate contractors do not provide highly specialized services and are subject to some degree of SDC or a right thereof. In these circumstances, the courts will need to decide whether the degree of SDC (or the right thereof) is sufficient to demonstrate employment. My concern is that many contractors will not accept this risk and instead move out of contracting or, much worse, consider aggressive avoidance schemes (as in IR35 Mk I).

In short, I wouldn't have any concerns about the right to SDC if the determination remained with MyCo or if the client were encouraged to produce a contract that reflected reality, but there's a good chance that neither of those two things will happen.

IMHO it can only be confirmed that there will be no right to SDC within the contract - working practices can't determine whether or not there remains in place a 'right' to SDC only that it is exercised. So, I feel that the unintended consequence of all this will be that no client in their right mind will sign a contract which states that they give away all and any right to SDC and everyone will end up inside IR35 by default. It's all very well HMRC et al quoting legal cases (none of which were determined purely on SDC) but this will be the commercial reality of their proposals.

LondonManc
15th October 2015, 09:55
What would be a better test is seeing how many of this list we are entitled to:

https://www.citizensadvice.org.uk/work/rights-at-work/basic-rights-at-work/

pjt
15th October 2015, 10:16
IMHO it can only be confirmed that there will be no right to SDC within the contract - working practices can't determine whether or not there remains in place a 'right' to SDC only that it is exercised. So, I feel that the unintended consequence of all this will be that no client in their right mind will sign a contract which states that they give away all and any right to SDC and everyone will end up inside IR35 by default. It's all very well HMRC et al quoting legal cases (none of which were determined purely on SDC) but this will be the commercial reality of their proposals.

Hypothetical question Lisa. In your view IF a client was then to give a contract with the right to SDC waived do you think this would be a bullet proof IR35-out gig?

LisaContractorUmbrella
15th October 2015, 10:31
Hypothetical question Lisa. In your view IF a client was then to give a contract with the right to SDC waived do you think this would be a bullet proof IR35-out gig?

In theory yes but if the gig was to stack shelves in Tesco and HMRC decided to investigate you'd struggle to make your case because the contract would blatantly not reflect reality. Saying that, the right judge on the right day could find in your favour simply because the contract is a legally binding document.

gables
15th October 2015, 10:34
IMHO it can only be confirmed that there will be no right to SDC within the contract - working practices can't determine whether or not there remains in place a 'right' to SDC only that it is exercised. So, I feel that the unintended consequence of all this will be that no client in their right mind will sign a contract which states that they give away all and any right to SDC and everyone will end up inside IR35 by default. It's all very well HMRC et al quoting legal cases (none of which were determined purely on SDC) but this will be the commercial reality of their proposals.

Is this because the scope\context of the SDC is undefined?

jamesbrown
15th October 2015, 10:34
IMHO it can only be confirmed that there will be no right to SDC within the contract - working practices can't determine whether or not there remains in place a 'right' to SDC only that it is exercised. So, I feel that the unintended consequence of all this will be that no client in their right mind will sign a contract which states that they give away all and any right to SDC and everyone will end up inside IR35 by default. It's all very well HMRC et al quoting legal cases (none of which were determined purely on SDC) but this will be the commercial reality of their proposals.

I mostly agree, although the current test for control is established in case law as the right to control, and it's whether the right applies in practice, not whether it's stated (or not) in the contract. Working practices can indeed establish whether a right exists, as it may be unspecified in the contract (e.g. Talentcore, where there was no SDC in practice because the managers were never there, but the right existed and was sufficient). In this context, you should read "working practices" as "the reality of the situation". However, I agree with your central point that the client won't want to sign away a right to SDC, especially when it implies a financial liability.

gables
15th October 2015, 10:39
In theory yes but if the gig was to stack shelves in Tesco and HMRC decided to investigate you'd struggle to make your case because the contract would blatantly not reflect reality. Saying that, the right judge on the right day could find in your favour simply because the contract is a legally binding document.

Presumably because you're expecting Tesco to be telling you what shelves to stack, but if the contract detailed the shelves to be stacked up front i.e. the deliverables then you were left to get on with it would this not show lack of SDC?

jamesbrown
15th October 2015, 10:39
Hypothetical question Lisa. In your view IF a client was then to give a contract with the right to SDC waived do you think this would be a bullet proof IR35-out gig?

No, because it depends on the reality of the situation, but it's highly likely that a client signing away a right to SDC also means it in reality (e.g. they cannot apply SDC in principle if they only understand the outcomes and not how they were arrived at, which is typically the situation in the work I do... and not because I present them with a bird's nest :D)

LisaContractorUmbrella
15th October 2015, 10:39
Is this because the scope\context of the SDC is undefined?

No, it is defined both by HMRC and in case law but it would be a commercial risk for the business (as there are financial penalties for getting it wrong) and most businesses are risk averse especially if they would be taking that risk on behalf of someone else i.e. a contractor. It may be that some will take it on if it looks like they are getting a substantial rate cut but, with the proposed changes to T&S to be taken into consideration, I can only see rates going up and not coming down.

jamesbrown
15th October 2015, 10:40
No, it is defined both by HMRC and in case law but it would be a commercial risk for the business (as there are financial penalties for getting it wrong) and most businesses are risk averse especially if they would be taking that risk on behalf of someone else i.e. a contractor. It may be that some will take it on if it looks like they are getting a substantial rate cut but, with the proposed changes to T&S to be taken into consideration, I can only see rates going up and not coming down.

This is what it comes down to.

LisaContractorUmbrella
15th October 2015, 10:41
Presumably because you're expecting Tesco to be telling you what shelves to stack, but if the contract detailed the shelves to be stacked up front i.e. the deliverables then you were left to get on with it would this not show lack of SDC?

No because, in reality, if you stacked the baked beans with aubergines you'd be told to re-do it which is then direction

LisaContractorUmbrella
15th October 2015, 10:43
I mostly agree, although the current test for control is established in case law as the right to control, and it's whether the right applies in practice, not whether it's stated (or not) in the contract. Working practices can indeed establish whether a right exists, as it may be unspecified in the contract (e.g. Talentcore, where there was no SDC in practice because the managers were never there, but the right existed and was sufficient). In this context, you should read "working practices" as "the reality of the situation". However, I agree with your central point that the client won't want to sign away a right to SDC, especially when it implies a financial liability.

But with Talentcore the worker was found not to be an employee as they had a right of substitution (even though it was not exercised in practice) which, to my mind, makes the idea of just using SDC as a determinant preposterous

gables
15th October 2015, 10:55
No, it is defined both by HMRC and in case law but it would be a commercial risk for the business (as there are financial penalties for getting it wrong) and most businesses are risk averse especially if they would be taking that risk on behalf of someone else i.e. a contractor. It may be that some will take it on if it looks like they are getting a substantial rate cut but, with the proposed changes to T&S to be taken into consideration, I can only see rates going up and not coming down.

Ah, and I get the risk averse bit too.

But if it so defined how come then on here we have different views on what SDC is?

LisaContractorUmbrella
15th October 2015, 11:00
Ah, and I get the risk averse bit too.

But if it so defined how come then on here we have different views on what SDC is?

Because HMRC's opinion is just that and the examples that they've given to illustrate their understanding are not realistic and, in case law, I don't believe that there's ever been a case that's been decided purely on SDC (I could be wrong on this but that's my understanding)

dynamicsaxcontractor
15th October 2015, 11:04
Ah, and I get the risk averse bit too.

But if it so defined how come then on here we have different views on what SDC is?

Could you imagine how much money would be saved on all sides if we could all just get on with our business instead of all of this. I am sure HMRC would get MORE money as we all would make MORE and pay MORE tax as well as all money SAVED on canning their IR35 department.

gables
15th October 2015, 11:15
Because HMRC's opinion is just that and the examples that they've given to illustrate their understanding are not realistic and, in case law, I don't believe that there's ever been a case that's been decided purely on SDC (I could be wrong on this but that's my understanding)

Hmm, does explain a lot.

So does HMRC's opinion trump that of the ClientCo? Also, I don't know how working practices are determined, but presumably by HMRC asking the client, I can't then see how HMRC can determine a different outcome, maybe I'm being naïve?? Although 'the right of' is a sneaky thing and maybe the gotcha..

gables
15th October 2015, 11:16
Could you imagine how much money would be saved on all sides if we could all just get on with our business instead of all of this. I am sure HMRC would get MORE money as we all would make MORE and pay MORE tax as well as all money SAVED on canning their IR35 department.

Absolutely

Pherlopolus
15th October 2015, 11:54
What would be a better test is seeing how many of this list we are entitled to:

https://www.citizensadvice.org.uk/work/rights-at-work/basic-rights-at-work/

I would say that where those rights originate from would be a good test, if from own LTD company outside of IR35, from clientco/agency then inside.

Bexie
15th October 2015, 11:54
How did this affect the contracting market in Switzerland do you know?
I do think contracting will continue it just wont be as lucrative.

There are quite a lot of differences between the UK and Swiss market that affect the changes, firstly most of the large companies that hire contractors have drastically reduced their rates so that the marginal difference from perm to contract in most cases is about 1:1.3 if you include expected bonuses.

My understanding is that the Swiss were/ are concerned at a number of levels,

first and foremost that the correct tax and social insurance was being taken. The Swiss have compulsary insurance for a number of different things including unemployment and accident insurance. The former is important since for the 1st 18 months it is worth around 70% of the maximum or 120k per year.

second, they enforce vacation payments. Pay is clipped at 8% up until 50 and then 10.1% to repay during vacation periods. Contractors are forced to take their time off.

third, the tax is quite a lot more complex. Interest is deductible from earnings, and there is an allowance for "not working from home" ie commuting for everyone. It is also cheaper. For example a married person with single income and two kids on 140k CHF per year will pay c. 23k in tax a single person about 29k.( you get punished for being single in Switzerland)(https://en.comparis.ch/steuern/steuervergleich/steuern-im-vergleich.aspx)

Finally, under Swiss law, with rare exceptions, requires that contractors are hired by the agency. Similar in a way to umbrella companies, but real contracts of employment. No umbrellas or private companies.

Finally before you all rush to Switzerland. Bear in mind it is expensive. A colleague of mine moved back to Warsaw because although the pay was a lot less the quality of living was a lot better.

Footnote.

Please see also Tax advice for UK citizens moving to the Cayman Islands. The formalities associated with notifying HMRC that you are leaving. some of the best expatriate advice I have seen. Georgy Boy can make your life a misery if you go back...

jamesbrown
15th October 2015, 12:02
But with Talentcore the worker was found not to be an employee as they had a right of substitution (even though it was not exercised in practice) which, to my mind, makes the idea of just using SDC as a determinant preposterous

Yes, I'm fully aware of that, but we're talking about SDC. It's clear that SDC is a much narrower test than what is currently established in case law for IR35 - that's the point - but the SDC component is nevertheless established in case law (and will be clarified further over time).

LisaContractorUmbrella
15th October 2015, 12:33
Yes, I'm fully aware of that, but we're talking about SDC. It's clear that SDC is a much narrower test than what is currently established in case law for IR35 - that's the point - but the SDC component is nevertheless established in case law (and will be clarified further over time).

It's not only narrower, it's also considered to be the least significant of all the tests by some - Lord Chief Justice Parker in Morren v Swinton stated: "Clearly superintendence and control cannot be the decisive test when one is dealing with a professional man or a man of some particular skill and experience. Instances of that have been given in the form of a master of a ship, an engine driver or a professional architect, or as in this case, a consulting engineer. In such cases there can be no question of the employer telling him how to do work; therefore the absence of control and direction in that sense can be of little, if any, use as a test”

LisaContractorUmbrella
15th October 2015, 12:38
Hmm, does explain a lot.

So does HMRC's opinion trump that of the ClientCo? Also, I don't know how working practices are determined, but presumably by HMRC asking the client, I can't then see how HMRC can determine a different outcome, maybe I'm being naïve?? Although 'the right of' is a sneaky thing and maybe the gotcha..

the proposed legislation means that clientco will have to prove that there is/was no SDC rather than HMRC having to prove that there isn't /wasn't (if you see what I mean) but no-one's opinion trumps anyone else's - that would be up to a Judge. The trouble is that going to Court against HMRC tends to work out pretty expensive and, 9 times out of 10, you won't get your costs back

jamesbrown
15th October 2015, 13:22
It's not only narrower, it's also considered to be the least significant of all the tests by some - Lord Chief Justice Parker in Morren v Swinton stated: "Clearly superintendence and control cannot be the decisive test when one is dealing with a professional man or a man of some particular skill and experience. Instances of that have been given in the form of a master of a ship, an engine driver or a professional architect, or as in this case, a consulting engineer. In such cases there can be no question of the employer telling him how to do work; therefore the absence of control and direction in that sense can be of little, if any, use as a test”

That's precisely one of the things I've been saying, repeatedly. When providing highly specialized services, SDC will generally not apply in principle, because there's no basis to control how the work is done, only to negotiate the outcomes (deliverables).

LondonManc
16th October 2015, 10:21
Could you imagine how much money would be saved on all sides if we could all just get on with our business instead of all of this. I am sure HMRC would get MORE money as we all would make MORE and pay MORE tax as well as all money SAVED on canning their IR35 department.

Correct. Like I've said before, you don't need a department, you have a simple definition. Employee benefits that contractors don't get are known to most - it would be simply to say that if you receive x, y and z, you're inside IR35 and need to be fully PAYE.

x, y and z being paid leave, sick leave, enforceable notice, redundancy, union rights, etc.

MPwannadecentincome
23rd October 2015, 12:30
"Yep, it is different but it's your choice to live away and travel to presumbly better paid contracts. You can't expect HRMC and the rest of us to subsidized your choice so you can be better off than the rest of us." ;)

for some people it's a case of a contract vs no contract at all

d000hg
23rd October 2015, 12:36
Has anyone got a summary - or link to one - of what we currently think the changes will BE? There was a load of talk about dividend taxes (which IMO are not a massive deal as it stands) - and T&S (which could be though I don't know the details). Then I've seen mutterings about major IR35 changes too but have no idea if that's coming or not.

Sorry if it's already in this thread - I didn't trawl through so if it is just say and I'll go find it.

jamesbrown
23rd October 2015, 12:41
Has anyone got a summary - or link to one - of what we currently think the changes will BE? There was a load of talk about dividend taxes (which IMO are not a massive deal as it stands) - and T&S (which could be though I don't know the details). Then I've seen mutterings about major IR35 changes too but have no idea if that's coming or not.

Sorry if it's already in this thread - I didn't trawl through so if it is just say and I'll go find it.

No, not really. Things should become clearer at the Autumn Statement on 25 Nov, at least w/r to the T&S. As it stands, there's a consultation (T&S) and a discussion (IR35), and even the T&S could change significantly (it certainly did between discussion and consultation). The dividend tax is not so much a game changer now as a starting point and, if they want to use it, a mechanism to render IR35 all but moot.

vwdan
23rd October 2015, 12:53
This is what it means...

Employee based in London is sent to Manchester office for 3 months and has expenses paid by the business

Ltd company employee/consultant/scum/whatever based in London works at client site in Manchester for 3 months and can claim no expenses but pays for costs out of own personal pay packet.

Employee has sick, holiday, parental, grievance, pension, etc etc

Ltd co entrepreneur gets none of that unless they pay for it out the business. Which also pays accountant, insurance, business overheads etc


Comparing a freelancer's travel expenses with those of a generic permanent employee is comparing apples with oranges. The comparison that should be made is with the employees of the big consultancy firms, who, if I understand correctly, are somehow miraculously out of scope of this legislation.


Once again in that scenario the risk taker, entrepreneur, and independent businessman (a.k.a. The Ltd Co Contractor) loses out.

Exactly - this is why I'm feeling peeved about the whole thing. People seem to completely forget that permies can claim most of the expenses we can claim if they're working away from their normal place of work. For those of is in something resembling consultancy the contractor lifestyle isn't really that much different to the permie consulting one. The main differences being a contractor sets their own expenses policy, but it of course comes out of their own bottom line.

If they align the permie/consultancy expenses with contractor ones then fine. But as it stands, it's just straight up targeting small business.

I did a week last year that looked like this:

Mon - Thur (Client 1, Central London)
Fri - Mon (Client 2, Outer London)
Tue - Wed (Client 3, Hull)
Thur - Fri (Client 4, Northampton)

I stayed in three hotels and travelled most of the country - you're telling me that it's somehow unreasonable to claim tax relief on that travel?

LisaContractorUmbrella
23rd October 2015, 13:41
Has anyone got a summary - or link to one - of what we currently think the changes will BE? There was a load of talk about dividend taxes (which IMO are not a massive deal as it stands) - and T&S (which could be though I don't know the details). Then I've seen mutterings about major IR35 changes too but have no idea if that's coming or not.

Sorry if it's already in this thread - I didn't trawl through so if it is just say and I'll go find it.

This is the consultation document that HMRC issued on T&S https://www.gov.uk/government/consultations/employment-intermediaries-and-tax-relief-for-travel-and-subsistence. All responses had to be in before the end of last month and HMRC are now reviewing them before telling us what the new legislation will be in the Autumn Statement on 25th November. There is an IR35 discussion document here https://www.gov.uk/government/consultations/intermediaries-legislation-ir35-discussion-document - again the response deadline has passed and we should know more at some point in the future.

BolshieBastard
24th October 2015, 11:51
Osbourne announce HMRC's intended screwing down of limited co expenses and dividend tax etc.

HMRC issues 'discussion document' to obtain views and opinions. HMRC receives views and opinions then totally ignores them.

Limited expenses for limited companies legislation enters the statute book circa April 2017. Mission accomplished.

Sorry to be blunt!

ShandyDrinker
24th October 2015, 12:38
Osbourne announce HMRC's intended screwing down of limited co expenses and dividend tax etc.

HMRC issues 'discussion document' to obtain views and opinions. HMRC receives views and opinions then totally ignores them.

Limited expenses for limited companies legislation enters the statute book circa April 2017. Mission accomplished.

Sorry to be blunt!

I really hope I'm wrong but unfortunately I think BB is right...

cojak
24th October 2015, 12:55
And so we return to the first post.
...or are things rarely as good or as bad as they first appear?

I'm just wondering about the consequences of the April tax changes going though virtually as-is. Let's face it - all of this consultation is so much window-dressing fluff. Lobbying by non-party-donating stakeholders in the recent past has been completely ignored.

What will happen to contractors, accountants, legitimate umbrellas, agencies and clients? And will those consequences happen over night or will it take a year or 2 to have an effect?

Or will things generally stay as they are?

I think that many contractors will go back to permiedom. Those in contracting will restrict themselves to contracts within commuting distance, or the day rate will be such that they'll take the hit but with a much depleted day rate.

jamesbrown
24th October 2015, 13:48
Osbourne announce HMRC's intended screwing down of limited co expenses and dividend tax etc.

HMRC issues 'discussion document' to obtain views and opinions. HMRC receives views and opinions then totally ignores them.

Limited expenses for limited companies legislation enters the statute book circa April 2017. Mission accomplished.

Sorry to be blunt!

Yes, except the T&S will be in the next Finance Bill, ready for April 2016, not April 2017 (anything on IR35 would likely be in the FB for April 2017).

SunnyInHades
24th October 2015, 23:40
I did a week last year that looked like this:

Mon - Thur (Client 1, Central London)
Fri - Mon (Client 2, Outer London)
Tue - Wed (Client 3, Hull)
Thur - Fri (Client 4, Northampton)

I stayed in three hotels and travelled most of the country - you're telling me that it's somehow unreasonable to claim tax relief on that travel?

I believe that type of arrangement will still allow claimable tax relief.
As I see it post 2016 doomsday, if Osborne won't budge..
Yipee, tax relief on travel/accommodation claimable: Client-Ltd, Client-SoleTrader
Boohoo, no tax relief on travel/accommodation claimable: Client-Agency-Ltd, Client-Agency-Umbrella-Employee, Client-Umbrella-Employee

BoredBloke
26th October 2015, 10:31
For those writing to their MP's, rather than simply pointing out the unfairness of removing T&S for contractors involved in working away from home, it might be an idea asking them to explain how their situation differs from ours....we both have jobs that take us away from home for long periods of time but MP's are allowed to claim T&S expenses but ours are being removed.

BolshieBastard
26th October 2015, 19:23
For those writing to their MP's, rather than simply pointing out the unfairness of removing T&S for contractors involved in working away from home, it might be an idea asking them to explain how their situation differs from ours....we both have jobs that take us away from home for long periods of time but MP's are allowed to claim T&S expenses but ours are being removed.

That wont get very far, trust me.

Hate to be the prophet of doom but I think this is virtually a slam dunk for the Government.

When you consider how many contractors act ignorant of IR35, stopping expenses will be something well off their radar.

On all the jobs Ive worked on, Ive been in the minority having to a, travel more than 30 minutes to work and b, stay away from home 4 nights a week.

at my current place, Id say a good 90% of contractor live within 30 minutes travel so the loss of travel expenses wont hit them (and that's not taking into consideration those who've been on site for more than 2 years so cannot claim anyway!).

mudskipper
26th October 2015, 22:34
For those writing to their MP's, rather than simply pointing out the unfairness of removing T&S for contractors involved in working away from home, it might be an idea asking them to explain how their situation differs from ours....we both have jobs that take us away from home for long periods of time but MP's are allowed to claim T&S expenses but ours are being removed.

Lisa posted points for a letter that included this
http://forums.contractoruk.com/future-contracting/108289-have-you-written-your-mp-yet-8.html#post2138252

Pherlopolus
28th October 2015, 14:16
I believe that type of arrangement will still allow claimable tax relief.
As I see it post 2016 doomsday, if Osborne won't budge..
Yipee, tax relief on travel/accommodation claimable: Client-Ltd, Client-SoleTrader
Boohoo, no tax relief on travel/accommodation claimable: Client-Agency-Ltd, Client-Agency-Umbrella-Employee, Client-Umbrella-Employee

So, Another scenario...

I work

Client - Agency - Ltd

All my travel is ad-hoc in nature (and under my control) and is between 0 and 3 nights a week to cover the support of workshops at my clients clients offices (I have visited my clients site on 4 occasions over the last 9 months, generally for the collection of a laptop, or other administrative function. On average I am away from my own office (home) for less than 40% of the time so the 24 month rules wouldn't apply.)

I don't have a desk in either the client or clients client site (all work done in meeting rooms to support requirements gathering workshops), the majority of the actual work is undertaken at my own site (which happens to be my home office)

I work on a specified programme only, and is not BAU.
I have a badge which Identifies me as a third party supplier
I have client email which identifies me very clearly as being supplied by a third party supplier
I am not allowed to have office functions VIA BYOD (inc email on phone etc) due to security restrictions, although there are elements of the work I can (and have) done via cloud services with MyCo's laptop.
I am not expected to perform "employee" type functions (training etc) although I do have to fill in a time sheet for project tracking purposes.
and I don't think I am under any S,D or C (no line manager although we have a Team Leader who also a contractor, mainly as a SPOC) the majority of the team are contractors, and the clients client reviews and signs off the requirements.

In your example..

If I worked Direct - T+S
If I worked through Agency - No T+S


Whereas a BAU contractor who just happened to find a client and went direct would be able to claim T+S

Can of worms doesn't even begin to cover what they have opened :s

I have to wonder if Agencies are going to move to a more "Introduction" basis than "Margin", and a rise in smaller consultancy numbers, who could potentially field a small team of people capable of covering smaller projects (1 x PM, 2 x BA 1 x SA, outsource development/implement team -maybe another small Dev based consultancy) for a fixed fee/timescale

d000hg
3rd November 2015, 17:41
For those writing to their MP's, rather than simply pointing out the unfairness of removing T&S for contractors involved in working away from home, it might be an idea asking them to explain how their situation differs from ours....we both have jobs that take us away from home for long periods of time but MP's are allowed to claim T&S expenses but ours are being removed.

I'm not sure this is even a comparable situation. For two reasons:

1)MPs are in full-time employment, and their employment contract allows claiming certain things back as expenses; every employer has slightly different policies so MPs for example don't get 1st-class train travel. By contrast we are operating as limited companies, or as freelancers, for multiple clients.

2)Travelling is a mandatory part of an MP's job. They cannot (I think) choose not to do it. By contrast, contractors choose where they work and live and do not have to take work which requires them to work away.

Not saying I agree with the T&S changes (I don't) just that "you get it, why can't we" is not a strong argument outside of Facebook meme graphics.

jamesbrown
3rd November 2015, 18:29
I'm not sure this is even a comparable situation. For two reasons:

1)MPs are in full-time employment, and their employment contract allows claiming certain things back as expenses; every employer has slightly different policies so MPs for example don't get 1st-class train travel. By contrast we are operating as limited companies, or as freelancers, for multiple clients.

2)Travelling is a mandatory part of an MP's job. They cannot (I think) choose not to do it. By contrast, contractors choose where they work and live and do not have to take work which requires them to work away.

Not saying I agree with the T&S changes (I don't) just that "you get it, why can't we" is not a strong argument outside of Facebook meme graphics.

How are MPs in full-time employment? They are not employees (although they are taxed as such), they are office holders and, indeed, their offices can and do employ others. They didn't receive any pay until the early 20th C., and even now it's considered an allowance rather than a salary. Also, Malcolm Rifkind may think he's self-employed, but he isn't (at least, not as an MP :laugh).

d000hg
4th November 2015, 14:13
MPs receive a fixed salary, which is liable to income tax. Sounds like employment to me.

BoredBloke
4th November 2015, 14:53
I wasn't meaning how they are employed, I was talking about their need to live away from home and the resulting need for expenses. Add to that the possible short term nature of an MP's stint in a constituency and you have a number of similarities to what contractors face when working away from home.

jamesbrown
4th November 2015, 14:56
MPs receive a fixed salary, which is liable to income tax. Sounds like employment to me.

It doesn't really matter what it sounds like to you, it's a factual question. They pay tax through PAYE, but they are not employees. See here (https://www.whatdotheyknow.com/request/12840/response/33300/attach/html/2/090702%20FOI%201652%2009%20Martin.pdf.html), for example.

TheFaQQer
4th November 2015, 16:07
MPs receive a fixed salary, which is liable to income tax. Sounds like employment to me.

Or it sounds like they are office holders, remunerated for the office they hold.

WordIsBond
4th November 2015, 16:59
1)MPs are in full-time employment, and their employment contract allows claiming certain things back as expenses; every employer has slightly different policies so MPs for example don't get 1st-class train travel. By contrast we are operating as limited companies, or as freelancers, for multiple clients.

So I guess I should write an employment contract that allows for claiming certain things back as expenses, and then HMRC will leave me alone?

The tax proposed is not on our limited companies, but on their employees and/or office-holders. There is a strong parallel between contractors and MPs.

Supervision, direction, and control?


When in that House M.P.’s divide,
If they’ve a brain and cerebellum, too,
They’ve got to leave that brain outside,
And vote just as their leaders tell ’em to.

d000hg
5th November 2015, 11:08
But everyone knows we're PSCs or temporary employees using a Ltd as a vehicle for convenience :devil

BrilloPad
5th November 2015, 12:44
But everyone knows we're PSCs or temporary employees using a Ltd as a vehicle for convenience :devil

That is what HMRC think. And only their opinion matters.

They have APNs and bank account raiding they can deploy at will.

WordIsBond
5th November 2015, 15:04
But everyone knows we're PSCs or temporary employees using a Ltd as a vehicle for convenience :devil
Doesn't matter.

We're either employees/office-holders of our Ltd or of our client, but they are taking away expenses.

MPs are office-holders, and get to keep their expenses.

The situation isn't identical, but the parallel is strong enough to show the injustice of it.

mudskipper
5th November 2015, 17:15
Doesn't matter.

We're either employees/office-holders of our Ltd or of our client, but they are taking away expenses.

MPs are office-holders, and get to keep their expenses.

The situation isn't identical, but the parallel is strong enough to show the injustice of it.

I don't think you want to be arguing that we're office holders. Office holder = IR35 caught.

WordIsBond
5th November 2015, 22:19
I don't think you want to be arguing that we're office holders. Office holder = IR35 caught.
Office-holder of MyCo is not IR35 caught.

The point is, if I'm an office-holder or employee of MyCo, or if HMRC wants to try to claim I'm an employee of ClientCo, either way, there's a strong parallel between me as a contractor and my MP.

d000hg
6th November 2015, 08:13
The situation isn't identical, but the parallel is strong enough to show the injustice of it.Again, I don't think so. It's a fundamental part of an MP's role to travel between London and their own constituency all the time. As a contractor, you do not have to choose to work at the other end of the country.

Personally I'm not in favour of the T&S changes but not for reasons of what's "fair" or what someone else is allowed to claim, just because it doesn't make sense.

MPwannadecentincome
6th November 2015, 20:17
The situation isn't identical, but the parallel is strong enough to show the injustice of it.

When the big companies can claim the expenses and we cannot, surely that is unfair as it shows bias against small companies in terms of trading and competition.

northernladuk
6th November 2015, 21:14
When the big companies can claim the expenses and we cannot, surely that is unfair as it shows bias against small companies in terms of trading and competition.

But HMRC don't believe we are small companies and that our clients are our main place of work so why should we get T&S to go everyday... Which normal permies don't usually get.

northernladuk
6th November 2015, 21:15
Office-holder of MyCo is not IR35 caught.

The point is, if I'm an office-holder or employee of MyCo, or if HMRC wants to try to claim I'm an employee of ClientCo, either way, there's a strong parallel between me as a contractor and my MP.

It's about the role you have when earning your crust at the client not within your LTD.

WordIsBond
6th November 2015, 22:25
It's about the role you have when earning your crust at the client not within your LTD.
Yeah, obviously I know that.

Look, you're an officeholder (director) of YourCo. Your MP is an officeholder.

He gets expenses, they are trying to say you shouldn't. It's that simple.

He has to travel, he says? So do you.

Even if you get expenses, they say you only get it for two years. He gets it for more as long as he does his "job".

He could move, of course. So could you. The ability to move is used to try to take away your expenses. Not his.

His employer does not require him to live in his constituency. If he chooses to live in his constituency (let's say Northumbria) and travel to London, how is that different from you choosing to live in Northumbria and travel to London where your company sends you to work?

He's under SDC. Government whips tell him how to do his job. If he doesn't follow along, he's likely to be out of a job before too long.

Contreras
6th November 2015, 23:07
His employer does not require him to live in his constituency. If he chooses to live in his constituency (let's say Northumbria) and travel to London, how is that different from you choosing to live in Northumbria and travel to London where your company sends you to work?

Are you seriously suggesting that constituents of Northumbria should travel to London if they wanted to meet their MP?

Living in/near the constituency IS very much part of the job of an MP.

It's also the rationale for second home allowances, which led to the expenses scandal, and a sore spot that's definitely worth poking at. I just wouldn't labour the point in such detail as you have.

MPwannadecentincome
7th November 2015, 21:15
But HMRC don't believe we are small companies and that our clients are our main place of work so why should we get T&S to go everyday... Which normal permies don't usually get.

Well, I consider the large IT companies actually to be my biggest competitor (yes other contractors may be competing too).

If I was employed as a permie by a large IT company and sent from site to site for each assignment, I would get the T&S (within the 24 month rule). Large Co would offset these T&S against profits (and tax).

Having chosen to win work by myself (though sometimes introduced by a 3rd party) and provide the same service had my competitor won it, I do not consider it fair if I cannot claim the same tax relief benefits as my competition.

In fact the "level paying field" is worsened as currently the advantage I have in not charging my client for same T&S would be taken away whereas large Co charge their clients the same T&S on top of the inflated rates for supplying those permies.

Milkyway
7th November 2015, 21:29
http://forums.contractoruk.com/general/110158-crackdown-personal-service-companies-could-raise-400m-tax.html

Guys don't worry about t & s intricacies anymore :)
Gideon has one more plan coming up.
Read the above link.

Well, if this new proposal becomes law, then we have answer to all related threads like the current one.

Forget about 24 month rule, T & S, dive change etc, the new proposal is the "mother of all" killer proposal that will kill contracting industry overnight.

northernladuk
7th November 2015, 22:21
Yeah, obviously I know that.

Look, you're an officeholder (director) of YourCo. Your MP is an officeholder.

He gets expenses, they are trying to say you shouldn't. It's that simple.

He has to travel, he says? So do you.

Even if you get expenses, they say you only get it for two years. He gets it for more as long as he does his "job".

He could move, of course. So could you. The ability to move is used to try to take away your expenses. Not his.

His employer does not require him to live in his constituency. If he chooses to live in his constituency (let's say Northumbria) and travel to London, how is that different from you choosing to live in Northumbria and travel to London where your company sends you to work?

He's under SDC. Government whips tell him how to do his job. If he doesn't follow along, he's likely to be out of a job before too long.

Are you not muddying things using MP's as an example. The outcry is they are spending public money on expenses. It says nothing about them not being able to claim the tax back on it which is the situation with us. You can claim any expense you want from your LTD, you just won't be able to get the tax back on it after Apr 16.

BoredBloke
9th November 2015, 12:26
Are you not muddying things using MP's as an example. The outcry is they are spending public money on expenses. It says nothing about them not being able to claim the tax back on it which is the situation with us. You can claim any expense you want from your LTD, you just won't be able to get the tax back on it after Apr 16.

The point is to try to appeal to your MP in terms they can understand. At the moment they just see us as tax abusers. The point is we need to be able to claim expenses in just the same way they do. Our expenses have to be incurred 'wholly and exclusively' just like theirs are supposed to be. The difference is that while they are able to claim for a role that might last 5 years, we might need to move every 6 months. Therefore there is no way you can expect a person to move their permanent residence, uprooting their family etc with each and every contract change.

MrMarkyMark
9th November 2015, 13:43
In fact the "level paying field" is worsened as currently the advantage I have in not charging my client for same T&S would be taken away whereas large Co charge their clients the same T&S on top of the inflated rates for supplying those permies.

Crapita have it cracked, further.
They have their own travel consultancy.

Client Co's, obviously, find that their Crapita consultant's all, strangely, come from the opposite side of the country, from where they are located :rolleyes:.
Crapita travel makes a fortune out of this.

WordIsBond
9th November 2015, 14:05
The point is to try to appeal to your MP in terms they can understand.
Exactly. It's not identical but it is similar enough to make them at least think about it.

I have no dog in this fight anyway, I work from home except for the occasional foreign trip.

MrMarkyMark
9th November 2015, 14:14
that our clients are our main place of work so why should we get T&S to go everyday... Which normal permies don't usually get.

We are nothing like "normal permies", especially you, NLUK :laugh
Would you call a consultant from <Insert any Consultancy Name Here> a "normal permie" then

I can't see HMRC truly believe anything different.

We also have to remember that most of the big 4 consultancies, are likely to make, make major donations to the conservative party.
Maybe that's what we need to do :eyes


I have no dog in this fight anyway, I work from home except for the occasional foreign trip.

Same here, being London based.
Still makes me really fume though, as I have plenty, from all over the country, sat around me.

MPwannadecentincome
10th November 2015, 00:01
Crapita have it cracked, further.
They have their own travel consultancy.

Client Co's, obviously, find that their Crapita consultant's all, strangely, come from the opposite side of the country, from where they are located :rolleyes:.
Crapita travel makes a fortune out of this.

Sorry, are you saying that they are committing fraud by lying about where their consultants are coming from, going out and buying rail or air tickets to show as an expense then claiming a refund on those rail or air tickets?

Given that any expenses charged to a client are normally the consultants own expense claim plus possible an admin fee I can't see how they can make a fortune without lying, if I am wrong please explain.

MrMarkyMark
10th November 2015, 09:24
Sorry, are you saying that they are committing fraud by lying about where their consultants are coming from, going out and buying rail or air tickets to show as an expense then claiming a refund on those rail or air tickets?

Given that any expenses charged to a client are normally the consultants own expense claim plus possible an admin fee I can't see how they can make a fortune without lying, if I am wrong please explain.

Blimey, totally missed the point, not really lying, but, certainly sharp practice....

Capita has consultants based all over the country.
Allegedly, If you are based in London, you will find you are mostly getting gigs up North.
Allegedly, If you are based in the North, you will find you are mostly getting gigs in London.

Travel and deals for this mobility, all booked through Capita travel, all passed on to client.

Quids in :smokin

ShandyDrinker
10th November 2015, 22:22
Not sure if this article has already been posted but an interesting take on T&S for contractors in the nuclear power industry:

Paul Murphy on how IR35 and T&S legislation could be disastrous for the UK (http://www.theglobalrecruiter.com/news/paul-murphy-on-how-ir35-and-ts-legislation-could-be-disastrous-for-the-uk/6495?)

MPwannadecentincome
11th November 2015, 22:08
Blimey, totally missed the point, not really lying, but, certainly sharp practice....

Capita has consultants based all over the country.
Allegedly, If you are based in London, you will find you are mostly getting gigs up North.
Allegedly, If you are based in the North, you will find you are mostly getting gigs in London.

Travel and deals for this mobility, all booked through Capita travel, all passed on to client.

Quids in :smokin

right so they are pissing off their employees by sending them to the other end of the country?

And how are they quids in... by employing some people to book the travel and invoice an extra few quid as admin fees on those travel expenses?

sorry I am completely lost on this one.

MrMarkyMark
12th November 2015, 09:02
right so they are pissing off their employees by sending them to the other end of the country?

And how are they quids in... by employing some people to book the travel and invoice an extra few quid as admin fees on those travel expenses?

sorry I am completely lost on this one.

:suicide:

Yes, they piss their employees off, by sending them to the other end of the country, needlessly.

i.e. a test manager based in Leeds will come down to London, a test manager based in London will end up in Leeds.

They make commissions on the hotels, travel tickets and spends in the hotel.

Imagine the discounts they get on everything, they then mark these prices up to their clients.
If you are moving people unnecessarily, that is profit you wouldn't have got.

I don't understand why you would be "lost", Capita Travel, are a very profitable business.


We're the largest UK-focused business travel and event management provider, with a turnover of £540 million and a team of over 900.

Get it now :rolleyes:.

LondonManc
12th November 2015, 09:09
Blimey, totally missed the point, not really lying, but, certainly sharp practice....

Capita has consultants based all over the country.
Allegedly, If you are based in London, you will find you are mostly getting gigs up North.
Allegedly, If you are based in the North, you will find you are mostly getting gigs in London.

Travel and deals for this mobility, all booked through Capita travel, all passed on to client.

Quids in :smokin

Very clever. So, they own a travel agency, insist on all their consultants working away and arrange their own travel, billing that back to the client, rather than simply the day rate of a local consultant? So, the tax payer is paying double bubble for every travelling Capita consultant on government projects. They'll obviously justify it with the old "no specialists in the area" tulip. :rolleyes:

MrMarkyMark
12th November 2015, 09:13
Very clever. So, they own a travel agency, insist on all their consultants working away and arrange their own travel, billing that back to the client, rather than simply the day rate of a local consultant? So, the tax payer is paying double bubble for every travelling Capita consultant on government projects. They'll obviously justify it with the old "no specialists in the area" tulip. :rolleyes:

Yep, I spoke to lots of people, who pretty much confirmed that is the case.

OnceStonedRose
11th February 2016, 16:51
Has anyone had their Finance Director take a look and advise as to where they stand, I got onto mine, absolutely crumby national tax accountancy place, and received a moody excel spreadsheet IR35 risk calculator, and a pdf of a spunky page they had cobbled together showing the Provisional Incorporation Planner - 2016/17, which basically said, "yeah you'll have to pay a couple of grand dividend tax".

Hi OnceStonedRose,
Re the expenses, the third party rules don’t apply to people not caught by IR35 and we think you are ok for that, IR35 questionnaire attached to check.
I have also done a check (on XXk profit) on the attached to compare tax now and tax next year, you are still better off.
Finally see link to info on our web page to dividends changes http://www.wankynationaltaxaccountants.co.uk/resources/show-article/title/The-Dividend-Allowance/id/66
Hope that goes some way to help.

So glad I'm better off even after Gideons attempts to have my kecks down, nice try cocknosed chancellor of the exchequer ... phew.:smokin

Hobosapien
12th February 2016, 14:27
Yep, I spoke to lots of people, who pretty much confirmed that is the case.


So the client pays the travel expenses on top of a typical day rate to the supplier for each body placed?

Is this common or is it just some way of the consultancy mangling the overall day rate so the client still pays the same typical rate and the consultancy gets a bigger slice of it by charging the consultant for the travel expenses?

As a contractor I've never had that kind of 'perk' of expenses on top of rate, instead having to claim expenses from my LTD so comes out of the rate the client pays rather than on top.

My current client, with whom I've already exhausted the 24 month rule for expenses, does have some 'consultants' on site so will be interesting to see if this travel expenses on top of day rate from the client's perspective is in play.