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webberg
3rd November 2015, 15:41
If the new world of 2016 is as bad as painted with taxed T&S and perhaps an increased risk of IR 35 applying, is the simple "remedy" of charging a higher daily rate going to be met with

1. No

2. Become an employee

3. Use a Ltd and take the risk

4. Something else

pjt
3rd November 2015, 16:14
If the new world of 2016 is as bad as painted with taxed T&S and perhaps an increased risk of IR 35 applying, is the simple "remedy" of charging a higher daily rate going to be met with

1. No

2. Become an employee

3. Use a Ltd and take the risk

4. Something else

I hope not but I'm currently pessimistically assuming the answer to a rate increase will be No. Option 3 wont be an option as far as I understand as the client will have the final say on the risk and they are likely to 9 times out of 10 avoid any risk.

northernladuk
3rd November 2015, 16:15
Who mentioned increased risk of IR35 past Apr 16?

And it will be number 1 in a vast majority of cases. Our taxation issues are non of the clients business.

DotasScandal
3rd November 2015, 16:29
If the new world of 2016 is as bad as painted with taxed T&S and perhaps an increased risk of IR 35 applying, is the simple "remedy" of charging a higher daily rate going to be met with

1. No
2. Become an employee
3. Use a Ltd and take the risk
4. Something else

If the new world of 2016 is as bad as painted with taxed T&S and perhaps an increased risk of IR 35 applying, I foresee a dislocation of the contractor market, and chaos that will make the first coming of IR35 look like a walk in the park. I'll answer for myself, but I suspect I won't be alone in my thinking.

* 1/ Definitely - with most organizations in (more or less radical) cost reduction mode (despite Osborne's economic miracle...), mechanical rate increases have zero chance of being accepted.
One just has to look at the regular "across the board" rate cuts at major banks, which used to be a rarity just a few years ago, and now are practically an everyday thing. For many, rates have been flat at best over the past 5 years or so.

* 2/ Very possibly - this in turn will be met with a "No" from many a contractor. Contrary to what HMRC claims, employees and contractors VERY RARELY do the same job, though of course when observed from a distance by someone who knows nothing about the subject matter, it all looks like same.
I for one would NEVER accept doing the kind of stuff I am doing now if I did not have the flexibility that contracting gives me. I would go do something else entirely.

3/ Most likely.

4/ On the high-end of the market, I foresee more British contractors foraying into more welcoming locales and more foreign contractors skipping the UK altogether, as it just won't be worth the bother anymore.
Translating to less revenue for Osborne and co. in the end.

Zero Liability
3rd November 2015, 17:29
Any changes to IR35 will likely come in from April 2017, not 2016. For now it's just the dividend tax and potential changes to T&S that are in the works.

d000hg
3rd November 2015, 18:00
If contractors en masse demand higher rates, supply and demand will take effect - however increased costs may have a knock-on effect that companies change their attitude to using contractors in the first place.

TheFaQQer
3rd November 2015, 18:17
Any changes to IR35 will likely come in from April 2017, not 2016. For now it's just the dividend tax and potential changes to T&S that are in the works.

IR35 needs a consultation and an Act before it can become law. But that doesn't mean that it won't happen in 2016.

We'll find out at the end of the month, of course.

TheFaQQer
3rd November 2015, 18:18
If the new world of 2016 is as bad as painted with taxed T&S and perhaps an increased risk of IR 35 applying, is the simple "remedy" of charging a higher daily rate going to be met with

1. No

2. Become an employee

3. Use a Ltd and take the risk

4. Something else

I suspect a combination of 2 and 4 - become an employee on a zero hours contract working for a consultancy.

jamesbrown
3rd November 2015, 18:20
IR35 needs a consultation and an Act before it can become law. But that doesn't mean that it won't happen in 2016.

We'll find out at the end of the month, of course.

Anything is possible, but this is unlikely in practice, unless they take a completely different approach (i.e. nothing like IR35). They explicitly put FB 2017 as a placeholder in the summer budget documents, which is a tacit acknowledgement of the need to consult widely.

northernladuk
3rd November 2015, 18:23
The Op seems to be posting a lot on the upcoming changes but I'm still not convinced he's totally understood it and is just firing random shots off.

webberg
3rd November 2015, 19:55
The OP is seeking information and views.

The OP has never been a contractor but has had (tax) dealings with many but from a while ago.

Consequently the OP, whilst comfortable in the tax technical aspects of schemes up to now, is seeking to understand what contractors might be thinking once the avalanche of rules on T&S, dividends, and IR35 changes (2016 or 2017) is in place.

The OP's observation on the contractors using this site is that many are anxious not to repeat history and find themselves in jeopardy from tax bills from long ago. Equally they are attracted/committed to the contracting world for many reasons, one of which and for some the main reason, is the ability to retain a greater proportion of their earnings.

The OP therefore is interested in future behaviours as much as past behaviours as eventually we will see a range of ideas being proposed which will offer a "solution" to the increased tax that HMG is determined to extract by fair means or foul. The OP's genuine concern is that HMRC will be less inclined in the future to offer settlement for such solutions (if they cross some imaginary line) and as such the reasons why contractors enter schemes becomes exponentially more important.

The OP is not in the business of and has no intention of offering such solutions. The OP did make a suggestion which was based on something seen very recently and that was comprehensively shot down but from which valuable lessons were learnt. The OP has not gone back to the source of that idea with an analysis (having not been invited to do so).

So you are partly correct in that my understanding is lacking. I understand where the ideas driving the tax rules have come from and how similar rules have operated in other areas of tax. I understand how HMRC has sought to apply those rules. I lack an appreciation of how the contractor world has evolved and will evolve. Is seeking to increase that understanding a problem?

Random? Not quite. Speculation based on snippets of information and comments made, yes.

So partly correct, partly not.

Obviously happy to continue here or via PM or via email if you wish.

psychocandy
4th November 2015, 10:47
Who mentioned increased risk of IR35 past Apr 16?

And it will be number 1 in a vast majority of cases. Our taxation issues are non of the clients business.

Deffo Option 1. As NLUK says, clients may already think of us as overpaid. They won't give a monkeys bumhole about the extra tax we have to pay.

Try telling a client that you now have to pay tax on travel costs (like permies do) and now have to pay more tax but still dont pay NI (like permies do) and you're not going to get much sympathy.

I get on well with my client and have already had an "off the record" chat about this to warn them of impending storm clouds. This is much the reaction I got.

Yes eventually, when availability and quality of contractors starts to drop off they will realise it affects them as well but that will take a LONG time. I think there will always be a demand for contractors - clients want this. But I just dont think its suddenly going to hike the rates up.

Best I'm hoping for (Assuming still at same client) is smallish rate increase (maybe 5%) and possibly some leeway to negotiate a bit of WFH (Wont save me much money since I get train season ticket - but will save me hassle even one day per week).

No way in a million years are they going to stump up in excess of 10% extra to cover any losses on dividend tax/expenses.

Option 2. Yes if you moan client may present this as a solution in their eyes. And then be confused when you say thanks but no thanks to their offer of £40K perm.

My client has hinted at this recently. I had to kindly explain that, yes its a long day for me to attend site every day, but I do OK out of contracting. But I would not consider a perm role this far away from home because of this.

LondonManc
4th November 2015, 11:36
If I'm paying £81 for a return ticket Manchester - London, then I'm not losing £81 if T&S comes in. However, accepting it could simply be the thin end of a very long wedge to divide different parts of the contract labour force.

psychocandy
4th November 2015, 11:49
If I'm paying £81 for a return ticket Manchester - London, then I'm not losing £81 if T&S comes in. However, accepting it could simply be the thin end of a very long wedge to divide different parts of the contract labour force.

But, its a minimum of 20% of £81 so £16 or so every day. 20 days per month £320 a month.

PLUS its possibly pushed you £81 more into the 40% bracket. This is the killer.
Depending on circumstances, this £1600 a month, £19K or so a year is now payable as a dividend. Which could be ALL at 40% (cant work it out its too hard for me). A lot more than the original £320 a month worse off then.

LondonManc
4th November 2015, 13:01
But, its a minimum of 20% of £81 so £16 or so every day. 20 days per month £320 a month.

PLUS its possibly pushed you £81 more into the 40% bracket. This is the killer.
Depending on circumstances, this £1600 a month, £19K or so a year is now payable as a dividend. Which could be ALL at 40% (cant work it out its too hard for me). A lot more than the original £320 a month worse off then.

Erm, I make the journey once a week. :)

psychocandy
4th November 2015, 13:07
Erm, I make the journey once a week. :)

Ah so not mega commuter then?

Yes but hotel in the week I presume?

pjt
4th November 2015, 13:52
Ah so not mega commuter then?

Yes but hotel in the week I presume?

Am I wrong in thinking the hotel would have the tax relief??

TheFaQQer
4th November 2015, 13:56
Am I wrong in thinking the hotel would have the tax relief??

If the T&S changes are implemented as planned, and there is supervision, direction or control, then you would not be able to claim tax relief on the hotel.

WordIsBond
4th November 2015, 17:12
If the new world of 2016 is as bad as painted with taxed T&S and perhaps an increased risk of IR 35 applying, is the simple "remedy" of charging a higher daily rate going to be met with

1. No

2. Become an employee

3. Use a Ltd and take the risk

4. Something else

Most engagers would prefer not to have employees for a lot of the tasks contractors do. So #2 won't be all that widespread, but a lot of hidden employees may go that way.

Some contractors will sit on the bench, for a while, if they can't get increased rates to cover the hit. Any UK client that wants my services will pay more because I am pretty sure I can keep busy with foreign clients. There will be enough who demand more pay or opt for foreign work or just drop out because it isn't worth it any longer, that there will be a supply shortage, unless rates increase to at least mitigate the damage. And when there is a supply shortage, rates will increase.

Since some contractors, maybe quite a few, will just take the tax hit in stride, the supply/demand dynamic won't be enough to push rates up to cover the complete tax hit. But rates definitely will increase until an equilibrium is reached. That's how economics works.

GB9
5th November 2015, 08:07
It's worth noting that the client may end up having a direct bearing on our tax situation by deciding whether or not the role is subject to SDC. If they say it is then by default they are pushing us into a higher tax bracket.

Edit: hence the client saying that our tax affairs aren't their business isn't totally correct.

Personally I will go for a higher rate for SDC contracts, and if possible, avoid SDC contracts altogether. If the situation is so bad that this is unavoidable then highest net bidder wins. And there would be very little likelihood of me working away from home unless desperate. Just wouldn't be worth it anymore.

fidot
5th November 2015, 12:07
Personally I will go for a higher rate for SDC contracts, and if possible, avoid SDC contracts altogether. If the situation is so bad that this is unavoidable then highest net bidder wins. And there would be very little likelihood of me working away from home unless desperate. Just wouldn't be worth it anymore.

Agreed. Did you see that any contract via an agency will have the presumption that SDC applies?

jamesbrown
5th November 2015, 17:03
I think rates will go up, not by contractors asking for it. Just simply when contractors stop renewing. It will be the out of the way places and central London that will get the shortages first... Also with the negative news around IR35, Travel and dividend taxes this will make a lot of permies think twice about jumping into contracting, reducing supply.

I personally have been on the two year limit on a work away contract and not renewed, I worked out that I could take a different contract for a lot less and be better off than staying.

Supply and demand will out.

It depends. Demand is in the UK, but supply is essentially global, so anything to increase overseas supplies (e.g. ICT) will impact this. Also, some clients may fundamentally shift their approach from contractors to consultancies. I'd expect quite some variation among sectors.

pjt
6th November 2015, 10:01
Also with the negative news around IR35, Travel and dividend taxes this will make a lot of permies think twice about jumping into contracting, reducing supply.

Supply and demand will out.

One small flaw in this is that permies will have no idea this is happening. I doubt most contractors are even aware!

Fingers crossed your right though.

MrMarkyMark
6th November 2015, 10:02
It depends. Demand is in the UK, but supply is essentially global, so anything to increase overseas supplies (e.g. ICT) will impact this. Also, some clients may fundamentally shift their approach from contractors to consultancies. I'd expect quite some variation among sectors.

In IB, one of the reasons, they use a lot of consultancies, is that they can body shop someone in, within a day or two, no security checks required.
Contractors have to go through, potentially, 5 weeks security checks, before commencing with the engagement.

cojak
6th November 2015, 11:07
As I've said in a previous post I think that many contractors will go back to permiedom (certainly if they are looking at retirement in the next few years). 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 final income.


http://forums.contractoruk.com/future-contracting/109487-will-contracting-go-out-bang-whimper.html#post2152484

mudskipper
6th November 2015, 11:28
Agreed. Did you see that any contract via an agency will have the presumption that SDC applies?

I remain unconvinced that the bit of the regulations that makes this assertion will apply to Ltd co contractors any more than it does today.

eazy
6th November 2015, 13:53
Due to lower oil price, there have been over 65,000 jobs lost in the UK over the past year. Several rate cuts, shorter working weeks, companies still trying to reduce head counts, freeze in new hires, no new projects being sanctioned.


1. No - Won't get any rate increases [ Oil company profits have more than halved]

2. Become an employee - Won't get employment offers due to market conditions.

3. Use a Ltd and take the risk - Yes, no other option.

4. Something else - Options abroad are limited due to the same issues of lower oil price.

IR35 with SDC (probably 2017) - As has been seen with agency reporting requirements, clients will not take any risks and report everything & everyone as under SDC. Higher chance of being caught by IR35.

It's grim up north!

Fred Bloggs
6th November 2015, 14:19
Due to lower oil price, there have been over 65,000 jobs lost in the UK over the past year. Several rate cuts, shorter working weeks, companies still trying to reduce head counts, freeze in new hires, no new projects being sectioned.


1. No - Won't get any rate increases [ Oil company profits have more than halved]

2. Become an employee - Won't get employment offers due to market conditions.

3. Use a Ltd and take the risk - Yes, no other option.

4. Something else - Options abroad are limited due to the same issues of lower oil price.

IR35 with SDC (probably 2017) - As has been seen with agency reporting requirements, clients will not take any risks and report everything & everyone as under SDC. Higher chance of being caught by IR35.

It's grim up north!Correct, I've been out of work a year now. I've had one interview in that time and after the interview even the agency cannot get any feedback from the client whether the role is being filled or not. That project is live and is underway right now in London but I suspect that the client co (an O&G super major) are weighing up doing the job without filling the role I was up for.

Regarding overseas work or permie jobs - not a chance. It might have to be enforced early retirement for me, I'm 58.

webberg
7th November 2015, 12:21
Thanks to all contributors here, I'm learning a lot and I suspect others are.

Just be careful as HMRC is known to read these posts (hello).

The offshore sourcing of specialists or clients is interesting.

HMRC has just agreed a remarkable project where some 60+ countries have agreed a template for taxation of certain activities, including remotely sourced labour and services.

This is known as BEPS (Base Erosion and Profit Shifting) and was probably originally aimed at our favourite coffee, internet and logistics operations. I confess that I have not read the final papers and agreements to see if the reach has extended to individual level, but I would expect it to have done so, or to do so shortly.

I can see that I will need to at least skim this agreement!:(

psychocandy
9th November 2015, 09:34
Correct, I've been out of work a year now. I've had one interview in that time and after the interview even the agency cannot get any feedback from the client whether the role is being filled or not. That project is live and is underway right now in London but I suspect that the client co (an O&G super major) are weighing up doing the job without filling the role I was up for.

Regarding overseas work or permie jobs - not a chance. It might have to be enforced early retirement for me, I'm 58.

Really???????