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rocktronAMP
27th November 2016, 11:41
Sunday morning reading, ruminating and musing

Based the recent Autumn 2016 statement from the chancellor

"From 6th April the responsibility for determining IR35 status in public sector engagements will shift from the contractor to the party paying them, which will usually be the recruitment agency. This means the agency will also be liable if they decide a contractor can work outside IR35 and their decision is subsequently challenged by HMRC."

does this mean independent contractors should be avoid any form GOV.UK that takes their contract end date beyond 5th April 2017?

Based on my own reading of this statement, it means that even if a current contract initially looks outside IR35 at the time, in the future it could be viewed as inside IR35 retrospective long after the contract has expired. That being case, any independent contractor ought to avoid GOV.UK 2017 work if the pay scale contract rates remain the same. In other words, GOV.UK would have to compensate contractors at a much higher contract rate, say 10%, via the recruitment agency, but that would be a conflict of interest with the aim of the Autumn statement announcement.

"HMRC are convinced that there is widespread ‘non-compliance’ in the public sector, estimating that 90% of ‘off payroll’ workers are not paying tax correctly."

It is a quite sad that there were / are some parts of the Government Digital Service and GOV.UK that were / are building interesting technology software. Azure/AWS/Cloud/PHP/Java/Microservices/Digital/Agile **** What a cluster (tulip)!

malvolio
27th November 2016, 12:03
A bit late to the party but totally agree! :wink

eek
27th November 2016, 12:14
I wouldn't, however, state that a 10% increase in rates is enough. Given that a contract inside ir35 doesn't allow expenses I would need a lot more than 10%.

DaveB
27th November 2016, 12:31
I wouldn't, however, state that a 10% increase in rates is enough. Given that a contract inside ir35 doesn't allow expenses I would need a lot more than 10%.

Indeed, closer to 40% I wouldd estimate,

northernladuk
27th November 2016, 12:40
Hope we aint gonna be getting too many more of these lazy questions. 2 today already :eyes:

eek
27th November 2016, 12:42
Hope we aint gonna be getting too many more of these lazy questions. 2 today already :eyes:

These are still the small minority well ahead of the game. Most will only know what's happening when their fence does the deductions and they see the far smaller payment arrive

DaveB
27th November 2016, 12:44
These are still the small minority well ahead of the game. Most will only know what's happening when their fence does the deductions and they see the far smaller payment arrive

More likely when their contracts get cancelled and new ones get issued with the new payment terms, but the effect will be much the same.

northernladuk
27th November 2016, 12:44
These are still the small minority well ahead of the game. Most will only know what's happening when their fence does the deductions and they see the far smaller payment arrive

Maybe we can lock the forums around that time then :(

cojak
27th November 2016, 13:08
I think that we are going to need TL;DR stickies on this for the B/C and A/L forums from now on.

eek
27th November 2016, 13:46
More likely when their contracts get cancelled and new ones get issued with the new payment terms, but the effect will be much the same.

The cynic in me says that they will assume it's just a renewal. And then you have the agencies who when hmos did their changes were trying to argue that the tax changes were not a material change to the contract and that the old contract was valid regardless of the new tax terms

Maslins
27th November 2016, 18:45
I wouldn't, however, state that a 10% increase in rates is enough. Given that a contract inside ir35 doesn't allow expenses I would need a lot more than 10%.

If that happens it's all a bit pointless isn't it. Oversimplified eg below:
- Old situation - agreed rate is £200/day, and contractor pays £50/day in tax. Net cost to public sector = net gain to contractor = £150.
- New situation - agreed rate is £250/day, and contractor pays £100/day in tax. Net cost to public sector = net gain to contractor = £150.

But I guess some would be happy as it suggests contractors pay their "fair share" in tax despite no real change?!

LondonManc
27th November 2016, 19:07
The cynic in me says that they will assume it's just a renewal. And then you have the agencies who when hmos did their changes were trying to argue that the tax changes were not a material change to the contract and that the old contract was valid regardless of the new tax terms

Probably right. The shizzle could hit the fan in March when agencies try mass conversion of contracts with significant clause changes.

youngguy
27th November 2016, 20:55
If that happens it's all a bit pointless isn't it. Oversimplified eg below:
- Old situation - agreed rate is £200/day, and contractor pays £50/day in tax. Net cost to public sector = net gain to contractor = £150.
- New situation - agreed rate is £250/day, and contractor pays £100/day in tax. Net cost to public sector = net gain to contractor = £150.

But I guess some would be happy as it suggests contractors pay their "fair share" in tax despite no real change?!

That would be a win for Gov and a win for us!

LondonManc
28th November 2016, 06:05
That would be a win for Gov and a win for us!

How so? Only if you have minimal expenses, unless you can get that negotiated as being picked up by client co

mudskipper
28th November 2016, 07:07
Not just gov.uk - any organisation covered by the FOI act, so includes BBC, TfL, etc, etc.. Pages and pages at the end of the Consultation document

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/526614/Off-payroll_working_public_sector-reform_intermediaries_legislation.pdf

youngguy
28th November 2016, 07:49
How so? Only if you have minimal expenses, unless you can get that negotiated as being picked up by client co

Yeah, only with low expenses . I did have an idea that contractors could just book their hotels through the PS dept system. A few years ago if I did business away for a Gov dept I'd just ring their train and hotel hotline and pick the tix up at the station. They wanted it this way as it made their accounting more straightforward.

I was concerned at the time for IR35 but that wouldn't be an issue anymore. That could possibly be negotiated locally as it is often a central coast code so doesn't hit the budgets in quite the same way?

LondonManc
28th November 2016, 07:56
Yeah, only with low expenses . I did have an idea that contractors could just book their hotels through the PS dept system. A few years ago if I did business away for a Gov dept I'd just ring their train and hotel hotline and pick the tix up at the station. They wanted it this way as it made their accounting more straightforward.

I was concerned at the time for IR35 but that wouldn't be an issue anymore. That could possibly be negotiated locally as it is often a central coast code so doesn't hit the budgets in quite the same way?

Decent rate with no expenses and hassles thereof inside IR35 wouldn't be too bad. Certainly wouldn't be end of world and would make an extra 20% on private sector dayrate seen reasonable too.

youngguy
28th November 2016, 08:32
Decent rate with no expenses and hassles thereof inside IR35 wouldn't be too bad. Certainly wouldn't be end of world and would make an extra 20% on private sector dayrate seen reasonable too.

No more ltd admin as well.

I'm not in the public sector anymore but for someone like myself who has around 6-7k expenses pa (not Inc pension) a bit of a rate increase could cover the hit - but let's see what the detail on Dec 5th and subsequent calculators say.

LandRover
28th November 2016, 11:05
No one concerned that HMRC will take the view, you did same role prior to April 2017, and now your inside IR35, so lets investigate why you thought you were outside before.

This is the elephant in the room concern for any contemplating staying in a public sector contract.

LondonManc
28th November 2016, 12:12
No one concerned that HMRC will take the view, you did same role prior to April 2017, and now your inside IR35, so lets investigate why you thought you were outside before.

This is the elephant in the room concern for any contemplating staying in a public sector contract.

But an interesting gambit for those moving from private to public.

If you're staying in a PS role, you'd need to change behaviour and so on - accept a works phone, take a phone call out of hours, etc and get yourself balls deep in IR35. That will only work if you weren't behaving as a disguised permie before though.

eek
28th November 2016, 14:54
But an interesting gambit for those moving from private to public.

If you're staying in a PS role, you'd need to change behaviour and so on - accept a works phone, take a phone call out of hours, etc and get yourself balls deep in IR35. That will only work if you weren't behaving as a disguised permie before though.

Or make sure the public sector role you are performing in April isn't the same one you've been doing for the past 18 months...

LondonManc
28th November 2016, 15:16
Or make sure the public sector role you are performing in April isn't the same one you've been doing for the past 18 months...

Kind of what the contract rewrites will be about. BA will be rebadged, etc. Dodgy isn't daft. Enough....

Andy Hallett
30th November 2016, 13:45
No one concerned that HMRC will take the view, you did same role prior to April 2017, and now your inside IR35, so lets investigate why you thought you were outside before.

This is the elephant in the room concern for any contemplating staying in a public sector contract.

An accountancy firm I have been speaking to are advising contractors to shut down legacy PSC companies prior to April and start afresh with a new company post April for this very reason.

northernladuk
30th November 2016, 13:47
An accountancy firm I have been speaking to are advising contractors to shut down legacy PSC companies prior to April and start afresh with a new company post April for this very reason.

You would assume they have a very good understanding of the new rules about this and are giving it as part of a well thought out and executed strategy and not just a knee jerk reaction thinking no further than the IR35 issue. If the latter a lot of people could find themselves in a position where they are unable to contract under a LTD for a few years.

An on the topic of knee jerk... I'd be highly suspicious of anyone giving such detailed actionable advice at this point bearing in mind we just don't yet and need to wait a little bit before jumping to conclusions.

westtester
30th November 2016, 14:44
An accountancy firm I have been speaking to are advising contractors to shut down legacy PSC companies prior to April and start afresh with a new company post April for this very reason.

Isn't Hector automatically notified when a company is being shut down? Seems like the ideal way to invite further investigation.

DotasScandal
30th November 2016, 15:07
If the latter a lot of people could find themselves in a position where they are unable to contract under a LTD for a few years.

How so? As far as we know it's perfectly acceptable, unless you are claiming Entrepreneurs Relief, that is.

northernladuk
30th November 2016, 15:13
How so? As far as we know it's perfectly acceptable, unless you are claiming Entrepreneurs Relief, that is.

Exactly this. If this isn't communicated properly, bearing in mind the vast number of contractors that haven't a clue how to do stuff, it could end in a lot of tears.

I'll bet everything I have someone will cock it up.

eek
30th November 2016, 15:36
An accountancy firm I have been speaking to are advising contractors to shut down legacy PSC companies prior to April and start afresh with a new company post April for this very reason.

Hmm a plan that would net said accountancy firm £1-5,000 per contractor.

Maslins
30th November 2016, 16:01
Hmm a plan that would net said accountancy firm £1-5,000 per contractor.

Unsure how you figure that? I don't think many accountancy firms make big bucks on the starting/ending of a contractor relationship. To be honest if there is "easy money" it's the contractors that carry on for years. They get the hang of what they need to do, what the accountant wants etc, but still pay the same as the newbies asking lots of questions and those leaving.

MVL Online is however excited at Andy's suggestion ;)

jonnyboy
30th November 2016, 21:21
Hmm a plan that would net said accountancy firm £1-5,000 per contractor.

What he said. I spoke to my accountant a few months back regarding my long term exit plan (winding up my company in 6-7 years and taking ER) and he said that winding up a company was not just a question of 'end trading, goodnight' - there was the wrap up of accounts, applying to HMRC for a wrap up notification, statatory noitice to any creditors and debtors, calculating tax liabilities, the actual closure, closing bank/vat/hmrc accounts, taking directors off listing, money transfers and ER processing (I know in this case ER is not part of the fiddle). My accountant said he used two specialist firms, and the current price tag was around £1200 - £1500 depending on assets in the company and generally took 4-9 months.

northernladuk
30th November 2016, 21:28
Did he also tell you can't trade again for 2 years or whatever the new rule is as well?

eek
30th November 2016, 21:32
Did he also tell you can't trade again for 2 years or whatever the new rule is as well?

That only counts if you take entrepreneur's relief. I think the suggestion is to close company a and start your next contract as company B.

It was one of the early approaches to avoiding historic IR35 issues. I really don't know how sensible it is...

jonnyboy
30th November 2016, 21:45
Did he also tell you can't trade again for 2 years or whatever the new rule is as well?

Yep, its called Phoenixing.... as Eeek says, its only if you take cash out via ER.. then you can trade, but it has to be a completely unrelated company (cannot be in the same group of HMRC company types)... otherwise you have to wait (as you say) for a 2 year gap. But that would not effect me, once I hit 56, I am out of this IT lark, and out of this country, and off to sunnier pastures. That is, assuming my plans work out, and the hector does not introduce more taxes to take is what is mine, and make it his.

jamesbrown
30th November 2016, 21:55
That only counts if you take entrepreneur's relief. I think the suggestion is to close company a and start your next contract as company B.

It was one of the early approaches to avoiding historic IR35 issues. I really don't know how sensible it is...

No, ER is something separate, claimed personally on your SATR. It simply applies a reduced rate of CGT to a qualifying capital distribution. The Transactions in Securities (TiS) legislation is designed to establish whether a capital distribution is valid in the first place (versus reclassified as a dividend distribution). It's the updated TiS legislation that has identified a 2yr timeframe for conducting the same or a similar trade or activity.

Maslins
1st December 2016, 10:38
What he said. I spoke to my accountant a few months back regarding my long term exit plan (winding up my company in 6-7 years and taking ER) and he said that winding up a company was not just a question of 'end trading, goodnight' - there was the wrap up of accounts, applying to HMRC for a wrap up notification, statatory noitice to any creditors and debtors, calculating tax liabilities, the actual closure, closing bank/vat/hmrc accounts, taking directors off listing, money transfers and ER processing (I know in this case ER is not part of the fiddle). My accountant said he used two specialist firms, and the current price tag was around £1200 - £1500 depending on assets in the company and generally took 4-9 months.

Hmmm...I'm anticipating your final sentence the "specialist firms" would be liquidators, hence the extra closing cost is for a liquidation.

For an accountant closing a company (non liquidation, just strike off), there'll typically be normal statutory accounts with a trivial amount of extra work ensuring balance sheet is tidied up a bit. Yes there's VAT/employer de-registration, but again, they're modest tasks. If it's a Maslins client there's no extra "close down" charges, unless perhaps the client had only joined us a few months earlier. The strike off itself just involves a £10 cheque to Companies House.

I don't see closing/restarting companies to be a boon for accountants.

As others have said, the 2 year thing is only really to do with tax benefits of CGT upon closure. Way before ESC C16 was closed off and MVL Online existed, there would be many contractors who would close their company every few years. Not for any tax breaks on closure, but to draw a line in the sand for IR35 purposes, so realistically worst case scenario would be HMRC going back a couple of years. Sounds like this new "plan" has a similar idea. Not saying I'd recommend it (certainly not something we've suggested to clients), but if these companies aren't taking out huge sums upon closure I don't see why they need to worry about doing something completely different for two years.