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eek
5th December 2016, 13:58
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/574562/Off-payroll_working_in_the_public_sector-reform_of_the_intermediaries_legislation_-_summary_of_responses.pdf

First bit to note of interest (from page 6).


However, the government does not believe that choosing to work through a limited
company should necessarily affect the amount of tax and NICs an individual pays.

So that's the FLC idea killed once and for all...

and page 9


Engagers will be required to inform the relevant party, such as an agency, whether the
off-payroll rules should apply and will be liable for this decision. HMRC will publish
guidance about the information needed which will also cover what engagers should do
if working practices change.

So agent's aren't going to get much say in the matter. A statement will come this role is inside / not inside IR35 ...

Now to see if the legislation matches a more complete reading of the documentation...

LondonManc
5th December 2016, 14:20
Page 13 makes for interesting reading.....


Government Response
This change does not widen the scope of the off payroll rules, but is designed to ensure the current rules work as intended.
The government recognises that some contractors will experience a reduction in takehome pay as a result of the withdrawal of the 5% tax-free allowance. PSCs will, however, still be able to claim allowable business expenses

Still no clarification or solid definition of a PSC though....

More on expenses on Page 10, which suggests, but does not explicitly declare, that PSC and inside IR35 means that you can claim expenses:


PSCs will, however, still be able to claim allowable business expenses and those available to employees

Obviously, work commutes and staying over could be awkward, especially if employees don't get them (which normally they wouldn't). Doesn't sound at all good.

Yet we get to Page 14 and it looks like they've taken nothing from the Uber debacle.

Anyone know how to throw a party with alcoholic beverages in a beer-making facility?

SueEllen
5th December 2016, 14:25
Page 13 makes for interesting reading.....



Still no clarification or solid definition of a PSC though....

More on expenses on Page 10, which suggests, but does not explicitly declare, that PSC and inside IR35 means that you can claim expenses:



Obviously, work commutes and staying over could be awkward, especially if employees don't get them (which normally they wouldn't). Doesn't sound at all good.

Yet we get to Page 14 and it looks like they've taken nothing from the Uber debacle.

Anyone know how to throw a party with alcoholic beverages in a beer-making facility?

In the PS they do and so do private companies if the office you work at is not your main place of work.

LondonManc
5th December 2016, 14:27
In the PS they do and so do private companies if the office you work at is not your main place of work.

I guess getting the definition of main place of work sorted out is fairly critical then. :)

seeourbee
5th December 2016, 14:28
Deleted

barrydidit
5th December 2016, 14:40
Yet we get to Page 14 and it looks like they've taken nothing from the Uber debacle.

Anyone know how to throw a party with alcoholic beverages in a beer-making facility?

:wave:

From page 6: "Individuals doing the same job should be treated similarly,
regardless of whether or not they work through a company. "

Oh dear.

sal
5th December 2016, 14:49
Engagers will be required to inform the relevant party, such as an agency, whether the
off-payroll rules should apply and will be liable for this decision. HMRC will publish
guidance about the information needed which will also cover what engagers should do
if working practices change.

Engagers = ClientCo right? If that's the case it will be up to the PS department to make de decision and if some managers takes the plunge and declare that you are outside IR35 it might become a good selling point for the contract.

seeourbee
5th December 2016, 15:03
So treated as a contractor, taxed as an employee. No employee benefits. I'm actually struggling to understand how this is legally sound. I see a lawsuit in the not too distance future. You can't have your cake and eat it. Look at the shenanigans in the Supreme Court today.

Gaz_M
5th December 2016, 15:05
A new online tool will be available by April 2017 for all to use and will make it easier to
apply the rules regardless of sector.

So even private sector is screwed if this online tool makes it nigh on impossible to pass.

LondonManc
5th December 2016, 15:08
So even private sector is screwed if this online tool makes it nigh on impossible to pass.

On the plus side, it'll screw Wipro et al who have to then pay all the bob PAYE and NICs to the Exchequer.

eek
5th December 2016, 15:13
So treated as a contractor, taxed as an employee. No employee benefits. I'm actually struggling to understand how this is legally sound. I see a lawsuit in the not too distance future. You can't have your cake and eat it. Look at the shenanigans in the Supreme Court today.

It's already been done in the Construction Industry (search for CIS).. It's interesting that the first people IPSE talked about in Stek's email are specialist CIS accountants.

seeourbee
5th December 2016, 15:20
What's been done ? This tax or a legal challenge ?

DotasScandal
5th December 2016, 15:21
it will be up to the PS department to make de decision and if some managers takes the plunge and declare that you are outside IR35

Pray tell, what would be the rationale for a manager taking such a plunge?

DotasScandal
5th December 2016, 15:22
So even private sector is screwed if this online tool makes it nigh on impossible to pass.

Bravo.

LondonManc
5th December 2016, 15:24
Pray tell, what would be the rationale for a manager taking such a plunge?

To attract the calibre of contract actually capable of doing the job?

DotasScandal
5th December 2016, 15:33
To attract the calibre of contract actually capable of doing the job?

You think a manager would actually take the risk of guaranteeing IR35 status?
I'll eat my hat it that happens.

sal
5th December 2016, 15:34
Pray tell, what would be the rationale for a manager taking such a plunge?

Saving an IT department of 50%+ contractors from a total collapse?

It all depends on what the online test/check tool will look like. A lot of the IT managers in the PS are pretty aware of the consequences if all their contractors are branded inside IR35. If they have to change some of the work practices, fiddle some numbers etc. to satisfy the tool and deem his contractors outside IR35 and keep them on board, without busting their budget they will do it.

The potential NI/Tax liability will not come out of their budget and they can play "dumb".

seeourbee
5th December 2016, 15:41
This is the end of the road for me unfortunately. All PS ir35 decisions will result in being taxed as Paye. So on £100k turnover you're talking about an extra £20k gone instantly in tax (rather than keeping the cash in the company). For me that's it, my business model is finished. Still struggling to believe how this is legally possible , but I guess the Government can do what Th heck it likes.

sal
5th December 2016, 15:45
You think a manager would actually take the risk of guaranteeing IR35 status?
I'll eat my hat it that happens.

I'm currently in a contract at an University. The department head ensured all contractors that regardless what happens come April 2017 we are not going to be left "out of pocket" and if the upcoming legislation deems us inside IR35 the rates will be adjusted to mitigate the added cost keeping us at the same level of take home pay as before. Whether or not they are capable of doing the correct calculation for everyones circumstances is irrelevant. The important bit is they are ready to foot the PAYE/NI bill as is.

Now imagine if they have a choice on the matter to declare us outside and save all the extra cost on the spot while making their contractors extremely happy to stay on. Worst case scenario somewhere down the line HMRC knocks on their door asking for the PAYE/NI, they will pay it regardless.

seeourbee
5th December 2016, 15:47
Have they even addressed double tax relief ? So you're going to be paying 40% income tax on your turnover already, so ... what .. the remainder becomes your new turnover .... on which you pay corporation tax, income tax in your company salary and dividend tax on your dividends. I don't think there's any cash left over there ?!

eek
5th December 2016, 15:47
I'm currently in a contract at an University. The department head ensured all contractors that regardless what happens come April 2017 we are not going to be left "out of pocket" and if the upcoming legislation deems us inside IR35 the rates will be adjusted to mitigate the added cost keeping us at the same level of take home pay as before. Whether or not they are capable of doing the correct calculation for everyones circumstances is irrelevant. The important bit is they are ready to foot the PAYE/NI bill as is.

Now imagine if they have a choice on the matter to declare us outside and save all the extra cost on the spot while making their contractors extremely happy to stay on. Worst case scenario somewhere down the line HMRC knocks on their door asking for the PAYE/NI, they will pay it regardless.

Being declared inside on April 1st may subject you to HMRC retrospectively looking at the rest of your contract (prior to April 1st) and chasing you for money....

Unless he's prepared to state you are outside and stand by that decision I wouldn't (personally) be staying....

eek
5th December 2016, 15:50
Have they even addressed double tax relief ? So you're going to be paying 40% income tax on your turnover already, so ... what .. the remainder becomes your new turnover .... on which you pay corporation tax, income tax in your company salary and dividend tax on your dividends. I don't think there's any cash left over there ?!

What corporation tax? what dividends? The company income will become £65,000 post-tax salary to be paid out by the company. The company won't be making any profit its just a money transfer mechanism....

seeourbee
5th December 2016, 15:53
I don't understand your post - you're saying the company turnover is £65k ? Without any deductions the company then pays corporation tax on the £65?

sal
5th December 2016, 15:54
Being declared inside on April 1st may subject you to HMRC retrospectively looking at the rest of your contract (prior to April 1st) and chasing you for money....

Unless he's prepared to state you are outside and stand by that decision I wouldn't (personally) be staying....

Exactly, I know that and not going to stay if declared inside IR35. Not to mention that as I have a non-working wife who is a shareholder they can't possibly get the level of take home pay right.

My contract is up for renewal in February, by that time it will be mostly clear what will happen come April. Unless my contract is declared outside IR35, there is snowball in hell chance of me extending past March.

mudskipper
5th December 2016, 15:56
Draft legislation for those that are that way inclined (i.e. james.brown!)

https://www.gov.uk/government/publications/finance-bill-2017-draft-legislation-overview-documents

sal
5th December 2016, 15:57
I don't understand your post - you're saying the company turnover is £65k ? Without any deductions the company then pays corporation tax on the £65?

Salary comes from pre-tax, so YourCo have £65k income and £65k paid in salary(es) = 0 profit = 0 CT bill

eek
5th December 2016, 15:58
I don't understand your post - you're saying the company turnover is £65k ? Without any deductions the company then pays corporation tax on the £65?

Not quite. Under the CIS rules your company receives the money with all taxes already deducted. The company's only job is to transfer that taxed income to you as your pay.

Hence contract £110,000. income tax and NI withheld (say £45,000 I know its wrong its just an exampled). Your company receives £110,000-45,000= £65,000. As that income has already been taxed it can be paid directly to you as income.

So company profit = £0 (everything came as income), dividends possible from profits £0 (as the company hasn't made a profit),

seeourbee
5th December 2016, 16:00
But it hasn't paid any salary yet, that's my point. Or maybe we just don't know the mechanics yet. Your company is going to recieve invoices net of tax. That is NOT the same thing as your company paying you the gross as salary. That's what I mean by there is some double tax detail missing so far.

seeourbee
5th December 2016, 16:02
Ok just read your previous post (posted at same time as me). Is that what they do in CIS ? News to me , then yes those mechanics make sense

eek
5th December 2016, 16:08
But it hasn't paid any salary yet, that's my point. Or maybe we just don't know the mechanics yet. Your company is going to recieve invoices net of tax. That is NOT the same thing as your company paying you the gross as salary. That's what I mean by there is some double tax detail missing so far.

Your company is receiving your salary net of tax. It can then either pay that money directly to you or keep it (albeit that's a bit pointless as tax has already been paid on it so it may as well go into your personal bank account).

seeourbee
5th December 2016, 16:09
You can apply to receive gross under CIS

eek
5th December 2016, 16:12
You can apply to receive gross under CIS

This isn't CIS. I only mentioned CIS as its a similar scheme to show that half the arguments I've heard which state that HMG can't do this are invalid because they've already done this in the past.

jamesbrown
5th December 2016, 16:13
Draft legislation for those that are that way inclined (i.e. james.brown!)

https://www.gov.uk/government/publications/finance-bill-2017-draft-legislation-overview-documents

Thanks, I'll probably scan that later although, TBH, the relevant part of ITEPA has become increasingly difficult to wade through, tiny details can matter, and recent blunders at the draft stage don't inspire confidence.

In the mean time, it's translated here :D

Treasury Implements Amy Lame Tax - Guido Fawkes Guido Fawkes (http://order-order.com/2016/12/05/treasury-implements-amy-lame-tax/)

LondonManc
5th December 2016, 16:14
Not quite. Under the CIS rules your company receives the money with all taxes already deducted. The company's only job is to transfer that taxed income to you as your pay.

Hence contract £110,000. income tax and NI withheld (say £45,000 I know its wrong its just an exampled). Your company receives £110,000-45,000= £65,000. As that income has already been taxed it can be paid directly to you as income.

So company profit = £0 (everything came as income), dividends possible from profits £0 (as the company hasn't made a profit),

Your company will actually make a loss due to insurance/accountancy fees.

Hotsauce56
5th December 2016, 16:18
Guys im a long time lurker on these forums and have watched your musings on this matter with intrigue.

Im in a PS contract which ive been undertaking since Dec 2015. Ive been looking for an out since I got wind of this stuff in March.

Today of all days ive been offered a private sector contract. However - they will be providing me to, you guessed it...the public sector.

As far as I can understand ill be inside. The relationship goes - public sector body > private sector tech company > agency > me (ltd).

Below is the sell I have received from the recruiter;;

Hi X,

The guy currently in the position puts in a minimum of 40 Hours per week – just as an idea of how many he puts in last week was 42 Hours.

The vacancy would sit with private sector company so therefore from an IR35 point of view you would be safe as you would be contracting to the private sector.

private sector company would then therefore be providing a consultancy service to public sector body and you wouldn’t be doing so directly for them.

The contract would lie between private sector company and yourself.

What are your thoughts on this and the rate?


What do you guys think? Do you know anyone who you think could conduct a reliable contract review at this stage? Cheers

eek
5th December 2016, 16:20
Your company will actually make a loss due to insurance/accountancy fees.

Yep I know that - I just didn't want to confuse sal any further.


In other news examples are now available at https://www.gov.uk/government/publications/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note albeit they are wrong.

Looking at the Midshire CC example its just wrong - Having used the Employment Status Service, they have determined that the off-payroll rules should apply and Tim tells them that the rate is now £120,000....

Although to be blunt such questions will need to be asked well before any interviews occur...

seeourbee
5th December 2016, 16:28
Why do I get the feeling that the Status Service is this:

Q: Do you work ?
A: Yes
HMRC: Off payroll rules apply

jamesbrown
5th December 2016, 16:29
One minor detail:

"If work is completed before 6 April 2017 but payment made on or after 6 April 2017 it will be within the new legislation."

youngguy
5th December 2016, 16:35
So we are a business that pays tax like an employee and then we get a p45? Am I the only one baffled ?

seeourbee
5th December 2016, 16:39
No your not. How this is legal is beyond me. What about employee rights and benefits? Pensions ? Paid holiday ? Sick pay ?

difficulttimes
5th December 2016, 16:40
So we are a business that pays tax like an employee and then we get a p45? Am I the only one baffled ?

And you are not considered to have any employment rights as it states.
With some incorrect dates and the dodgiest flow charts I've ever seen I wonder if they must think that they can do what they want. No-one is accountable to us... I look forward to the first tribunal case

eek
5th December 2016, 16:41
So we are a business that pays tax like an employee and then we get a p45? Am I the only one baffled ?

The point is these people should be employees (even if on a temporary fixed term basis) and I suspect this is designed to ensure that is the case....

SueEllen
5th December 2016, 16:41
And you are not considered to have any employment rights as it states.
With some incorrect dates and the dodgiest flow charts I've ever seen I wonder if they must think that they can do what they want. No-one is accountable to us... I look forward to the first tribunal case

Where is the link so I can put in a contribution to it?

SueEllen
5th December 2016, 16:43
The point is these people should be employees (even if on a temporary fixed term basis) and I suspect this is designed to ensure that is the case....

But departments deliberately don't take on people as employees so they aren't lumbered with their pension responsibilities, and if they take them on as temps for too long the unions kick up a fuss.

jamesbrown
5th December 2016, 16:44
The point is these people should be employees (even if on a temporary fixed term basis) and I suspect this is designed to ensure that is the case....

According to the consultation, that was explicitly not the case. It was a clear have/eat cake strategy. Afterall, it would be much easier (for "employees") if employment were mandated (e.g. FTC) on the outcome of the ESI.

eek
5th December 2016, 16:45
Where is the link so I can put in a contribution to it?

https://www.gov.uk/government/publications/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note

enjoy yourself. They are incomplete clearly missing words in some places and utterly insane.

As I said in a post above, you will need to determine status before I go near a contract and if its inside the odds of me taking it are zero. Now fixed term with all income directed into a final salary pension scheme with 5 days wfh and I may change my mind...

seeourbee
5th December 2016, 16:47
In another discussion we established the main and only reason for them doing this is to get more emplyERs NI. So why not skip all this crap and just ask the employer to pay NI on contractors ? Surely that's more simple ?

eek
5th December 2016, 16:49
But departments deliberately don't take on people as employees so they aren't lumbered with their pension responsibilities, and if they take them on as temps for too long the unions kick up a fuss.

Which is why the fun bit is going to be the tribunals. Agency regulations say that you have to be treated as if you were an employee after 12 weeks (assuming you haven't opted out), Equalities act means that you have to pay people doing the same work equally..

eek
5th December 2016, 16:53
Looking at this example https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/574554/the-ministry.pdf can I ask WTFFFFFFFF (the amount of F's is accurate) that person is doing working via a limited company....

seeourbee
5th December 2016, 16:57
If we all close our companies (I will) then HMRC loses all that VAT. Don't they care ?

difficulttimes
5th December 2016, 16:59
Looking at this example https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/574554/the-ministry.pdf can I ask WTFFFFFFFF (the amount of F's is accurate) that person is doing working via a limited company....

That was my first thought - she is getting a promotion as a contractor. Also, interesting that there is no mention in their dodgy flowchart that she is also owed backtaxes for the last 18 months! Even if this does exist WHY would this person in a million years accept the new contract. Are they dreaming? Interesting that they aren't using examples of social workers or NHS workers etc.

eek
5th December 2016, 17:00
If we all close our companies (I will) then HMRC loses all that VAT. Don't they care ?

The first thing to remember is that VAT is not tax its HMRC's money that we collect for it on it's behalf.

DotasScandal
5th December 2016, 17:00
Looking at this example https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/574554/the-ministry.pdf can I ask WTFFFFFFFF (the amount of F's is accurate) that person is doing working via a limited company....

Those examples are so childish and existing in the realm of fantasy that I'm thinking it's some kind of running joke. You should see the ones from the APN legislation 2014.
I'm wondering if Gauke himself makes all those amateurish flow charts.

seeourbee
5th December 2016, 17:02
The first thing to remember is that VAT is not tax its HMRC's money that we collect for it on it's behalf.

Yes, and if my company doesn't charge it, it won't collect it, it won't get paid to HMRC . So they lose cash.

eek
5th December 2016, 17:03
Those examples are so childish and existing in the realm of fantasy that I'm thinking it's some kind of running joke. You should see the ones from the APN legislation 2014.
I'm wondering if Gauke himself makes all those amateurish flow charts.

You can imagine the question:-

have you got flow charts to cover all scenarios? Yep there is 8 of them.. I've covered all parts of the public sector...

eek
5th December 2016, 17:07
Yes, and if my company doesn't charge it, it won't collect it, it won't get paid to HMRC . So they lose cash.

VAT is also tax neutral in the case of the public sector. Council pays VAT out, councils get a grant for the amount paid out, most of it is collected back by HMRC.

Outside of banking, gambling VAT is total neutral. We bill £100k+VAT, our clients deduct that £20k in VAT payments from the amount of VAT they pay HMRC...

youngguy
5th December 2016, 17:08
The point is these people should be employees (even if on a temporary fixed term basis) and I suspect this is designed to ensure that is the case....

Which brings us back to the original agreement which is just employ them then!

No sign of the digital tool either so people can't really plan

seeourbee
5th December 2016, 17:10
VAT is also tax neutral in the case of the public sector. Council pays VAT out, councils get a grant for the amount paid out, most of it is collected back by HMRC.

Outside of banking, gambling VAT is total neutral. We bill £100k+VAT, our clients deduct that £20k in VAT payments from the amount of VAT they pay HMRC...

Yes I know, but I was thinking the private sector which is inevitably the next step.

LondonManc
5th December 2016, 17:11
Yes, and if my company doesn't charge it, it won't collect it, it won't get paid to HMRC . So they lose cash.

Incorrect. Given that it's all government cash, they'll want to pay you as little as possible - the more in your pocket, however they pay you, the more it costs them overall. That'll be the simple vision. This is management by spreadsheet at its most dangerous. There's no thought about the secondary and tertiary markets that lots of contractors support - shops, bars and restaurants near places of work, etc.

The risk is ultimately that they'll end up getting consultancies in and the big pot of cash will disappear elsewhere at a quicker rate than we could spend it.

youngguy
5th December 2016, 17:11
Looking at this example https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/574554/the-ministry.pdf can I ask WTFFFFFFFF (the amount of F's is accurate) that person is doing working via a limited company....

If that is their idea of a company no wonder they all think we are disguised employees

SueEllen
5th December 2016, 17:16
Which brings us back to the original agreement which is just employ them then!



Because then they have pension liabilities for those people for the rest of their lives AND they are harder to get rid off.

Anyone working in the public sector after April 2017 should join a union.

While departments will want to hire some people as permanent employees they won't want to hire ALL their contractors in this way.

Unions while in theory they don't support new members in legal cases if there is a chance they can make case law out of it they will support you.

eek
5th December 2016, 17:17
Yes I know, but I was thinking the private sector which is inevitably the next step.

Read my post again.

I bill private end client £25k + £5k VAT. In their VAT calculation for the quarter they state income £100k VAT £20k, expenditure £25k, VAT paid out £5k. So the end client pays out £15k to HMRC as the rest of the VAT is accounted for in the expenditure.

Total VAT received by HMRC £20k (£15k from end client, £5k from me).

Say the end client employes me instead. Income for quarter £100k, VAT £20k. expenditure £0k VAT paid £0k. The end client then needs to pay VAT of £20k but HMRC has received the same amount.

Total VAT received by HMRC £20k (£20k from the end client £0 from me).

As I've continually had to state for years VAT is regarded as neutral by HMRC because of the example above. You can argue that banks and gambling is different but in the scheme of VAT the amount they make from end clients unable to reclaim it is ant hill sized....

DotasScandal
5th December 2016, 17:18
Contractors joining an union!

Think we'll see flying pigs first ;)

LondonManc
5th December 2016, 17:19
If that is their idea of a company no wonder they all think we are disguised employees

Indeed. Simone's a bit of a cheap one isn't she?

Looking at the flow chart, this could be another bit of Indian giving from central government. They'll up council budgets for them and take it back off them via contractor business NICs. Joe Public won't have a clue about it and obviously won't protest at people paying the "correct" tax if Tory's Pravda equivalent words it correctly for the red top rags. It'll just end up that the councils get an extra £20k per year and give it all back as NICs. Window dressing. What a bunch of winkers.

eek
5th December 2016, 17:19
Because then they have pension liabilities for those people for the rest of their lives AND they are harder to get rid off.

Anyone working in the public sector after April 2017 should join a union.

While departments will want to hire some people as permanent employees they won't want to hire ALL their contractors in this way.

Unions while in theory they don't support new members in legal cases if there is a chance they can make case law out of it they will support you.

I don't believe that will be true come April (to be honest its not true now given the tricks the unions are seeing being played as councils try to manage)...

eek
5th December 2016, 17:20
Contractors joining an union!

Think we'll see flying pigs first ;)

Looks at my GMB membership card and badge.....

seeourbee
5th December 2016, 17:22
Why won't the "tests" apply to consultancies like KPMG then ? As far as I can see KPMG bums are sat in seats, doing daily work that a good civil servant could do if they had time and skills. So why not tax KPMG invoices as employees too ?

SueEllen
5th December 2016, 17:22
If that is their idea of a company no wonder they all think we are disguised employees

That's what they have been told by the agencies they use.

I've had agents presume in the past without actually looking it up the company I use had one director when it had two. They actually stated this on their systems when Companies House clearly recorded I had two directors and I got the other director to sign the contract.

DotasScandal
5th December 2016, 17:24
Looks at my GMB membership card and badge.....

I believe you are more clued up than average.
99% of contractors I know insist on "doing their own thing", and would rather die than actually joining forces with other contractors.
Of course, necessity my change that eventually, but do not understimate the intertia.

DotasScandal
5th December 2016, 17:25
Why won't the "tests" apply to consultancies like KPMG then ? As far as I can see KPMG bums are sat in seats, doing daily work that a good civil servant could do if they had time and skills. So why not tax KPMG invoices as employees too ?

Ah....
You sure you really want to go down that rabbit hole?

eek
5th December 2016, 17:25
I believe you are more clued up than average.
99% of contractors I know insist on "doing their own thing", and would rather die than actually joining forces with other contractors.
Of course, necessity my change that eventually, but do not understimate the intertia.

Truthfully I only have it for the freebies and offers (that make most of IPSE's look poor).

SueEllen
5th December 2016, 17:26
Why won't the "tests" apply to consultancies like KPMG then ? As far as I can see KPMG bums are sat in seats, doing daily work that a good civil servant could do if they had time and skills. So why not tax KPMG invoices as employees too ?

KPMG and the larger consultancies bid for bits of work where they need to put in more than one body at a time.

youngguy
5th December 2016, 17:26
Because then they have pension liabilities for those people for the rest of their lives AND they are harder to get rid off.

Exactly that. The 'tax we dodge' covers those liabilities . Or to out it another way the premium clients pay is to be able to engage and disengage us quickly and without the issues of employee rights and regulations

youngguy
5th December 2016, 17:28
Indeed. Simone's a bit of a cheap one isn't she?

Looking at the flow chart, this could be another bit of Indian giving from central government. They'll up council budgets for them and take it back off them via contractor business NICs. Joe Public won't have a clue about it and obviously won't protest at people paying the "correct" tax if Tory's Pravda equivalent words it correctly for the red top rags. It'll just end up that the councils get an extra £20k per year and give it all back as NICs. Window dressing. What a bunch of winkers.

Ultimately cost will increase though. Whether it is agent margins, contractors rates or more consultants, costs.will.go.up and the perceived tax gained will be lost elsewhere

seeourbee
5th December 2016, 17:32
KPMG and the larger consultancies bid for bits of work where they need to put in more than one body at a time.

I don't understand. They are still humans sat at a desk doing work a civil servant could and should be doing .

DotasScandal
5th December 2016, 17:35
I don't understand. They are still humans sat at a desk doing work a civil servant could and should be doing .

What you don't understand is how the Big4 get their (Big) contracts. It's a totally different world.

LondonManc
5th December 2016, 17:35
Ultimately cost will increase though. Whether it is agent margins, contractors rates or more consultants, costs.will.go.up and the perceived tax gained will be lost elsewhere

Think about it. Government projects are what is being spent on here.

If you're paid £100k over the course of the year as an outside IR35 contractor, you'll see about £75k of that.

You'll see, at a guess, about £12k less inside IR35.

Under this model, any money that isn't taken home by you in either scenario gets back to the tax men somehow. They make an extra £12k a year out of putting you inside IR35. No brainer. They can put your rate up £50 a day, even £100 a day and they'll still not care. More money goes back to central government.

It's the PS departments/team that lose out, but central government doesn't care about that. It's getting extra PAYE out of you and the missing business NICs from the PS department. The departments lose out via both business NICs expense and best contractors walking.

SueEllen
5th December 2016, 17:40
I don't understand. They are still humans sat at a desk doing work a civil servant could and should be doing .

Unfortunately it is not on iPlayer any more but you can read this article linky (https://www.theguardian.com/business/2016/oct/17/management-consultants-cashing-in-austerity-public-sector-cuts)

It gives a clue on how larger consultancies land and expand.

Actually found it on Youtube - linky (https://youtu.be/00UFYU_Gr7w)

youngguy
5th December 2016, 17:45
Think about it. Government projects are what is being spent on here.

If you're paid £100k over the course of the year as an outside IR35 contractor, you'll see about £75k of that.

You'll see, at a guess, about £12k less inside IR35.

Under this model, any money that isn't taken home by you in either scenario gets back to the tax men somehow. They make an extra £12k a year out of putting you inside IR35. No brainer. They can put your rate up £50 a day, even £100 a day and they'll still not care. More money goes back to central government.

It's the PS departments/team that lose out, but central government doesn't care about that. It's getting extra PAYE out of you and the missing business NICs from the PS department. The departments lose out via both business NICs expense and best contractors walking.

I agree wholeheartedly.

...and therein lies the problem - they may make 12pa but that assumes no contractor leaves, no agency increases margins to their their extra admin, no project is delayed due to a walkout (cost money or deferring benefit) and no consultancy charging ppl at 2-2.5 cost comes in to fix it.

Very short sighted and makes the workers in Gov (as opposed to policy makers) much harder

youngguy
5th December 2016, 17:46
Serious Q (notwithstanding I haven't rad all the docs yet)

What do we know today from the new info that we didn't know yesterday? Has any clarity been provided?

eek
5th December 2016, 17:46
I agree wholeheartedly.

...and therein lies the problem - they may make 12pa but that assumes no contractor leaves, no agency increases margins to their their extra admin, no project is delayed due to a walkout (cost money or deferring benefit) and no consultancy charging ppl at 2-2.5 cost comes in to fix it.

Very short sighted and makes the workers in Gov (as opposed to policy makers) much harder

but that's a win win for the policy makers. We got the law made, implementation fails to implement it, come the promotions board the policy makers are already 2 points ahead - they successfully delivered, implementation have totally failed...

northernladuk
5th December 2016, 17:47
Serious Q (notwithstanding I haven't rad all the docs yet)

What do we know today from the new info that we didn't know yesterday? Has any clarity been provided?

Have you read it?

SueEllen
5th December 2016, 17:48
I agree wholeheartedly.

...and therein lies the problem - they may make 12pa but that assumes no contractor leaves, no agency increases margins to their their extra admin, no project is delayed due to a walkout (cost money or deferring benefit) and no consultancy charging ppl at 2-2.5 cost comes in to fix it.

Very short sighted and makes the workers in Gov (as opposed to policy makers) much harder

You forget it is NOT their money.

eek
5th December 2016, 17:48
Serious Q (notwithstanding I haven't rad all the docs yet)

What do we know today from the new info that we didn't know yesterday? Has any clarity been provided?

Decision is made by the end client, agencies don't have much say in it....

Will need to triple check that but that seems to be what all the documentation states...

eek
5th December 2016, 17:51
According to the consultation, that was explicitly not the case. It was a clear have/eat cake strategy. Afterall, it would be much easier (for "employees") if employment were mandated (e.g. FTC) on the outcome of the ESI.

And that's the bit we need to attack every way we can...

youngguy
5th December 2016, 17:59
Decision is made by the end client, agencies don't have much say in it....

Will need to triple check that but that seems to be what all the documentation states...

The person who probably understands the least about our business model, but who is most willing to put info into a tool and accept the first answer it gives

jamesbrown
5th December 2016, 18:11
Decision is made by the end client, agencies don't have much say in it....

Will need to triple check that but that seems to be what all the documentation states...

The documentation is ambiguous on this, as far as I can tell. It's either:


The client identifies when the contract is within scope; or
The client identifies whether it is caught.

I suspect it's the former, because the documentation alludes to agents and others using the online tool. In other words, I think the client's responsibility is not to deem whether a contract is caught (although it probably should be their responsibility), but simply to inform the agent that the contract is within scope (i.e. relevant public authority, and all other preconditions met).

eek
5th December 2016, 18:19
The documentation is ambiguous on this, as far as I can tell. It's either:


The client identifies when the contract is within scope; or
The client identifies whether it is caught.

I suspect it's the former, because the documentation alludes to agents and others using the online tool. In other words, I think the client's responsibility is not to deem whether a contract is caught (although it probably should be their responsibility), but simply to inform the agent that the contract is within scope (i.e. relevant public authority, and all other preconditions met).

From page 9 of the consultation response


Engagers will be required to inform the relevant party, such as an agency, whether the
off-payroll rules should apply and will be liable for this decision. HMRC will publish
guidance about the information needed which will also cover what engagers should do
if working practices change.

and from the technical notes https://www.gov.uk/government/publications/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note#requirement-on-public-sector-body-to-provide-information-to-agency-as-to-whether-employment-status-test-is-met


Requirement on public sector body to provide information to agency as to whether employment status test is met
33.The public sector client must inform the intermediary, agency, or third party with whom they have a contract to provide the services that the contract falls within the new off-payroll rules or that it does not. This conclusion can be included in the contract with the intermediary, agency, or other third party, or separately.

34.If the public sector client does not notify the intermediary, agency, or other third party of the status of the worker then they may request in writing that the public sector client provides the necessary information. The public sector client can also be asked by the person they have contracted with about the reasons or reaching the conclusion they did.

35.The public sector client must reply to the written requests for a decision on whether the off-payroll rules are applicable or for the reasons why the client reached a conclusion within 31 days of receiving the request. If the public sector client does not reply to the request as to whether the off-payroll rules apply within 31 days they become responsible for accounting for PAYE.

36.Public authorities must ensure there is clear process in place to comply with this information requirement.

So from my reading it seems the department is making the decision - and personally they should be doing so prior to advertising the role....

jamesbrown
5th December 2016, 18:27
From page 9 of the consultation response


When I mentioned ambiguous, it was precisely those instances that I was thinking about. Why should that be interpreted as "inside IR35" rather than "within the scope of a determination"? Remember, there are preconditions on whether the contract is within the scope of a determination, beyond whether it is a public authority (which, in itself, may be ambiguous in some cases).

Obviously, if the agent makes a request for information, the public authority will need to respond, but that isn't the same thing. The question is whether the client makes the determination by default, or responds to a request for information.

eek
5th December 2016, 18:36
When I mentioned ambiguous, it was precisely those instances that I was thinking about. Why should that be interpreted as "inside IR35" rather than "within the scope of a determination"? Remember, there are preconditions on whether the contract is within the scope of a determination, beyond whether it is a public authority (which, in itself, may be ambiguous in some cases).

Obviously, if the agent makes a request for information, the public authority will need to respond, but that isn't the same thing. The question is whether the client makes the determination by default, or responds to a request for information.

Isn't that more to do with the timing of the determination rather than who is making the determination.

The one thing I was looking for (and some agencies were no doubt fearing / hoping for) was whether agencies could determine the result and that doesn't appear to be the case....

jamesbrown
5th December 2016, 18:44
Isn't that more to do with the timing of the determination rather than who is making the determination.

The one thing I was looking for (and some agencies were no doubt fearing / hoping for) was whether agencies could determine the result and that doesn't appear to be the case....

It comes down to whether you interpret:


falls within the new off-payroll rules

As falls within a determination or falls within a determination and is determined inside. You may be correct, but they could've been much clearer about this. For example:


Following representations, the government has decided not to introduce the separate
gateway tests outlined in the consultation document. The government agrees that the
proposed gateway tests only work as designed if the person using them already
understands employment status case law – and that most people would still need to
go on to carry out the full test. Instead, engagers and agencies will be able to use the online tool alone; providing
simplicity and certainty from day one of the contract.

Why agencies? I think that the information sharing requirement could be just that. In other words, the public authority must share information, but not necessarily make the determination. Your interpretation is still quite likely, though, and that was my first interpretation too, but I changed my mind upon re-reading, not so much about what would happen in practice, but more about whether the legal requirement is on the client to actually make the determination.

fool
5th December 2016, 18:49
Decision is made by the end client, agencies don't have much say in it....

Will need to triple check that but that seems to be what all the documentation states...

This is the interesting part. Even if you're delivering well and on amazing terms with your public sector point of contact, you're going to struggle to convince a structurally different legal, contract or procurement department to decide the status in your favour.

I guess here ends the gravy train, unless you have someone with a lot of juice willing to bat for you, which is where the 90% figure actually makes sense.

eek
5th December 2016, 18:58
It comes down to whether you interpret:



As falls within a determination or falls within a determination and is determined inside. You may be correct, but they could've been much clearer about this. For example:



Why agencies? I think that the information sharing requirement could be just that. In other words, the public authority must share information, but not necessarily make the determination. Your interpretation is still quite likely, though, and that was my first interpretation too, but I changed my mind upon re-reading, not so much about what would happen in practice, but more about whether the legal requirement is on the client to actually make the determination.

I remember that but I'm assuming the technical notes override the consultation response...

eek
5th December 2016, 19:10
Just found the example descriptions outside the flow charts @ https://www.gov.uk/government/publications/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note#examples .

Light reading there but it seems if you work with staff on a daily basis, sit in their office or use their hardware you are screwed.

mudskipper
5th December 2016, 19:10
I think the draft legislation is saying "it's the client". (IANAL)


61M Engagements to which Chapter applies
(1) Sections 61N to 61R apply where—
(a) an individual (“the worker”) personally performs, or is under
an obligation personally to perform, services for another
person (“the client”),
(b) the client is a public authority,
(c) the services are provided not under a contract directly
between the client and the worker but under arrangements
involving a third party (“the intermediary”), and
(d) the circumstances are such that—
(i) if the services were provided under a contract directly
between the client and the worker, the worker would
be regarded for income tax purposes as an employee
of the client or the holder of an office under the client,
or
(ii) the worker is an office-holder who holds that office
under the client and the services relate to the office.


61S Information to be provided by clients and consequences of failure
(1) If the conditions in section 61M(1)(a) to (c) are met in any case, and a
person as part of the arrangements mentioned in section 61M(1)(c)
enters into a contract with the client, the client must inform that
person (in the contract or otherwise) of which one of the following is
applicable—
(a) the client has concluded that the condition in section
61M(1)(d) is met in the case;
(b) the client has concluded that the condition in section
61M(1)(d) is not met in the case.
-------------------

(61M(1)(d) - see above is the 'you're IR35 caught' bit)

eek
5th December 2016, 19:27
I think the draft legislation is saying "it's the client". (IANAL)


61M Engagements to which Chapter applies
(1) Sections 61N to 61R apply where—
(a) an individual (“the worker”) personally performs, or is under
an obligation personally to perform, services for another
person (“the client”),
(b) the client is a public authority,
(c) the services are provided not under a contract directly
between the client and the worker but under arrangements
involving a third party (“the intermediary”), and
(d) the circumstances are such that—
(i) if the services were provided under a contract directly
between the client and the worker, the worker would
be regarded for income tax purposes as an employee
of the client or the holder of an office under the client,
or
(ii) the worker is an office-holder who holds that office
under the client and the services relate to the office.


61S Information to be provided by clients and consequences of failure
(1) If the conditions in section 61M(1)(a) to (c) are met in any case, and a
person as part of the arrangements mentioned in section 61M(1)(c)
enters into a contract with the client, the client must inform that
person (in the contract or otherwise) of which one of the following is
applicable—
(a) the client has concluded that the condition in section
61M(1)(d) is met in the case;
(b) the client has concluded that the condition in section
61M(1)(d) is not met in the case.
-------------------

(61M(1)(d) - see above is the 'you're IR35 caught' bit)

Yep. I was operating on the following basis:-

Technical note is what they are aiming for
Law should be identical but could be screwed up (see April with umbrella companies and the T&S first run).
Consultation discussion earlier document that doesn't really matter any more so things may be wrong there.

And the technical note does say client determines (albeit can be slow upto 31 days after engagement about doing so)...

Most of the examples are real taking the mickey examples though....

But the bit in red is going to give the unions a field day....

youngguy
5th December 2016, 19:55
The agency will pay secondary*NICs*related to the engagement, as it does for directly employed people
.
That's not going to be absorbed by agencies without a change to their margins

eek
5th December 2016, 19:58
That's not going to be absorbed by agencies without a change to their margins

Which means that agencies are going to need determination before they spend time looking for people....

SlipTheJab
5th December 2016, 20:02
Whats going to happen to a lot of the contractor accountants I wonder, if I was caught and in the PS come next year I would (IF I wanted to continue in the PS) bin the Ltd and go Brolly as, the resident ones that usually post on here have been very quiet of late :tumble:

youngguy
5th December 2016, 20:04
Which means that agencies are going to need determination before they spend time looking for people....

Absolutely.the one 'good thing' of this is that there Should be clarity before the role goes to the agent and is therefore advertised so agents and contractors can decide if it is worth it to their business .


Imagine a world where agents won't bid for a role due to the taxes THEY incur 😉

jamesbrown
5th December 2016, 20:17
I remember that but I'm assuming the technical notes override the consultation response...

Personally, I wouldn't assume anything. There are lots of minor mistakes throughout, including in the technical notes.

jamesbrown
5th December 2016, 20:21
it seems if you work with staff on a daily basis, sit in their office or use their hardware you are screwed.

I think you're screwed under all circumstances as far as the determination is concerned. The actual position is a completely different matter, and their opinions on case law are worth no more (generally less) than others, but that was never the point...

jamesbrown
5th December 2016, 20:24
I think the draft legislation is saying "it's the client". (IANAL)


61M Engagements to which Chapter applies
(1) Sections 61N to 61R apply where—
(a) an individual (“the worker”) personally performs, or is under
an obligation personally to perform, services for another
person (“the client”),
(b) the client is a public authority,
(c) the services are provided not under a contract directly
between the client and the worker but under arrangements
involving a third party (“the intermediary”), and
(d) the circumstances are such that—
(i) if the services were provided under a contract directly
between the client and the worker, the worker would
be regarded for income tax purposes as an employee
of the client or the holder of an office under the client,
or
(ii) the worker is an office-holder who holds that office
under the client and the services relate to the office.


61S Information to be provided by clients and consequences of failure
(1) If the conditions in section 61M(1)(a) to (c) are met in any case, and a
person as part of the arrangements mentioned in section 61M(1)(c)
enters into a contract with the client, the client must inform that
person (in the contract or otherwise) of which one of the following is
applicable—
(a) the client has concluded that the condition in section
61M(1)(d) is met in the case;
(b) the client has concluded that the condition in section
61M(1)(d) is not met in the case.
-------------------

(61M(1)(d) - see above is the 'you're IR35 caught' bit)

That's what we're looking for. The client is defined as the public authority, and they must make the IR35 decision, not just provide the information necessary to make that decision. So eek was correct on this.

It makes sense insofar as the agent was never in a position to make a (proper) determination.

seeourbee
5th December 2016, 20:25
Why are the agencies seeing reduced margins - surely it will still be 20% on the daily rate ? No change there ?

youngguy
5th December 2016, 20:27
Whats going to happen to a lot of the contractor accountants I wonder, if I was caught and in the PS come next year I would (IF I wanted to continue in the PS) bin the Ltd and go Brolly as, the resident ones that usually post on here have been very quiet of late :tumble:

Big knock on effect for agencies (especially smaller ones) and accountants (more work, less people as many will go brolly) etx. So less small businesses all round and more capita's and big 4.

It does seem like there is little point in having the hassle of a ltd if you are purely engaged in the ps- it more or less becomes an agency worker model

eek
5th December 2016, 20:31
That's what we're looking for. The client is defined as the public authority, and they must make the IR35 decision, not just provide the information necessary to make that decision. So eek was correct on this.

It makes sense insofar as the agent was never in a position to make a (proper) determination.

It also shuts down a lot of the schemes that otherwise would have been created and makes shifting it to the private sector slightly harder. A public sector manager wants to keep his job and final salary pension, your typical private company director wants to minimise costs...

northernladuk
5th December 2016, 20:33
Big knock on effect for agencies (especially smaller ones) and accountants (more work, less people as many will go brolly) etx. So less small businesses all round and more capita's and big 4.

It does seem like there is little point in having the hassle of a ltd if you are purely engaged in the ps- it more or less becomes an agency worker model

You and many others are making out that people get a gig in the PS and are stuck with it for life. Don't want to burst your bubble but we work in the private sector as well. You might get the odd PS gig if you can take the hit and go back to private so little change to the accountants.

You are second guessing how accountants will be affected on a flawed assumption.

jamesbrown
5th December 2016, 20:51
It also shuts down a lot of the schemes that otherwise would have been created and makes shifting it to the private sector slightly harder. A public sector manager wants to keep his job and final salary pension, your typical private company director wants to minimise costs...

True, but I'd still bet on a high degree of risk aversion (read: false employment). I have no doubt that, for the most clearcut cases, where the client agrees, there will be a way to obtain an outside determination, certainly in the private sector and possibly for some in the public sector, but the wider implications for the contracting community are pretty clear; there's going to be a lot of false employment and many accountants and other professional service providers in the IR35 industry will not survive (even if they try to serve engagers).

eek
5th December 2016, 21:21
True, but I'd still bet on a high degree of risk aversion (read: false employment). I have no doubt that, for the most clearcut cases, where the client agrees, there will be a way to obtain an outside determination, certainly in the private sector and possibly for some in the public sector, but the wider implications for the contracting community are pretty clear; there's going to be a lot of false employment and many accountants and other professional service providers in the IR35 industry will not survive (even if they try to serve engagers).

To be honest I'm not at all concerned about false employment, I'm not rushing to be employed by anyone.

All I want is a world where as a specialist consultant competing directly against consultancies I can be treated as a self employed specialist rather than having the substitution hops to jump through. And I feel we are a step closer to that today.

jamesbrown
5th December 2016, 21:27
To be honest I'm not at all concerned about false employment, I'm not rushing to be employed by anyone.

All I want is a world where as a specialist consultant competing directly against consultancies I can be treated as a self employed specialist rather than having the substitution hops to jump through. And I feel we are a step closer to that today.

Likewise, I'm not personally concerned about any of this (or, rather, not very concerned, except by the underlying tone from Hammond that small service providers are invariably trying to game the system). Almost all of my clients are overseas, and I can easily move overseas if required. My contracts are about as far outside IR35 as they could be. I'm not interested in setting up a larger consultancy, as I do highly specialised work, and I can't be bothered with the hassle of it (easier to sub than employ, if needed). Ultimately, I'm not that fussed about tax either, providing it's fair (i.e. not have/eat cake). However, I don't think this bodes well for contracting more generally, and we should all be concerned about that at some level (even for the selfish reason that we'll be impacted, indirectly, by the availability of accountants and other service providers, although that is not what I'm talking about).

youngguy
5th December 2016, 21:38
You and many others are making out that people get a gig in the PS and are stuck with it for life. Don't want to burst your bubble but we work in the private sector as well. You might get the odd PS gig if you can take the hit and go back to private so little change to the accountants.

You are second guessing how accountants will be affected on a flawed assumption.

You need to re-read my post and reset some of your assumptions my grumpy little friend!

jonnyboy
5th December 2016, 23:42
I love Jasmine. There, my feelings are out. I will hang a banner from the walls and declare... "I LOVE JASMINE".

By Jasmine, I mean this jasmine, from one of the very last sections of this awful guide......


Jasmine is a Website Designer, contracted to a large local authority to design and build a website - off-payroll working rules do not apply.
asmine is a website designer who provides her services through her own company, Jasmine WWW Ltd. The PSC has been contracted by a local authority, Midshire CC to design and build a new website, through which local residents should be able to access and use their services.
Midshire CC has agreed to pay Jasmine WWW Ltd £200,000 for Jasmine’s services.

Given the nature of Jasmine’s work and the contract with the PSC, the service indicates that the rules do not apply in this instance.


So what that seems to suggest, is that if its not a x days @ £y a day sitting at company ABCs desk day in and day out, then its all good.
You can still do project based work, at an agreed price, and it falls outside of the rules.

Yes, now I know that people are going to say 'yes, but landing those gigs is going to be impossible", but if you have a client that REALLY REALLY wants to keep you, then this seems a get out (or at least a short term side step).

northernladuk
6th December 2016, 00:28
I love Jasmine. There, my feelings are out. I will hang a banner from the walls and declare... "I LOVE JASMINE".

By Jasmine, I mean this jasmine, from one of the very last sections of this awful guide......



So what that seems to suggest, is that if its not a x days @ £y a day sitting at company ABCs desk day in and day out, then its all good.
You can still do project based work, at an agreed price, and it falls outside of the rules.

Yes, now I know that people are going to say 'yes, but landing those gigs is going to be impossible", but if you have a client that REALLY REALLY wants to keep you, then this seems a get out (or at least a short term side step).

You are way over simplifying it. She is delivering a product. A completed website. She can do in her own time and as fast as she wants to depending on clients need. Very very few contractors offer products like that. We offer professional services so a different model. The public sector is probably the worst lot for bending rules as well. They will follow any process regardless of the fall out and cost in most cases.

The rest of the example makes the situation very clear. You can just select an option thats not covered and then try to pretend it might fit. That's just pointless and get us nowhere.

gisajob
6th December 2016, 07:38
Guys im a long time lurker on these forums and have watched your musings on this matter with intrigue.

Im in a PS contract which ive been undertaking since Dec 2015. Ive been looking for an out since I got wind of this stuff in March.

Today of all days ive been offered a private sector contract. However - they will be providing me to, you guessed it...the public sector.

As far as I can understand ill be inside. The relationship goes - public sector body > private sector tech company > agency > me (ltd).

This is something that I was concerned about but I think it is covered on page 8:

Government Response
The government agrees that this definition of the public sector is appropriate for the
purposes of the change. It covers what most people would recognise as the public
sector, is a stable list that rarely changes and organisations will know whether or not
they are subject to the FOI Act.
The government also agrees that the reform should not be extended to private
companies carrying out public functions. HMRC will provide guidance to cover the process for the
small minority of cases where it may not be clear that an organisation is within the public sector.

eek
6th December 2016, 08:18
Guys im a long time lurker on these forums and have watched your musings on this matter with intrigue.

Im in a PS contract which ive been undertaking since Dec 2015. Ive been looking for an out since I got wind of this stuff in March.

Today of all days ive been offered a private sector contract. However - they will be providing me to, you guessed it...the public sector.

As far as I can understand ill be inside. The relationship goes - public sector body > private sector tech company > agency > me (ltd).

Below is the sell I have received from the recruiter;;

Hi X,

The guy currently in the position puts in a minimum of 40 Hours per week – just as an idea of how many he puts in last week was 42 Hours.

The vacancy would sit with private sector company so therefore from an IR35 point of view you would be safe as you would be contracting to the private sector.

private sector company would then therefore be providing a consultancy service to public sector body and you wouldn’t be doing so directly for them.

The contract would lie between private sector company and yourself.

What are your thoughts on this and the rate?


What do you guys think? Do you know anyone who you think could conduct a reliable contract review at this stage? Cheers

The question that matters is:-

Who is responsible for the work being delivered?

If its the software house you probably won't have a problem, if all the software house is doing is providing a bum on a seat on a project managed by a project manager employed by the public sector client and you work alongside public sector employees I think you are caught...

MoroccanMole
6th December 2016, 08:59
The earlier consultation document made clear that the reach of the new legislation covered contractor working through larger private sector consultancies.

That being said, two factors to consider. Firstly if it's a package of work or direct staff supply, and the second is if all parties in the supply chain are aware of the legislation.

Tbh, if the contract requires a minimum number of hours a weeks, this sounds a lot like SDC to me.

BoredBloke
6th December 2016, 09:36
If the client is deducting tax at source, how do they account for the fact that you might not be employed for the whole year. Many contractors have bench time to contend with. Is there a mechanism for claiming back over paid taxes? I handle my payroll with the assumption that I might find myself out of work at relatively short notice and I need funds in the business to continue paying my salary and the various company bills. As far as I see things, the easy to hire/fire nature of contracting is not being changed, but our ability to build a warchest is.

What happens if you have 2 clients at once? If they are deducting tax at source on contract 1, what happens to the earnings regarding contract 2?

eek
6th December 2016, 09:39
If the client is deducting tax at source, how do they account for the fact that you might not be employed for the whole year. Many contractors have bench time to contend with. Is there a mechanism for claiming back over paid taxes? I handle my payroll with the assumption that I might find myself out of work at relatively short notice and I need funds in the business to continue paying my salary and the various company bills. As far as I see things, the easy to hire/fire nature of contracting is not being changed, but our ability to build a warchest is.

What happens if you have 2 clients at once? If they are deducting tax at source on contract 1, what happens to the earnings regarding contract 2?

P45 is given to client when you begin, p45 is given to you when you finish.

Tax reclaim is via self assessment at the end of the year, other clients will pay your company gross so you would probably take that income via dividends or leave in the company until next year

SueEllen
6th December 2016, 09:44
If the client is deducting tax at source, how do they account for the fact that you might not be employed for the whole year. Many contractors have bench time to contend with. Is there a mechanism for claiming back over paid taxes? I handle my payroll with the assumption that I might find myself out of work at relatively short notice and I need funds in the business to continue paying my salary and the various company bills. As far as I see things, the easy to hire/fire nature of contracting is not being changed, but our ability to build a warchest is.

What happens if you have 2 clients at once? If they are deducting tax at source on contract 1, what happens to the earnings regarding contract 2?

That's what self-assessment is for.

Oh and don't be surprised, like many of my friends' over the years who have to claim back loads of money, if HMRC tells you you don't need to submit a return any more.

MoroccanMole
6th December 2016, 09:46
If you give consideration to the employment rights angle, and the recent Uber ruling, a PS body will be running through a check list and answering 'yes' to all the criteria that would make you an employee and eligible for employee benefits.

Hotsauce56
6th December 2016, 09:57
The earlier consultation document made clear that the reach of the new legislation covered contractor working through larger private sector consultancies.

That being said, two factors to consider. Firstly if it's a package of work or direct staff supply, and the second is if all parties in the supply chain are aware of the legislation.

Tbh, if the contract requires a minimum number of hours a weeks, this sounds a lot like SDC to me.

Guys thanks for your replies.

Chatting with the recruiter it seems its a package of work delivered as a consultancy service rather than a staff supply. I'm hesitant.

Given the ignorance on these changes I would be surprised if all parties are aware. Out of the chain of four companies involved in this new gig, I'd say its just myself and the recruiter who are aware at this stage.

I'll await the contract with bated breath. Does anyone know who could conduct a decent contract review at this stage and give me an understanding of where I would stand in April 2017, based on what we know to date?

northernladuk
6th December 2016, 09:58
If you give consideration to the employment rights angle, and the recent Uber ruling, a PS body will be running through a check list and answering 'yes' to all the criteria that would make you an employee and eligible for employee benefits.

Except for the fact it's a contract with your limited and not you.

jonnyboy
6th December 2016, 10:04
You are way over simplifying it. She is delivering a product. A completed website. She can do in her own time and as fast as she wants to depending on clients need. Very very few contractors offer products like that. We offer professional services so a different model. The public sector is probably the worst lot for bending rules as well. They will follow any process regardless of the fall out and cost in most cases.

The rest of the example makes the situation very clear. You can just select an option thats not covered and then try to pretend it might fit. That's just pointless and get us nowhere.

How so? Jasmine delivers a web site. I deliver a data warehouse, or a lump of software, or an intranet page. Yes, its a radical change... from a contractor role (x days @ £x) to a freelancer role (deliver x for a total cost of £xxxx). Clearly it would be a different way of working - no more turning up and working 9am to 5pm Mon to Fri, but if the client wants something, they pay for it to be created and the end price, and its down to the contractor (now freelancer) to work out how long it will take and do it in the way that they see best, meeting with the client from time to time to check in and show how its progressing. In the mean time, this farce plays out and we can watch the Public Sector burn.

Whats the difference between Jasime and myself?

malvolio
6th December 2016, 10:08
How so? Jasmine delivers a web site. I deliver a data warehouse, or a lump of software, or an intranet page. Yes, its a radical change... from a contractor role (x days @ £x) to a freelancer role (deliver x for a total cost of £xxxx).

Whats the difference between Jasime and myself?
She gets paid for delivering a finished product, and doesn't get paid of she doesn't. She also doesn't necessarily get paid until it's delivered

You can run your project for 7 months, get paid weekly and then cock up the implementation so it doesn't work (and I've seen that happen several times). You may get sued for poor workmanship or you may not, but you will still have been paid.

It's called business risk, and in HMG's world view, is the true separator between BoS and Freelance.

MoroccanMole
6th December 2016, 10:13
Invoice against delivery milestones.

jonnyboy
6th December 2016, 10:18
She gets paid for delivering a finished product, and doesn't get paid of she doesn't. She also doesn't necessarily get paid until it's delivered

You can run your project for 7 months, get paid weekly and then cock up the implementation so it doesn't work (and I've seen that happen several times). You may get sued for poor workmanship or you may not, but you will still have been paid.

It's called business risk, and in HMG's world view, is the true separator between BoS and Freelance.

Maybe I am not explaining myself correctly. As it stands, with these rules and measures in place, until the legal bun fights that will happen are concluded, come April 2017, contracting in the PS is no more. Not unless you want to go slowly bankrupt. Even if there are court cases and test cases, I thing contracting is dead full stop - the government will just update the IR35 rules to side step whatever cases they loose, and then when its nice and solid in the PS, roll it out across the private sector. So bum on seat contracting is dead. Gone. Goodbye. End of story.

I am talking about freelancing - proper freelancing. Here is the quote to build that data warehouse you want (that I would be working as a day contractor for in the past, but you cant have that now). Now I will deliver this in my own time, and will have it finished in 3 months, and it will cost you £45,000. I will need a £10.000 deposit to start the work, and will expect payment of the balance 1 week after I deliver it.

malvolio
6th December 2016, 10:20
Invoice against delivery milestones.
Assuming you can break your project down into discrete deliverables (a dubious assumption in many cases) then there is still a risk. For example, miss a milestone - easy given these at PS contracts and PS workers you are dealing with - and you don't get paid. You may even get penalised.

LondonManc
6th December 2016, 10:25
Given the Uber ruling, surely it's in public sector interest to not have loads of contractors claiming sick days, holidays, union representation and everything else? On that basis alone, I'd say that the public sector department ultimately using the contractor should be arbitrarily allowed to decide which type of contractor they want - a short term perm or a true freelancer. Hector shouldn't get a say because it's the public sector department that's taking the extra administration on or not.

What that would need, though, is a clear definition of off payroll or not, e.g. sick pay, holiday pay, union representation, forced working hours (9-5 M-F, unless permies can do different), etc. versus less control, no work no pay, etc. If public sector bodies can see the pros and cons of both methods of engagement and they are responsible for reporting which staff are recruited under which approach, then it would make life easier for everyone.

Cirrus
6th December 2016, 10:33
Not unless you want to go slowly bankrupt. So bum on seat contracting is dead. Gone. Goodbye. End of story.
My lad works for EY and does work along side contractors (in banks). As we all know, these kind of roles can be filled by permies, contractors or consultancies, on a relatively random basis.

As a consultancy permie he pays a lot of tax.

He is, however, far from going bankrupt.

You are just throwing your toys out the pram. Contracting goes on. One of two things happens: either you have a lower income (and have to live like a permie including building warchests) or you put your rate up and recover lost income out of taxed fees.

It's bad but you have to suck it up and stop whingeing.

northernladuk
6th December 2016, 10:40
It's bad but you have to suck it up and stop whingeing.

Totally this.

Mis-representing examples and then throwing the towel in when you still don't fully understanding isn't helping anyone.

jonnyboy
6th December 2016, 10:41
You are just throwing your toys out the pram. Contracting goes on. One of two things happens: either you have a lower income (and have to live like a permie including building warchests) or you put your rate up and recover lost income out of taxed fees.


And the award for missing the point goes to this man!

Would you be happy with paying the same National Insurance as everybody else, but not being allowed to use the NHS?
What about entering a 100m race, but being told you had to do it in bare feet whilst everybody else got to wear trainers?
What about being forced to pay road tax, but you (just you) are not allowed to drive on motorways?

The point is we could take the simple route and all double our day rates - problem solved. But the changes are forcing us to be the same as a permi, but with NONE of the rights. IF a permi is sacked, he gets redundancy, a right to ask why, to take his employer to court, to get paid if he is sick. We get nothing. Politicians always like to throw around the word "fair".. so which part of that is fair?

If anything, they are making it more complex for us - as our accounting and salaries will become a nightmare. We will take to deal with a new system of tax credits from the agency who deducts the tax as a week 1 40% rate, and then reapply this against any salary from our companies.

eek
6th December 2016, 10:42
Except for the fact it's a contract with your limited and not you.

Employment tribunals as with HMRC will happily look through artificial entities.

And while I haven't chatted with my union mates yet (may see one on Friday lunchtime) I suspect the actual law will be very interesting for them

SussexSeagull
6th December 2016, 10:42
Does tend to get overlooked that a fair amount of contractors in the Public Sector probably go through Umbrellas already so will hardly notice this.

sal
6th December 2016, 10:50
Does tend to get overlooked that a fair amount of contractors in the Public Sector probably go through Umbrellas already so will hardly notice this.

Which doesn't change the fact that a fair amount are not using umbrella..

Also doesn't change the fact that the scatter gun approach is harming genuine businesses in many cases.

SueEllen
6th December 2016, 10:52
Employment tribunals as with HMRC will happily look through artificial entities.

I was going to post something similar.

All courts in the UK will happily look through artificial entities, and if the law doesn't meet what the judge requires they are vocal about it.


And while I haven't chatted with my union mates yet (may see one on Friday lunchtime) I suspect the actual law will be very interesting for them

Though it doesn't help if contractors don't join the unions concerned so they can take on cases but I guess like with Uber and Deliveroo they will get members.

SussexSeagull
6th December 2016, 10:56
Which doesn't change the fact that a fair amount are not using umbrella..

Also doesn't change the fact that the scatter gun approach is harming genuine businesses in many cases.

Yes but you are talking like it is absolutely impossible to continue contracting in the public sector. It plainly obviously is as some people are doing it more or less on the same terms already.

sal
6th December 2016, 11:06
Yes but you are talking like it is absolutely impossible to continue contracting in the public sector. It plainly obviously is as some people are doing it more or less on the same terms already.

It might become, if the PS bodies star finding it harder and harder to find contractors for their projects and end up engaging the big consultancies to keep things "going". Once they sink their teeths in, it will be hard to go back...

But isn't that the whole point of the entire exercise...

SueEllen
6th December 2016, 11:31
It might become, if the PS bodies star finding it harder and harder to find contractors for their projects and end up engaging the big consultancies to keep things "going". Once they sink their teeths in, it will be hard to go back...

But isn't that the whole point of the entire exercise...

The big consultancies then have to find people with the right skills who will happily work for them including in the middle of nowhere.

From the people I've had contact with in the past 18 months this is a bit of a problem....

LondonManc
6th December 2016, 11:32
The big consultancies then have to find people with the right skills who will happily work for them including in the middle of nowhere.

From the people I've had contact with in the past 18 months this is a bit of a problem....

Given the BBC documentary on it, I don't think they'll have problem finding green and keen graduates who can use Powerpoint.

sal
6th December 2016, 11:36
The big consultancies then have to find people with the right skills who will happily work for them including in the middle of nowhere.

From the people I've had contact with in the past 18 months this is a bit of a problem....

Plenty of people on the sub-continent eager for their T2 visas...

eek
6th December 2016, 12:10
Employment tribunals as with HMRC will happily look through artificial entities.

And while I haven't chatted with my union mates yet (may see one on Friday lunchtime) I suspect the actual law will be very interesting for them

And to add to the above.

If the law says (as its currently phrased):

if the services were provided under a contract directly
between the client and the worker, the worker would
be regarded for income tax purposes as an employee
of the client or the holder of an office under the client,
or

what do you think an employment tribunal is going to say if you ask for employment rights and the reason why you are in the current position is that you have been required (under duress) to use a separate company...

Cirrus
6th December 2016, 12:18
And the award for missing the point goes to this man!


The point is we could take the simple route and all double our day rates - problem solved. But the changes are forcing us to be the same as a permi, but with NONE of the rights. IF a permi is sacked, he gets redundancy, a right to ask why, to take his employer to court, to get paid if he is sick. We get nothing.

Apologies if you are still missing the point.

My lad works for EY. He sits next to you.

If your/his client can the project and EY sack him as a result. He has rights.

However what you can't seem to accept is he gets rights from his employer not his client

Are you following me?

When you are a 2017 contractor and you get canned. You have exactly the rights you crave. You can have sick pay, maternity pay, redundancy. Whatever you like. But it's your company that pays. Not the client. They are not employing you. Just because you keep saying it seems like employment doesn't actually make it so.

HMRC have not said you will be an employee. Everybody here is implying this but I've not heard it yet. What they've said is you'll pay tax rather like an employee (although not identically).

You may well say that is a bit harsh but you're not losing benefits. It's no different to what's happened all these years up to now. What's changing is those benefits are going to be taxed.

LondonManc
6th December 2016, 12:21
Apologies if you are still missing the point.

My lad works for EY. He sits next to you.

If your/his client can the project and EY sack him as a result. He has rights.

However what you can't seem to accept is he gets rights from his employer not his client

Are you following me?

When you are a 2017 contractor and you get canned. You have exactly the rights you crave. You can have sick pay, maternity pay, redundancy. Whatever you like. But it's your company that pays. Not the client. They are not employing you. Just because you keep saying it seems like employment doesn't actually make it so.

HMRC have not said you will be an employee. Everybody here is implying this but I've not heard it yet. What they've said is you'll pay tax rather like an employee (although not identically).

You may well say that is a bit harsh but you're not losing benefits. It's no different to what's happened all these years up to now. What's changing is those benefits are going to be taxed.

What benefits?

VillageContractor
6th December 2016, 12:29
All my work is in the private sector and I expect that these changes will cause me problems later down the line.

Maybe I'm being naive but companies/businesses/government departments will still need work to be done (there will still be demand), so if they want to continue with temporary staff then they will have to increase the rates they pay otherwise no one will take the role.

Even if it goes to a big consultancy they need to employ capable people and not all companies will accept wet nose grads who have no idea what they're doing.

My clients need a service they pay market rate for a certain level. If I have to pay more tax I raise my rates. My client pays it or tries to get someone in cheaper/lower standards

BoredBloke
6th December 2016, 12:31
When you are a 2017 contractor and you get canned. You have exactly the rights you crave. You can have sick pay, maternity pay, redundancy. Whatever you like. But it's your company that pays. Not the client. They are not employing you. Just because you keep saying it seems like employment doesn't actually make it so.


The point is, if you want us to act like a business and allocate these 'rights' then let us act like a true business. Let us retain the money in the company to pay for bench time and settle up the tax at the year end like businesses do. What's happening here is they want to tax us like an employee but then expect us to still act like a business.

If I agree a contract that is expected to run for 6 months but then the client cans the project after 2 (as happened to me at CITI recently) I'm happy to use my retained income to cover pay my salary and cover my business costs while finding my next role. What I'm not happy about is a large slug of that income being taken away at source leaving me less to play with when hunting down my next role.

BoredBloke
6th December 2016, 12:34
All my work is in the private sector and I expect that these changes will cause me problems later down the line.

Maybe I'm being naive but companies/businesses/government departments will still need work to be done (there will still be demand), so if they want to continue with temporary staff then they will have to increase the rates they pay otherwise no one will take the role.

Even if it goes to a big consultancy they need to employ capable people and not all companies will accept wet nose grads who have no idea what they're doing.

My clients need a service they pay market rate for a certain level. If I have to pay more tax I raise my rates. My client pays it or tries to get someone in cheaper/lower standards

I suspect that they will no longer be able to attract people at the rate they are prepared to pay and that will mean they can blame a skills shortage to bring in an ICT bod from India - since the big consultancies are not covered by this legislation I expect its going to be a boom period for Wipro and the like.

malvolio
6th December 2016, 12:39
...

My clients need a service they pay market rate for a certain level. If I have to pay more tax I raise my rates. My client pays it or tries to get someone in cheaper/lower standards
Well good luck with getting a rate rise any time soon for the bulk of PS work. :tongue

Charging more simply won't work. It will take a long while before the PS realise that paying BigCo to fix their problems results in them paying 200% more for the same contractors. And the contractors will rapidly discover they are still going to be paid net if they are working on a PS contract, no matter how many parties are in the daisy chain.

But the choices are simple:

1. Don't do PS
2. Do PS and accept you will lose 20-25% of your income to tax and no expenses
3. Go umbrella (same problem, less paperwork)
4. Take an FTC (same problem, much less income)
5. Go permie.

Personally I'll stick with #1.

BoredBloke
6th December 2016, 12:44
What benefits?

I think he means the benefits an employee gets. So we get say 100k for a years work - that's assuming we have no bench time/long term sick etc. Compare that to the permie salary of 40k. The 60k difference is the bit we should be paying the benefits out of. I'd agree if this 100k wasn't going to be taxed at source. So if I'm diagnosed with a long term illness and can't work for months, my company (already taxed) funds are going to dwindle quickly because there is nobody working for the business topping them up. The company would soon fold and I'd be getting nothing....compare that to his permie son who works for the consultancy. In his case there are plenty of others working to provide his benefits when he's off sick or benched.

eek
6th December 2016, 12:48
The point is, if you want us to act like a business and allocate these 'rights' then let us act like a true business. Let us retain the money in the company to pay for bench time and settle up the tax at the year end like businesses do. What's happening here is they want to tax us like an employee but then expect us to still act like a business.

If I agree a contract that is expected to run for 6 months but then the client cans the project after 2 (as happened to me at CITI recently) I'm happy to use my retained income to cover pay my salary and cover my business costs while finding my next role. What I'm not happy about is a large slug of that income being taken away at source leaving me less to play with when hunting down my next role.

I think you have to look at this from the other side.

1) HMG see people abusing limited companies to earn more than they would do if working under PAYE and so that needs to be resolved and this solves that problem.

2)Separately there are a set of people who use limited companies but who actually are freelance (us). They may be impacted by the change and that appears to be acceptable collateral to HMG.

3) There is then a separate 3rd group of people who would like to have a permanent job in that public sector department but for various reasons are required to use a limited company to get work there (a prime example is expanding departments where the council are having major cutbacks elsewhere and politics is proving an issue).

Now the question is how big is that second group. I know it contains me and others on here but I suspect that when HMG states that IR35 isn't being used correctly in 90% of cases we are the 10% and the issue is that HMG only have a sledge hammer and they are going to use it.

NotAllThere
6th December 2016, 12:50
...
HMRC have not said you will be an employee. Everybody here is implying this but I've not heard it yet. What they've said is you'll pay tax rather like an employee (although not identically)...Yes. These arguments are the same as back in 1999/2000 when IR35 was introduced. The idea of claiming for employment rights (aka the Nuclear Option) was also mooted then, as way of encouraging clients and agents to write contracts outside IR35. IIRC it was even tried and it failed (HP were the end client?). Employment law has changed since then, so maybe it is time for another try.

BoredBloke
6th December 2016, 12:53
Well good luck with getting a rate rise any time soon for the bulk of PS work. :tongue

Charging more simply won't work. It will take a long while before the PS realise that paying BigCo to fix their problems results in them paying 200% more for the same contractors. And the contractors will rapidly discover they are still going to be paid net if they are working on a PS contract, no matter how many parties are in the daisy chain.

But the choices are simple:

1. Don't do PS
2. Do PS and accept you will lose 20-25% of your income to tax and no expenses
3. Go umbrella (same problem, less paperwork)
4. Take an FTC (same problem, much less income)
5. Go permie.

Personally I'll stick with #1.

1 is fine until they say it's not fair having contractors in the public sector and private sectors doing essentially the same work but paying different levels of tax and that all contractors should pay broadly the same level of tax. So what will you pick from 2 to 5 then? This is just a blue print for what's up the pipeline for the rest of us. Nice to know that the Tories are the party of small business.

eek
6th December 2016, 13:00
1 is fine until they say it's not fair having contractors in the public sector and private sectors doing essentially the same work but paying different levels of tax and that all contractors should pay broadly the same level of tax. So what will you pick from 2 to 5 then? This is just a blue print for what's up the pipeline for the rest of us. Nice to know that the Tories are the party of small business.

I think your jump in logic there is bigger today than it was on Friday. Everything is phrased in ways that work far better in the public sector than would work in the private sector - that's not to say I don't expect this to move to the private sector at some point but I suspect that while they are using argument 1 in my list above they would use argument 3 for the private sector....

BoredBloke
6th December 2016, 13:05
I think you have to look at this from the other side.

1) HMG see people abusing limited companies to earn more than they would do if working under PAYE and so that needs to be resolved and this solves that problem.

2)Separately there are a set of people who use limited companies but who actually are freelance (us). They may be impacted by the change and that appears to be acceptable collateral to HMG.

3) There is then a separate 3rd group of people who would like to have a permanent job in that public sector department but for various reasons are required to use a limited company to get work there (a prime example is expanding departments where the council are having major cutbacks elsewhere and politics is proving an issue).

Now the question is how big is that second group. I know it contains me and others on here but I suspect that when HMG states that IR35 isn't being used correctly in 90% of cases we are the 10% and the issue is that HMG only have a sledge hammer and they are going to use it.


I don't agree. I think we were the target here. Look at the examples they quote....a bum on the seat data analyst and a project manager - these are not the driver who was made to go down the limited company route by the end client.

mudskipper
6th December 2016, 13:13
I don't agree. I think we were the target here. Look at the examples they quote....a bum on the seat data analyst and a project manager - these are not the driver who was made to go down the limited company route by the end client.

I agree with BB. We're not collateral.

jamesbrown
6th December 2016, 13:20
Yep, definitely not collateral, and they've used the classic "no current plans" phrasing to indicate that this is coming to the private sector soon.

youngguy
6th December 2016, 13:28
Well good luck with getting a rate rise any time soon for the bulk of PS work. :tongue

Charging more simply won't work. It will take a long while before the PS realise that paying BigCo to fix their problems results in them paying 200% more for the same contractors. And the contractors will rapidly discover they are still going to be paid net if they are working on a PS contract, no matter how many parties are in the daisy chain.

But the choices are simple:

1. Don't do PS
2. Do PS and accept you will lose 20-25% of your income to tax and no expenses
3. Go umbrella (same problem, less paperwork)
4. Take an FTC (same problem, much less income)
5. Go permie.

Personally I'll stick with #1.

Nice choices summary.

I do agree that it will take some time for rates to creep up, but I'd hope all ps contractors still have the convo's and try and leave (if they can) or move to private as soon as they can. The quicker everyone does that and ps feels the impact the quicker they will wise up (which will of course still take yrs)

LondonManc
6th December 2016, 13:33
I agree with BB. We're not collateral.

Agreed.

What they don't realise is the end result will be the cash that they could have had us returning into the economy being taken into the big four consultancies as they dive in to take the shortfall and even worse being taken out of the country by Indian tech cos and their workers. Yet more British short-termism at its finest. Green-eyed chunts envious of our position without actually understanding our position.

Lance
6th December 2016, 13:34
I've just read the whole document.

https://www.gov.uk/government/publications/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note

This thread has lots of doom and gloom about the changes.
But from what I can see the only changes are :
1) If inside IR35 the client pays PAYE/NICs
2) no more 5% 'nominal' expenses

The document states that genuine expenses are still tax deductible (presumably at SA time though).
And the document has examples of both inside and outside IR35 working.
All of which seem to be based on the IR35 tests. Presumably the test cases as they're the only ones that stand up in law. EDIT - the online tool being the blunt instrument to gauge in or out but not based on actual law. /EDIT

The bigger impact of the change would be if the client and/or agency deem you inside when you're actually out, due to being risk averse.

Have I completely missed something or is this just IR35 applied differently?

MoroccanMole
6th December 2016, 13:40
The 'uproar' stems from the fact that a lot of Contractors feel their client will wrongly class them as inside IR35. These are probably the same Contractors who have held a BoS role for 36 months and look forward to their 6 monthly appraisals. Some of these guys need to be thrown under the bus as a sacrifice for the genuine contractors and small consultancies to keep trading as Ltd.

Cirrus
6th December 2016, 13:42
Have I completely missed something or is this just IR35 applied differently?
It's looks - roughly - that IR35 was supposed to be obeyed by us but we didn't comply. They couldn't find an effective way of getting us to comply so they've told their State Departments to enforce it on us.

How that carries across to private sector clients who are not subject to State pressure, is the interesting question

LondonManc
6th December 2016, 13:47
The 'uproar' stems from the fact that a lot of Contractors feel their client will wrongly class them as inside IR35. These are probably the same Contractors who have held a BoS role for 36 months and look forward to their 6 monthly appraisals. Some of these guys need to be thrown under the bus as a sacrifice for the genuine contractors and small consultancies to keep trading as Ltd.

That requires someone at HMG/HMRC to be prepared to listen and understand that there's a difference between a specialist and a permietractor and to be both able to and prepared to work that difference into legislation. At that point, permietractors could then accept that their easy ride is over and go back perm, FTC or full PAYE via umbrella and proper microconsultancies can continue.

That arguably also relies on us specialists making more of a case that we work more than the hours seen on site/billed for because we have other things to do to maintain ourselves as specialists.

MoroccanMole
6th December 2016, 13:48
In the short term (before this is rolled out to the Private Sector) market forces will dictate the next steps.

If a PS Client wants to recruit a body to manage a help desk for 6 months; advertised as inside Ir35 (as these roles always have been).

If PS Client wants to procure some technical or professional services, the market will dictate if the supply chain will accept the increased costs or elsewise they will be forced to review their procurement methods and engage small consultancies the same way they engage the larger ones.

Lance
6th December 2016, 13:49
It's looks - roughly - that IR35 was supposed to be obeyed by us but we didn't comply. They couldn't find an effective way of getting us to comply so they've told their State Departments to enforce it on us.

How that carries across to private sector clients who are not subject to State pressure, is the interesting question

Given that there are examples and definitions of how you can be in a PS role and still be outside then perhaps the clients will enforce IR35 as intended. Surely that's not a bad thing?

I agree that they'll not be able to use this method to make private sector put more people inside. There's no reason for them to. And it may actually mean the clients become far more savvy of IR35 as well (no more getting upset when you don't ask permission for a holiday etc.).

You say "that IR35 was supposed to be obeyed by us but we didn't comply" but that assumes that most people ducked IR35 it when they shouldn't have. How true is that now though? Most of the supervised contractors I know are all umbrella.

So I guess the document doesn't answer too much. Is still vague and we still don't know how this will work in practise.

Doom and gloom it isn't though. Unless you're a PS worker who should be inside IR35 anyway.

Lance
6th December 2016, 13:50
The 'uproar' stems from the fact that a lot of Contractors feel their client will wrongly class them as inside IR35. These are probably the same Contractors who have held a BoS role for 36 months and look forward to their 6 monthly appraisals. Some of these guys need to be thrown under the bus as a sacrifice for the genuine contractors and small consultancies to keep trading as Ltd.

hear hear

Lewis
6th December 2016, 13:52
HMRC have not said you will be an employee. Everybody here is implying this but I've not heard it yet. What they've said is you'll pay tax rather like an employee (although not identically)..

In this example (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/574551/midshire-cc.pdf) the agency gives Tim a P45 (https://www.gov.uk/paye-forms-p45-p60-p11d/p45) despite the fact Tim is employed by Tim HR Ltd. A P45 (https://www.gov.uk/paye-forms-p45-p60-p11d/p45) is (as it currently stands) "from your employer when you stop working for them."

MoroccanMole
6th December 2016, 13:53
hear hear

Better informed clients would be the upside of these recent developments.

Better informed clients, terrified of treating us in a way that could leave them liable for withheld employment rights would be better still.

northernladuk
6th December 2016, 13:58
The 'uproar' stems from the fact that a lot of Contractors feel their client will wrongly class them as inside IR35. These are probably the same Contractors who have held a BoS role for 36 months and look forward to their 6 monthly appraisals. Some of these guys need to be thrown under the bus as a sacrifice for the genuine contractors and small consultancies to keep trading as Ltd.

Indeed. I've been saying that for a long time like here..

http://forums.contractoruk.com/future-contracting/114703-public-sector-ir35-consultation-launched-35.html#post2295462

same as Eek who also mentioned it here

http://forums.contractoruk.com/future-contracting/117671-will-hector-come-after-public-sector-contractors-8.html#post2329670

and quite a few other people. Not all would state it on the forum but it's still a widely discussed option.

You get a lot of stick for suggesting it but still think it was something that should be done. Would it have avoided this I don't know but that's no reason not to consider it at some point.

malvolio
6th December 2016, 13:59
In this example (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/574551/midshire-cc.pdf) the agency gives Tim a P45 (https://www.gov.uk/paye-forms-p45-p60-p11d/p45) despite the fact Tim is employed by Tim HR Ltd. A P45 (https://www.gov.uk/paye-forms-p45-p60-p11d/p45) is (as it currently stands) "from your employer when you stop working for them."
Well yeah, but a P45 is a statement of taxes paid, nothing else. Given they are paying taxes on your behalf I'd have thought it a useful backup.

Simply hiding behind semantics isn't going to help anyone. It's also not going to change to any significant degree and it's not going to confer any kind of employment rights and benefits. Finally expenses stop because you can't get expenses if you're IR35 caught (yes, I know, exceptional expenses are still allowable - that doesn't cover going to your normal work). People need to start planning how they are going to deal with it.

Lance
6th December 2016, 13:59
In this example (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/574551/midshire-cc.pdf) the agency gives Tim a P45 (https://www.gov.uk/paye-forms-p45-p60-p11d/p45) despite the fact Tim is employed by Tim HR Ltd. A P45 (https://www.gov.uk/paye-forms-p45-p60-p11d/p45) is (as it currently stands) "from your employer when you stop working for them."

Read the whole document. It's very clear that the worker will not become a employee. How that stacks up legally, after Uber, is another question.

eek
6th December 2016, 13:59
The document states that genuine expenses are still tax deductible (presumably at SA time though).

Have I completely missed something or is this just IR35 applied differently?

Not quite. Only those expenses that you could claim as an employee of the end client are claimable. That means you can claim for that day trip to Blackpool / Sheffield but you can't claim for your weekly commute to Newcastle and accommodation in Newcastle if you are working there 50% of the time.

Note the carefully picked example to reflect a question from someone last week.....

eek
6th December 2016, 14:00
Read the whole document. It's very clear that the worker will not become a employee. How that stacks up legally, after Uber, is :popcorn:.

FTFY as I know test cases will be forthcoming....

MrMarkyMark
6th December 2016, 14:02
That requires someone at HMG/HMRC to be prepared to listen and understand that there's a difference between a specialist and a permietractor and to be both able to and prepared to work that difference into legislation. At that point, permietractors could then accept that their easy ride is over and go back perm, FTC or full PAYE via umbrella and proper microconsultancies can continue.

That arguably also relies on us specialists making more of a case that we work more than the hours seen on site/billed for because we have other things to do to maintain ourselves as specialists.

Arguably very true if you are a product specialist for 20 years+ as you and I are LM.
,
We both know, the best contract in our market, we usually only find a good perm, who has previously been a contractor, or a boutique consultant.

D&C are moot, as we are usually telling the client what they need to do, rather than the other way round.
Obviously, they spec out what they want and that is usually roughly, at best.

Lance
6th December 2016, 14:03
Finally expenses stop because you can't get expenses if you're IR35 caught (yes, I know, exceptional expenses are still allowable - that doesn't cover going to your normal work). People need to start planning how they are going to deal with it.

Differs slightly from the text of the document.




Step 3 - deduct an amount as represents expenses that would have been deductible if the worker had been the client’s employee and the expenses had been met by the worker out of those earnings

The next trick is to get the PS site as a temporary workplace. How exactly a 6 month contract 100 miles away could be classed as a permanent workplace I'm not sure.

eek
6th December 2016, 14:03
Indeed. I've been saying that for a long time like here..

http://forums.contractoruk.com/future-contracting/114703-public-sector-ir35-consultation-launched-35.html#post2295462

same as Eek who also mentioned it here

http://forums.contractoruk.com/future-contracting/117671-will-hector-come-after-public-sector-contractors-8.html#post2329670

and quite a few other people. Not all would state it on the forum but it's still a widely discussed option.

You get a lot of stick for suggesting it but still think it was something that should be done. Would it have avoided this I don't know but that's no reason not to consider it at some point.

Heck I've said as much on IPSE's forums multiple times..... Then again I've taken to speaking my mind....

eek
6th December 2016, 14:05
Differs slightly from the text of the document.




The next trick is to get the PS site as a temporary workplace. How exactly a 6 month contract 100 miles away could be classed as a permanent workplace I'm not sure.

It is because you are permanently there. The fact your job is of a temporary nature is irrelevant to the rules.

For very long term contractors the reaction to the expenses problem would be one of meh. Prior to 1996 expenses were rather different to what they currently are (unfortunately I can't remember the exact details but I know I wasn't re-claiming train fares into London back then).

LondonManc
6th December 2016, 14:09
Heck I've said as much on IPSE's forums multiple times..... Then again I've taken to speaking my mind....

Which makes IPSE part of the problem. They're not going to advocate throwing people under the bus who should be while taking membership fees from them.

seeourbee
6th December 2016, 14:11
hear hear

Damn right. I know a "contractor" who has been doing what he's been doing for 10 years now. A contractor! Don't make me laugh. I have contracts that are 3m, 6m etc - proper contracting work. The long stayers have totally effed it up for a genuine industry.

Lance
6th December 2016, 14:13
It is because you are permanently there. The fact your job is of a temporary nature is irrelevant to the rules.

For there long term contractors the reaction to the expenses problem would be one of meh. Prior to 1996 expenses were rather different to what they currently are (unfortunately I can't remember the exact details but I know I wasn't re-claiming train fares into London back then).

According to this document.

https://www.gov.uk/government/consultations/travel-and-subsistence-framework-discussion-paper/travel-and-subsistence-discussion-paper


“Permanent workplace” in turn is defined as being a workplace that they attend regularly and which is not a “temporary workplace”.


temporary workplace defined as


whether the employee is attending the workplace for a limited duration or a “temporary purpose”

whether they perform, or expect to perform their duties to a significant extent at the workplace (interpreted to mean spending over 40% of their working time there – also known as the “40% rule”)

whether they attend, or expect to attend, the workplace for more than 24 months

That definition is precisely the same for a permie, a temp or a contractor.
But a permi breaks the 24 month rule as it's a permanent job.

MrMarkyMark
6th December 2016, 14:13
Damn right. I know a "contractor" who has been doing what he's been doing for 10 years now. A contractor! Don't make me laugh. I have contracts that are 3m, 6m etc - proper contracting work. The long stayers have totally effed it up for a genuine industry.

There was a guy recently at our place who had been contracting there for 25 years :eek:.

They eventually got rid, yet he was back a couple of months later as they needed him for a particular project :laugh

LondonManc
6th December 2016, 14:14
Damn right. I know a "contractor" who has been doing what he's been doing for 10 years now. A contractor! Don't make me laugh. I have contracts that are 3m, 6m etc - proper contracting work. The long stayers have totally effed it up for a genuine industry.

That's why I like the two year rule for expenses - big projects can take 18 months + wrap-up but longer than that is BAU rather than a project. The daft thing is that it (the 24 month expense rule) also applies if I were to get a job for a rival who is based in a similar area (as rival companies often are - car industry in the midlands, banks in CW/The City, etc.) so I cannot leverage experience gained with one client to any real financial benefit with the next one! :mad:

eek
6th December 2016, 14:15
Which makes IPSE part of the problem. They're not going to advocate throwing people under the bus who should be while taking membership fees from them.

Go back and look at the my thread in General from November 23rd and the article courtesy of Orange Genie last week. (I suspect) IPSE are seen as part (possibly a big part) of the problem and not the solution..... So yes they are treated to meetings in Number 10 but that's probably as much to humour them or to listen and work out how to bypass them....

I will leave that particular topic here as I reckon that above is enough to really annoy the IPSE board....

LondonManc
6th December 2016, 14:16
Go back and look at the my thread in General from November 23rd and the article courtesy of Orange Genie last week. (I suspect) IPSE are seen as part (possibly a big part) of the problem and not the solution..... So yes they are treated to meetings in Number 10 but that's probably as much to humour them or to listen and work out how to bypass them....

I will leave that particular topic here as I reckon that above is enough to really annoy the IPSE board....

The thread that you linked to a few posts ago?

northernladuk
6th December 2016, 14:17
Which makes IPSE part of the problem. They're not going to advocate throwing people under the bus who should be while taking membership fees from them.

Correct.

seeourbee
6th December 2016, 14:18
I like the 12m rule myself. In 10 years of doing this I've never had a contract over that.

MrMarkyMark
6th December 2016, 14:18
Go back and look at the my thread in General from November 23rd and the article courtesy of Orange Genie last week. (I suspect) IPSE are seen as part (possibly a big part) of the problem and not the solution..... So yes they are treated to meetings in Number 10 but that's probably as much to humour them or to listen and work out how to bypass them....

I will leave that particular topic here as I reckon that above is enough to really annoy the IPSE board....

As I've said before I consider it a conflict of interests, their business model is pretty much selling insurances to people, against the very thing they are supposed to rally against.

One of the primary reasons I have never joined actually.

eek
6th December 2016, 14:19
According to this document.

https://www.gov.uk/government/consultations/travel-and-subsistence-framework-discussion-paper/travel-and-subsistence-discussion-paper



temporary workplace defined as



That definition is precisely the same for a permie, a temp or a contractor.
But a permi breaks the 24 month rule as it's a permanent job.

Nope you are looking in the wrong place there. Temporary workplace is set within HMRC Travel and Subsistence documentation which I'm not going to linked to here. The logic however goes:-

If I get a permanent job in London I can't claim expenses to get into London.
If I take an IR35 covered contract in London my permanent base instantly becomes London.

Jobs inside IR35 are treated identically to being a permi for that is the default rule. The ability for us to call home our base is unique to consultancies (and even then not always) and contractors.

malvolio
6th December 2016, 14:19
Differs slightly from the text of the document.




The next trick is to get the PS site as a temporary workplace. How exactly a 6 month contract 100 miles away could be classed as a permanent workplace I'm not sure.

Have you not been paying attention? IR35 = no expenses. End of...

eek
6th December 2016, 14:20
The thread that you linked to a few posts ago?

Yep http://forums.contractoruk.com/general/117991-so-i-think-its-finally-dawned-ipses-management.html which I will grant is me gloating but heck I'm 2 up at the moment regardless of the rewards IPSE have won.....

m0n1k3r
6th December 2016, 14:23
Not quite. Under the CIS rules your company receives the money with all taxes already deducted. The company's only job is to transfer that taxed income to you as your pay.

Hence contract £110,000. income tax and NI withheld (say £45,000 I know its wrong its just an exampled). Your company receives £110,000-45,000= £65,000. As that income has already been taxed it can be paid directly to you as income.

So company profit = £0 (everything came as income), dividends possible from profits £0 (as the company hasn't made a profit),

All based on the false assumption that all contractors draw all company revenue as personal income. That might be true for construction workers, but is not necessarily so for knowledge workers.

SueEllen
6th December 2016, 14:24
Damn right. I know a "contractor" who has been doing what he's been doing for 10 years now. A contractor! Don't make me laugh. I have contracts that are 3m, 6m etc - proper contracting work. The long stayers have totally effed it up for a genuine industry.

Actually you can be a specialist contractor who has been on the same site for years. I know a few.

However in the case of the ones I know if they are full-time they either don't claim expenses and get schedules done for each package of work, OR know they fall under IR35.

Just because you do shorter contracts it doesn't mean you are more or less of a contractor than these people. It depends completely on the type of role you do.

SueEllen
6th December 2016, 14:25
All based on the false assumption that all contractors draw all company revenue as personal income. That might be true for construction workers, but is not necessarily so for knowledge workers.

Construction workers buy tools and safety kit.

malvolio
6th December 2016, 14:26
Which makes IPSE part of the problem. They're not going to advocate throwing people under the bus who should be while taking membership fees from them.
So go away and define the dividing line between a freelance contractor and someone who is merely pretending to be one. Then tell IPSE which of their members fail that test and won't get protected.

To save you the effort, there are two groups that qualify: those who have been forced into incorporation that should never have been (e.g. several thousand television technicians) and the Friday to Monday brigade who have brought the whole sorry mess on the rest of us.

Or we continue to fight on the basis that 4.5 million people don't want to be employees in any shape or form. As soon as you say "Well, OK, that bunch over there don't count", you've lost not only this argument but every other one as well. Given IPSE are the only people actually fighting this mess, I don't see ruining their stance as in any way helpful. And this constant insistence that some freelances are somehow more freelance than others is just nonsense, and misses the whole point of the discussion.

MrMarkyMark
6th December 2016, 14:26
Nope you are looking in the wrong place there. Temporary workplace is set within HMRC Travel and Subsistence documentation which I'm not going to linked to here. The logic however goes:-

If I get a permanent job in London I can't claim expenses to get into London.
If I take an IR35 covered contract in London my permanent base instantly becomes London.

Jobs inside IR35 are treated identically to being a permi for that is the default rule. The ability for us to call home our base is unique to consultancies (and even then not always) and contractors.

Sometimes consultants are allocated a "home" office, in one of the consultancies actual offices.

In my Mrs. case this office was not very far away from our home, so she used to get them trying to send her to the back of beyond for each client.
This was purely a way of them to preserve getting the expenses past the two year rule.
Obviously, if they had let her use her home, they may have fallen foul of the 2 year rule, in the London area, for example.
All the northern based people were working in London, also :laugh

It was very much in their interest to do this, as they ran a travel business as well and all travel arrangements had to be booked through them, kerrrchhiiiinnnnng.

Of course the consultancy is one very widely used by the government, you really couldn't make it up :rollin:

eek
6th December 2016, 14:27
All based on the false assumption that all contractors draw all company revenue as personal income. That might be true for construction workers, but is not necessarily so for knowledge workers.

Meh. You are looking at it from your point of view. Switch it round and look at it from HMG's point of view and tax avoidance is taking place and they want it stamped out....

seeourbee
6th December 2016, 14:28
In theory yes, but I would say that person is in a lot weaker position arguing that it's a business with many clients.

Lewis
6th December 2016, 14:30
Well yeah, but a P45 is a statement of taxes paid, nothing else. Given they are paying taxes on your behalf I'd have thought it a useful backup.

Simply hiding behind semantics isn't going to help anyone. It's also not going to change to any significant degree and it's not going to confer any kind of employment rights and benefits. Finally expenses stop because you can't get expenses if you're IR35 caught (yes, I know, exceptional expenses are still allowable - that doesn't cover going to your normal work). People need to start planning how they are going to deal with it.

Yeah yeah I know, I was merely pointing out they are reusing a form that as it currently stands is clearly for employement purposes - just to add to the confusion!

eek
6th December 2016, 14:33
Given IPSE are the only people actually fighting this mess, I don't see ruining their stance as in any way helpful.

:rollin: Because others are definitely going to be fighting this just focusing on different battles to IPSE - for whom I'm struggling to see a battle that works for their membership that doesn't confirm what seems to be HMG's opinion of them.

My advice for IPSE would be to go and read When I met chancellor Hammond after Autumn Statement 2016 :: Contractor UK (http://www.contractoruk.com/news/0012799when_i_met_chancellor_hammond_after_2016.ht ml) until you fully understand the implications of it.

Then look at it from HMG's viewpoint and see if you can work out how you can achieve their desire without letting public sector departments ride roughshod over HMG's desire for people who should be on payroll.

At a minimum that means killing both Monday to Friday contracting and binning those forced to move to freelancing and if that means others are caught by collateral damage HMG aren't going to be concerned.

LondonManc
6th December 2016, 14:38
Yep http://forums.contractoruk.com/general/117991-so-i-think-its-finally-dawned-ipses-management.html which I will grant is me gloating but heck I'm 2 up at the moment regardless of the rewards IPSE have won.....

IPSE appears to have a conflict/confluence of interest - selling insurance against something that they're campaigning to abandon. If it's abandoned, then they have no product to sell.....

As for the VAT part, surely if we're taxed as employees, there should be no VAT involved and we go on payroll?

LondonManc
6th December 2016, 14:43
So go away and define the dividing line between a freelance contractor and someone who is merely pretending to be one. Then tell IPSE which of their members fail that test and won't get protected.

To save you the effort, there are two groups that qualify: those who have been forced into incorporation that should never have been (e.g. several thousand television technicians) and the Friday to Monday brigade who have brought the whole sorry mess on the rest of us.

Or we continue to fight on the basis that 4.5 million people don't want to be employees in any shape or form. As soon as you say "Well, OK, that bunch over there don't count", you've lost not only this argument but every other one as well. Given IPSE are the only people actually fighting this mess, I don't see ruining their stance as in any way helpful. And this constant insistence that some freelances are somehow more freelance than others is just nonsense, and misses the whole point of the discussion.

I was merely making an observation that there appears to be a flaw in the plan suggested.

The problem is the companies - they want to avoid business NICs on a mass basis and our most efficient tax vehicle has been forced on us by HMRC.

I'm not advocating throwing anyone under the proverbial bus - I'm saying (yet again) that HMRC want to go after the mass avoidance of business NICs but don't have the necessary foresight of the crapfest that they face and the actual new numbers; they blindly see the missing NICs as an extra income without looking at the opportunity cost to gain that purported £440m

eek
6th December 2016, 14:44
IPSE appears to have a conflict/confluence of interest - selling insurance against something that they're campaigning to abandon. If it's abandoned, then they have no product to sell.....

As for the VAT part, surely if we're taxed as employees, there should be no VAT involved and we go on payroll?

Lets not go there again. VAT is neutral in HMRC's eyes and really just a minor admin task (yep I know its work) for companies whose income is above x...

If your company has an income before tax of £83k VAT is required, earn below £83k with only a public sector client and you could deregister....

m0n1k3r
6th December 2016, 14:47
I don't understand. They are still humans sat at a desk doing work a civil servant could and should be doing .

You would typically not see the MD of KMPG doing client work, and even if they do, it would (a) typically not be full-time, and (b) be performed with autonomy (interim executives are hired because they contribute unique and valuable knowledge that the organisation doesn't possess, and therefore don't have an ability to impose control over).

b r
6th December 2016, 14:49
The ability for us to call home our base is unique to consultancies (and even then not always) and contractors.

Disagree.

I have a friend who works for <insert Indian consultancy>, he's based out of home - and has been working on the same customer site for the best part of 5 years, all travel is fully expensed.

LondonManc
6th December 2016, 14:51
Lets not go there again. VAT is neutral in HMRC's eyes and really just a minor admin task (yep I know its work) for companies whose income is above x...

If your company has an income before tax of £83k VAT is required, earn below £83k with only a public sector client and you could deregister....

VAT is now neutral given that they've upped it from 14.5% to 16.5% :mad::mad::mad:

I'd be impressed if you could earn more than 83k with only a public sector client up north :D

How do you know beforehand that you'll have an income of £83k? Do you base it on previous years? I'd earn that down south but potentially not up north, given then disparity in rates.

eek
6th December 2016, 14:51
The ability for us to call home our base is unique to consultancies (and even then not always) and contractors.

Disagree.

I have a friend who works for <insert Indian consultancy>, he's based out of home - and has been working on the same customer site for the best part of 5 years, all travel is fully expensed.

Just because a company is abusing the rules doesn't justify others doing it.

eek
6th December 2016, 14:51
VAT is now neutral given that they've upped it from 14.5% to 16.5% :mad::mad::mad:

I'd be impressed if you could earn more than 83k with only a public sector client up north :D

How do you know beforehand that you'll have an income of £83k? Do you base it on previous years? I'd earn that down south but potentially not up north, given then disparity in rates.

I turned down £700 a day for 21 months keeping a system going...

DWP and HMRC rates up north are the same as London and often towards (or even above) the top of the market....

LondonManc
6th December 2016, 14:51
Just because a company is abusing the rules doesn't justify others doing it.

It depends if those expenses are in his contract or not - if they are, then there's no abuse.

chopper
6th December 2016, 14:53
So how will pension contributions work? Will PS contractors have to make pension contributions on the money received after NICs deducted (obviously, Income tax relief exists)?

MrMarkyMark
6th December 2016, 14:55
The ability for us to call home our base is unique to consultancies (and even then not always) and contractors.

Disagree.

I have a friend who works for <insert Indian consultancy>, he's based out of home - and has been working on the same customer site for the best part of 5 years, all travel is fully expensed.

Oh.............you seem to be surprised they are breaking the rules, then :laugh

There is a reason others operate differently you know :)

eek
6th December 2016, 14:59
So how will pension contributions work? Will PS contractors have to make pension contributions on the money received after NICs deducted (obviously, Income tax relief exists)?

Yep - it would be one of the reasons why (were I to end up in a Public sector contract inside these rules) I would be seeking employment rights so that my pension could be paid gross....

Granted you could solve the same problem using an umbrella but then you would have to trust the umbrella to do things honestly and swallow the umbrella's charges....

DotasScandal
6th December 2016, 15:00
Nice choices summary.

Missing

6. Move off this godforsaken island and offer your services elsewhere.

Life is short.

m0n1k3r
6th December 2016, 15:03
Apologies if you are still missing the point.

My lad works for EY. He sits next to you.

If your/his client can the project and EY sack him as a result. He has rights.

However what you can't seem to accept is he gets rights from his employer not his client

Are you following me?

When you are a 2017 contractor and you get canned. You have exactly the rights you crave. You can have sick pay, maternity pay, redundancy. Whatever you like. But it's your company that pays. Not the client. They are not employing you. Just because you keep saying it seems like employment doesn't actually make it so.

HMRC have not said you will be an employee. Everybody here is implying this but I've not heard it yet. What they've said is you'll pay tax rather like an employee (although not identically).

You may well say that is a bit harsh but you're not losing benefits. It's no different to what's happened all these years up to now. What's changing is those benefits are going to be taxed.

It is all well so far, but let's say your PSC charges the client £100k, and pay you £50k in gross salary. Surely there ought to be a mechanism whereby the company can reclaim the over-deducted taxes, as the company supposedly need that money for operational costs such as accounting, legal, equipment, insurance and other expenses as well as employer's pensions contributions?

Without such a mechanism the company will not have the money to fulfil its employer obligations. It is as if the HMRC intentionally is forcing PSC's to break the law.

mudskipper
6th December 2016, 15:03
IPSE appears to have a conflict/confluence of interest - selling insurance against something that they're campaigning to abandon. If it's abandoned, then they have no product to sell.....

IPSE are a not-for-profit members organisation. Their raison d'etre is to lobby and campaign for the interests of their members and provide protection to enable those members to go about their business. The remit extends far beyond IR35, and, if all you're interested in is tax investigation insurance, there are cheaper ways to get that protection. Which would suggest that IR35 insurance isn't the only reason that IPSE's members stick around.

m0n1k3r
6th December 2016, 15:08
I think you have to look at this from the other side.

1) HMG see people abusing limited companies to earn more than they would do if working under PAYE and so that needs to be resolved and this solves that problem.

There's nothing wrong with the ambition, but they go about it in the wrong way. They could instead, for example, require the company to pay shareholders who are also working in the company (and the government nowadays also define directors as employees) to take a salary of a certain size (say, 1.5x average national income) before they can draw any dividends, or else those dividends drawn on a low salary will be taxed under PAYE. This would be consistent with how many other countries have approached the same problem and also avoids many deliberations about inside/outside IR35.

eek
6th December 2016, 15:11
There's nothing wrong with the ambition, but they go about it in the wrong way. They could instead, for example, require the company to pay shareholders who are also working in the company (and the government nowadays also define directors as employees) to take a salary of a certain size (say, 1.5x average national income) before they can draw any dividends, or else those dividends drawn on a low salary will be taxed under PAYE. This would be consistent with how many other countries have approached the same problem and also avoids many deliberations about inside/outside IR35.

Been there, suggested that doesn't solve the Monday to Friday abuse they are trying to fix

m0n1k3r
6th December 2016, 15:13
Construction workers buy tools and safety kit.

I buy computers, software, training etc. Clients increasingly expect me to bring my own, and that is also my preference.

malvolio
6th December 2016, 15:15
Been there, suggested that doesn't solve the Monday to Friday abuse they are trying to fix

Friday to Monday.

But the fix is simple. If your current client is the same organisation as your immediately previous employer and you and your "client" can't prove conclusively that you are doing a fundamentally different job - which is possible only if you aren't in it for the tax savings on both sides - then you are taxed on your gross earnings.

You want to be a freelance, go out and find a client. Sitting at the same desk isn't it.

LondonManc
6th December 2016, 15:21
Been there, suggested that doesn't solve the Monday to Friday abuse they are trying to fix

This does:


Friday to Monday.

But the fix is simple. If your current client is the same organisation as your immediately previous employer and you and your "client" can't prove conclusively that you are doing a fundamentally different job - which is possible only if you aren't in it for the tax savings on both sides - then you are taxed on your gross earnings.

You want to be a freelance, go out and find a client. Sitting at the same desk isn't it.

Correct and, as you say, an easy fix. Thrown in some commonly agreed fix for paying a more appropriate level of PAYE on actual days worked and there's room for profit after taking costs into account still.

SueEllen
6th December 2016, 15:26
Just because a company is abusing the rules doesn't justify others doing it.

Actually more and more companies are basing employees at home.

The reason for this is cost cutting. It is cheaper to have home based employees than pay for office space.

sal
6th December 2016, 15:30
IPSE are a not-for-profit members organisation. Their raison d'etre is to lobby and campaign for the interests of their members and provide protection to enable those members to go about their business. The remit extends far beyond IR35, and, if all you're interested in is tax investigation insurance, there are cheaper ways to get that protection. Which would suggest that IR35 insurance isn't the only reason that IPSE's members stick around.

I know quite a few people that would agree to disagree with you on this.

perplexed
6th December 2016, 15:30
I buy computers, software, training etc. Clients increasingly expect me to bring my own, and that is also my preference.

Many buy computers, software and training. Using my own computer is also my preference but I recognise that turning up with a computer doesn't mean the client will necessarily allow a device outside their direct ownership and control from being plugged into their network; for example, where clients use encrypted hard drives.

MrMarkyMark
6th December 2016, 15:31
Actually more and more companies are basing employees at home.

The reason for this is cost cutting. It is cheaper to have home based employees than pay for office space.

Apart from when this is the situation, as I posted below, the consultancy has a travel agency as well, gets discounts and charges the normal price to the actual clients.

The government is one of their major clients so the tax payer is footing the bill for all this.


Sometimes consultants are allocated a "home" office, in one of the consultancies actual offices.

In my Mrs. case this office was not very far away from our home, so she used to get them trying to send her to the back of beyond for each client.
This was purely a way of them to preserve getting the expenses past the two year rule.
Obviously, if they had let her use her home, they may have fallen foul of the 2 year rule, in the London area, for example.
All the northern based people were working in London, also

It was very much in their interest to do this, as they ran a travel business as well and all travel arrangements had to be booked through them, kerrrchhiiiinnnnng.

perplexed
6th December 2016, 15:32
With regards to the whole public / private sector divide ( at present ), would an idea be to maintain Ltd for private sector work, use a brolly for public?

Note I didn't say it was a good idea, there are probably loads of reasons to shoot that idea down over.

m0n1k3r
6th December 2016, 15:35
Many buy computers, software and training. Using my own computer is also my preference but I recognise that turning up with a computer doesn't mean the client will necessarily allow a device outside their direct ownership and control from being plugged into their network; for example, where clients use encrypted hard drives.

Been consulting at HMRC, NHS etc (not under CL1) using my own equipment, as did all the bods from CapGemini etc. The requirements were HDD encryption enabled, antivirus installed (on a Mac), connecting to a "guest" WiFi and using VPN to access the real networks etc. It certainly is doable in many, but not all cases.

malvolio
6th December 2016, 15:37
I know quite a few people that would agree to disagree with you on this.
And I know several thousand that wouldn't. You need to read the survey results and note the above 90% retention rate.

SueEllen
6th December 2016, 15:39
I buy computers, software, training etc. Clients increasingly expect me to bring my own, and that is also my preference.

I appreciate that.

However someone posted that construction workers don't have to buy stuff and I know that isn't true. Some of the tools they have to buy are expensive.

HMRC's argument against all of us freelance workers and contractors whether we are construction workers or in IT, is that employees buy materials and equipment so they can do their work.

seeourbee
6th December 2016, 15:40
You would typically not see the MD of KMPG doing client work, and even if they do, it would (a) typically not be full-time, and (b) be performed with autonomy (interim executives are hired because they contribute unique and valuable knowledge that the organisation doesn't possess, and therefore don't have an ability to impose control over).

Fine, then the MD is outside IR35. But all his minions are. I sit next to them ! So by fairness those portions of the KPMG bill should be taxed under Paye.

perplexed
6th December 2016, 15:42
Been consulting at HMRC, NHS etc (not under CL1) using my own equipment, as did all the bods from CapGemini etc. The requirements were HDD encryption enabled, antivirus installed (on a Mac), connecting to a "guest" WiFi and using VPN to access the real networks etc. It certainly is doable in many, but not all cases.

It's certainly doable. There are some clients who won't countenance any external device being used whatsoever - which whilst infuriating is understandable.

northernladuk
6th December 2016, 15:49
With regards to the whole public / private sector divide ( at present ), would an idea be to maintain Ltd for private sector work, use a brolly for public?

Note I didn't say it was a good idea, there are probably loads of reasons to shoot that idea down over.

Why do that? You can still use your LTD on inside gigs. All you are saving is a bit of time going brolly and the cost difference would be pretty negligible.

eek
6th December 2016, 16:01
And I know several thousand that wouldn't. You need to read the survey results and note the above 90% retention rate.

If members are saying the only reason why they are members is insurance you probably need to not argue that point and start marketing the other "benefits" better. Otherwise April onwards may be very painful for IPSE

youngguy
6th December 2016, 16:08
With regards to the whole public / private sector divide ( at present ), would an idea be to maintain Ltd for private sector work, use a brolly for public?

Note I didn't say it was a good idea, there are probably loads of reasons to shoot that idea down over.

That would probably be the most expensive way as you will have brolly costs plus accountant costs

Brolly is a bit easier no doubt but it remains to be seen what tangible benefits remain for being ltd solely in the ps. A bit of an ability to retain some finds maybe.... possibly a way of working a bit more flexibly ? I'm personally unclear

SueEllen
6th December 2016, 16:10
With regards to the whole public / private sector divide ( at present ), would an idea be to maintain Ltd for private sector work, use a brolly for public?

Note I didn't say it was a good idea, there are probably loads of reasons to shoot that idea down over.

Depends on how much your accountant costs a month.

Use the cheapest method.

malvolio
6th December 2016, 16:21
If members are saying the only reason why they are members is insurance you probably need to not argue that point and start marketing the other "benefits" better. Otherwise April onwards may be very painful for IPSE
Yeah, whatever. IPSE are the only people fighting this battle, I get seriously annoyed at the negativity from those who don't even stand up to be counted.

A close friend died today. The free £5k life insurance held by all IPSE members will go a little way towards helping his wife deal with the aftermath.

eek
6th December 2016, 16:27
Yeah, whatever. IPSE are the only people fighting this battle, I get seriously annoyed at the negativity from those who don't even stand up to be counted.

A close friend died today. The free £5k life insurance held by all IPSE members will go a little way towards helping his wife deal with the aftermath.

The first bit isn't relevant to the quote you are linking to so clearly as you are not in a fit state to argue it's probably better that you don't.

Oh and that marketing plug is in awfully bad taste and given that I read the IPSE forum actually confirms my statement that IPSE isn't marketing the other benefits. Thankfully someone ensured the family was aware of the benefit before it was too late.

Cirrus
6th December 2016, 16:32
Surely there ought to be a mechanism whereby the company can reclaim the over-deducted taxes, as the company supposedly need that money for operational costs such as accounting, legal, equipment, insurance and other expenses as well as employer's pensions contributions? I'm disappointed they took away the 5%. There was a logic to that, I can't see why they've changed. I've heard 'because you don't need to fret about status anymore' but it was more about business expenses than legal.

With pensions you will get tax refunded to a degree when you make personal (taxed) contributions. It's less than now but permies generally can't stick massive wadges of cash into their company pensions so there is some argument for it.


Without such a mechanism the company will not have the money to fulfil its employer obligations. It is as if the HMRC intentionally is forcing PSC's to break the law.
I think it is very tricky to start talking about obligations to yourself. If you haven't kept back enough cash/credit to pay yourself when you're sick, isn't that a matter of prudence rather than law?

eek
6th December 2016, 16:39
I'm disappointed they took away the 5%. There was a logic to that, I can't see why they've changed. I've heard 'because you don't need to fret about status anymore' but it was more about business expenses than legal.

With pensions you will get tax refunded to a degree when you make personal (taxed) contributions. It's less than now but permies generally can't stick massive wadges of cash into their company pensions so there is some argument for it.


I think it is very tricky to start talking about obligations to yourself. If you haven't kept back enough cash/credit to pay yourself when you're sick, isn't that a matter of prudence rather than law?

The logic is that there should be no incentive to running a limited company - that 5% offered an incentive hence it has to go....

Pensions you can claim the Income tax part back, just not the NI part. As I said above its probably one of the big reasons for trying for employment rights....

marius123
6th December 2016, 16:40
Apologies if I've missed this in the discussions but alongside fairly full time contract work I do much shorter engagements which include things like running a training course or workshop for a client or doing a small consulting engagement (we're talking days here).

Some of these clients have been public sector in the past.

Is there some sort of threshold on length if it's consulting? Is a training course or workshop fine anyway because it's a product being delivered (like the web developer example in the guidance?).

malvolio
6th December 2016, 16:42
The first bit isn't relevant to the quote you are linking to so clearly as you are not in a fit state to argue it's probably better that you don't.
I think I'm still coherent thanks. And it's entirely relevant unless you can show me one post that you have made that is fully supportive of IPSE's activities.


Oh and that marketing plug is in awfully bad taste and given that I read the IPSE forum actually confirms my statement that IPSE isn't marketing the other benefits. Thankfully someone ensured the family was aware of the benefit before it was too late.
In your opinion. I'm not marketing anything. Were you paying attention in the other place you may have seen that marketing and communicating the range of IPSE's benefits more effectively was one of my main proposals. Let's see how that develops, shall we.

northernladuk
6th December 2016, 16:44
Blimey. Mal and Eek are the new NLUK and PC...

northernladuk
6th December 2016, 16:45
Apologies if I've missed this in the discussions but alongside fairly full time contract work I do much shorter engagements which include things like running a training course or workshop for a client or doing a small consulting engagement (we're talking days here).

Some of these clients have been public sector in the past.

Is there some sort of threshold on length if it's consulting? Is a training course or workshop fine anyway because it's a product being delivered (like the web developer example in the guidance?).

I'd say so yes.

b r
6th December 2016, 16:49
Fine, then the MD is outside IR35. But all his minions are. I sit next to them ! So by fairness those portions of the KPMG bill should be taxed under Paye.

Which is the point I made on the 'how many workers does a business need to not be a PSC'.


It's less than now but permies generally can't stick massive wadges of cash into their company pensions so there is some argument for it.

Except employees can usually make personal contributions to a company scheme, which are net of tax - ie when you get a bonus.

m0n1k3r
6th December 2016, 16:51
Fine, then the MD is outside IR35. But all his minions are. I sit next to them ! So by fairness those portions of the KPMG bill should be taxed under Paye.

IR35 only applies where the worker has control over the company and have material shareholding (defined as > 5%). I find it hard to believe that any minions would have that. In the case of KPMG, I also find it hard to believe that the MD would have it.

eek
6th December 2016, 16:56
I think I'm still coherent thanks. And it's entirely relevant unless you can show me one post that you have made that is fully supportive of IPSE's activities.


In your opinion. I'm not marketing anything. Were you paying attention in the other place you may have seen that marketing and communicating the range of IPSE's benefits more effectively was one of my main proposals. Let's see how that develops, shall we.

As I fundamentally believe that IPSE's campaigning has achieved little in the last few years beyond making IPSE seem to Government ministers as supporting tax avoiders (see the When I met chancellor Hammond after Autumn Statement 2016 :: Contractor UK (http://www.contractoruk.com/news/0012799when_i_met_chancellor_hammond_after_2016.ht ml) albeit I know that IPSE aren't anywhere near the worst culprits and are being tarred with the same brush as far worse culprits) its hardly likely that I can be fully supportive of IPSE's activities. Especially as I can't think of any claimed success after Arctic that I believe is a success and, let's be generous, I'm rather dubious about the claimed success of IPSE's T&S campaign (for reasons I really can't be arsed to discuss again).

What I do, however, still do is encourage people to join - and perhaps you should think about why I still do so given my opinion of their campaigning and the explicit hostility there is between various IPSE representatives, directors and myself....

m0n1k3r
6th December 2016, 16:57
With pensions you will get tax refunded to a degree when you make personal (taxed) contributions. It's less than now but permies generally can't stick massive wadges of cash into their company pensions so there is some argument for it.

Personal contributions, yes, but my service agreement with my company also stated that the company should make employer's contributions for me.


I think it is very tricky to start talking about obligations to yourself. If you haven't kept back enough cash/credit to pay yourself when you're sick, isn't that a matter of prudence rather than law?

It is not about my obligations to myself. It is about my employer's obligations to me. The company is a legal entity distinctly separate from myself. Working through a limited company, I am (according to the government) an employee of it.

https://www.gov.uk/working-for-yourself/overview (see "If you set up a limited company ...")

The company must have the means to keep back enough cash/credit to keep paying me a salary when I'm sick, on holiday etc. On that basis, it is entirely unreasonable to assume that whatever the company received will be used in its entirety to pay wages.

eek
6th December 2016, 17:01
Personal contributions, yes, but my service agreement with my company also stated that the company should make employer's contributions for me.



It is not about my obligations to myself. It is about my employer's obligations to me. The company is a legal entity distinctly separate from myself. Working through a limited company, I am (according to the government) an employee of it.

https://www.gov.uk/working-for-yourself/overview (see "If you set up a limited company ...")

The company must have the means to keep back enough cash/credit to keep paying me a salary when I'm sick, on holiday etc. On that basis, it is entirely unreasonable to assume that whatever the company received will be used in its entirety to pay wages.

Under IR35 however your company is utterly irrelevant. You are taking on a public sector contract inside IR35 and therefore are being paid via PAYE. Your company, all agencies and anyone else between the public sector client and you personally are an irrelevance to HMRC....

youngguy
6th December 2016, 17:05
Personal contributions, yes, but my service agreement with my company also stated that the company should make employer's contributions for me.



It is not about my obligations to myself. It is about my employer's obligations to me. The company is a legal entity distinctly separate from myself. Working through a limited company, I am (according to the government) an employee of it.

https://www.gov.uk/working-for-yourself/overview (see "If you set up a limited company ...")

The company must have the means to keep back enough cash/credit to keep paying me a salary when I'm sick, on holiday etc. On that basis, it is entirely unreasonable to assume that whatever the company received will be used in its entirety to pay wages.

I'm interested to see what legal advice ipse are getting and where that goes .

Probably nowhere but let's see.

m0n1k3r
6th December 2016, 17:07
Under IR35 however your company is utterly irrelevant. You are taking on a public sector contract inside IR35 and therefore are being paid via PAYE. Your company, all agencies and anyone else between the public sector client and you personally are an irrelevance to HMRC....

... for tax purposes only. The company still has employer and other obligations, as well as still being viewed as a real, genuine and separate legal entity as an employer for the purposes of the Companies Act.

I'm fine with the HMRC wanting to disallow me to draw any income from IR35 gigs as dividends, but it is simply conflated thinking that a specific tax status would release the company from its other obligations.

Anyway - this is not a problem if it is clear from the outset that a specific opportunity will be taxed under IR35. The issue appears if the engager would later simply change its mind - and especially if it would then apply retroactively, even if the working conditions themselves could be shown to be well outside any normal employment or worker relationship.

MrMarkyMark
6th December 2016, 17:14
... for tax purposes only. The company still has employer and other obligations, as well as still being viewed as a real, genuine and separate legal entity as an employer for the purposes of the Companies Act.

I'm fine with the HMRC wanting to disallow me to draw any income from IR35 gigs as dividends, but it is simply conflated thinking that a specific tax status would release the company from its other obligations.

Anyway - this is not a problem if it is clear from the outset that a specific opportunity will be taxed under IR35. The issue appears if the engager would later simply change its mind - and especially if it would then apply retroactively, even if the working conditions themselves could be shown to be well outside any normal employment or worker relationship.

Agreed, hence why they state on the supporting documentation they make it clear that they believe the LTD is responsible for supplying any employee benefits.

It certainly does not sum up with the explanation of trying to be "fair", that's for sure :)

LondonManc
6th December 2016, 17:17
Agreed, hence why they state on the supporting documentation they make it clear that they believe the LTD is responsible for supplying any employee benefits.

It certainly does not sum up with the explanation of trying to be "fair", that's for sure :)

I think we need to start doing as PC does and claim JSA between contracts. They want us to have rights, we'll use them.

MoroccanMole
6th December 2016, 17:23
And the Ltd Company has no operating income from which to provide employee benefits......

MoroccanMole
6th December 2016, 17:24
In fact, assuming 100% Public Sector work, the Ltd Company will not be able to remain solvent because no income and no allowable expenses.

So how does that tally with the responsibilities of being a Director of a Ltd Company if my entire company earnings are paid as a salary without leaving anything over to cover the running of a business.

Will I be reporting a loss each year?