Will it work itself out in the end?

[davetza]

Does anyone else think there is a possibility that once the PS get their head around IR35 they will figure out they can structure their contracts and working practices to make sure roles are outside IR35 and therefore still have have access to contractors with the right skill sets at the right cost?? I am sure there is most probably some insurance company out there putting together a product for PS bodies around IR35 in the same way we have been able to get IR35 insurance from our end. I am not saying this will happen quickly but I think it is something that could eventually happen or am I being to optimistic???

[LondonManc]

Head. In. Sand.

The HMRC will want their pound of flesh. The problem is that they are missing out on Business NICs but cannot, as it stands, tax the client for them when they take contractors on.

Not only that but the other issue is that contractors and agents get together to build an IR35-friendly contract that may be blown away by working practices. The idea of this change is to get a working practices assessment by the client ahead of the contract being issued. HMRC believe that this is a better assessment of IR35 than a contract whereas the reality is that the two should be stood together and assessed.

Simple fact is that there are many contractors who will definitely be inside IR35 who are currently being declared as outside. This tool will, unfortunately, over-compensate for that because it will no doubt not be calibrated correctly. Therefore more contractors than should be will now be caught by IR35.

If you've tried the tool and you're inside, although you're currently declared as outside, brace yourself.

[BrilloPad]

It will just lead to large consultancies taking the work - government will pay a lot more.

[RonBW]

It will just lead to large consultancies taking the work - government will pay a lot more.

And the consultancies will bring in contractors / offshore resources to deliver the same thing.

I watched a consultancy take over a PS project some years back, keep all the contractors (brought in new management at the top and a new permie team lead in each section) and add £7 million onto the project bill in one go.

[LondonManc]

And the consultancies will bring in contractors / offshore resources to deliver the same thing.

I watched a consultancy take over a PS project some years back, keep all the contractors (brought in new management at the top and a new permie team lead in each section) and add £7 million onto the project bill in one go.

Which they won't be able to do now unless they somehow get a determination that those contractors are outside IR35.

[DotasScandal]

I watched a consultancy take over a PS project some years back, keep all the contractors (brought in new management at the top and a new permie team lead in each section) and add £7 million onto the project bill in one go.

And you'll get to watch a lot more of that, as it's the new model. The interesting question is what % of the 7M was paid under the table as kickbacks to whoever awarded the contract.

[WordIsBond]

OP may be right. HMRC doesn't want to enforce IR35 themselves, they've pushed it off on PSBs, and it is going to cost the PSBs a lot of money. But HMG doesn't have a lot of money to give them.

HMRC is fighting against economics on this one. Economics usually wins. Not always, because governments of all kinds have a remarkable affinity to economic stupidity. But eventually, economics wins one way or another, anyway. And if you suddenly decide a PSB has to pay a lot more money without giving it any more, things start to break. It's just reality.

When things start to break, then there has to be pushback or accommodation to reality in some way.

[LondonManc]

OP may be right. HMRC doesn't want to enforce IR35 themselves, they've pushed it off on PSBs, and it is going to cost the PSBs a lot of money. But HMG doesn't have a lot of money to give them.

HMRC is fighting against economics on this one. Economics usually wins. Not always, because governments of all kinds have a remarkable affinity to economic stupidity. But eventually, economics wins one way or another, anyway. And if you suddenly decide a PSB has to pay a lot more money without giving it any more, things start to break. It's just reality.

When things start to break, then there has to be pushback or accommodation to reality in some way.

The good news is that bobs can't come over for contracts without being sponsored; but how low could Wipro/Infosys go in matching contractor rates?

[pictavia]

I hope so.

If a manager has a distinct IT project he/she can outsource to a freelancer, then why not go out to tender? PSBs would need to be clear that they are looking for a service and not an individual to bash C# code in their IT department.

I generally agree with the rationale for the changes, there's way too much disguised employment out there but HMRC's implementation has been expensive and disruptive.

No reason why agencies can't sell proper business to business contracts, but they need to be kept completely separate from their employment businesses and advertised on dedicated boards.

[SussexSeagull]

Depends from whose perspective you refer to. I would argue a lot of contractors are under DOC so really haven't got any complaints going forward (any retro tax grab is a different matter). The roles should really have been filled by permanent people or FTC to start with but they would struggle to attract the right sort of people with the money on offer.

Eventually, via a lot of failed projects, the market will cut in and they will have to either recruit there own people or get the large consultancies to do it for them by proxy.

It is basically a massive realignment.

The publics sector is a big old place but the genuine consultants could do quite well out of it.