PDA

View Full Version : End of IT contracting this June?



skysies
26th March 2017, 19:07
I posted this in another thread but thought it's worth starting a new discussion. Times reported on May planning to end IT contracting in the form we know it. There still will be, but most likely all will be inside IR35.

For someone like me who sees contracting as means for making more money, and nothing more or less, that will be a game changer.

Politically it will be much easier to sell this than increasing the NICs of the Uber taxi driver. Considering the financial mayhem that will come with Brexit and the huge hole that it will open in the budget, I think this time it's serious as cancer.

Below the link.

Theresa May to Abolish Contracting Profession in June (http://www.itcontractor.com/theresa-may-abolish-contracting-profession-june/)

adubya
26th March 2017, 19:26
Poor article, the author doesn't seem to have journalism skills, is it someone's blog ? :)

SueEllen
26th March 2017, 19:28
You posted this thread in General and were directed to the Public Sector forum. What information do you want?

Contracting since the advent of IR35 has been about more than just the money.

TheGreenBastard
26th March 2017, 19:30
That blog is essentially a random word generator. There might be bits of truth sprinkled in, but generally poor reporting IMO.

On the topic, I guess it will come down to the health of public sector IT projects once the new IR35 laws come in, personally I think it could go both ways. The projects might fall on their arse, or Indian sweatshop "consultancies" might fill the void.

TestMangler
26th March 2017, 19:38
That blog is essentially a random word generator. There might be bits of truth sprinkled in, but generally poor reporting IMO.

On the topic, I guess it will come down to the health of public sector IT projects once the new IR35 laws come in, personally I think it could go both ways. The projects might fall on their arse, or Indian sweatshop "consultancies" might fill the void.

By calling it a 'skills shortage'.

LondonManc
27th March 2017, 08:01
That blog is essentially a random word generator. There might be bits of truth sprinkled in, but generally poor reporting IMO.

On the topic, I guess it will come down to the health of public sector IT projects once the new IR35 laws come in, personally I think it could go both ways. The projects might fall on their arse, or Indian sweatshop "consultancies" might fill the void.

In which case, the government will be responsible for the financial death of the country, with millions of potential tax revenue flowing over to India.

DotasScandal
27th March 2017, 09:01
In which case, the government will be responsible for the financial death of the country, with millions of potential tax revenue flowing over to India.

And millions flowing back to Conservative pockets through unofficial (kickbacks) or very official ("donations") channels.
Which is, let's face it, the only thing that matters to the lot currently defining policy.

LondonManc
27th March 2017, 09:52
And millions flowing back to Conservative pockets through unofficial (kickbacks) or very official ("donations") channels.
Which is, let's face it, the only thing that matters to the lot currently defining policy.

It doesn't even matter who's in power any more. They're all terrible. The revolution cannot be far off at this rate.

DotasScandal
27th March 2017, 10:57
It doesn't even matter who's in power any more. They're all terrible. The revolution cannot be far off at this rate.

The concept of revolution is antithetic to the British national ethos - suffering in silence is more like it.
Besides, for a revolution, you need revolutionaries, not an army of slugs sedated by bread and circuses...
So, sorry, but probably not in this generation nor the next.

BrilloPad
27th March 2017, 11:16
It all depends what "control" means - so no change there.

Admin used to replace links to that site with "notausefulsite". When did that stop?

TheFaQQer
27th March 2017, 11:37
I posted this in another thread but thought it's worth starting a new discussion. Times reported on May planning to end IT contracting in the form we know it. There still will be, but most likely all will be inside IR35.

The Times did no such thing. I suggest that you read what they actually wrote, based on what May had said, rather that Gerry McGlaughlin's "interesting" interpretation of what she said.

The Times article can be found here (http://www.thetimes.co.uk/article/may-to-bosses-give-workers-more-rights-wdnrk0j8t?shareToken=805f4e08afc3a3cd23bdfac56e954 b94).

LondonManc
27th March 2017, 11:56
The Times did no such thing. I suggest that you read what they actually wrote, based on what May had said, rather that Gerry McGlaughlin's "interesting" interpretation of what she said.

The Times article can be found here (http://www.thetimes.co.uk/article/may-to-bosses-give-workers-more-rights-wdnrk0j8t?shareToken=805f4e08afc3a3cd23bdfac56e954 b94).

A couple of interesting things from that.


The problem is particularly acute in the delivery and technology service sectors, but ministers fear that the practice is spreading to more conventional parts of the economy.

I don't see it as an acute problem as described in technology; it's more the state of play.

However, the article then goes on to talking about control of workers. This for me should lead to a set of two contracts arriving based heavily on control, if that's the key theme. Contingent workers - freelance, gig economy, etc. should be served either a worker contract or a supplier contract, whereby the worker contract is Inside IR35 and you get the associated rights or a Supplier contract because you've got a limited company and its associated risks and costs.

MarkT
27th March 2017, 13:44
I think that the public sector stuff is a red herring, no matter what happens, it'll be transferred across.

It goes well? - Great! They got Capita et al to staff the void with body shops of FTC types and all is grand.
Roll it out to the private sector

It doesn't go well? - Huge void created with people walking to the private sector? That's because it's not a level playing field.
Roll it out to the private sector

Wyrd bið ful aræd

DotasScandal
27th March 2017, 15:15
That's because it's not a level playing field.
Roll it out to the private sector


Exactly.
And don't forget the obligatory press release stressing how yet another "unfairness" has been fixed by the great moral crusaders at at HMRC.
Create problem - Provide solution - Profit!
Old as the hills.

Craic
29th March 2017, 07:39
Yes but is the article correct in what it says. If it is then not only public sector contractors are scuppered but private sector contractors will be too.

"The report is going to recommend much stricter rules governing what is self-employment."

"Perhaps they will allow contractors to continue contracting but through umbrella companies rather than PSCs."

This is what is happening in the publci sector now. Why wouldn't it happen in 12 months in the private sector too?

After all if the Government believe that a contractor earning £100,000 should pay the same tax and NI as a permie earning £100,000, why would they think this is fair that they pay the same tax in the public sector and not the private sector?

cojak
29th March 2017, 07:46
Yes but is the article correct in what it says. If it is then not only public sector contractors are scuppered but private sector contractors will be too.

"The report is going to recommend much stricter rules governing what is self-employment."

"Perhaps they will allow contractors to continue contracting but through umbrella companies rather than PSCs."

This is what is happening in the publci sector now. Why wouldn't it happen in 12 months in the private sector too?

After all if the Government believe that a contractor earning £100,000 should pay the same tax and NI as a permie earning £100,000, why would they think this is fair that they pay the same tax in the public sector and not the private sector?

Because the private sector is far more savvy, aggressive and has deeper pockets to challenge than the Public Sector?

Fred Bloggs
29th March 2017, 08:00
Because the private sector is far more savvy, aggressive and has deeper pockets to challenge than the Public Sector?
I wouldn't bank on that in every case in the private sector by any means. There is a significant and increasing trend for companies in the UK to win work and apart from project managing it in the UK, actually off shoring all the actual work. I am talking about oil and gas sector but it applies to a wide range of industries. In addition to that, another emerging trend that is sure to grow is that project hire roles are made on FTC rather than Ltd Co contractor basis. In my own office, right here there are four long term contracting guys engaged on FTC terms. They need to feed their families at the end of the day, you take what is going. In another office on the same project, there are considerably more too. I'm not saying the world as we know it will be changed overnight, but the direction of travel is clear I'm afraid.

SueEllen
29th March 2017, 08:07
Because the private sector is far more savvy, aggressive and has deeper pockets to challenge than the Public Sector?

^^^This

You forget the private sector isn't ruled by people who are afraid they won't get their promotion if they don't comply.

adubya
29th March 2017, 08:07
After all if the Government believe that a contractor earning £100,000 should pay the same tax and NI as a permie earning £100,000, why would they think this is fair that they pay the same tax in the public sector and not the private sector?

I guess "they" don't understand that a company would hire a contractor for an engagement and accept the £100,000 cost but wouldn't hire someone and pay them the same rate, it would be significantly lower to cover all the guff that goes with employing a permie.

jamesbrown
29th March 2017, 08:16
^^^This

You forget the private sector isn't ruled by people who are afraid they won't get their promotion if they don't comply.

It really depends how they proceed post Taylor. If the PS rules are extended to the private sector, I tend to agree (although there will still be a large number of companies whose approach to risk/compliance will dictate caution). If they opt for a statutory definition of self employment (which I support, in principle, and see as increasingly likely in practice), there won't be nearly the same scope for fudging/subjectivity.

LondonManc
29th March 2017, 08:20
It really depends how they proceed post Taylor. If the PS rules are extended to the private sector, I tend to agree (although there will still be a large number of companies whose approach to risk/compliance will dictate caution). If they opt for a statutory definition of self employment (which I support, in principle, and see as increasingly likely in practice), there won't be nearly the same scope for fudging/subjectivity.

Let's not forget that this covers far more than IT contracting in the private sector - Uber, Deliveroo, Mitie, plumbers, engineers, all sorts. Some industry sectors may be far more clear cut than others.

SueEllen
29th March 2017, 08:25
It really depends how they proceed post Taylor. If the PS rules are extended to the private sector, I tend to agree (although there will still be a large number of companies whose approach to risk/compliance will dictate caution). If they opt for a statutory definition of self employment (which I support, in principle, and see as increasingly likely in practice), there won't be nearly the same scope for fudging/subjectivity.

The Tories will get pressure from their party donors who tend to be directors of large companies so there will be some sort of fudge.

After all Camoron had his fingers in the pie concerning Uber in London. This is the link for those who don't know what I mean - linky. (http://www.dailymail.co.uk/news/article-4351418/Cameron-aide-s-uber-cover-up.html)It was reported first in the Daily Mail and picked up by the FT and some other outlets.

jamesbrown
29th March 2017, 08:49
The Tories will get pressure from their party donors who tend to be directors of large companies so there will be some sort of fudge.

After all Camoron had his fingers in the pie concerning Uber in London. This is the link for those who don't know what I mean - linky. (http://www.dailymail.co.uk/news/article-4351418/Cameron-aide-s-uber-cover-up.html)It was reported first in the Daily Mail and picked up by the FT and some other outlets.

Yeah, but Hameface's chumocracy is antithesis to May. They approach things very differently. I think May has already demonstrated that she's willing to consider ignoring big business, although Parliamentary realities have dictated a lot of back-peddling on the more Millipedesque suggestions (workers on boards etc.). With a little care though (:laugh), what we're talking about here really doesn't carry the same risks as the NI debacle, and I can see there being broad support if it's carefully packaged as anti-avoidance.

TheFaQQer
29th March 2017, 09:11
I guess "they" don't understand that a company would hire a contractor for an engagement and accept the £100,000 cost but wouldn't hire someone and pay them the same rate, it would be significantly lower to cover all the guff that goes with employing a permie.

That is very much an argument that HMG and certain think tanks choose to ignore.

As a percentage, the owner-director limited company contractor is likely to pay lower tax than someone earning the same wage as an employee. The message that gets lost no matter how loud anyone shouts it is that the employee does NOT get the same wage as the contractor, and so the likelihood is that the net contribution to the economy made by the contractor (and their limited company) is much higher than the contribution that the employee makes.

I left my last permie job where I earned around £35k and took a contract paying £400 a day, which meant that I paid significantly more into the public purse as a contractor than I ever did as an employee.

VectraMan
29th March 2017, 09:31
I left my last permie job where I earned around £35k and took a contract paying £400 a day, which meant that I paid significantly more into the public purse as a contractor than I ever did as an employee.

If the employer/client is having to pay more for someone has an economic and tax effect too. If the employer's CT bill is reduced by paying more for a contractor than an employee, and the contractor is able to pay a lower tax percentage than the employee, then overall that's a tax loss for the government.

LondonManc
29th March 2017, 09:33
If the employer/client is having to pay more for someone has an economic and tax effect too. If the employer's CT bill is reduced by paying more for a contractor than an employee, and the contractor is able to pay a lower tax percentage than the employee, then overall that's a tax loss for the government.

What you've missed, though, is the ancillary impact of the contractor's disposable income - posh coffees, better restaurants, generally an extra 20-30k having an impact on the wider economy and the ripple effect which it creates.

SueEllen
29th March 2017, 09:54
Yeah, but Hameface's chumocracy is antithesis to May. They approach things very differently. I think May has already demonstrated that she's willing to consider ignoring big business, although Parliamentary realities have dictated a lot of back-peddling on the more Millipedesque suggestions (workers on boards etc.). With a little care though (:laugh), what we're talking about here really doesn't carry the same risks as the NI debacle, and I can see there being broad support if it's carefully packaged as anti-avoidance.

I presume you didn't see the housing white paper? It was a chance to stop landbanking and either temporary/permanently increase the tax take, but the Tories under May decided to keep the status quo.

SueEllen
29th March 2017, 09:56
What you've missed, though, is the ancillary impact of the contractor's disposable income - posh coffees, better restaurants, generally an extra 20-30k having an impact on the wider economy and the ripple effect which it creates.

Lots of politicians now don't believe in the trickle down effect economic theory due to the increase in income inequality in Western economies like the UK and US.

LondonManc
29th March 2017, 09:59
Lots of politicians now don't believe in the trickle down effect economic theory due to the increase in income inequality in Western economies like the UK and US.

The politicians don't believe anything that doesn't suit their agenda.
HTHBIDI

jamesbrown
29th March 2017, 10:49
I presume you didn't see the housing white paper? It was a chance to stop landbanking and either temporary/permanently increase the tax take, but the Tories under May decided to keep the status quo.

Indeed, but I also mentioned the political realities. It comes down to the degree of pushback, and I would not expect a large pushback on measures that are wrapped as "anti-avoidance". This is most definitely not a re-run of the NI debacle. We are not the "self-employed" as perceived by the mainstream press. Remember, the Tory backbenchers don't want to rebel for the sake of it. They know division projects incompetence (witness Labour).

Craic
29th March 2017, 13:45
It's very clever of the Government to push the decision on a contractors' IR35 status onto the hirers - with financial penalties possibe if they screw up.

The hirers don't want to take any risks and so make all contract positions inside IR35 no matter if the person applying is outside IR35.

I think those who say that this wouldn't work in the private sector are wrong.

Which permie boss would want the hassle from his bosses if he screws up and there are financial penalties for his, or her, company?

DotasScandal
29th March 2017, 13:52
It's very clever of the Government to push the decision on a contractors' IR35 status onto the hirers - with financial penalties possibe if they screw up.

The hirers don't want to take any risks and so make all contract positions inside IR35 no matter if the person applying is outside IR35.

I think those who say that this wouldn't work in the private sector are wrong.

Which permie boss would want the hassle from his bosses if he screws up and there are financial penalties for his, or her, company?

Agree with all of the above, except I don't call this "clever", but cunning and cynical (as per the Tory playbook).

LondonManc
29th March 2017, 14:15
Agree with all of the above, except I don't call this "clever", but cunning and cynical (as per the Tory playbook).

Or alternatively lazy, or confusing, or dangerous.

I guess it depends whose view you're taking. The permie Project Manager who has just lost half his team due them buggering off after being declared inside will see it as dangerous. Someone else who is having to make the decisions based on no prior knowledge of IR35 will see it as lazy, while anyone who is new to IR35 in the PSB and is trying to exercise reasonable care but tries to tally IR35 back to the ESS tool will see it as confusing.

Couldn't organise a piss up in a brewery is probably the best summary I've heard.

DotasScandal
29th March 2017, 14:21
Or alternatively lazy, or confusing, or dangerous.

I guess it depends whose view you're taking. The permie Project Manager who has just lost half his team due them buggering off after being declared inside will see it as dangerous. Someone else who is having to make the decisions based on no prior knowledge of IR35 will see it as lazy, while anyone who is new to IR35 in the PSB and is trying to exercise reasonable care but tries to tally IR35 back to the ESS tool will see it as confusing.

Couldn't organise a piss up in a brewery is probably the best summary I've heard.

I'm talking about the political masters (like this guy (https://www.dotas-scandal.org/tag/david-gauke/)), not the poor bastards on the ground left to hold the bag. Don't mistake ideology for incompetence. Some of these guys hate contractors and want contracting dead.

SueEllen
29th March 2017, 14:55
Indeed, but I also mentioned the political realities. It comes down to the degree of pushback, and I would not expect a large pushback on measures that are wrapped as "anti-avoidance". This is most definitely not a re-run of the NI debacle. We are not the "self-employed" as perceived by the mainstream press. Remember, the Tory backbenchers don't want to rebel for the sake of it. They know division projects incompetence (witness Labour).

Luckily for us the likes of News International and The Daily Mail Group engage contractors as well as traditional freelancers.

SueEllen
29th March 2017, 15:00
It's very clever of the Government to push the decision on a contractors' IR35 status onto the hirers - with financial penalties possibe if they screw up.

The hirers don't want to take any risks and so make all contract positions inside IR35 no matter if the person applying is outside IR35.

I think those who say that this wouldn't work in the private sector are wrong.

Which permie boss would want the hassle from his bosses if he screws up and there are financial penalties for his, or her, company?

The permie boss(es) who engage contractors in many of the companies that have hired my services, aren't the permie boss whose team I most frequently end up engaging with.

This can become annoying when you want a timesheet validated/signed. In SMEs the finance director, who is a qualified accountant, can be involved and if you don't send them the timesheet in the right window it's not validated on time.

AtW
29th March 2017, 15:22
What you've missed, though, is the ancillary impact of the contractor's disposable income - posh coffees, better restaurants, generally an extra 20-30k having an impact on the wider economy and the ripple effect which it creates.

Yep, that might just push the real estate to proper crash post-Brexit.

DotasScandal
29th March 2017, 15:37
Yep, that might just push the real estate to proper crash post-Brexit.

It will never be allowed to crash. Carney will see to it (even if it means devaluing the pound like there's no tomorrow).

jamesbrown
29th March 2017, 15:47
Luckily for us the likes of News International and The Daily Mail Group engage contractors as well as traditional freelancers.

I try to avoid both TBH, but it seems to me that the Fail is most definitely not on our side. It helps that some of the most notorious examples come from the BBC or other PSBs (e.g. Ed Lester).

jamesbrown
29th March 2017, 15:49
It's very clever of the Government to push the decision on a contractors' IR35 status onto the hirers - with financial penalties possibe if they screw up.

The hirers don't want to take any risks and so make all contract positions inside IR35 no matter if the person applying is outside IR35.

I think those who say that this wouldn't work in the private sector are wrong.

Which permie boss would want the hassle from his bosses if he screws up and there are financial penalties for his, or her, company?

Don't forget, this was the original proposal in 1999 before big business lobbied to have it canned. It isn't a recent revelation.

SueEllen
29th March 2017, 15:54
I try to avoid both TBH, but it seems to me that the Fail is most definitely not on our side. It helps that some of the most notorious examples come from the BBC or other PSBs (e.g. Ed Lester).

Yeah they detest the public sector particularly the BBC and NHS. Doesn't mean they aren't happy to have workers off their payroll as they are a private enterprise.

AtW
29th March 2017, 16:00
It will never be allowed to crash. Carney will see to it (even if it means devaluing the pound like there's no tomorrow).

What would he do if suddenly people with big mortgages get a lot less income due to massively increased tax? The rates are already very low, that card was played.

Craic
30th March 2017, 08:24
But the 64 million dollar question is, as the article asks, will Hammond and May roll out the public sector iR35 changes to the private sector?

DotasScandal
30th March 2017, 08:50
But the 64 million dollar question is, as the article asks, will Hammond and May roll out the public sector iR35 changes to the private sector?

They will try - 100% certain.
The justification will be that the Government has identified an "unfairness" (of their own making, but never mention that...) due to the difference of treatement of contractors between the public and private sectors.
Cue announcement that the changes will now be applied to the private sector in order to "level the playing field" - taking effect at the time of announcements (shock & awe method).
A long campaign of retrospective investigation by HMRC will follow to look into the affairs of those who suddenly found themselves "inside" courtesy of "the tool". A "Guilty by default" approach will be adopted, a la APN.
Trust that anything that's not nailed down will be looted.
Cause, you know..."the country needs money" (David Gauke).

ChimpMaster
30th March 2017, 09:34
They will try - 100% certain.
The justification will be that the Government has identified an "unfairness" (of their own making, but never mention that...) due to the difference of treatement of contractors between the public and private sectors.
Cue announcement that the changes will now be applied to the private sector in order to "level the playing field" - taking effect at the time of announcements (shock & awe method).
A long campaign of retrospective investigation by HMRC will follow to look into the affairs of those who suddenly found themselves "inside" courtesy of "the tool". A "Guilty by default" approach will be adopted, a la APN.
Trust that anything that's not nailed down will be looted.
Cause, you know..."the country needs money" (David Gauke).

I know there is a vein of humour/sarcasm in there but - for once - I don't think the government will or could make this change retrospective, else they would have done it to the PS contractors. Though I agree, this country is well and truly on the road to disaster in this respect.

Though I wonder, how did/will HMRC treat the PS contractors who had a Ltd Co with retained profits? Will those contractors be allowed to keep using the same Ltd, but with all post-April invoices being subject to PAYE?

LondonManc
30th March 2017, 10:22
I know there is a vein of humour/sarcasm in there but - for once - I don't think the government will or could make this change retrospective, else they would have done it to the PS contractors. Though I agree, this country is well and truly on the road to disaster in this respect.

Though I wonder, how did/will HMRC treat the PS contractors who had a Ltd Co with retained profits? Will those contractors be allowed to keep using the same Ltd, but with all post-April invoices being subject to PAYE?

I'd imagine that it's up to the PS contractor as to what they want to do with their limited company; dormancy seems the most sensible option until the storm is weathered and the future becomes clearer.

DotasScandal
30th March 2017, 10:25
I know there is a vein of humour/sarcasm in there but - for once - I don't think the government will or could make this change retrospective, else they would have done it to the PS contractors.


We're not talking about retospective application of the IR35 rules, we're talking about retrospective investigation of those who will have signaled themselves by now being "inside" (with the kind help of "the tool") when they had declared themselves "outside" previously yet didn't change roles.

TheFaQQer
30th March 2017, 10:26
Will those contractors be allowed to keep using the same Ltd, but with all post-April invoices being subject to PAYE?

As I wrote in the FAQ, I don't expect it to be an option for contractors after a little while. There are plenty of downsides to the agencies and no upsides, so why would the agency change their systems when there are much easier options for them?

Keep the company if you want to, or look to close it down to move the money into your pocket rather than the company, but I don't expect there will be an option to work in public sector via your own limited company by this stage next year because there is so little incentive for the agency to deal with you this way.

matzie
30th March 2017, 10:42
This is all conjecture and we know nothing for sure yet.

Whatever happens, those of us who are genuinely in business on our own account will adapt to change, and we will survive. We may be worse off, we may have to tighten our belts, but we will survive. It will be ok. The sky will not fall.

Craic
30th March 2017, 11:02
The sky might not fall but contractors take home pay will - by up to 20%.

ChimpMaster
30th March 2017, 13:14
The sky might not fall but contractors take home pay will - by up to 20%.

Perhaps not, if you stick together and force the government's hand. All they want to show is that they are bringing in more tax receipts. What they won't show to the public is the extra cost of paying PS contractors to stay on.

DotasScandal
30th March 2017, 13:49
Perhaps not, if you stick together and...

:laugh

Craic
31st March 2017, 06:15
Does anyone know what plans IPSE have to fight this? We don't know if these IR35 changes will be rolled out in the private sector or not but it would be best to be prepared.

It would be best to lobby against them beforehand as, once they are announced, it will be hard to put the genie back in the bottle as that would be considered a Government climbdown.

It would be best to get them to quietly drop the changes beforehand.

Fred Bloggs
31st March 2017, 07:35
Does anyone know what plans IPSE have to fight this? We don't know if these IR35 changes will be rolled out in the private sector or not but it would be best to be prepared.

It would be best to lobby against them beforehand as, once they are announced, it will be hard to put the genie back in the bottle as that would be considered a Government climbdown.

It would be best to get them to quietly drop the changes beforehand.
That's the best post I've seen in ages. I'll tell you what the plans are. They will have cozy fire side chats with a cup of tea in the mistaken belief that since they got invited to the corridors of power they are to be taken seriously. Spreadsheet Phil, will turn to his secretary afterwards and say "thank f**k we got them out of the way quickly. Business as usual, Sir Humphrey". In the meantime, back at IPSE Towers they'll be busy patting themselves on the back telling each other on the IPSE forum what a jolly good job they are doing and how lucky all those contractors are to have them looking after them, lobbying for all those employment rights that nobody wants. Snag, is the last couple of years, the new fire side chat strategy just hasn't worked. Normally, when a strategy doesn't work, you go back to the old strategy that worked well for about 15 years or so. They just do not seem able to grasp the scale of the failure that the fire side chat policy has been. I think that covers it.

malvolio
31st March 2017, 08:52
That's the best post I've seen in ages. I'll tell you what the plans are. They will have cozy fire side chats with a cup of tea in the mistaken belief that since they got invited to the corridors of power they are to be taken seriously. Spreadsheet Phil, will turn to his secretary afterwards and say "thank f**k we got them out of the way quickly. Business as usual, Sir Humphrey". In the meantime, back at IPSE Towers they'll be busy patting themselves on the back telling each other on the IPSE forum what a jolly good job they are doing and how lucky all those contractors are to have them looking after them, lobbying for all those employment rights that nobody wants. Snag, is the last couple of years, the new fire side chat strategy just hasn't worked. Normally, when a strategy doesn't work, you go back to the old strategy that worked well for about 15 years or so. They just do not seem able to grasp the scale of the failure that the fire side chat policy has been. I think that covers it.
Has it occurred to you (or have you simply not bothered to look) that multiple major organisations as well as IPSE have explained in great detail to HMG why this is a monumentally stupid and financially illiterate idea. How would you move on if HMG simply ignore everything they are being told?

Also, it's easy to do to the Public Sector where there are no shareholders to upset. It is enormously more difficult to do it to the private one. "Sorry, Mr Corporate party sponsor, I've just put your cost of employment up by 30% and killed off your flexible workforce". That would really work, wouldn't it?

Incidentally, IPSE have told St Teresa to her face it's a bad idea. Biscuits were not provided.

DotasScandal
31st March 2017, 08:59
That's the best post I've seen in ages. I'll tell you what the plans are. They will have cozy fire side chats with a cup of tea in the mistaken belief that since they got invited to the corridors of power they are to be taken seriously. Spreadsheet Phil, will turn to his secretary afterwards and say "thank f**k we got them out of the way quickly. Business as usual, Sir Humphrey". In the meantime, back at IPSE Towers they'll be busy patting themselves on the back telling each other on the IPSE forum what a jolly good job they are doing and how lucky all those contractors are to have them looking after them, lobbying for all those employment rights that nobody wants. Snag, is the last couple of years, the new fire side chat strategy just hasn't worked. Normally, when a strategy doesn't work, you go back to the old strategy that worked well for about 15 years or so. They just do not seem able to grasp the scale of the failure that the fire side chat policy has been. I think that covers it.

Thanks for writing my post for me!

Fred Bloggs
31st March 2017, 11:40
Thanks for writing my post for me!
Very welcome.

SussexSeagull
31st March 2017, 12:55
I am sure it wasn't for the want of trying but the current government aren't listening to IPSE or anyone else who suggest that not grabbing as much tax as possible might help the economy in other areas.

The upcoming Taylor report will be interesting but I fear it will try and align employment and tax status which ultimately contractor don't want.

AtW
4th April 2017, 01:39
Govt cut corp tax and it intends to claw back a lot via other taxes - there is no amount of talking would change it, they don't care if companies will have to increase rates - if anything that would get Govt more tax, no amount of lobbying would change it

malvolio
4th April 2017, 06:47
Govt cut corp tax and it intends to claw back a lot via other taxes - there is no amount of talking would change it, they don't care if companies will have to increase rates - if anything that would get Govt more tax, no amount of lobbying would change it
No. Cutting CT is a bid to bring more business into the UK and so push up overall tax revenues. Our rates are not really part of that equation.

AtW
4th April 2017, 12:12
No. Cutting CT is a bid to bring more business into the UK and so push up overall tax revenues. Our rates are not really part of that equation.

Yes, they want to bring in more business, however the cuts in CT are projected to "cost" a lot of revenue - increasing sharply over next few years, so to offset that the Govt is adding all sort of new costs: say take "Apprentice Levy" which is just 0.5% , imagine how much more they can claw back by making companies pay Employer NICs on all self-employed engagements? Plus they get a chunk extra from new employees with IR35

b r
4th April 2017, 12:14
No. Cutting CT is a bid to bring more business into the UK and so push up overall tax revenues.

Don't confuse paid rates with advertised rates.

malvolio
4th April 2017, 12:26
Don't confuse paid rates with advertised rates.
I haven't for the last 20 years or so, but thanks for the advice. Still not sure how it's relevant though...

Craic
4th April 2017, 15:41
IPSE are demanding that the Government, via the Matthew Taylor report’s definition of self employment should be based around the following:-

Having autonomy in their work. For freelancers this means the ability to send substitutes and for there to be no requirement to do work outside what is agreed
Having control over working arrangements. Self-employed people are able to decide how to complete their tasks and the hours and location they choose to work in
Taking on business risk. Self-employed take responsibility for their finance and tax responsibilities and can be paid on a per task basis
Level of independence from clients. This would include things such as having to wear a uniform or using your own tools and equipment to complete your work.

Craic
5th April 2017, 14:09
Surely what IPSE are demanding would make most IT Contractors who work on IT projects as developers etc. squarely caught by IR35. This would include many of their members who are currently using personal service companies.

TheFaQQer
5th April 2017, 16:29
Surely what IPSE are demanding would make most IT Contractors who work on IT projects as developers etc. squarely caught by IR35. This would include many of their members who are currently using personal service companies.

How so?

Do you have freedom over the work that you do (ie are you subject to supervision, direction and control)? Do you have a right of substitution that allows you to provide a suitable replacement without the client being able to reject without a valid reason? Are you independent from your client, or are you part and parcel of their organisation?

If you fail the three pillars of employment then you fail the IR35 tests and are inside; if you do not fail all three pillars then you cannot be an employee so are outside IR35.

I have no idea how many contractors are inside IR35, outside IR35 or inside IR35 pretending to be outside and hoping not to get investigated. The government is looking to close the gap between self employed and employed and left to their own devices will come up with a definition that suits Treasury as much as possible. If nobody is out there saying "this is what you should consider when determining whether someone is self employed or not" then sure as eggs is eggs we'll end up with a definition which doesn't suit the majority of people who work like us.

There are people who are clearly self employed, and there are people who are clearly employees. And there is a grey area in between the two extremes of black and white. Government would like to define as many people as possible as being in the black (for taxation purposes) whereas the genuine self employed want to see as many people that work like "me" (a genuinely self employed freelance contractor) in the white as possible. Those who are forced into being self employed so that their employer can avoid paying tax and national insurance would fail the test of self employment (giving the individual and the government a win that they want) whilst those of us who freelance out of choice can argue "I am a contractor" clearly, articulately and persuasively whilst still allowing government to claim a win because they are increasing revenues from those who are disguised employees and employers who use their workforce this way.

SueEllen
5th April 2017, 18:55
I thought I would post this here as this thread mentions them.

Apparently Deliveroo has created terminology to prove their workers aren't self-employed linky (https://www.theguardian.com/business/2017/apr/05/deliveroo-couriers-employees-managers)


In a six-page document seen by the Guardian, Deliveroo says its couriers, who deliver takeaways, should always be referred to as “independent suppliers” – self-employed workers with few employment rights – rather than as employees, workers, staff or team members.

Fred Bloggs
5th April 2017, 23:59
Mercilessly edited by FB to say -

I have no idea how many contractors are inside IR35, outside IR35 or inside IR35 pretending to be outside and hoping not to get investigated.

IIRC, HMRC and HMG reckon it is close to 90% who should be IR35 caught. I have worked mainly on major engineering projects for most of my contracting career and I reckon they are not far wrong to be frank. With the vast majority pretending to be "real businesses". I know a very small minority of contractors who for sure are operating businesses as the man in the street would recognise it, but most are just a convenient sham.

SueEllen
6th April 2017, 02:33
IIRC, HMRC and HMG reckon it is close to 90% who should be IR35 caught. I have worked mainly on major engineering projects for most of my contracting career and I reckon they are not far wrong to be frank. With the vast majority pretending to be "real businesses". I know a very small minority of contractors who for sure are operating businesses as the man in the street would recognise it, but most are just a convenient sham.

Every contractor works alongside a small subsection of other contractors amongst the total number of a contractors there are, regardless of how many clients they work with.

That means some contractors end working alongside 90% of other contractors who should be caught while others work where far less people should be caught.

As HMRC doesn't know what happens in other government departments let alone in private enterprises, I would take their estimates with a massive pinch of salt.

What I do know is that in the public sector contracts I worked on, if you wanted D&C then you would be removed very quickly.

Fred Bloggs
6th April 2017, 03:35
Every contractor works alongside a small subsection of other contractors amongst the total number of a contractors there are, regardless of how many clients they work with.

That means some contractors end working alongside 90% of other contractors who should be caught while others work where far less people should be caught.

As HMRC doesn't know what happens in other government departments let alone in private enterprises, I would take their estimates with a massive pinch of salt.

What I do know is that in the public sector contracts I worked on, if you wanted D&C then you would be removed very quickly.
And........ our mileages will vary as appropriate. Being extremely fortunate in having a skill set that is now almost impossible to acquire (took me 40 years) yet is still in demand (the demand pool has shrunk far less than the experience pool) I just get left alone. I'm engaged as a subject matter expert and that's all there is to it. I'm not saying I'm any different in all other respects to every other guy who spends between 6 months and 2 to 3 years on a project before moving on (all private sector, all blue chip clients). Yet, just like you say from your experience about D&C, I can say quite categorically that on big engineering projects if you aren't part and parcel of the team and behave in exactly that way, you are out through the door. Most large projects are manned almost entirely by contractors from project director down to clerks. Sometimes, a non team member type will be sacked at a couple of hours notice, sometimes at a weeks notice depending on the available replacements. On more than one occasion, I have been that replacement. My solution to being a SME but looking like an integral part of the team? Make sure everything is done well and before 99.9% of the time anyone even realises anything is to be done. That way, I am part of the team but never given any instruction on what to do or how to do it. Does that make sense?

malvolio
6th April 2017, 06:40
And........ our mileages will vary as appropriate. Being extremely fortunate in having a skill set that is now almost impossible to acquire (took me 40 years) yet is still in demand (the demand pool has shrunk far less than the experience pool) I just get left alone. I'm engaged as a subject matter expert and that's all there is to it. I'm not saying I'm any different in all other respects to every other guy who spends between 6 months and 2 to 3 years on a project before moving on (all private sector, all blue chip clients). Yet, just like you say from your experience about D&C, I can say quite categorically that on big engineering projects if you aren't part and parcel of the team and behave in exactly that way, you are out through the door. Most large projects are manned almost entirely by contractors from project director down to clerks. Sometimes, a non team member type will be sacked at a couple of hours notice, sometimes at a weeks notice depending on the available replacements. On more than one occasion, I have been that replacement. My solution to being a SME but looking like an integral part of the team? Make sure everything is done well and before 99.9% of the time anyone even realises anything is to be done. That way, I am part of the team but never given any instruction on what to do or how to do it. Does that make sense?
That is rather the whole point of our argument. If keeping the customer happy and doing the job properly means pretending to be a part of their organisation, then that's what we'll do. It does not mean we are part of that organisation. We are hired to do a better job than their own staff and to be disposed of as soon as our job is done.

I find it exasperating in the extreme that people - other contractors as well as HMG - still think "fitting in" (to use a very loose term) to do the job properly and being an independent, self-managing entity are somehow mutually exclusive. They aren't, it's simply adopting a persona for a given purpose.

Or for another illustration: Robert de Niro? Oh yeah, he was that taxi driver bloke who lost the plot a while back, wasn't he.

MrMarkyMark
6th April 2017, 07:53
And........ our mileages will vary as appropriate. Being extremely fortunate in having a skill set that is now almost impossible to acquire (took me 40 years) yet is still in demand (the demand pool has shrunk far less than the experience pool) I just get left alone. I'm engaged as a subject matter expert and that's all there is to it. I'm not saying I'm any different in all other respects to every other guy who spends between 6 months and 2 to 3 years on a project before moving on (all private sector, all blue chip clients). Yet, just like you say from your experience about D&C, I can say quite categorically that on big engineering projects if you aren't part and parcel of the team and behave in exactly that way, you are out through the door. Most large projects are manned almost entirely by contractors from project director down to clerks. Sometimes, a non team member type will be sacked at a couple of hours notice, sometimes at a weeks notice depending on the available replacements. On more than one occasion, I have been that replacement. My solution to being a SME but looking like an integral part of the team? Make sure everything is done well and before 99.9% of the time anyone even realises anything is to be done. That way, I am part of the team but never given any instruction on what to do or how to do it. Does that make sense?

This +1

How my roles generally pan out these days.

TheFaQQer
6th April 2017, 08:32
IIRC, HMRC and HMG reckon it is close to 90% who should be IR35 caught. I have worked mainly on major engineering projects for most of my contracting career and I reckon they are not far wrong to be frank. With the vast majority pretending to be "real businesses". I know a very small minority of contractors who for sure are operating businesses as the man in the street would recognise it, but most are just a convenient sham.

The consultation papers when the PS changes were first discussed said that 90% of PSCs who should be inside IR35 weren't paying up correctly - but the press / MPs / blogs etc have generally interpreted this as "90% don't pay up".

When in coalition, Alexander led a review that found that in central government 90% of PSCs were paying the right amount of tax - a point that I made to HMRC directly.

SueEllen
6th April 2017, 08:38
The consultation papers when the PS changes were first discussed said that 90% of PSCs who should be inside IR35 weren't paying up correctly - but the press / MPs / blogs etc have generally interpreted this as "90% don't pay up".

When in coalition, Alexander led a review that found that in central government 90% of PSCs were paying the right amount of tax - a point that I made to HMRC directly.

Case of the left hand not knowing what the right hand is doing.

SussexSeagull
6th April 2017, 14:02
There is a fairly large HMRC office near me and the contractors in there are so far into IR35 they would need a map and compass to get out again.

Unfortunately a lot of current contracts, in the public and private sectors, fairly much demand the client has direction and control but the market has got itself into it's current state where clients don't want full time staff and fixed term contracts don't attract experienced people.

SueEllen
6th April 2017, 14:18
There is a fairly large HMRC office near me and the contractors in there are so far into IR35 they would need a map and compass to get out again.

Unfortunately a lot of current contracts, in the public and private sectors, fairly much demand the client has direction and control but the market has got itself into it's current state where clients don't want full time staff and fixed term contracts don't attract experienced people.

So you have done some work for HMRC in that office then?

SussexSeagull
6th April 2017, 14:27
So you have done some work for HMRC in that office then?

No but I know people who have and worked with them on other things.

I assume this might be about to change with the IR35 changes but they tend to bring in people who have worked for them before so it tends to be something of an old boys (and girls) club where you have to know someone to break in. I had a phone interview with them years ago and was beaten by someone who was a personal friend of one of the other contractors doing the interview.

In terms of working practice other than being paid differently it basically sounded like they were a member of staff e.g. clocking in and out and contributing to permanent staffs appraisals.

I think the IR35 public services changes have been very clumsily implemented but I do think cosy little cartels like this did need breaking up.

SueEllen
6th April 2017, 14:33
No but I know people who have and worked with them on other things.

I assume this might be about to change with the IR35 changes but they tend to bring in people who have worked for them before so it tends to be something of an old boys (and girls) club where you have to know someone to break in. I had a phone interview with them years ago and was beaten by someone who was a personal friend of one of the other contractors doing the interview.

In terms of working practice other than being paid differently it basically sounded like they were a member of staff e.g. clocking in and out and contributing to permanent staffs appraisals.

I think the IR35 public services changes have been very clumsily implemented but I do think cosy little cartels like this did need breaking up.

Why the feck are they doing staff appraisals? Are they mad?

Oh some of the government departments in London and the SE are paying around 75K permie for Digital Developers due to the various bits they add to the salary.

SussexSeagull
6th April 2017, 14:50
Why the feck are they doing staff appraisals? Are they mad?

Oh some of the government departments in London and the SE are paying around 75K permie for Digital Developers due to the various bits they add to the salary.

I suspect part of the problem with the HMRC is they are judging everyone by their own standards.

They do struggle to recruit local permanent staff as well. In fact I might have to look into it if my prospects don't improve!

Regur
10th April 2017, 12:00
Well after 22 years as a contractor - I've finally chucked in the towel and gone permie. Well done Hector - I'll let you win this one.

I think you'd be a fool not to expect drastic and damaging changes to happen over the next 18 months to contracting within the UK in all industries. With the political uncertainty in the next couple of years I think I'd rather jump now and move to somewhere I want to go rather than be pushed later on.

The ride was fun whilst it lasted though. Feels a bit weird to not be invoicing every week but I'm sure the paid holidays will ease me through the pain of not feeling elitist and looking down with disdain at the permanent members of staff anymore :glasses

For me, the positives of contracting have slowly been ground down and are now outweighed by the negatives, and as for those of you who are going to stand firm and continue, I salute you - but I think the writing is on the wall....

PermMCCon
10th April 2017, 16:39
Well after 22 years as a contractor - I've finally chucked in the towel and gone permie. Well done Hector - I'll let you win this one.

I think you'd be a fool not to expect drastic and damaging changes to happen over the next 18 months to contracting within the UK in all industries. With the political uncertainty in the next couple of years I think I'd rather jump now and move to somewhere I want to go rather than be pushed later on.

The ride was fun whilst it lasted though. Feels a bit weird to not be invoicing every week but I'm sure the paid holidays will ease me through the pain of not feeling elitist and looking down with disdain at the permanent members of staff anymore :glasses

For me, the positives of contracting have slowly been ground down and are now outweighed by the negatives, and as for those of you who are going to stand firm and continue, I salute you - but I think the writing is on the wall....


I'm on the same boat, except I did 5 successful / profitable years rather than your 20!!!

I was sitting there in a big bank who was offering me a nice permie package... why the hell not? They are a great bunch and I am thoroughly enjoying the work.

Yes off course I will miss all the Contractor perks, but at the same time I am already enjoying the perks of permiedom (eg no slight uneasiness in the gut re contracts) and all the benefits that come with permiedom with a good company (medical cover, life insurance and a boat load of other benefits I didn't know I needed or existed!).

Contracting is still a perfect fit for some people, but I agree that the "contracting vs permie" divide is getting closer. :fight:

malvolio
10th April 2017, 17:54
I'm on the same boat, except I did 5 successful / profitable years rather than your 20!!!

I was sitting there in a big bank who was offering me a nice permie package... why the hell not? They are a great bunch and I am thoroughly enjoying the work.

Yes off course I will miss all the Contractor perks, but at the same time I am already enjoying the perks of permiedom (eg no slight uneasiness in the gut re contracts) and all the benefits that come with permiedom with a good company (medical cover, life insurance and a boat load of other benefits I didn't know I needed or existed!).

Contracting is still a perfect fit for some people, but I agree that the "contracting vs permie" divide is getting closer. :fight:
I don't - but it all depends on why you went contacting in the first place. :wink

breaktwister
11th April 2017, 22:08
We are hired to do a better job than their own staff and to be disposed of as soon as our job is done.


But it is only fair that two people doing the same job should pay the same tax

v8gaz
12th April 2017, 07:55
But it is only fair that two people doing the same job should pay the same tax for the same benefits, security and risk

FTFY, assuming you weren't simply having a laugh.

Yonmons
1st May 2017, 12:08
But it is only fair that two people doing the same job should pay the same tax

You are trying wind us contractors up with that comment surely !! LOL

n123
4th May 2017, 21:27
I see the situation as perfect lobbying by Big Business, Umbrella companies etc.

If contractors are squeezed, they will run either to become permie (win for Big Business, lot of cheap workers around) or to Umbrella companies (No question of IR35, and safe revenue stream). HMRC will be happy as they can collect more tax and penalties by catching and putting everyone into IR35. Big Business has no problem, as it does not have to pay Employers NI, Redundancy tangles, Pension contributions, Bonus, Promotion, Holiday, Maternity, Shares, Medical Insurance, Life Insurance, etc.

As a contractor, one pays Corporation Tax, Dividend Tax, VAT, PAYE (Income Tax and NI - might be lower depending on circumstances). Not to mention other costs like Professional Indemnity Insurance and Public Liability, IPSE membership, IR35 contract reviews/protection, their own medical insurance, pension, self funded holidays etc. ). A permie pays high PAYE (Tax and NI, Employers and Employee contribution), but on low gross. So, in effect, contractor could be paying more in total tax.

So
- if contractors run to Umbrellas, Umbrellas will surely benefit
- if they continue with their current risks, then Big Business are happy to avoid all incidental costs and can get rid of them when they want without redundany, etc. HMRC is happy, as they can always come to bite contractors with retrospective penalties and IR35 claims.
- if contracts run to become permanent, again Big Business is happy to get loads of cheap local labour and HMRC is happy to get all the big PAYE & NI.

Whatever happened to this petition? https://www.change.org/p/uk-government-help-preserve-the-right-to-be-a-contractor-in-the-uk

cojak
4th May 2017, 22:40
We've seen it and we thought it was a bit rubbish..,


Yep I criticised as poorly written when someone posted it here back in November with about 18 signatures, and I criticised it again yesterday when someone mentioned it was doing the rounds on linkedin.

Personally it makes us look like woe is me, tax evading greedy muppets so I wouldn't sign it if my life depended on it.

Edit: oh, that's a different petition.

Well, good luck with it...

northernladyuk
12th May 2017, 08:03
FTFY, assuming you weren't simply having a laugh.

Worse security, benefits and risk should be compensated for commercially, not subsidised by the tax system.

Cirrus
12th May 2017, 11:47
Worse security, benefits and risk should be compensated for commercially, not subsidised by the tax system.Contractors generally get paid a lot more than permies. You could well argue that they are already commercially compensated for the various aspects of freelance work (travel, accommodation, downtime, sickness, pregnancy, holidays etc). The historic tax breaks were icing on the cake but maybe not 'justified' in any sense. As a general point I have never understood why people think if they don't have employee benefits from their clients then they can go round to HMRC and ask them to chip in.

northernladuk
12th May 2017, 11:53
Contractors generally get paid a lot more than permies.

Not me. I only get paid 8k a year.

BrilloPad
12th May 2017, 11:58
Worse security, benefits and risk should be compensated for commercially, not subsidised by the tax system.

Big companies should pay the same CT as small companies. Which would have a far greater impact. A sense of perspective is needed.

SussexSeagull
12th May 2017, 12:21
Don't forget that the abandoned NI rise was also aimed at industries where people don't have a lot of choice in being self employed.

For us it is just part of the slow but steady move towards contracting becoming a less and less attractive option. I was chatting to an agent the other day about something I am up for which might end up being a permanent role instead of a contract, which apparently is becoming more and more common.

To be fair as some contractors behave like permanent employees in all but being paid twice the money we really should have seen that coming.

PerfectStorm
12th May 2017, 14:15
The first instalment of it was to increase National Insurance for contractors.

That was for self employed people, not contractors per se

northernladyuk
12th May 2017, 14:57
Big companies should pay the same CT as small companies.

They do.

northernladyuk
12th May 2017, 14:59
Not me. I only get paid 8k a year.

Plus the cash in hand work.

WordIsBond
12th May 2017, 17:23
Worse security, benefits and risk should be compensated for commercially, not subsidised by the tax system.
Only if you think there is no broader societal or economic benefit to having a flexible workforce. If having a flexible workforce strengthens the economy, why should not the tax system encourage it? The tax system encourages R&D, green energy, having kids, child care, fuel-efficient cars, pension savings, capital expenditures, etc, etc, etc.

If a flexible workforce is valuable to the economy as a whole, and valuable to society by allowing more people to have the lifestyle benefits of flexible working, why should it be only the engagers that have to pay for it? Why shouldn't society chip in a little bit via the tax system?

jamesbrown
12th May 2017, 18:16
Only if you think there is no broader societal or economic benefit to having a flexible workforce. If having a flexible workforce strengthens the economy, why should not the tax system encourage it? The tax system encourages R&D, green energy, having kids, child care, fuel-efficient cars, pension savings, capital expenditures, etc, etc, etc.

If a flexible workforce is valuable to the economy as a whole, and valuable to society by allowing more people to have the lifestyle benefits of flexible working, why should it be only the engagers that have to pay for it? Why shouldn't society chip in a little bit via the tax system?

Right, but I don't think these two views are incompatible. Certainly, we shouldn't be compensated via the tax system for things that are explicitly reflected in rates. However, there may be a reason to encourage particular ways of working via the tax system. The problem is that the current tax system is a birds next of historical precedent, not a carefully articulated reason for preferring one form of working over another. If you listen to the IFS and others, they are arguing that the magnitude of difference is unjustified, not that there should be no difference. There is an alternate case to be made, but I think most could agree that the largely arbitrary and substantial favouring of one form of working over another is not really justified. In principle, I'm with northernladyuk, but there's an argument to be had about the precise value of any tax bonus, so that it has some level of consent. The problem we face is that the average punter (or MP for that matter) doesn't understand these nuances, so there will be more people arguing for zero or very small differences, once inconvenient manifesto commitments are out the way.

WordIsBond
12th May 2017, 21:19
You are absolutely right that we shouldn't be compensated via tax for things for which we've already been compensated.

If you listen to the IFS and others, they are arguing that the magnitude of difference is unjustified, not that there should be no difference.
How much difference should there be? I don't know.

Limited companies have regulatory requirements that employees and the self-employed don't have. We either have to pay for an accountant or do unpaid work to carry out those requirements ourselves. Those burdens are imposed by law. It's only equitable that the tax structure compensate us for that. It's not right that our engagers should have to, it's the law that says we have to report in such and such a way.

We also, along with the self-employed, have to do self-assessment, something that many employed people don't have to do. So again, accountancy fees or unpaid work, imposed by law. Tax structure should compensate for that, too.

We have risk. We get compensated for it by the engagers. Fair enough. Employees have security. Employees do not get taxed on their "security" -- but HMRC wants us to be taxed on our "risk compensation." That's not fair or right. Sure, the Treasury should not give us tax benefit to compensate us for the risk, I'd agree. But should they tax us on the compensation we get for taking that risk, when employees aren't taxed accordingly? They should AT LEAST allow us to be taxed on that risk compensation in the year we personally receive it, when we may be on the bench, rather than forcing us to be taxed on it in the year our company earns it, the way IR35 compels us to be taxed.

We have to buy PII. Employees don't. But contractors in the public sector are taxed on the money they use to buy that PII. Should the engager pay enough to compensate them for having to buy PII? Of course. Should they be taxed on that extra compensation? Employees aren't taxed on the PII they don't have to buy, how is it fair for us to be taxed on it?

Even in terms of fairness, given the above and other considerations, there should be some measure of difference in tax treatment. Beyond that, the government should be encouraging the flexible workforce. How much? I don't know.


There is an alternate case to be made, but I think most could agree that the largely arbitrary and substantial favouring of one form of working over another is not really justified.
Yes, if we think it is arbitrary. I don't think it is arbitrary, personally, as I've argued. I think there are substantive reasons for favouring flexible working. But obviously, the point of "consent" is an important one. And I think things have been substantially out of balance, which has undercut consent.

And you are obviously right that the average punter doesn't get it. And the average politician is more interested in playing up to the average punter for votes than in doing what makes sense, even if the politician does have the economic sense to understand the issues. And most of them don't have that sense, anyway. The ones that do either don't care or they are afraid to tell the truth. So we'll continue with the stupidity and the "fairness" arguments.

jamesbrown
12th May 2017, 22:09
How much difference should there be? I don't know.

But that's precisely the point I'm making. Implicit in the above statement, I think, is your agreement that the the current difference is arbitrary. Not the need for a difference, but the amount. It is largely the product of historical precedent, not careful planning. My argument isn't that the tax system shouldn't encourage particular ways of working, only that it shouldn't be arbitrary. It needs to be justified by politicians and tested at the ballot box (albeit alongside a million other issues), otherwise there's no consent for it. Was the difference before the recent changes to dividend taxation the appropriate difference? Is the current difference the appropriate difference? Obviously, the maximum level of encouragement is zero tax on qualifying forms of work (your house appreciates in price completely tax free, for example). The ability to defer income seems, to me, an entirely reasonable way in which to encourage flexible forms of working; there's an indisputable connection between cause (being out of work) and effect (paying "too much" tax, when averaged over some period). Anyone who works outside of IR35 can do that, and most do. Aside from the ability to fully offset business expenses, perhaps that's enough. Certainly, there shouldn't be any penalty for choosing a flexible form of working.

In the long-run, the obvious way to do this would be to align NI with income tax, tax all forms of income in the same way (with a direct offset for CT paid), ensure that all business investment is fully offset for tax purposes, and then work out the extent to which a particular form of working should be encouraged. There are many ways in which to achieve the latter, whether using rates, allowances, or the ability to defer income, for example. The IFS et al. are arguing for something like 1% on NI (:laugh), because they're only capable of simple calculations that involve totting up the state benefits accrued by different forms of work(er). Most employees would probably expect zero difference, because they haven't thought about this stuff too carefully. Neither see the bigger picture. The bigger picture is a flexible economy; one that attracts inward investment. It needs reasoned argument, and reasonable politicians (:laugh).

WordIsBond
13th May 2017, 07:33
But that's precisely the point I'm making. Implicit in the above statement, I think, is your agreement that the the current difference is arbitrary. Not the need for a difference, but the amount.
That's correct. It appeared to me you were saying that treating people differently was arbitrary. I'd say it isn't, that it's economically sound. But yes, the current difference is arbitrary. Well, not quite arbitrary in the classic sense of the word, but based more on historical precedent, to use your term, than good sense.


Was the difference before the recent changes to dividend taxation the appropriate difference? Is the current difference the appropriate difference?
I still think it is marginally out of balance, personally. But any difference is going to be somewhat arbitrary, because the "right" amount is determined by how much you think government should be encouraging this behaviour. When you say it shouldn't be arbitrary, you are effectively saying government policy should be neutral, that there shouldn't be tax incentive, there should only be tax compensation for what is quantifiable.

Once you move into the realm of "incentive" or "encouraging" it is always going to have an arbitrary component. How valuable is the thing you are encouraging to society, and how much should you encourage it? Those things are impossible to quantify.

Obviously, the maximum level of encouragement is zero tax on qualifying forms of work (your house appreciates in price completely tax free, for example).
Well, to nitpick, the maximum level is infinite because you can have tax credits to encourage certain things. Home ownership in America is beyond tax free, you actually get to deduct the interest on your mortgage from your income. If HMG decide that the flexible workforce is so important that they want to subsidise it with tax credits, they'll have my vote. :D


The ability to defer income seems, to me, an entirely reasonable way in which to encourage flexible forms of working; there's an indisputable connection between cause (being out of work) and effect (paying "too much" tax, when averaged over some period). Anyone who works outside of IR35 can do that, and most do. Aside from the ability to fully offset business expenses, perhaps that's enough. Certainly, there shouldn't be any penalty for choosing a flexible form of working.
And that's the real problem with IR35, it actually penalises. If it merely equalised, it would be much more tolerable. I wouldn't be content with saying "perhaps that's enough," because it provides no incentive, and I think that is short-sighted. I'm not a big advocate of government incentivising behaviour, in general, but I do think things that provide real economic benefit (I'll include R&D here, for instance) can and should be incentivised.


In the long-run, the obvious way to do this would be to align NI with income tax....
I pretty much agreed with everything in this paragraph, but it will never happen. Because if the masses ever actually learned that the government takes over 40% of their salary in tax (by the time you include NI contributions), you'd see more outrage than if Theresa May were caught barbecuing a puppy, or the shadow chancellor were caught citing Karl Marx. So they'll never do it.

jamesbrown
13th May 2017, 12:32
When you say it shouldn't be arbitrary, you are effectively saying government policy should be neutral, that there shouldn't be tax incentive, there should only be tax compensation for what is quantifiable.


No, I'm not saying that it should be neutral, I'm saying that it should be justified. However, I fear the difference between justified and quantified is dancing on the head of a pin; afterall, once an incentive exists it is "quantifiable". The issue is that the current incentive has not been thought through or justified adequately.



Once you move into the realm of "incentive" or "encouraging" it is always going to have an arbitrary component. How valuable is the thing you are encouraging to society, and how much should you encourage it? Those things are impossible to quantify.


The starting point is to determine what needs to be encouraged. This hasn't been expressed with sufficient clarity. Currently, the system favours dividend income for contractors that operate through companies, not business growth/investment or flexible working per se. If we want to encourage flexible working, the critical starting point is to ensure that sporadic income can be deferred for tax purposes and, therefore, taxed at more representative (fair™) marginal rates. Clearly, IR35 fails on this point by introducing an overly burdensome and subjective test on which businesses should be allow to make and defer payments to their shareholders (vs. their "disguised employees"). I think there's a very clear and convincing case for eliminating IR35, but it's undermined by having large differences in the way various forms of income are taxed. It shouldn't be about the marginal rates, but about which marginal rates are paid. Flexible work implies sporadic income, and fair™ use of income deferral. It also implies a fair™ system for offsetting business expenses and supporting R&D. It doesn't imply a large bonus w/r to marginal tax rates just because a shareholder can receive a dividend.



tax credits


PC approves this sentiment :D

cykophysh39
14th May 2017, 09:51
Is that the fake news I hear Donald bang on about so often?

That is one massive spammy affiliate website, and you must be desperate to get links!

SussexSeagull
14th May 2017, 18:09
Problem is Civil Servants suggest these things and they know next to nothing of the reality of self-employment.

Most of us are basically freelancers who had to go create Limited Companies out of necessity. Once we had a corporate entity we started looking at ways to reduce tax liability (admittedly some more keenly than others!). In exchange we basically signed away employment rights and job security.

So far so good but everyone fancied a piece of the pie and too many of us started behaving like employees with slightly different contractual and renumeration arrangements. If a contractor is sitting at the same desk for years on end people are going to start asking why they get a better deal to the permanent employee next to him. Eventually the HMRC was always going to call time on it.

Sadly genuine consultants and those of us who go out of our way to stay out of IR35 will be caught up in it.

We really can't say we didn't see it coming.

SueEllen
14th May 2017, 20:52
Problem is Civil Servants suggest these things and they know next to nothing of the reality of self-employment.

Most of us are basically freelancers who had to go create Limited Companies out of necessity. Once we had a corporate entity we started looking at ways to reduce tax liability (admittedly some more keenly than others!). In exchange we basically signed away employment rights and job security.

So far so good but everyone fancied a piece of the pie and too many of us started behaving like employees with slightly different contractual and renumeration arrangements. If a contractor is sitting at the same desk for years on end people are going to start asking why they get a better deal to the permanent employee next to him. Eventually the HMRC was always going to call time on it.


As an employer why would you hire someone permanently if your project was only for 8 months? You may as well get a contractor in and then wave bye bye to them after 8 months.

As a public body including HMRC why would you hire someone permanently and have their pension liabilities for life? You may as well get a contractor in and wave bye bye to them after 5 years.

SussexSeagull
14th May 2017, 21:02
As an employer why would you hire someone permanently if your project was only for 8 months? You may as well get a contractor in and then wave bye bye to them after 8 months.

As a public body including HMRC why would you hire someone permanently and have their pension liabilities for life? You may as well get a contractor in and wave bye bye to them after 5 years.

They are both valid scenarios (well any scenario is valid if you are willing to pay for it but you know what I mean).

It is a problem of perception. We know that we are saving the client money in ways other than pay/invoicing and the accounts and HR departments get it as well but to the untrained eye a lot of contractors come in at the same time as everyone else, do the same job then leave with everyone else. This isn't helped by a majority of contractors who want to keep their heads down, not rock the boat by trying to stay out of IR35 and rack up the renewals.

WordIsBond
15th May 2017, 05:09
No, I'm not saying that it should be neutral, I'm saying that it should be justified. However, I fear the difference between justified and quantified is dancing on the head of a pin; afterall, once an incentive exists it is "quantifiable". The issue is that the current incentive has not been thought through or justified adequately.
Of course.


If we want to encourage flexible working, the critical starting point is to ensure that sporadic income can be deferred for tax purposes and, therefore, taxed at more representative (fair™) marginal rates. Clearly, IR35 fails on this point by introducing an overly burdensome and subjective test on which businesses should be allow to make and defer payments to their shareholders (vs. their "disguised employees"). I think there's a very clear and convincing case for eliminating IR35, but it's undermined by having large differences in the way various forms of income are taxed. It shouldn't be about the marginal rates, but about which marginal rates are paid. Flexible work implies sporadic income, and fair™ use of income deferral. It also implies a fair™ system for offsetting business expenses and supporting R&D. It doesn't imply a large bonus w/r to marginal tax rates just because a shareholder can receive a dividend.

Agreed.

fair™
But what is that? How do we get there?

We're up against several difficulties in eliminating the imbalances, in part because we don't have a flat tax. One example of the problem is with corporation tax.

If you want to roughly equalise taxation for different kinds of income, you have various problems. A portion of the taxation of every shareholder is corporation tax, but that's the same for everyone. It applies to the pensioner who doesn't even have the personal allowance in income -- he gets hit with CT, effectively, against his shareholding. It also applies to the additional rate taxpayer -- and at the same rate.

You could eliminate CT entirely and increase dividend taxation accordingly. That would solve part of the problem, but it would mean non-UK shareholders in UK companies would be tax free. Well, maybe the inward investment would be worth it. Or maybe you require companies to withhold a 25% tax on any dividends paid to non-UK taxpayers. That would add a complication but getting rid of corporation tax would compensate them nicely for it.

If you did that you'd have to significantly reform ER, obviously. And you'd have to look carefully at capital gains tax, because companies would have a strong incentive to retain funds (tax free) rather than disburse dividends, which would push up share prices, so you'd have income being pushed into capital gains rather than into dividends.

But if you tax capital gains exactly the way you tax dividends, to solve that problem, then you have the problem that some of the capital gains aren't really gains at all, they are just inflation. So are you going to tax people heavily on what is effectively just inflation? You can inflation-index gains, to counteract that, but then why aren't you inflation-indexing interest?

And round and round we go. There's a reason why equal treatment of all income hasn't just happened. It's pretty hard to do equitably unless you have a flat tax, and the great British electorate isn't going to go for a flat tax.

jamesbrown
15th May 2017, 10:52
Of course.
But what is that? How do we get there?


It's what I described above. To me, income deferral is justifiable and adequate. If you want to take more in a given year, you pay more tax. Tax all forms of income equivalently, and allow business taxes, R&D and other business expenses to be fully offset. Reform being "hard" is basically a disguised argument for maintaining the status quo. How difficult would it be to dramatically improve on what we have now? Not at all. By definition, a fair system would encourage business growth and investment for business reasons, primarily, and not tax reasons (tax = tail wagging the dog). Let's face it, tax remains an important driver behind the choice of business structure for many contractors.

Anything else (e.g. improved marginal rates for dividend income) is just a "bung". I'm not against that, per se (because I do think the tax system has some role in encouraging entrepreneurship), but it's inherently more difficult to quantify, so you can expect a polarised debate with the IFS, Resolution Foundation and many others on the opposite side.

jamesbrown
15th May 2017, 10:54
Oh, and by the way, my natural instinct is to achieve equivalence by lowering employment taxes, rather than increasing taxes on the self-employed and company directors :D

WordIsBond
15th May 2017, 11:22
Oh, and by the way, my natural instinct is to achieve equivalence by lowering employment taxes, rather than increasing taxes on the self-employed and company directors :D
We certainly agree there. :D

And I agree that it wouldn't be hard to improve the current mess. But I don't think "tax all forms of income equivalently" is possible unless you go to one of the following: 1) flat tax rate 2) 0% corporation tax or mandatory look through. If you have a progressive tax system, and corporation tax is part of the picture, you have to make corporation tax progressive, which is not really feasible. So you have to remove CT from the picture. But mandatory look-through undercuts your income deferral principle (which is of course sound).

"Tax all forms of income equivalently" is fine in principle. In practice, I don't think it is politically palatable.

eek
16th May 2017, 21:39
"Tax all forms of income equivalently" is fine in principle. In practice, I don't think it is politically palatable.

Employers NI makes that impossible.

WordIsBond
17th May 2017, 07:40
Employers NI makes that impossible.
Yes, it's the same problem as CT.

Again, it really is possible. Just kill ER NI and increase the rate of employee NI to make up for it. Employers would have to increase salaries to make up the difference. But I can't see any employer refusing to do so.

But it isn't politically palatable. "You're giving my boss a tax break and making ME pay for it?" So it won't happen.

None of the things that really make sense towards tax simplification and a coherent tax system will happen. Anything worthwhile will be killed by demagoguery.

Tomo1971
20th May 2017, 09:01
In the 17 years I have been in the industry I am in, I have had 18 different 'jobs' - ranging from a week long to just under two years in duration. They have been a mix of PAYE and contracting/umbrella.

Out of the four PAYE roles I have had I was made redundant from three of them - there is just no security in the industry at the level I am at to make it worth been PAYE - there isnt enough time to build up any level of extra protection offered by law, ie, I have never been in ANY of the roles over two years. OK, when I was PAYE, I got the obligatory 4 weeks holiday, but only in one of them did I get sick pay (they were an international blue chip with 95,000 world wide employees at one time) - so really, what is the point of me been PAYE unless it was with another blue-chip?

I also, except the most recent PAYE role where i was based 40 miles from home, have been travelling the length and breadth of the UK - either field based or office based. I really cant imagine that if I was forced into PAYE that any 'employer' would take me on, knowing that they would have to pay accommodation and fuel costs as most of the clients have worked for a Englandshire based (I live in Scotland). The few that are in Scotland don't pay the best of money anyway and I would definitely have to pay my own commuting costs.

The one shoe fits all approach from Government just doesn't work.

SussexSeagull
21st May 2017, 00:17
In the 17 years I have been in the industry I am in, I have had 18 different 'jobs' - ranging from a week long to just under two years in duration. They have been a mix of PAYE and contracting/umbrella.

Out of the four PAYE roles I have had I was made redundant from three of them - there is just no security in the industry at the level I am at to make it worth been PAYE - there isnt enough time to build up any level of extra protection offered by law, ie, I have never been in ANY of the roles over two years. OK, when I was PAYE, I got the obligatory 4 weeks holiday, but only in one of them did I get sick pay (they were an international blue chip with 95,000 world wide employees at one time) - so really, what is the point of me been PAYE unless it was with another blue-chip?

I also, except the most recent PAYE role where i was based 40 miles from home, have been travelling the length and breadth of the UK - either field based or office based. I really cant imagine that if I was forced into PAYE that any 'employer' would take me on, knowing that they would have to pay accommodation and fuel costs as most of the clients have worked for a Englandshire based (I live in Scotland). The few that are in Scotland don't pay the best of money anyway and I would definitely have to pay my own commuting costs.

The one shoe fits all approach from Government just doesn't work.

Throw in wage stagnation as well.

SueEllen
21st May 2017, 06:01
Throw in wage stagnation as well.

Wage stagnation in the IT industry just means that permies change jobs every few months.

fool
22nd May 2017, 08:52
Wage stagnation in the IT industry just means that permies change jobs every few months.

Until they get to the top end of the market, where wages are stagnent...

Fred Bloggs
22nd May 2017, 10:54
Wage stagnation in the IT industry just means that permies change jobs every few months.
Very hard to make any headway these days. Most (all?) decent blue chip employers use the same benchmarks for setting salary levels. Nobody wants to out of line and I believe many in similar businesses have unofficial anti-poaching agreements.