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legal
11th October 2018, 10:16
Hammond plans tax crackdown on 'synthetic self-employed' - BBC News (https://www.bbc.co.uk/news/business-45822650)

Nothing new but time to take this seriously now?

The Treasury is finalising plans to overhaul tax rules which allow self-employed people to avoid paying national insurance contributions.

The move will be targeted at people who set themselves up as private companies to take on work.

It could be announced in the Budget at the end of the month, I understand.

swamp
11th October 2018, 10:47
This is great news!

Most clients will simply put declare thier contractors outside IR35.

If they don't, then the good ones will jump ship. And the others will litigate for employment rights.

jamesbrown
11th October 2018, 10:58
he tried it 2 years ago and failed as it was directly in opposition to a manifesto item.
I don't recall they changed that bit of the manifesto for the last GE. If the manifesto wasn't changed he's not doing it again as it nearly cost him his job.

Sure he will. The public sector reforms were announced in 2016. The private sector reforms will happen too.

This issue doesn't have nearly the same resonance as the proposed hike to Class 4 NI that was scrapped - there's no "white van man" angle w/r to IR35. If anything, the optics are reversed.

EDIT: OK, I see you deleted your post - I guess you misread or something. Fair enough. :D

Lance
11th October 2018, 11:07
Sure he will. The public sector reforms were announced in 2016. The private sector reforms will happen too.

This issue doesn't have nearly the same resonance as the proposed hike to Class 4 NI that was scrapped - there's no "white van man" angle w/r to IR35. If anything, the optics are reversed.

EDIT: OK, I see you deleted your post - I guess you misread or something. Fair enough. :D

I thought the OP was on about the change to NICs that he tried previously. Then I read the article.... My bad.

frustin
11th October 2018, 11:19
This is great news!

Most clients will simply put declare thier contractors outside IR35.

If they don't, then the good ones will jump ship. And the others will litigate for employment rights.

Is it really great news? why wont affect people in contract positions already?

Matt88
11th October 2018, 11:27
This is great news!

Most clients will simply put declare thier contractors outside IR35.

If they don't, then the good ones will jump ship. And the others will litigate for employment rights.

I think you've not been an employee for so long, you forget how businesses are run. They follow all legislation! Religiously! And they'll start scrutinizing everyone they hire, and ensure their hires are following IR35 to the letter of the law.

In fact, they'll probably go overboard and only hire contractors who adhere to IR35 I imagine.

£35k a year employees, earning £100k+ a year, was never really sustainable. I know it's fantastic for you, because there's no chance in hell you'd ever earn a really high salary as an actual employee, but why on earth are the people in the government just turn a blind eye to all this stuff.

You had a nice run, and I'm sure you think you're something special, but you're not. You're people who would be earning £30-40k if you were an employee. So why on earth should you earn double that (a lot of which is tax avoidance) just because you have to pay your own pension, and holiday pay.

IT Contractors should be earning e £50k a year max. That compensates them fully for the pension, holiday pay, health insurance, sick pay

Matt88
11th October 2018, 11:29
Sure he will. The public sector reforms were announced in 2016. The private sector reforms will happen too.

This issue doesn't have nearly the same resonance as the proposed hike to Class 4 NI that was scrapped - there's no "white van man" angle w/r to IR35. If anything, the optics are reversed.

EDIT: OK, I see you deleted your post - I guess you misread or something. Fair enough. :D

The previous attempt was related to raising tax. A completely different optic.

Making sure businesses and contractors follow the law (IR35) is quite reasonable. And I doubt anyone will shed any tears for those trying to circumnavigate the law

jamesbrown
11th October 2018, 11:31
Is it really great news? why wont affect people in contract positions already?

I hardly think it could be described as great news, but there's also a degree of unpredictability about how the private sector will respond vs. the public sector.

Presumably, a large chunk of BoS contractors will be evaluated negatively and will need to switch to umbrella or apply the deemed payment or clients will switch to employed FTC for those roles. For those that bridge the change with existing contracts and are evaluated negatively, the greatest risk is presumably to their prior status.

Another large chunk will likely benefit from the change as clients become more aware of the need to demonstrate their truly outside requirements as outside.

A smaller number (some who post on this board) have seen this coming for a while and have already made plans of various types.

fiisch
11th October 2018, 11:42
I'm unconvinced Hammond will get this to pass in Parliament - presumably this would have all sorts of negative consequences. I should imagine that, should this come to pass, we'd all be better off emptying our company coffers before this legislation comes in.

This may be a naïve question, but what's to stop Fiisch Contracting Ltd. setting up a HQ in the Isle of Man, ala larger corporations adept at tax avoidance?

Poor Matt88 sounds like he's had enough of being out-earned by the contractors he sits next to....

vwdan
11th October 2018, 11:50
Usual crap

Matt all of the advice you post seems to be absolutely awful and doesn't seem to be based on experience. What is your contracting experience? Do you actually run a Ltd Co...

(I know you don't, I just copied and pasted my last post to you because people need to be aware that everything you type is crap. I can only presume there's some weird jealousy here, but you don't seem to have a clue about anything Contract related but you post from a position of perceived knowledge which really gets my goat. Why even post here - is it because you wanted to be a contractor and didn't have the balls and skills?)

Oh, just to nip this in the bud:



£35k a year employees, earning £100k+ a year, was never really sustainable. I know it's fantastic for you, because there's no chance in hell you'd ever earn a really high salary as an actual employee, but why on earth are the people in the government just turn a blind eye to all this stuff.

You had a nice run, and I'm sure you think you're something special, but you're not. You're people who would be earning £30-40k if you were an employee. So why on earth should you earn double that (a lot of which is tax avoidance) just because you have to pay your own pension, and holiday pay


Mind if I tell you about the time I left a £75k+ job to come back to contracting, because I was bored. I could get a job like that tomorrow.

TheCyclingProgrammer
11th October 2018, 11:51
Nobody actually expected him to listen to the consultation responses did they? The comments on the BBC article make it clearly obvious that this is a fairly "uncontroversial" move given that a) most non-contractors/freelancers really understand what this is all about and b) the general public clearly think we're all tax avoiding shysters and would support this.

But I'm not completely pessimistic, I think there's a good chance that this will backfire on the government and all that will happen is most clients will be happy to work with their contractors on an outside IR35 basis and that is a *good* thing for us because it puts the onus on the client to take what being "outside IR35" means more seriously and realising they cannot exert direction or control over us. They might even become more amenable to genuine unfettered RoS clauses if they think it covers their arses.

vwdan
11th October 2018, 11:55
But I'm not completely pessimistic, I think there's a good chance that this will backfire on the government and all that will happen is most clients will be happy to work with their contractors on an outside IR35 basis and that is a *good* thing for us because it puts the onus on the client to take what being "outside IR35" means more seriously and realising they cannot exert direction or control over us. They might even become more amenable to genuine unfettered RoS clauses if they think it covers their arses.

This is where I'm at - if not, I've got faith that market forces will dictate that prices will rise to compensate. Either way, I don't think we're going to lose out in the same way as taking an IR35 contract today.

Still a load of crap, of course, but I'll definitely wait and see.

jamesbrown
11th October 2018, 11:57
Nobody actually expected him to listen to the consultation responses did they? The comments on the BBC article make it clearly obvious that this is a fairly "uncontroversial" move given that a) most non-contractors/freelancers really understand what this is all about and b) the general public clearly think we're all tax avoiding shysters and would support this.

But I'm not completely pessimistic, I think there's a good chance that this will backfire on the government and all that will happen is most clients will be happy to work with their contractors on an outside IR35 basis and that is a *good* thing for us because it puts the onus on the client to take what being "outside IR35" means more seriously and realising they cannot exert direction or control over us. They might even become more amenable to genuine unfettered RoS clauses if they think it covers their arses.

Agree with this assessment, esp. for those at the upper end of the contracting market.

gnarledcontractor
11th October 2018, 12:02
I think you've not been an employee for so long, you forget how businesses are run. They follow all legislation! Religiously! And they'll start scrutinizing everyone they hire, and ensure their hires are following IR35 to the letter of the law.

In fact, they'll probably go overboard and only hire contractors who adhere to IR35 I imagine.

£35k a year employees, earning £100k+ a year, was never really sustainable. I know it's fantastic for you, because there's no chance in hell you'd ever earn a really high salary as an actual employee, but why on earth are the people in the government just turn a blind eye to all this stuff.

You had a nice run, and I'm sure you think you're something special, but you're not. You're people who would be earning £30-40k if you were an employee. So why on earth should you earn double that (a lot of which is tax avoidance) just because you have to pay your own pension, and holiday pay.

IT Contractors should be earning e £50k a year max. That compensates them fully for the pension, holiday pay, health insurance, sick pay


Ok, I'll bite. Having looked at the sort of employee salaries for the type of contract I do, they are coming in at roughly my contract rate allowing for sick pay/holiday pay, pension and other benefits. And when I was employed for a little while about 3 years ago that is the range I was looking at and achieved. Its not at all a question of thinking one is special just trying to command the very best rate/salary you can in order to support yourself and your family. I'm not going to lower myself to explaining in any detail why capping salary is a terrible Marxist idea which benefits no-one, but since we have in the private sector a system where largely specialists, contractors and staff are paid per their expertise then that expertise is rewarded with a higher rate/salary.

You make sweeping statements about tax avoidance (which might I add is legal) - after dividend tax, corporation tax and all the other stuff LTD contractors pay for I calculate that the gap in tax take if I was an employee is about 6.5k in my favour when the money arrives in my account. I'm making the assumption that you are a permanent employee and never have to worry about trifling stuff like being benched, getting all the various insurances, paying for an accountant, your own training, jumping through all the hoops that the yearly budget tosses up.

Nobody is special in this world - not even you - largely in the private sector certainly we all get the rate/salary that we are worth in the business we work in - and that includes contractors and permies.

swamp
11th October 2018, 12:07
But I'm not completely pessimistic, I think there's a good chance that this will backfire on the government and all that will happen is most clients will be happy to work with their contractors on an outside IR35 basis and that is a *good* thing for us because it puts the onus on the client to take what being "outside IR35" means more seriously and realising they cannot exert direction or control over us. They might even become more amenable to genuine unfettered RoS clauses if they think it covers their arses.

This is what has happened in the public sector. I work outside IR35, and the decision and liability isn't mine. Even HMRC hire contractors outside IR35!

TheCyclingProgrammer
11th October 2018, 12:11
This is what has happened in the public sector. I work outside IR35, and the decision and liability isn't mine. Even HMRC hire contractors outside IR35!

I don't work in the public sector, I'd assumed it had gone the other way there as public sector clients didn't want to be seen to be supporting "tax avoidance" (look at the bad press the BBC gets with its presenters for example). Interesting to hear it's already happening there.

poorautojobber
11th October 2018, 12:15
I think you've not been an employee for so long, you forget how businesses are run. They follow all legislation! Religiously! And they'll start scrutinizing everyone they hire, and ensure their hires are following IR35 to the letter of the law.

In fact, they'll probably go overboard and only hire contractors who adhere to IR35 I imagine.

£35k a year employees, earning £100k+ a year, was never really sustainable. I know it's fantastic for you, because there's no chance in hell you'd ever earn a really high salary as an actual employee, but why on earth are the people in the government just turn a blind eye to all this stuff.

You had a nice run, and I'm sure you think you're something special, but you're not. You're people who would be earning £30-40k if you were an employee. So why on earth should you earn double that (a lot of which is tax avoidance) just because you have to pay your own pension, and holiday pay.

IT Contractors should be earning e £50k a year max. That compensates them fully for the pension, holiday pay, health insurance, sick pay

Your not very good at this are you...... you just embarrassed yourself. Move a long to a perm forum.

cmscotland
11th October 2018, 12:18
I tend to agree that Employers in the Private sector are likely to do more to comply to make sure your outside IR35 to ensure that their flexible workforce is maintained without incurring any headaches from having to provide “rights” which could easily come in alongside.

Although I suspect that some more “risk averse” organisations may just make blanket determinations to avoid any risk of being hit with fines/legal battles from HMRC later.

swamp
11th October 2018, 12:23
Although I suspect that some more “risk averse” organisations may just make blanket determinations to avoid any risk of being hit with fines/legal battles from HMRC later.

Since the Susan Winchester case, where she successfully claimed holiday pay after being declared inside IR35, clients will find themselves between the devil and the deep blue sea.

Declare outside and risk investigation. Declare inside and risk litigation (or contractors walking).

Hammond is about to open a Pandora's box!

cojak
11th October 2018, 12:30
IT contractors should be earning £50k max?

Oh Dear, as if we were all the same. You know who will also be crying into their beer? Agents - you can see all that work and commission going down the Swanny.

Contractors will be flexible because that’s in their nature. I’m not sure about agents though.

Lance
11th October 2018, 12:44
Mind if I tell you about the time I left a £75k+ job to come back to contracting, because I was bored. I could get a job like that tomorrow.

Brilliant.

Same here. Was on a high salary but being controlled by idiots.
I take home a similar amount (a little more if I want to but not always), but am happier, have more freedom, and am NOT under direction and control.

You called this idiot out brilliantly. He's the reason why I won't go perm again no matter how much tax I have to pay.

Joolsey86
11th October 2018, 13:14
I'm unconvinced Hammond will get this to pass in Parliament - presumably this would have all sorts of negative consequences. I should imagine that, should this come to pass, we'd all be better off emptying our company coffers before this legislation comes in.

This may be a naïve question, but what's to stop Fiisch Contracting Ltd. setting up a HQ in the Isle of Man, ala larger corporations adept at tax avoidance?

Poor Matt88 sounds like he's had enough of being out-earned by the contractors he sits next to....

I agree, if he worked harder, studied and pass a few exams, then he might be remunerated better. However he will have to get that chip off his shoulder first!

Joolsey86
11th October 2018, 13:19
So who will pay my redundancy, pension, training, sickness and bonus?

The government? I thought they were skint?

Jog On
11th October 2018, 13:33
Just spoke to my accountant who reckons it ain't gonna happen.

DaveB
11th October 2018, 13:41
So who will pay my redundancy, pension, training, sickness and bonus?

The government? I thought they were skint?

The end client, based in the case that HMRC just settled with one of their own contractors.

cmscotland
11th October 2018, 13:42
Just spoke to my accountant who reckons it ain't gonna happen.

To be fair it wouldn’t be the first time that something’s leaked to the press ahead of the budget to get everyone in a frenzy before they actually announce something bad but not “quite as bad” in an effort to stop folk moaning!

Joolsey86
11th October 2018, 13:48
Just spoke to my accountant who reckons it ain't gonna happen.

Is your accountant in the know, or is that just a guess?

Eirikur
11th October 2018, 13:53
Time for those who haven't done so already to cancel IPSE membership, this club of idiots has proven to be completely useless.

westtester
11th October 2018, 14:24
Time for those who haven't done so already to cancel IPSE membership, this club of idiots has proven to be completely useless.

Haven't they become advocates for benefits for contractors who are caught inside? I thought they'd pretty much abandoned trying to get IR35 overturned.

That said, will the likes of IPSE and QDos be changing their IR35 insurance offerings if the private sector roll-out goes ahead?

westtester
11th October 2018, 14:26
To be fair it wouldn’t be the first time that something’s leaked to the press ahead of the budget to get everyone in a frenzy before they actually announce something bad but not “quite as bad” in an effort to stop folk moaning!

That probably means April 2020 rather than 2019 for the implementation.

pjt
11th October 2018, 14:38
That said, will the likes of IPSE and QDos be changing their IR35 insurance offerings if the private sector roll-out goes ahead?

No need for any insurance if your outside IR35 under the new rules. All the risk sits with the client making the decision. IR35 worries go away when you get the outside determination.

Swamp Thing
11th October 2018, 15:07
Is it just me or is anyone else suspicious of Hammond using the label ‘synthetic self-employed’?

He’s such a donkey he wouldn’t have come up with this term. It feels like an emotive label used by one of his team of millennial advisors to grab the popular vote. Probably from the same cohort of advisors that steered Osborne towards the new BTL tax regime (plenty of emotive spiel in that white paper). You know, the young ones with a big axe to grind against entrepreneurship and risk-taking.

Hobosapien
11th October 2018, 15:07
Clients like the relative simplicity of contractors not being employees and all the red tape and inflexibility that goes with it, so I expect them to default to 'inside IR35' to keep things simple and lower risk, and the contractor just has to make sure the rate offsets all the taxes the client has offloaded on them. :smokin

Though if the government really wanted to stop 'fake self employment' they'd make it illegal for a company to use an individual that isn't an employee, requiring proper B2B contracts that could then allow the individual to be genuinely self-employed and not have to operate via a PSC to fulfil agency requirements.

Joolsey86
11th October 2018, 15:12
Clients like the relative simplicity of contractors not being employees and all the red tape and inflexibility that goes with it, so I expect them to default to 'inside IR35' to keep things simple and lower risk, and the contractor just has to make sure the rate offsets all the taxes the client has offloaded on them. :smokin

Though if the government really wanted to stop 'fake self employment' they'd make it illegal for a company to use an individual that isn't an employee, requiring proper B2B contracts that could then allow the individual to be genuinely self-employed and not have to operate via a PSC to fulfil agency requirements.

But the government wont do that, as they want their cake and eat it.

They want a dynamic flexible workforce (Cake) and they want this dynamic workforce to pay more tax than anyone else in the country and receive no employee benefits whatsoever (Eat it.)

Will never ever vote Conservative again.

dx4100
11th October 2018, 15:28
Given contractors who are caught inside IR35 are going to demand higher rates and employee style benefits I would imagine it will be the kick up the arse clients / agents need to start properly declaring contractors outside of IR35 and start treating them as much.

I don't think the private sector will react quite like the public sector did. I can see a lot of private firms simply accepting we are truly independent. I mentioned it today at my current gig and he said, "well you are independent - I don't see the issue". Of course just one opinion but there is the possibility this works well. And if it doesn't - well I will take all those employee benefits and a resonable fee thank you very much....

dx4100
11th October 2018, 15:30
But the government wont do that, as they want their cake and eat it.

They want a dynamic flexible workforce (Cake) and they want this dynamic workforce to pay more tax than anyone else in the country and receive no employee benefits whatsoever (Eat it.)

Will never ever vote Conservative again.

Yup but who is going to do that ? I contract first and foremost because I like the flexibility and style of work I get as a contractor but ultimately if it doesn't pay enough to make it worth while then simple economics kick in and I won't do it.

I ain't no mug :D

sira
11th October 2018, 18:49
Another ridiculous money grab. In the long term, Hammond's coffers will be worse off.

If it passes Parliament, will be interesting how companies react. If they decide to take the easy route and offer only perm, or even worse FTC's, then we are all royally screwed.

In terms of Accounting, there are loopholes around IR35 (source: my accountant) but is contingent on employers not shifting to FTC's.

Another tertiary consideration is how agencies will handle it, given that half of them don't even know what IR35 is.

Personally, if the worst case scenario pans out and contracts dry up, then I'll be on the first plane outta here. Wont let the coffers be boosted with 40% of my income.

WordIsBond
11th October 2018, 20:26
Still not persuaded this will go through, especially not without some tweaks to CEST. But if it does clients will generally fall into the following groups:

1. Highly risk averse clients who are willing to pay for risk avoidance. They will just increase rates and declare everyone inside, with iron-clad 'no employment rights' provisions.

2. Highly risk averse clients who are not willing to pay. They will declare everyone inside, lose the best contractors, and may end up having to pay anyway.

3. Moderately risk averse clients. They will look to adjust working practices on some roles, declare others inside, and for those outside, buy a new insurance product that QDOS will come up with, TLC35 For Clients, or something similar. Contractors may end up paying for that insurance or it becomes part of the negotiation, but it will protect the client, not the contractor.

4. Aggressive and/or stupid clients. They will decide that they don't want to lose contractors, they don't want to pay extra, and so they will just declare contractors outside. Maybe they'll make some small modifications to working practices / contracts.

QDOS will still sell insurance to contractors who are afraid that the rules will change on them or afraid that the client will go under and HMRC will come after ContractorCo. This insurance will be inexpensive. It will also cover contractors with foreign clients (that insurance also should be inexpensive).

A lot of people will be inside IR35 that probably shouldn't be, due to categories 1&2 above. The rest of us can mostly stop worrying about IR35. And HMRC will be mostly happy because a lot more people will be paying a lot more tax.

But corporate profitability will drop both because they will have to pay more for contractors and because they have the extra cost of administering the whole thing, and because companies will be more hesitant to take on contractors because it is now a hassle and/or risky. So the benefit of the flexible workforce will diminish. So they'll probably lose half or more of the extra revenue in reduced corporation tax. But that isn't important to the narrative so they will declare it a success.

Hobosapien
12th October 2018, 07:55
The other option that clients are already using is to outsource to large consultancies to supply the resource in an attempt to offload all risk and responsibility. Some clients may even think it will save them money and be no less efficient in terms of quality, the other clients will accept the increased cost as the fee for doing business this way.

I wonder if the consultancies will sub contract to us instead of getting cheaper foreign labour to fill the 'skills shortage'. :eyes

Should still be clients out there that have already been burned by potentially lower quality resource at inflated consultancy prices that are willing to engage contractors via the established channels.

webberg
12th October 2018, 08:32
The view above from WordisBond I think I would largely agree with.

However HMRC will also be aware of this.

Their emphasis will switch from chasing contractors who declare themselves outside IR35 to those end clients who make that declaration without really changing any of the documented terms of their engagement, or worse, the actual terms of the engagement.

I sense a revolution coming in how all sides of this equation need to think.

Being inside or outside IR35 is not a choice. It's a position derived from the facts. In weighing those facts, whilst some weight is carried by how the engagement is documented and whether or not a PSC is used, the reality is that the matter being tested is what the job is and how it is done.

I suspect a lot of engagers are going to be very nervous and will flee to the high ground of a blanket inside IR35.

There will then commence a trial of strength between the contractor and the end user. Who needs the other most?

There is danger for both where both agree to be outside IR35. In that case, I can see a lot of contracts with indemnity clauses pushing the potential cost of tax and employee NIC back onto contractor. (Employee NIC is ALWAYS the obligation of the end user if the public sector rules are followed).

Interesting times will see the rise of interesting "solutions".

Some of those solutions will have the potential to create the same tax problems we see today from the use of schemes in the past.

dx4100
12th October 2018, 08:34
Haven't they become advocates for benefits for contractors who are caught inside? I thought they'd pretty much abandoned trying to get IR35 overturned.

That said, will the likes of IPSE and QDos be changing their IR35 insurance offerings if the private sector roll-out goes ahead?


I would expect the likes of the insurance offered by QDos and Abbey Tax will be totally pointless and will disappear if the changes go ahead. There is a whole industry around IR35 that is effectively over ? IPSE membership and its benefits will probably stay as IR35 isn't the only tax challenge / issue we face and the fight will no doubt focus on obtaining rights for caught contractors etc.

Joolsey86
12th October 2018, 08:52
There seems to be an assumption that clients will raise their daily rate to accommodate an IR35 extension to private sector.

The thing is if IR35 client responsibility extension is in PUBLIC and PRIVATE, then there is nowhere left to run, so clients can charge what they want. We are under the illusion, we the contractor sets the rates. The market does.

DaveB
12th October 2018, 09:04
There seems to be an assumption that clients will raise their daily rate to accommodate an IR35 extension to private sector.

The thing is if IR35 client responsibility extension is in PUBLIC and PRIVATE, then there is nowhere left to run, so clients can charge what they want. We are under the illusion, we the contractor sets the rates. The market does.

It will vary by client. The HMRC case that IPSE fought means that we can now point out to clients that by putting us inside they leave themselves open to claims for employee benefits, which is entirely fair. If they are going to treat us like employess then we should get the same benefits. They can either provide the benefits, up the rate in return for being indemnified against that, or they can declare us outside.

Joolsey86
12th October 2018, 09:15
It will vary by client. The HMRC case that IPSE fought means that we can now point out to clients that by putting us inside they leave themselves open to claims for employee benefits, which is entirely fair. If they are going to treat us like employess then we should get the same benefits. They can either provide the benefits, up the rate in return for being indemnified against that, or they can declare us outside.

You are right, but that will mean dramatically decreased rates, I was at a very large accountancy firm until recently. Their IR35 pay worked out about the same as a permie, as they deducted holiday, sickness and PAYE obviously from their rate.

Scary times.

WordIsBond
12th October 2018, 09:23
There is danger for both where both agree to be outside IR35. In that case, I can see a lot of contracts with indemnity clauses pushing the potential cost of tax and employee NIC back onto contractor. (Employee NIC is ALWAYS the obligation of the end user if the public sector rules are followed).

Interesting times will see the rise of interesting "solutions".

Some of those solutions will have the potential to create the same tax problems we see today from the use of schemes in the past.
A much simpler interesting solution will simply be for QDOS, etc, to issue a new kind of insurance policy to cover that indemnity.

I see three significant risks that go away under this scenario:
1. Since Employer NIC (not Employee as you stated) is the obligation of the end user, the end user is also on the hook if the case is lost, so the risk of them saying stupid things to HMRC is much lower. It won't be some HR bod answering HMRC questions, it will be some lawyer making sure they don't say anything dumb.

2. Today, the contract with the agency may be IR35 friendly but the upper contract may not be. That is much less likely under this scenario. Clients will want to avoid those kinds of clauses in the upper contract if they will get them in trouble later.

3. Many clients tend to want to treat contractors like employees. Under this scenario, HR/Legal will be telling their own people/management that contractors are independent and not employees and should not be viewed as such. Contractors should have to fight less to maintain their independence.

All of that should mean that the cost of indemnity insurance should be markedly lower. Given that, there will be less incentive for schemes, etc. QDOS sells a policy, it's a matter of negotiation between the client and the contractor who pays for it, but the cost should be low enough that it really isn't a big deal.

Joolsey86
12th October 2018, 09:25
A much simpler interesting solution will simply be for QDOS, etc, to issue a new kind of insurance policy to cover that indemnity.

I see three significant risks that go away under this scenario:
1. Since Employer NIC (not Employee as you stated) is the obligation of the end user, the end user is also on the hook if the case is lost, so the risk of them saying stupid things to HMRC is much lower. It won't be some HR bod answering HMRC questions, it will be some lawyer making sure they don't say anything dumb.

2. Today, the contract with the agency may be IR35 friendly but the upper contract may not be. That is much less likely under this scenario. Clients will want to avoid those kinds of clauses in the upper contract if they will get them in trouble later.

3. Many clients tend to want to treat contractors like employees. Under this scenario, HR/Legal will be telling their own people/management that contractors are independent and not employees and should not be viewed as such. Contractors should have to fight less to maintain their independence.

All of that should mean that the cost of indemnity insurance should be markedly lower. Given that, there will be less incentive for schemes, etc. QDOS sells a policy, it's a matter of negotiation between the client and the contractor who pays for it, but the cost should be low enough that it really isn't a big deal.


I pay nearly £1000 a year for full cover (including tax owed), I feel this is worth it as it takes a little weight off my shoulders. I hope it works out like you say, but think most HR will just err on the side of caution.

WordIsBond
12th October 2018, 09:31
You are right, but that will mean dramatically decreased rates, I was at a very large accountancy firm until recently. Their IR35 pay worked out about the same as a permie, as they deducted holiday, sickness and PAYE obviously from their rate.

The market is not a monolith. There will be clients who like the reduced obligations of outside IR35 contracts. They will get the best contractors, and so other clients will have to either have outside roles or pay more. It's basic economics -- an equilibrium will be achieved. Inside IR35 roles will pay more, outside roles will pay less. Clients won't be able to just say, 'I'm going to pay the same but go risk-averse and declare everyone inside.' The market will shift and they won't get good contractors if they do that.

Contractors won't be able to just say, 'I'm going to demand outside roles and the same pay,' either. Since more contracts will be inside, clients will want a discount on the rates for outside roles. There will be a new equilibrium for outside roles as well.

In the end, because neither contractors nor clients are monolithic, supply and demand will mean new equilibriums will be reached. It is going to cost both contractors and clients money -- neither group has the power to force the entire cost to fall on the other group, because neither group will form a unified cartel.

So, less money for us, less money for clients, more money for HMRC -- but the economic damage may also, in the long run, mean less money for HMRC, too. It certainly isn't going to be as profitable for them as they think it will be. Economics doesn't work that way.

WordIsBond
12th October 2018, 09:35
I pay nearly £1000 a year for full cover (including tax owed), I feel this is worth it as it takes a little weight off my shoulders. I hope it works out like you say, but think most HR will just err on the side of caution.
Many will, and I wasn't talking about them. I was talking about webberg's comments about those who are willing to take the risk of outside contracts. But there's another risk -- that employment rights kick in. Avoiding one risk brings another risk for them, and if they avoid both, and grant employment rights, then it becomes very expensive.

legal
12th October 2018, 10:43
Hammond plans tax crackdown on 'synthetic self-employed' - BBC News (https://www.bbc.co.uk/news/business-45822650)

Nothing new but time to take this seriously now?

The Treasury is finalising plans to overhaul tax rules which allow self-employed people to avoid paying national insurance contributions.

The move will be targeted at people who set themselves up as private companies to take on work.

It could be announced in the Budget at the end of the month, I understand.

Looks like the content of article is amended after I initially got the extract.

This line is removed, "It could be announced in the Budget at the end of the month, I understand.".

ChimpMaster
12th October 2018, 12:01
Isn't one of the greatest risks that, if the client chooses to declare a contractor within IR35, then potentially the short-sighted HMRC will deem that contractor as always having been within IR35 at that client, for however long the contract has run.

This could see many thousands on contractors forced to pay IR35 tax going back up to 6 years, i.e. however long the contractor has been at business with that client.

Another retro-tax.

Gibbon
12th October 2018, 12:08
Isn't one of the greatest risks that, if the client chooses to declare a contractor within IR35, then potentially the short-sighted HMRC will deem that contractor as always having been within IR35 at that client, for however long the contract has run.

This could see many thousands on contractors forced to pay IR35 tax going back up to 6 years, i.e. however long the contractor has been at business with that client.

Another retro-tax.

This is my take, and why every business person should walk as soon as they are found to be under IR35.

madame SasGuru
12th October 2018, 12:40
This is my take, and why every business person should walk as soon as they are found to be under IR35.

I would go further and suggest that if you've been at a client for a long time it would be very wise to move before April 2019 (or 2020 in the very unlikely event that things are delayed)..

DaveB
12th October 2018, 12:45
Isn't one of the greatest risks that, if the client chooses to declare a contractor within IR35, then potentially the short-sighted HMRC will deem that contractor as always having been within IR35 at that client, for however long the contract has run.

This could see many thousands on contractors forced to pay IR35 tax going back up to 6 years, i.e. however long the contractor has been at business with that client.

Another retro-tax.

This is where the recent case against HMRC becomes important. If a client arbitrarily declares that the contractor is now caught under IR35 then that triggers a potential liability for employment benefits for the entire period of the contract. This will make many clients think twice about it as the costs could be considerable and actually offset the financial liability for the contractor, as compensation for lost holidays etc tgether with refunded Corporation Tax ( since under an IR35 cuaght contract there is little to no CT to pay) could add up to a considerable sum.

Whorty
12th October 2018, 13:43
I think you've not been an employee for so long, you forget how businesses are run. They follow all legislation! Religiously! And they'll start scrutinizing everyone they hire, and ensure their hires are following IR35 to the letter of the law.

In fact, they'll probably go overboard and only hire contractors who adhere to IR35 I imagine.

£35k a year employees, earning £100k+ a year, was never really sustainable. I know it's fantastic for you, because there's no chance in hell you'd ever earn a really high salary as an actual employee, but why on earth are the people in the government just turn a blind eye to all this stuff.

You had a nice run, and I'm sure you think you're something special, but you're not. You're people who would be earning £30-40k if you were an employee. So why on earth should you earn double that (a lot of which is tax avoidance) just because you have to pay your own pension, and holiday pay.

IT Contractors should be earning e £50k a year max. That compensates them fully for the pension, holiday pay, health insurance, sick pay

Bit of green eyed monster there mate. Do you not have the skills and experience to go freelance?

webberg
12th October 2018, 15:56
This is where the recent case against HMRC becomes important. If a client arbitrarily declares that the contractor is now caught under IR35 then that triggers a potential liability for employment benefits for the entire period of the contract. This will make many clients think twice about it as the costs could be considerable and actually offset the financial liability for the contractor, as compensation for lost holidays etc tgether with refunded Corporation Tax ( since under an IR35 cuaght contract there is little to no CT to pay) could add up to a considerable sum.

Is that strictly true?

The judgement on the contract is being made for tax purposes. I see that holiday pay might be due if the engagement was "always" an employment, but other benefits?

Most other benefits arise out of employment law and here that is not in point.

Also if the contractor has recorded contract income as company income, but it is subsequently held to be employment income, the tax rules work by "deeming" the income to be salary. There is a CT double tax relief provision but I think that operates for the year the adjustment/decision is made rather than being back dated.

I'd be interested in hearing of any practical experinces here, especially if my view is incorrect.

cojak
13th October 2018, 08:45
Haven't they become advocates for benefits for contractors who are caught inside? I thought they'd pretty much abandoned trying to get IR35 overturned.


Yes, they have, and many forced contractors will be grateful for that.

cojak
13th October 2018, 09:05
Interesting times will see the rise of interesting "solutions".

Some of those solutions will have the potential to create the same tax problems we see today from the use of schemes in the past.

And we have just had the first whiff of that:
https://www.contractoruk.com/forums/the-future-of-contracting/108470-ir35-back-first-principles-4.html#post2591643

And my response:

Do you have that in writing?

This is where dealing with IR35 skids you into EBT-type Tax Avoidance schemes.

Take great care that you aren’t setting yourselves up to be moved into the HMRC Enquiries forum, people...

DaveB
13th October 2018, 09:58
Is that strictly true?

The judgement on the contract is being made for tax purposes. I see that holiday pay might be due if the engagement was "always" an employment, but other benefits?

Most other benefits arise out of employment law and here that is not in point.

Also if the contractor has recorded contract income as company income, but it is subsequently held to be employment income, the tax rules work by "deeming" the income to be salary. There is a CT double tax relief provision but I think that operates for the year the adjustment/decision is made rather than being back dated.

I'd be interested in hearing of any practical experinces here, especially if my view is incorrect.

I think you could make an argument that if the client unilaterally declares a contract inside, when previously it was out side, and there are no other material changes to the arrangements, then the contract was always inside and as such tax relief would be available for the full period of the contract and employee benefits should have been provided from the start. ISPE are actively looking for people to whom this has happened following the settlement with HMRC on the Winchester case.

HMRC will certainly argue that if a contract declared to be outside is found on investigation to be inside they would expect all previous payments received to be recategorised as deemed income and tax payable appropriately. If that is the case the the payments no longer count toward CT and a refund would be due.

PTP
13th October 2018, 10:52
Isn't one of the greatest risks that, if the client chooses to declare a contractor within IR35, then potentially the short-sighted HMRC will deem that contractor as always having been within IR35 at that client, for however long the contract has run.

This could see many thousands on contractors forced to pay IR35 tax going back up to 6 years, i.e. however long the contractor has been at business with that client.

Another retro-tax.

Like these guys I think that's the case.

So if you're in a contract with your preferred client and you've had 2 spells there (2 years + 1 year) + if contracting was dead they'd be your preferred for perm.......then do you risk burning bridges by quitting if they say you are Inside IR35? Or do you offer to stay in exchange for a rate rise and risk retro-tax? I'd expect that QDOS & co would still win cases for the period they try to retro-tax......& any retro holiday & benefits would reduce the impact if caught..............So maybe it would be worth the risk, especially if you've already set aside the cash for potential disputes :confused:

edison
13th October 2018, 11:58
Brilliant.

Same here. Was on a high salary but being controlled by idiots.
I take home a similar amount (a little more if I want to but not always), but am happier, have more freedom, and am NOT under direction and control.



I'm the same too. I've got plenty of friends who were on £100k plus salaries contracting/working as interims. It's definitely a growth area of the market.

edison
13th October 2018, 12:03
The other option that clients are already using is to outsource to large consultancies to supply the resource in an attempt to offload all risk and responsibility. Some clients may even think it will save them money and be no less efficient in terms of quality, the other clients will accept the increased cost as the fee for doing business this way.

I wonder if the consultancies will sub contract to us instead of getting cheaper foreign labour to fill the 'skills shortage'. :eyes

Should still be clients out there that have already been burned by potentially lower quality resource at inflated consultancy prices that are willing to engage contractors via the established channels.

Exactly this.

A friend of mine owns and runs an IT recruitment company specialising in financial services. Over the summer he had a large number of vacancies due to the likes of Wipro and Infosys hoovering up contractors to fulfil contracts at large banks. It's certainly an increasingly common model in some sectors.

sira
15th October 2018, 20:58
I just used CEST and the tool said 'We're unable to determine the tax status of this engagement'. :yay::bang::facepalm: And yet they want to extend it...

ChimpMaster
16th October 2018, 08:50
I just used CEST and the tool said 'We're unable to determine the tax status of this engagement'. :yay::bang::facepalm: And yet they want to extend it...

Had a bash at it for fun and it's heavily centred around the Substitution and Working Schedule questions. Seems that everything else is pretty much irrelevant. Another case of HMRC skewing the rules to make it almost impossible to avoid IR35.

sira
16th October 2018, 20:19
If it passes parliament, does anyone think HMRC will try to collect back-taxes from private sector contractors?

I heard that HMRC are trying to do that in the public sector at the moment (or will do it).

cmscotland
17th October 2018, 06:34
If it passes parliament, does anyone think HMRC will try to collect back-taxes from private sector contractors?

I heard that HMRC are trying to do that in the public sector at the moment (or will do it).

Of course they will if they think they can make a few quid.

sira
18th October 2018, 19:37
In my view, I think it will be announced in the budget. Keep hearing stories from friends and others about how HMRC has become increasingly aggressive in tax collection. One example, my friend runs a clinic, and he had underpaid on some taxes for a few months (genuine error) and HMRC gave him no payment plan option and demanded the money within 14 days, and threatened to send bailiffs.

From an article today - "Mel Stride, the Financial Secretary to the Treasury, in an interview with Accountancy Age earlier in the year, stated that he felt it was only fair to extend the rules into the private sector, so everybody was dealt with on a similar basis." Is IR35 a ticking time bomb for the accounting profession? - Accountancy Age (https://www.accountancyage.com/2018/10/17/is-ir35-a-ticking-time-bomb-for-the-accounting-profession/)

No matter how many flaws there are with CEST or IR35, if theres a chance that it will boost coffers, then Hammond will put it through. And for every headline/case you hear of people winning against HMRC; there will be thousands more who silently suffer from a HMRC tax grab.

All what will happen is, many companies (not all) will shift to FTC's, as it will be difficult to justify many roles as being outside IR35. This year, I've already seen a huge increase in FTC's and numerous large recruitment agencies have also reported the trends in their bi-annual and quarterly reports. Extract from one report "Another trend noticed in the past quarter was firms looking to hire people on Fixed Term Contracts rather than on a daily rate. Whilst daily rates would normally make up 75-80% of the market, its swung to an even 50% split."

jamesbrown
18th October 2018, 19:45
All what will happen is, many companies (not all) will shift to FTC's, as it will be difficult to justify many roles as being outside IR35. This year, I've already seen a huge increase in FTC's and numerous large recruitment agencies have also reported the trends in their bi-annual and quarterly reports. Extract from one report "Another trend noticed in the past quarter was firms looking to hire people on Fixed Term Contracts rather than on a daily rate. Whilst daily rates would normally make up 75-80% of the market, its swung to an even 50% split."

Agree that it will be in the budget, either for April 2019 or April 2020. Agree that the above will be something to look for - thanks for the quote, interesting.

Hobosapien
19th October 2018, 07:20
I presume FTCs are typically at permie rate rather than contract rate. So may as well go full permie if can't find suitable proper contracts.

This will end up with the inevitable call for further leniency on international skills import to fill the 'skills shortage'. i.e. a shortage of local people with the skills but unwilling or able to work at such low rates of pay. Try working on a FTC in central London where the daily commuting or local accommodation cost would eat most of it. :eyes

May as well go on 16 hour working week doing a couldn't care less job and claim all the bennies like those smart enough to play the system when it's so loaded against 'hard working families'. Too easy a tax target rather than the myriad of lawyered up multi-national tax dodgers that can afford to run rings around HMRC for years until a deal is done.

:throw: I feel a little better now but reality bites hard.

cojak
19th October 2018, 14:21
If you’re tired of the fight, it may be better to go permie,but be warned that you are running out of time for the luxury of a search for a good permie job with a decent salary and benefits.

There’s going to be a scramble for those kind of jobs, and if you make the decision to jump you don’t want to be at the back of the queue.

Hobosapien
19th October 2018, 15:10
Yes, I realise from my recent posts across various threads that the appeal of traditional contracting (piloting a freelance based Ltd company rather than pseudo-employee via a brolly) may be terminal with what is already happening or likely to in the near future.

As such I have a couple of months until my next contract renewal (with the potential there won't be one) to mull it over and decide what I'd like to do given the possible opportunities I could massage my CV into delivering, and sharpen up some recently lesser used skills via courses and targeted reading (books and online) where necessary.

Sometimes a new challenge is as good as a rest. Should be plenty of scope for a change given the IT skills shortage. :eyes

matzie
19th October 2018, 16:35
I realise there doesn't seem a lot of scope for remaining confident, with what's almost certainly ahead. But, I believe that people who are genuinely in business on their own account will adapt and do whatever we need to do to survive. We may be significantly worse off for a while. But personally, as someone who never works subject to another's supervision/direction/control, and won't do unless there's absolutely no choice - it's not *just* about the money.

Hobosapien
20th October 2018, 07:18
Yes there will always be some positives about contracting but largely it depends on the role or nature of the contract. Some roles are better suited to being able to remain isolated from disguised employee status whereas others are almost guaranteed to be caught within IR35.

So where the contract is more delivery of something tangible within a well defined timescale rather than to perform a role that mirrors others within the client's permie structure, you can be more confident that whatever the government comes up with you can remain independent in both nature of work and taxation.

The difficulty is when the role/contract falls in a grey area where working practices are key and the goalposts can be changed retrospectively once in contract.

Personally I'm going to weigh up the pros and cons of three avenues I see in front of me:

1. Contracting via my Ltd that has been unofficially dormant this last year, or close it down. No plan B worthwhile me keeping it going if not using it for contracting. Closed there's less risk of IR35 investigation, no ongoing accountancy fees (that will likely increase with the looming Making Tax Digital changes), and can always open another one if worth going back to this method of operating.

2. Continue contracting as a pseudo-employee of an umbrella company (presuming rules on that don't change soon :eyes), with a rate higher than normally accepted to offset being inside IR35 as much as possible. Using the pension contribution (up to £40k per year) method of offsetting taxes on the way in feels good, but no idea what the taxes will look like on the way out when the time comes.

3. Go full permie somewhere within commuting distance. No more working away during the week and can just go with the flow, taking my foot of the gas like many non-voracious permies do to pay the bills without all the corporate bollox to climb an imaginary career ladder.

Then the decision is what role I want to continue working within that has both opportunity of work and a worthwhile typical rate. Having moved between various techy related roles over the years I at least aren't stuck with one.

For those having similar thoughts, don't worry it'll be fine, the death of contracting has been predicted for decades. :eyes

SussexSeagull
21st October 2018, 18:10
I think it being in a budget is fairly much a done deal, most probably this time round. I can then see a battle royale between HR and Accounts departments with HR wanting people outside and Accounts people inside to mitigate risk.

JohnM
23rd October 2018, 21:40
why is everyone so doom and gloom about this - the UK based IT economy cannot survive without a flexible contract based workforce. That is an unquestionable fact

Companies will always need contractors for projects, contracts will be rewritten and working practices changed to keep employee's outside of IR35 on the vast majority of IT contracts apart maybe at the really big companies.

If a company wants a contract resource it will do whatever it has to do in order to get it. By the time this comes into force in April 2020 most private sector contracts and working practices will have been completely rewritten and reworked.

I hope all you doom mongers do go perm as it will leave loads of work for those of us left behind

BR14
23rd October 2018, 21:43
why is everyone so doom and gloom about this - the UK based IT economy cannot survive without a flexible contract based workforce. That is an unquestionable fact

Companies will always need contractors for projects, contracts will be rewritten and working practices changed to keep employee's outside of IR35 on the vast majority of IT contracts apart maybe at the really big companies.

If a company wants a contract resource it will do whatever it has to do in order to get it. By the time this comes into force in April 2020 most private sector contracts and working practices will have been completely rewritten and reworked.

I hope all you doom mongers do go perm as it will leave loads of work for those of us left behind

Magic! - can i have your dealer's number? does 'e deliver? :smokin

Hobosapien
24th October 2018, 08:36
Companies will always need contractors for projects, contracts will be rewritten and working practices changed to keep employee's outside of IR35 on the vast majority of IT contracts apart maybe at the really big companies.

If a company wants a contract resource it will do whatever it has to do in order to get it. By the time this comes into force in April 2020 most private sector contracts and working practices will have been completely rewritten and reworked.


Only senior managers at client companies can prove that theory. Any on here able to offer their input on how their client is looking to mitigate private sector IR35 changes if they happen? I expect most clients won't have a scooby do about it until Gammond puts it in the budget. :eyes


I hope all you doom mongers do go perm as it will leave loads of work for those of us left behind

:laugh Good point. We're all competitors, providing we have similar skills sets and go for similar roles. See you at the interview waiting area. I'll be the one getting the contract. :smokin If I haven't gone permie by then. :o

sira
24th October 2018, 09:04
This wont be delayed until 2020. Hammond wont pass up an opportunity to try and claim more tax.

We'll either have to exert more effort into finding ex-ir35 gigs, go perm or take the dreaded FTC's.

HMRC know that a percentage of contractors will turn perm, so win win for them. Its a shame they are too clueless to consider the long-term negative implications on the economy.

ChimpMaster
24th October 2018, 10:46
This wont be delayed until 2020. Hammond wont pass up an opportunity to try and claim more tax.

How much "notice" was given by the government when IR35 was forced onto all Public sector contracts?



HMRC know that a percentage of contractors will turn perm, so win win for them. Its a shame they are too clueless to consider the long-term negative implications on the economy.

Except that HMRC are too stupid to realise that tax-take will drop considerably when they force contractors into permanent employment.

Scruff
24th October 2018, 11:03
How much "notice" was given by the government when IR35 was forced onto all Public sector contracts?

Except that HMRC are too stupid to realise that tax-take will drop considerably when they force contractors into moving abroad

Fixed that for my intentions

ChimpMaster
24th October 2018, 11:27
Fixed that for my intentions

And for anyone who remains in the UK and switches to a permanent job: rather than generating say £100k in revenue as a contractor (£450/day), they will earn probably half that in salary, so let's say £50k, as a permie.

Permanent job: £50k gives HMRC £13k tax/NI + £5.7k Employers NI, so a total of £19,700 tax

Contractor: £100k (with minimal salary and expenses) gives rise to 16.7k Corp Tax + 13k tax on dividends on full profit distribution. So a total of £29,700 tax

And this is where the delinquency of HMRC shines through.

swamp
24th October 2018, 14:15
And this is where the delinquency of HMRC shines through.

This is being driven by Treasury and Cabinet Office, not HMRC.

Someone claimed it would generate £400m extra tax in the public sector. And now after 18 months they are now claiming it has raised £410m. So the chance of an extra billion will be too hard to resist for Hammond. But the private sector will be a lot more savvy: they won't simply roll over and accept blanket assessments like the NHS.

Big Blue Plymouth
28th October 2018, 14:45
And they'll start scrutinizing everyone they hire, and ensure their hires are following IR35 to the letter of the law.



In that case they won't be able to find people to do the job.

My current PS client has bent over backwards to ensure we're out of the scope of IR35. Struggling to get good people even then...
Edit: myself excepted, of course ;-)

AtW
28th October 2018, 15:16
Permanent job: £50k gives HMRC £13k tax/NI + £5.7k Employers NI, so a total of £19,700 tax

Contractor: £100k (with minimal salary and expenses) gives rise to 16.7k Corp Tax + 13k tax on dividends on full profit distribution. So a total of £29,700 tax

And this is where the delinquency of HMRC shines through.

Their gamble is that same contractor will have to accept £100k permie job or maybe even get higher rate, in either of those cases taxes would go up.

£100k permie job (based on PAYE calculator that I googled) will be £28k income tax, £5.6k employee NICs + £12.6k employer NICs = ~47k - good 50% more tax than in the example above (which could have included wife as 50% shareholder, so tax take would drop much further).

Anybody who thinks that HMRC will let that tax go is delusional.

Anybody who thinks that Employers will take on the risk of being liable for that extra tax is also delusional.

Massive increase in rates to compensate will be only available to a few very skilled and very lucky ones.

With Brexit coming there will be nowhere to go (without getting work permit first, which will be limited in most countries that pay top dollar for IT jobs).

swamp
28th October 2018, 18:35
Anybody who thinks that Employers will take on the risk of being liable for that extra tax is also delusional.

In most cases it will be the agency that is liable for IR35, not the client. But in many cases they will take the risk, just as they are taking that risk today in the public sector.

sira
28th October 2018, 21:46
I spoke with my agency on Friday. They reckon, most likely scenario is an increase in rates to offset the tax. Only one agencies view though, so take it with a pinch of salt.

D-day tomorrow. Brace yourselves.

Oh Hammond..:winker:

AtW
28th October 2018, 22:00
In most cases it will be the agency that is liable for IR35, not the client. But in many cases they will take the risk, just as they are taking that risk today in the public sector.

You should check contracts carefully - tax warranties section

sira
29th October 2018, 16:39
IR35 in 2020.

Budget 2019: Off-Payroll IR35 reforms to be extended to private sector in April 2020 (https://www.contractorcalculator.co.uk/payroll_ir35_reforms_extended_private_sector_april _545410_news.aspx)

Anyone know what " for large and medium sized businesses" means? i.e only large/medium firms need to implement IR35?

northernladuk
29th October 2018, 16:40
IR35 in 2020.

Budget 2019: Off-Payroll IR35 reforms to be extended to private sector in April 2020 (https://www.contractorcalculator.co.uk/payroll_ir35_reforms_extended_private_sector_april _545410_news.aspx)

Anyone know what " for large and medium sized businesses" means? i.e only large/medium firms need to implement IR35?

You could try asking the question in any of the other IR35 in 2020 threads that have started to discuss exactly this maybe?

sira
29th October 2018, 16:49
You could try asking the question in any of the other IR35 in 2020 threads that have started to discuss exactly this maybe?

Sorry master.

Yorkie62
29th October 2018, 17:17
IR35 in 2020.

Budget 2019: Off-Payroll IR35 reforms to be extended to private sector in April 2020 (https://www.contractorcalculator.co.uk/payroll_ir35_reforms_extended_private_sector_april _545410_news.aspx)

Anyone know what " for large and medium sized businesses" means? i.e only large/medium firms need to implement IR35?

medium 100-999 employees

large over 250 employees and has grown beyond the limits of a medium-sized business. This definition of a large-sized enterprise is the one adopted by the United Kingdom's Department for Business Enterprise and Regulatory Reform for statistical purposes.

jamesbrown
29th October 2018, 17:19
IR35 in 2020.

Budget 2019: Off-Payroll IR35 reforms to be extended to private sector in April 2020 (https://www.contractorcalculator.co.uk/payroll_ir35_reforms_extended_private_sector_april _545410_news.aspx)

Anyone know what " for large and medium sized businesses" means? i.e only large/medium firms need to implement IR35?

From the consultation response:


The government intends to use similar criteria to define small businesses as is found in the Companies Act 2006.

And, no, IR35 is applicable in all cases, only the PSC will be responsible for applying the rules when the client is a small business, i.e. the current system applies in that scenario.

Waldorf
29th October 2018, 17:20
IR35 in 2020.

Budget 2019: Off-Payroll IR35 reforms to be extended to private sector in April 2020 (https://www.contractorcalculator.co.uk/payroll_ir35_reforms_extended_private_sector_april _545410_news.aspx)

Anyone know what " for large and medium sized businesses" means? i.e only large/medium firms need to implement IR35?

For accounting periods beginning on or after 01/01/2016 a small company must meet at least two of the following conditions:

* annual turnover must be not more than £10.2 million
* the balance sheet total must be not more than £5.1 million
* the average number of employees must be not more than 50

Therefore any company exceeding two or more of the above criteria will be a medium/large business. I would suggest that most contractor’s end client will be a medium or large enterprise.

jamesbrown
29th October 2018, 17:22
I would suggest that most contractor’s end client will be a medium or large enterprise.

That's the general idea. They can say that 95% of clients won't apply the rules. What they won't tell you is that 95% of contractors will be impacted. :laugh

AtW
29th October 2018, 17:37
For accounting periods beginning on or after 01/01/2016 a small company must meet at least two of the following conditions:

* annual turnover must be not more than £10.2 million
* the balance sheet total must be not more than £5.1 million
* the average number of employees must be not more than 50

Therefore any company exceeding two or more of the above criteria will be a medium/large business. I would suggest that most contractor’s end client will be a medium or large enterprise.

How do you feel about Torys now?

Hobosapien
29th October 2018, 18:02
In most cases it will be the agency that is liable for IR35, not the client. But in many cases they will take the risk, just as they are taking that risk today in the public sector.

In that case agencies will move to only accepting applicants that are or will be using a brolly (or agency's own payroll), no more Ltd PSCs. Just like how currently they don't accept any self-employed non-incorporated applicant. :eyes

Waldorf
29th October 2018, 20:51
How do you feel about Torys now?

Still prefer them to the Marxist Labour Party.

Truth is this crackdown would have been presented to any chancellor as a leakage of tax revenues and so this move was inevitable.

It is always going to hard to argue why a contractor on say £100K can choose to pay a very low salary, benefit from expenses, split the shares with a spouse etc and pay little tax, plus the option to build up cash and only pay 10% at the end.

AtW
29th October 2018, 21:39
Still prefer them to the Marxist Labour Party.

Truth is this crackdown would have been presented to any chancellor as a leakage of tax revenues and so this move was inevitable.

It is always going to hard to argue why a contractor on say £100K can choose to pay a very low salary, benefit from expenses, split the shares with a spouse etc and pay little tax, plus the option to build up cash and only pay 10% at the end.

With current Toris you will get Korbyn too, enjoy!

WordIsBond
30th October 2018, 07:12
With current Toris you will get Korbyn too, enjoy!
We'd have him now if a few more people had done what you advocated and voted Lib Dem at the last election.

At least they are increasing the higher rate threshold. The Lib Dems and Labour would never have done that.

Instead of sniping at the least worst of the entire pack of fools, why don't you come up with a decent alternative.

Hobosapien
30th October 2018, 09:14
It is always going to hard to argue why a contractor on say £100K can choose to pay a very low salary, benefit from expenses, split the shares with a spouse etc and pay little tax, plus the option to build up cash and only pay 10% at the end.


It's just a different way of accounting, similar to why clients like to use contractors as a different way of accounting for short term resource rather than body count on their payroll. Some at client may not understand that and see a contractor earning 'a lot' in terms of pure rate, when really they need to compare it to a permie of equivalent level with all the employer tax and benefits they pay out. Then there's the extra on top for being able to get rid of a contractor at short notice without all the permie red tape.

Even traditional contracting meant paying corp tax (20%) and higher rate income tax if needing to withdraw divis over the lower tax threshold to cover typical cost of living. Now there's the divi tax to squeeze that even further. Expenses have always been legitimate when working away during the week for a short term contract. So by trying to 'level the playing field'' they've just made it unfair the other way when contractor is deemed to be caught inside IR35.

At least with the move to make clients decide on the IR35 status it moves the liability and onus onto them to decide what sort of resource they really need and want, a permie style bum on seat or a specialist that can deliver a service for a particular need (usually project driven but could be a one off deliverable).

True contracting not temp employee should always command a premium as by nature the client is wanting something different and more specialised that they'd otherwise have to get fleeced by a consultancy for.

RobScott
12th December 2018, 20:34
for contractors who follow the rules and pay the tax that is due and respect IR35 , there is no need to worry.

I welcome it ..seen many blatantly abuse the system and pay little tax while the rest prop up the NI for them!