Treat contractors like employees - what would you do?

[Jog On]

Treat contractors like employees, says leading think tank :: Contractor UK

All income should be taxed equally regardless of source, according to a new review by the left-leaning think tank, the Institute of Fiscal Studies.

The report, written by Scottish economist Sir James Mirlees, suggests that unless there is a “very good reason”, income-raising economic activities should be treated identically.

The report was welcomed by the cost-cutting coalition government, with a Treasury spokesman telling the Telegraph that the government would consider the review’s findings.

The author claims he could raise national income by 1.4pc, or £20bn.

If there were no financial/tax incentives to provide flexible services and endure the risk, business overheads and insecurity of contracting - what would you do? Seriously? Say they brought in something like this next budget how would you adapt?

Go perm? Emigrate? Just take up the Gary?

[MrMark]

Treat contractors like employees, says leading think tank :: Contractor UK





If there were no financial/tax incentives to provide flexible services and endure the risk, business overheads and insecurity of contracting - what would you do? Seriously? Say they brought in something like this next budget how would you adapt?

Go perm? Emigrate? Just take up the Gary?

You're making the assumption that people go contracting only because of the tax incentives. Obviously it plays a part with some, but I would have thought an aversion to permie-dom, the challenge of new projects, and the ability to earn a good whack (even if taxed at the same rate), all are draws to the contracting life.

[d000hg]

I don't see a problem with paying the same amount of tax on earning X as a permie should earning X, if it meant I didn't have to go through the Ltd rigmarole. If you got into contracting to avoid paying tax, that was the wrong reason... higher income or greater flexibility, but not escaping tax.

If you earn more than a permie, pay more tax. If you're benched and earn less, pay less.

[Jog On]

I don't see a problem with paying the same amount of tax on earning X as a permie should earning X, if it meant I didn't have to go through the Ltd rigmarole. If you got into contracting to avoid paying tax, that was the wrong reason... higher income or greater flexibility, but not escaping tax.

If you earn more than a permie, pay more tax. If you're benched and earn less, pay less.

That's not why I got in - obviously it was the income hike which is in part due to the tax structure of a LTD. How would it work with Corp tax, accountant fees etc? VAT? Flat rate VAT?

Would they just force you to take PAYE after all your expenses with no company profit to pay CT on?

[Bunk]

That's not why I got in - obviously it was the income hike which is in part due to the tax structure of a LTD. How would it work with Corp tax, accountant fees etc? VAT? Flat rate VAT?

Would they just force you to take PAYE after all your expenses with no company profit to pay CT on?

They may not force you but would there be any point doing anything else? This is effectively the same as being IR35 caught at the moment.

[IR35 Avoider]

If there were no financial/tax incentives to provide flexible services and endure the risk, business overheads and insecurity of contracting - what would you do?

The financial incentive should come from higher pay, not lower taxes. Making everyone effectively IR35-caught (if that is what happens) will result in a variety of compensating changes: some higher rates, some lower take-home, some shifting to normal employment.

[SupremeSpod]

I would use legal avoidance tactics to mitigate my liability.

[MarillionFan]

I would use legal avoidance tactics to mitigate my liability.

WSS

If I'm taking a risk with my livelihood to be able to allow companies to be able to react quickly to business circumstances then I want some additional benefit for it. Otherwise we can all just sit on our arses giving it a good scratch and making UK PLC even more uncompetitive.

[IR35 Avoider]

My proposed tax (and benefits) reforms

1. Change the benefits system to a per-individual rather than per household basis. This removes the incentive to create (or fake) single adult households/families.
2. Calculate individual benefit amounts on the basis that the recipient will share a household with one other adult on benefits. Completely ignore the reality, so the recipient will probably be better off the more adults they share with and the wealthier those adults are. Given that "two can live as cheaply as one" the benefits system should not be paying for the luxury of living in a single-adult household.
3. Have a single rate of tax on all income of all types.
4. For people who don't claim benefits only, the tax system should give a personal allowance that is roughly equivalent in the relief it gives from the single rate of tax to the benefits they would get if they did claim.
5. The single rate of tax and level of personal allowance/average individual benefit should be set so that 50% of households are net contributors to the government. (It is already the case, presumably by design, that 50% of households are net givers and the other half net takers, once all taxes and benefits are considered.)

[Jog On]

WSS

If I'm taking a risk with my livelihood to be able to allow companies to be able to react quickly to business circumstances then I want some additional benefit for it. Otherwise we can all just sit on our arses giving it a good scratch and making UK PLC even more uncompetitive.

+1

What is the point of the risk in the risk/reward ratio if they take away a big chunk of the reward aspect. What is the point of the financial and administrative overheads of running a LTD if you're going to just be taxed as a permie? What is the point of being a permie with no job security, no duvet days, no sick days, no redundancy, no holidays etc etc just to only be on a higher rate than Joe permie.. It would have to be a much higher rate to make it worth it and with Bob on his way over I don't see that happening.

The way this government is slashing and burning I dread to think what they're going to come up with.