Reply from MP about IR35 Reforms

[fatboyslim]

So do don't think that IR35 status is determined by the contract?

And that travelling expenses is determined by the 24 month ruke?

Which is by intention - so if you get a 1 year extension after 18 months then you can no longer claim.

I hope I have got that right or NLUK will have kittens....

The 24 month rule kicks in only after you actually finish 24 months right?

People can write clever wording in contracts to wriggle out of rules to avoid tax, but 24 month test seems pretty good.
A lot of people are hidden permies for tax saving purpose,its good that taxman closing the gap between permies and hidden permies.

[mudskipper]

The 24 month rule kicks in only after you actually finish 24 months right?

People can write clever wording in contracts to wriggle out of rules to avoid tax, but 24 month test seems pretty good.
A lot of people are hidden permies for tax saving purpose,its good that taxman closing the gap between permies and hidden permies.

No. The 24 month rule kicks in as soon as you know you will be in the same location for 24 months. So if you sign a 2 year contract, T&S is not allowable. It's separate to IR35. (If IR35 caught, T&S aren't allowable anyway)

[SueEllen]

The 24 month rule kicks in only after you actually finish 24 months right?

People can write clever wording in contracts to wriggle out of rules to avoid tax, but 24 month test seems pretty good.
A lot of people are hidden permies for tax saving purpose,its good that taxman closing the gap between permies and hidden permies.

Oh and if you are at client A for 18 months and client B for 6 months and they are in the same location or near by then don't try to claim expenses for going to client B.

[BoredBloke]

Taking the devil's advocate side for a minute, could it not be said that all this shows is that the employee is simply worth more to the company than the contractor, and this is the case even before any consideration of taxes, because the comparison of before-tax earnings is much more for the employee in this instance.

There is a premium for flexibility and skills! Look at the consultancies

[Acme Thunderer]

no but I am sure an international resourcing company with H1B's could supply someone who had seen the box in Currys for that. Of course MPs are very popular as non executive directors.

So for an equivalent job a contractor would expect to get paid more e.g. pricing the risks into their rate AND a preferential tax treatment - income splitting, low salary, high dividends?

For me the biggest issue with IR35 caught is travel costs. These got binned because unscrupulous agencies/companies start taking the Mick.

[malvolio]

So for an equivalent job a contractor would expect to get paid more e.g. pricing the risks into their rate AND a preferential tax treatment - income splitting, low salary, high dividends?

The usual misunderstanding of corporate finance. Contractor rates are set pretty much by a rate card based on the cost of employment of someone permanent doing the same grade role. While we may get more of the money, the cost to the company is rarely more than that of having a permie The only real exception is when you're hiring a specialist or someone senior when there is more of a negotiation: but even then there is a budgeted upper limit.

For me the biggest issue with IR35 caught is travel costs. These got binned because unscrupulous agencies/companies start taking the Mick.

Not really, but there are other more serious issues around IR35, the most significant being you can only cover your bench time - including sickness and other non-earning days - out of your personal taxed income. Other than the liability issue the biggest benefit of your own company is the ability to manage your gross income, regardless of what level of taxation is applied.

[SueEllen]

For me the biggest issue with IR35 caught is travel costs. These got binned because unscrupulous agencies/companies start taking the Mick.

If you or another close member of your family gets cancer (or some other chronic illness) then you will understand why IR35 is a problem.

I know contractors and employees who have had to take a year of work because of illnesses like this. Those who are employees who work for decent companies are given lots of time off and can use the private healthcare provision provided by the employer to get treated quickly. If you are a contractor you have to rely on your savings so you better make sure you have some.

[fatboyslim]

No. The 24 month rule kicks in as soon as you know you will be in the same location for 24 months. So if you sign a 2 year contract, T&S is not allowable. It's separate to IR35. (If IR35 caught, T&S aren't allowable anyway)

ah, ok.

[fatboyslim]

If you or another close member of your family gets cancer (or some other chronic illness) then you will understand why IR35 is a problem.

I know contractors and employees who have had to take a year of work because of illnesses like this. Those who are employees who work for decent companies are given lots of time off and can use the private healthcare provision provided by the employer to get treated quickly. If you are a contractor you have to rely on your savings so you better make sure you have some.

Yes but that risk was always there, IR35 did not create that risk. I would say the rates you want should reflect that risk, buying an insurance coverage is a probably better idea.

The issue they want to tackle is the hidden employees who take advantage of the situation. They don't bring flexibility to the job market. They are of no advantage to businesses. Why should they be treated specially. A client and an employee can both play this game and avoid paying tax to hmrc.
(this has actually happened, people have been forced to become 'self-employed' by companies overnight, for tax purpose)

This is bad situation for contractors too. I don't want people to hog same role year after year and get treated differently, their risk is substantially less after 2 years I would say. This is unfair to permies.
No wonder everyday a permie wants to become a contractor.

[MrMarkyMark]

If you or another close member of your family gets cancer (or some other chronic illness) then you will understand why IR35 is a problem.

I know contractors and employees who have had to take a year of work because of illnesses like this. Those who are employees who work for decent companies are given lots of time off and can use the private healthcare provision provided by the employer to get treated quickly. If you are a contractor you have to rely on your savings so you better make sure you have some.

Good post.

Exactly that happened to my Mrs. for 9 months this last year.

Luckily I could largely WFH which enabled here to get better properly, she is back firing on all cylinders now, in fact she's just got another extension