Originally posted by JohntheBike
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The real unfairness in IR35 is that it is unfairly punitive. It doesn't just make you pay employment-level tax on the amount that the employee would be paid. It also makes you pay tax on that extra compensation you are getting for those employee rights.
The employee gets the benefits and isn't taxed on them. The IR35-contractor may get pay in lieu of employee rights, but he has to pay tax on that extra pay. You get perhaps a 30-40% premium on your rate to compensate you for the rights you aren't getting. Unlike the employee, you have to pay tax on that.
If IR35 weren't so punitive compliance would be better. The imbalances I talked about above are significant, but the real killer is that IR35 is so unfair. Contractors not only have a huge financial incentive to cheat, they also can salve their conscience for doing so because it really is unfair.
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