If not IR35, then what? If not IR35, then what? - Page 3
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  1. #21

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    Quote Originally Posted by malvolio View Post
    Disagreed, totally.

    For one thing, the Supreme Court ruled that it is perfectly legal between spouses and an attempt to resurect it under a different guise was firmly defeated, largely on the back of that decision.

    Any attempt to modify the rules for dividends will fail, since it it is almost impossbible to achieve without screwing up most of the major companies in the country. Go look at how many major ones are actually owned by three or four people or, for another example, tell Philip Green that he has to pay major taxes on the income he hands over to his wife in Monaco. They will simply move out to somewhere more accommodating.

    Forget tax, the line of attack to influence government has to be through employment rights for workers where appropriate. That way they gain kudos for improving people's lives rather than taxing them further to death.
    the line of attack to influence government has to be through employment rights for workers where appropriate
    agreed, and it's a pity that IPSE didn't recognise this sooner and campaigned appropriately

  2. #22

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    Quote Originally Posted by WordIsBond View Post
    That's all a rather long-winded way to say that income splitting is an issue that isn't going to be solved with IR35. But, if you removed the income splitting imbalance, you would remove much of the incentive to cheat on IR35. You would also, in my view, have a fairer society / tax system. I do not believe it is fair for one family to have £90K income without touching the higher rate band or losing their child benefit, and another to have £90K and lose their child benefit and pay 40% on half their income.

    The contractor who is taking home £90K, therefore, has a compelling reason to try to stay on the right side of the IR35 line. Once you have that, then you will have contractors who will cheat.
    an excellent analysis.

  3. #23

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    Quote Originally Posted by webberg View Post
    Let me float an idea.

    Farmers are subject to seasonal fluctuations in prices etc. As such they have an "averaging" basis available to them by which they can average profits over a number of years, mixing good and bad and coming out with a reasonably accurate overall tax rate.

    Authors have the same.

    A lot of the differences in contractordom arise because of dividends and the ability to move funds out of companies at CGT rates.

    Why not think about averaging.

    Start with say 5 years. Over that period, assume that all dividends are subject to tax at normal tax rates and perhaps even NIC. If at the end of that period, the company/vehicle used is full of money, assume that it has been distributed as remuneration, adjust the CT and collect PAYE (for want of a better description)?
    possibly, but what I think many forget is that the IT contractor community is not seen as an essential industry like farming is and that we are all regarded as tax avoiders.

  4. #24

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    Quote Originally Posted by PTP View Post
    * T&S Expenses! Yes the difference between CT + Div Tax on one hand, and IT + NIC on the other, is no longer big enough to provide a significant incentive to cheat or treat as outside IR35. But really what needs comparing is CT + Div Tax + T&S being tax deductible on one hand, vs
    IT + NIC and T&S not being tax deductible.........That in my view is still a critical enough difference to create an incentive or dealbreaker for a contract to be outside IR35.
    Yes, you are correct. I'd forgotten it because it is a non-issue for me personally. I'd say if you go back to the 24 month rule for inside roles as well as outside roles that would be equitable. That way the permatractors can't go on claiming expenses forever. It's still very beneficial to the economy and thus to HMG/HMRC to have a flexible workforce, even if people are inside IR35. The T&S change for inside roles gained a few quid in taxes and seriously damaged flexibility.
    Quote Originally Posted by PTP View Post
    And like WIB said but from another angle, it's not fair that a contractor would pay far more NI for earning the same amount over 6 months as they would have paid if they had earnt it over 12 months. This unfairness would be ironed out if they merged IT and NI and treated it more in line with IT.
    Yes, it would. They won't do that. If you really wanted to solve problems they'd also merge ER NI so that people could see just how much money HMRC is taking.

  5. #25

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    Quote Originally Posted by JohntheBike View Post
    possibly, but what I think many forget is that the IT contractor community is not seen as an essential industry like farming is and that we are all regarded as tax avoiders.
    I was not drawing a comparison between industries.

    I was trying to point out that the argument that employees pay more tax than contractors is usually based on a comparison of earnings over one year. Arguably that is inappropriate for contractors who would perhaps not draw all the earnings of the PSC in one year but rather allow sums to accumulate and then extract them after a period of some years.

    I suggest therefore that a better comparison between employee and contractor is over a [5] year period when the tax cost of that extraction can be part of the equation.

    If that is valid, then a system whereby a contractor's earnings (including those of the PSC) are reviewed every 5 years and averaged over that period, might be one way of achieving a balance, without having to use IR35.

    Of course, this method would also involve some form of tax payment/credit/franking to happen, but that is spreadsheet territory rather than subjective assessment of shifting facts.

    It's just an idea to be kicked around.
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  6. #26

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    Quote Originally Posted by JohntheBike View Post
    possibly, but what I think many forget is that the IT contractor community is not seen as an essential industry like farming is and that we are all regarded as tax avoiders.
    And I can tell you that compared to farmers, contractors are beginners in the tax avoidance world.
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  7. #27

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    Quote Originally Posted by Manic View Post
    HMG would argue they have shifted the burden of ER onto the engager/employer as part of the off payroll rules as they assume responsibility for the payment of all correct taxes.
    They can argue that but do the facts bear it out? Are the people at Barclays/Lloyds etc seeing an uplift in the rates offered to reflect ER NI being borne by the engager? Pretty sure that isn't going to happen.

  8. #28

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    Quote Originally Posted by webberg View Post
    Let me float an idea.

    Farmers are subject to seasonal fluctuations in prices etc. As such they have an "averaging" basis available to them by which they can average profits over a number of years, mixing good and bad and coming out with a reasonably accurate overall tax rate.
    It's a good idea. If you took away ER/MVL but offered "averaging" to contractors, it would certainly help with the bench time issues.

    It still leaves the question, how do you distinguish between contractors who use averaging and other companies for which you want to offer ER/MVL? I suppose you could only offer ER if someone had X full-time employees over Y years, or something like that. The kind of entrepreneurship that you really want to encourage with ER is the kind that results in employment.

  9. #29

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    Surely the whole point of using a limited Company - and one that I've been saying for a long time - is that it allows you to even out an uneven income stream for times when you are not working? You don't need another layer of complexity in the tax landscape, merely accept that I left money in the company so that when I had a largely enforced 14 month break I could still pay the mortgage and feed the family. the major failing of IR35 is that it destroys that ability.

    It's not tax avoidance, it's prudent fiscal planning.
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  10. #30

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    And, incidentally, attacking the taxation aspect of contracting is a waste of time. Parliament simply aren't listening, and haven't been for several years.
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