IR35 - the end of a flexible workforce IR35 - the end of a flexible workforce
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    Default IR35 - the end of a flexible workforce

    I just can’t believe this is the end of contracting. Most companies will blanket every contractor as inside ir35. So some will accept and some will simply retire or move on. I’m contemplating either to accept PAYE or to start a completely new business. But this is such a shame as I’m good at what I do and I enjoy it too. But because of this change, companies won’t treat my company as a proper company and in fact treat me like a disguised employee. I just can’t accept that.

    So looks like I’ll end up starting a new business that is completely different to IT. And I can’t help but think what a shame. It’s a shame for the economy, it’s a shame that a flexible workforce will be reduced, it’s a shame that in the long run the country actually gets less tax (as we pay vat, corporation tax and personal tax).

    I think by the time they realise they have messed things up it will be too late.

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    Quote Originally Posted by Rebel View Post
    I just can’t believe this is the end of contracting. Most companies will blanket every contractor as inside ir35. So some will accept and some will simply retire or move on. I’m contemplating either to accept PAYE or to start a completely new business. But this is such a shame as I’m good at what I do and I enjoy it too. But because of this change, companies won’t treat my company as a proper company and in fact treat me like a disguised employee. I just can’t accept that.

    So looks like I’ll end up starting a new business that is completely different to IT. And I can’t help but think what a shame. It’s a shame for the economy, it’s a shame that a flexible workforce will be reduced, it’s a shame that in the long run the country actually gets less tax (as we pay vat, corporation tax and personal tax).

    I think by the time they realise they have messed things up it will be too late.
    You can take the VAT out of that equation, what you pay in VAT your agency reclaims from their bill.


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    Quote Originally Posted by Acme Thunderer View Post
    You can take the VAT out of that equation, what you pay in VAT your agency reclaims from their bill.


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    Ok fine, let’s remove Vat. So then they are getting more tax overall? As everyone will be forced to go PAYE. Some will retire and some will do something else, but the rest will go PAYE. And the country will indeed get more tax so it’s a win?

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    In simple terms - Yes.

    My turnover (exc VAT) is about double what I earned as a permie. My current corporation tax and personal tax bill is only about 10% higher than what I paid as a permie, and that isn’t counting what my employers at the time would have been paying in ERNI.




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    This is not the end of a flexible workforce. It is not the end of IT consulting.

    It is the end of individuals using limited companies to avoid paying national insurance and income tax.

    You are still free to work for whomever you like and you are free to negotiate your rate.

    You can no longer employ your wife as 'company secretary' or pay dividends to avoid national insurance.


    "But what about expenses?" I hear you all cry. Why should a freelance IT worker be allowed to claim tax relief on hotels, equipment? Why can't ALL workers claim this relief? What makes a [I]contractor[I] more entitled to claim his train fare tax free vs an agency temp or a permie?

    95% of contractors are not legitimate companies; they are agency temps.

    Let's do a simple example

    Bob is a casual and works in Zara on tuesday, H&M on thursday and Tesco at the weekend. It takes bob 2 hours to commute to tesco. If Bob is feeling unwell, he can send his brother Tim in his place.

    Sally works full time in Zara.

    Should Bob be entitled to claim his train fare tax free? Should Bob be able to employ his non-working wife and split his earnings? Should Bob be able to pay himself dividends and avoid paying national insurance?

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    Quote Originally Posted by helen7 View Post
    This is not the end of a flexible workforce. It is not the end of IT consulting.

    It is the end of individuals using limited companies to avoid paying national insurance and income tax.

    You are still free to work for whomever you like and you are free to negotiate your rate.

    You can no longer employ your wife as 'company secretary' or pay dividends to avoid national insurance.


    "But what about expenses?" I hear you all cry. Why should a freelance IT worker be allowed to claim tax relief on hotels, equipment? Why can't ALL workers claim this relief? What makes a [I]contractor[I] more entitled to claim his train fare tax free vs an agency temp or a permie?

    95% of contractors are not legitimate companies; they are agency temps.

    Let's do a simple example

    Bob is a casual and works in Zara on tuesday, H&M on thursday and Tesco at the weekend. It takes bob 2 hours to commute to tesco. If Bob is feeling unwell, he can send his brother Tim in his place.

    Sally works full time in Zara.

    Should Bob be entitled to claim his train fare tax free? Should Bob be able to employ his non-working wife and split his earnings? Should Bob be able to pay himself dividends and avoid paying national insurance?

    I see what you mean and ok that makes sense.

    However, I don’t see a contractor/freelancer as being a disguised employee. I see a contractor/freelancer as someone who is a specialist and who has their own company providing services to companies such as banks. To say that we are not a proper company and in fact disguised employees isn’t right. If we were employees then we would get sick pay and we would have a pension, we would be entitled to more work after we finish the current assignment.

    But we don’t get any of that.

    The tax is something separate in my mind. I’m more concerned with the fact that we as contractors are not considered as being a proper company but in fact disguised employees.

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    Helen, let’s modify your example a little.

    Bob, isn’t just a casual worker he is an electrician that went out to those three clients to fix something. He is therefore a legitimate business providing a service.

    Now let’s take this a step further and say Zara requires him to take on a longer term project. But this time, hmrc kick in and says you are within ir35 so cant operate as a company. I mean how does that make any sense? Let people operate usinh which ever model works for them.

    If you or hmrc are concerned about people saving tax then that is the fault of personal tax vs corporation tax. Perhaps there shouldn’t be such a big difference in the tax between companies and employees.

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    Quote Originally Posted by helen7 View Post
    Bob is a casual and works in Zara on tuesday, H&M on thursday and Tesco at the weekend. It takes bob 2 hours to commute to tesco. If Bob is feeling unwell, he can send his brother Tim in his place.

    Sally works full time in Zara.

    Should Bob be entitled to claim his train fare tax free? Should Bob be able to employ his non-working wife and split his earnings? Should Bob be able to pay himself dividends and avoid paying national insurance?
    "Should"... I see you've swallowed the government propaganda concerning fairness™. In order to make things "fair" for everyone let's make sure everyone is screwed.

    Where I live home to office travel is a permitted deduction, as are other employment related expenses. Dividends are taxable income, so while useful for income levelling, the main way of getting money out of my ltd co is salary. (dividend splitting can't be done, since households are taxed, not individuals). My main (non salary) company expenses are software licences, insurance, office equipment and supplies, and accountancy fees. It ticks along nicely. I'm sure most UK contractors wouldn't object to working in this way.

    However, the new regime won't destroy contracting, simply because contracting remains an attractive option due to higher earning potential. After all, since 2000, many people have opted to work through brollies anyway.
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    Quote Originally Posted by Rebel View Post
    I just can’t believe this is the end of contracting. Most companies will blanket every contractor as inside ir35. So some will accept and some will simply retire or move on. I’m contemplating either to accept PAYE or to start a completely new business. But this is such a shame as I’m good at what I do and I enjoy it too. But because of this change, companies won’t treat my company as a proper company and in fact treat me like a disguised employee. I just can’t accept that.

    So looks like I’ll end up starting a new business that is completely different to IT. And I can’t help but think what a shame. It’s a shame for the economy, it’s a shame that a flexible workforce will be reduced, it’s a shame that in the long run the country actually gets less tax (as we pay vat, corporation tax and personal tax).

    I think by the time they realise they have messed things up it will be too late.
    I have been expecting this for years. Many posters on CUK seem to think its a good thing. They are "real" contractors - its clearing the rest who are "fakes".

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