IR35 Discussion with Client - Knives are out

[economicpygmy]

Extracts from an IR35 discussion with an ‘expert’ from the client I'm doing some work for:

Contractors are creating a black hole by not paying high levels of income tax and these changes are to address that ( I actually groaned at this ).
There is no risk of the HMRC investigating if you go perm or through the agencies umbrella from a previously outside contract ( they wont cover this risk ).

Interestingly; apparently there's case law to support:
Substitution plays a minimal part in the determination of IR35.
Without a worker that may be substituted being on the payroll of the contractors limited company, no substitution is valid (proof required).
If you get paid by the hour, you're an employee/inside.
If you fill out a time-sheet, you're an employee/inside.
If you use the companies IT, you're an employee/inside.



They've looked at 'a selection' of contracts and determined 99% of contractors to be inside (there loads at this place).
Paying dividends instead of PAYE is avoiding tax and they wont deal with any limited company which does that.
For any limited company not paying a contractor via PAYE, the agency will require 12% 'top up' fee (WTF?).

All checked with the HMRC.

All from a company which struggles to find people and wants contractors to stay



Interesting times

[JamesBrown11]

"Contractor pays less tax than permie" is BS.

Contractor having 100% share in his LTD has to pay Corp tax, VAT and Div tax (including higher rate band), and PI tax and NI if he draws higher salary.

On £500/d he pays £70k in taxes per year, whereas permie on £80k pays £25k plus £10k paid by his employer.

That's why I think the £1.16bn projected by HMRC is unrealistic.

[eek]

"Contractor pays less tax than permie" is BS.

Contractor having 100% share in his LTD has to pay Corp tax, VAT and Div tax (including higher rate band), and PI tax and NI if he draws higher salary.

On £500/d he pays £70k in taxes per year, whereas permie on £80k pays £25k plus £10k paid by his employer.

That's why I think the £1.16bn projected by HMRC is unrealistic.

VAT is neutral and doesn't count. HMRC will look at any comment with VAT in it and ignore the rest of it and the basis that if you don't understand fundamental x the rest of the document will have similar flaws.

And IR35 is now about one thing and one thing alone. Employers NI is a tax firebreak that must be protected at all costs (raises £70bn a year, and the rise of JustEat and other similar companies show how quickly that income could be destroyed).

[dsc]

All from a company which struggles to find people and wants contractors to stay

I'd say *****'em then, if they are retarded enough to carry on with this approach, then I hope all of their projects go to tulip due to lack of resources.

FFS all it takes if for clients to go proper B2B with PCSs and life would be good again for both sides, but clearly this is too much to ask for.

[JamesBrown11]

I agree with dsc. All it takes is for clients to open their ******* eyes, see differences in permie vs contractor, and stop treating them like employees. It's not rocket science. Hopefully 2020 will teach clients the hard way.

[JohntheBike]

I agree with dsc. All it takes is for clients to open their ******* eyes, see differences in permie vs contractor, and stop treating them like employees. It's not rocket science. Hopefully 2020 will teach clients the hard way.

Hopefully 2020 will teach clients the hard way.

there needs to be a high profile case where a client has their fingers burnt for that to happen. Like the BBC cases. Although all these seem to have done is muddy the waters and perhaps encourage the PAYE or umbrella approach that many large clients are taking.

[dsc]

Big question is what happens first, clients still getting good talent via brolly / PAYE due to contractors switching or major clients going into deep trouble due to lack of talent and relaxing their rules to allow outside contracts (isn't this what happend in the public sector?). There's also the whole "we don't need contractors we will just outsource" approach which can go to tulip, but that's a more long term experiment and even if it goes wrong, effects won't really be seen till say at least 6-12months from the moment it starts.

[krytonsheep]

FFS all it takes if for clients to go proper B2B with PCSs and life would be good again for both sides

Definitely, the problem is the work flow of a lot of companies isn't really suited to that arrangement. They just want bums on seats who they have direct control over, if they can't hire enough permies, they'll get permie-tractors to fill the gaps.

Hopefully moving forward companies will start thinking more about using B2B Sow remote contracts.

[northernladuk]

(there loads at this place).
Paying dividends instead of PAYE is avoiding tax and they wont deal with any limited company which does that.
For any limited company not paying a contractor via PAYE, the agency will require 12% 'top up' fee (WTF?).

All checked with the HMRC.

All from a company which struggles to find people and wants contractors to stay

To be fair it sounds like they aren't wanting contractors, they are just using this route to employ staff, which many large clients are doing and have given HMRC the perfect fodder for the new changes. Standard permitractor sweat shop and there are plenty about. It could be argued they've come to the right conclusion about determinations, but looking at that list, gone the wrong way about it.

I'd be seriously worried if I were a contractor at a place like this right now.

[simes]

Extracts from an IR35 discussion with an ‘expert’ from the client I'm doing some work for:

Can you name the expert? Am thinking it is an EY / PWC type of 'expert' as opposed to a named individual? If the former, there are cases on these forums already demonstrating a complete lack of comprehension.

If the latter, of course ignore this.