Will contracting go out with a bang or a whimper? Will contracting go out with a bang or a whimper?
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  1. #1

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    Default Will contracting go out with a bang or a whimper?

    ...or are things rarely as good or as bad as they first appear?

    I'm just wondering about the consequences of the April tax changes going though virtually as-is. Let's face it - all of this consultation is so much window-dressing fluff. Lobbying by non-party-donating stakeholders in the recent past has been completely ignored.

    What will happen to contractors, accountants, legitimate umbrellas, agencies and clients? And will those consequences happen over night or will it take a year or 2 to have an effect?

    Or will things generally stay as they are?

    I think that many contractors will go back to permiedom. Those in contracting will restrict themselves to contracts within commuting distance, or the day rate will be such that they'll take the hit but with a much depleted day rate.
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  2. #2

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    It's an unknown frankly. Too many variables to think about. Consider:

    1. Hotness of contracting disappears => contractor supply falls, permie supply increases.
    2. Permie supply increases => permie wages fall.
    3. Contractor supply falls => contractor rates rise.
    4. Contractor rates rise => new contractors will enter the market.
    5. Contractor rates rise => companies more keen to hire permies.
    6. Companies keen to hire permies => permie wages rise again.
    7. Those switching contractor to permanent will more likely have been inside IR35 in past contracts => gov't likely to investigate them.

    My suspicion is that while contracting will not disappear completely, the nature of what contracting is will change.
    I'd expect contracting to split into two - a portion going into full time permanent positions, a portion going into real consultancy fee-driven work as their own business, a portion going into larger consultancies, a portion looking at more business friendly pastures.

    Could begin with a whimper in March followed by turmoil in May/June.

    tl;dr Heaven knows.

  3. #3

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    Quote Originally Posted by cojak View Post
    ...or are things rarely as good or as bad as they first appear?

    I'm just wondering about the consequences of the April tax changes going though virtually as-is. Let's face it - all of this consultation is so much window-dressing fluff. Lobbying by non-party-donating stakeholders in the recent past has been completely ignored.

    What will happen to contractors, accountants, legitimate umbrellas, agencies and clients? And will those consequences happen over night or will it take a year or 2 to have an effect?

    Or will things generally stay as they are?

    I think that many contractors will go back to permiedom. Those in contracting will restrict themselves to contracts within commuting distance, or the day rate will be such that they'll take the hit but with a much depleted day rate.
    In my experience, many contractors live a short distance from where they work. Wherever Ive worked, Ive been in the minority of contractors who travelled more than 30 minutes to their work site.

    At my current client, less than 5 out of 50 live more than 30 minutes away. The loss of expenses wont affect these people and they'll stay contracting unless they start finding 'local' roles hard to find.

    if they work through a hubbie \ wife limited with a 50 / 50 split, they'll claim the 5000 tax free each a total of 10g's so I doubt that would greatly affect them either.
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  4. #4

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    Quote Originally Posted by BolshieBastard View Post
    In my experience, many contractors live a short distance from where they work. Wherever Ive worked, Ive been in the minority of contractors who travelled more than 30 minutes to their work site.

    At my current client, less than 5 out of 50 live more than 30 minutes away. The loss of expenses wont affect these people and they'll stay contracting unless they start finding 'local' roles hard to find.

    if they work through a hubbie \ wife limited with a 50 / 50 split, they'll claim the 5000 tax free each a total of 10g's so I doubt that would greatly affect them either.
    This. I'll bet most of those don't know what is happening anyway.

    There are going to be some real wake up calls post April and same again April after when these head in the sand people suddenly hit reality.
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  5. #5

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    Quote Originally Posted by cojak View Post
    What will happen to contractors, accountants, legitimate umbrellas, agencies and clients? And will those consequences happen over night or will it take a year or 2 to have an effect?

    Or will things generally stay as they are?

    I think that many contractors will go back to permiedom. Those in contracting will restrict themselves to contracts within commuting distance, or the day rate will be such that they'll take the hit but with a much depleted day rate.
    I think many will go back to permiedom once reality bites and contracting becomes more of a lifestyle choice than having any financial benefit. The work away from home for the week crowd will also reduce significantly as that will become something only the wealthy can afford to do.

    Quote Originally Posted by BolshieBastard View Post
    In my experience, many contractors live a short distance from where they work. Wherever Ive worked, Ive been in the minority of contractors who travelled more than 30 minutes to their work site.

    At my current client, less than 5 out of 50 live more than 30 minutes away. The loss of expenses wont affect these people and they'll stay contracting unless they start finding 'local' roles hard to find.

    if they work through a hubbie \ wife limited with a 50 / 50 split, they'll claim the 5000 tax free each a total of 10g's so I doubt that would greatly affect them either.
    I think it depends where you are. I've worked in a number of places where the majority of contractors aren't local. Certainly for London based contractors I imagine you could work your entire contracting career without having to travel outside of the M25 or probably even within a smaller radius of central London. The last time I was in Canary Wharf I was the exception where I was doing a 2 hour (90 mile) commute each way every day.

    Quote Originally Posted by northernladuk View Post
    This. I'll bet most of those don't know what is happening anyway.

    There are going to be some real wake up calls post April and same again April after when these head in the sand people suddenly hit reality.
    Too right!

  6. #6

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    In the city people come from all sorts of far flung places. Enfield. Chelmsford. Sevenoaks.

    Apparently some even come from North of Watford.

    I hope they go go back to under the rock from where they crawled.
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  7. #7

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    It's a good question to raise and one I've been asking myself.

    For my own situation, I think it's about as bad as it gets. I've been on the bench for the last 11 months so I've missed a big opportunity to earn a last tranche good money as the end of contracting as we know it is now only 6 months away for me, or so it seems. I live in the North West of England but have rarely worked locally in the last 20 years. Even as a permie, I was traveling Europe and further afield. Typically, the last few years, I've incurred about £2k per month traveling and subsistence, to pay this from taxed income is going to be extremely painful, I doubt it's do-able. As I now receive a private pension from a former employer, I don't pay myself any salary, just divis, that's going to be a whole lot more expensive soon. And when we are all declared inside IR35 as seems likely by default in 18 months time, it will be grim.

    The Petrochemical industry that sustained me for the first 20 years of my career has virtually vanished from the North West and is in desperate straights elsewhere in the UK. The UK oil and gas industry has collapsed with a reported ~60,000 jobs lost in the North Sea and Aberdeen area alone during the past year.

    For me in my late 50's the perm market seems closed anyway. It's (ageism) never been an issue in contracting but it certainly is in the perm market (recently lost a role because I was considered too experienced). There's nothing in the North West anyway and very little in the traditionally very busy South East. I've turned to applying for roles in the Middle East as a last resort, salaries are no better than the UK (lower in many cases) over there but there are jobs available. So far I've had no response at all to dozens of applications both direct and via agencies. I think my age is against me again for roles out there.

    What am I going to do? I don't know. I don't want to leave Engineering and I have a lot to offer clients/employers in my own niche/specialism. But I'm just not finding work. I might have to just cut my cloth and live (survive) off my pension. I suppose I'm lucky to have that at least.

  8. #8

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    I'm lucky in that the T&S won't affect me (100% WFH; the only journeys I make are not "ordinary commuting"). If the courts interpret SDC as I'd anticipate (as the "how" element of control, considered in the round), that specific change is also unlikely to affect me.

    I have no idea how most of my clients could be dragged into this, as they are mainly overseas, with no UK presence, so I'll have to wait for the details on that. That could put me out of business, though, as there's no way overseas clients are going to get involved in this crap and my services are so specialized that I couldn't survive on local clients.

    I'll do my utmost to stay contracting, even if it's less financially viable than becoming a permie. For those that are hardest hit by T&S, that will be the practical reality. The only point I'd make is that, subject to what happens with clients determining status, I'd ignore any spin that HMRC put on SDC, as I think there's a solid case to be made for anyone offering expertise on which the client cannot control the working methods (i.e. the "how" element of control).

  9. #9

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    Quote Originally Posted by Fred Bloggs View Post
    For my own situation, I think it's about as bad as it gets. I've been on the bench for the last 11 months so I've missed a big opportunity to earn a last tranche good money as the end of contracting as we know it is now only 6 months away for me, or so it seems.
    This is the situation that concerns me the most about the T&S and IR35 (in particular) consultations. One aspect that seems to have been missed in the case studies is the inherent risk of having to find a new role every X months. While some seem able to finish a contract on a Friday and another one lined up to start immediately the following week, for many it is just not the case.

    I've been lucky in that I've only been out of contract for up to 2 months in the last 8 years of contracting but I know there's the chance that it could be 6-12 months if the market is bad.

    Fingers crossed you manage to find something.

  10. #10

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    Like NLUK said there are going to be a lot of people in for a shock come April, two of the contractors here had no idea about the T&S situation and they're commuting from Bristol at the moment.

    For me I'm lucky at present as this is my first gig near home (30 mins drive), other than that I've had to work away near or in London. This won't be viable anymore and there's very little chance of the work being remote, my only option is to look for contracts that are commutable within the area and again there are very few.

    It may be that I end up going back to permiedom but it's the last thing I want to do
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