Treasury response to "Don't extend IR35 reforms to Private sector" petition (no news)

[Joolsey86]

And yet I look at the gig economy or Sports Direct and see people on zero hour contracts or worse who are paying tax like employees and yet don't have any more rights than we do.

Good point eek.

In life there are many nuances, unless you are HMRC.

[BoredBloke]

"It is fair that two individuals doing the same job in the same way pay broadly the same tax and National Insurance, even if one of them structures their work through a company."

I wish they would debunk this crock. Hammond used the example of an employee on 100k comparing it to a contractor on 100k. The problem is that the cost to employ the employee is a lot higher than the cost to employ the contractor. It should be that the contractor on 100k should pay broadly the same as an employee whose overall cost of employment is 100k - pensions and employers NI are funded by the employer on top. Also, you can bet that HMRC will boast about the increase in the PAYE tax take, but fail to mention the corresponding drop in Corp and Divi tax.

[Swamp Thing]

"It is fair that two individuals doing the same job in the same way pay broadly the same tax and National Insurance, even if one of them structures their work through a company."

I wish they would debunk this crock. Hammond used the example of an employee on 100k comparing it to a contractor on 100k. The problem is that the cost to employ the employee is a lot higher than the cost to employ the contractor. It should be that the contractor on 100k should pay broadly the same as an employee whose overall cost of employment is 100k - pensions and employers NI are funded by the employer on top. Also, you can bet that HMRC will boast about the increase in the PAYE tax take, but fail to mention the corresponding drop in Corp and Divi tax.

And don't forget the VAT.
I had 30 mins with my local MP last week, taking him through exactly this point with a number of worked examples. I explained to him that I would deliberately choose to earn less as a PAYE, not the £100K equivalent per this example. Been there and earned +£100K as a perm and the work-life balance went to sh1t; never again. Therefore the tax receipts to Treasury would be less compared to the contractor model. he eventually understood this, but not before he opined that surely I was working just like Uber? FFS.

So I then took him thru contracts and working practices (MOO, RoS, SDC) - yes, after 20 mins he was still listening - and then he understood the difference. He's an intelligent guy, but I realised what a mountain we must all climb when the basics have to be gone thru again and again.

I told him that Treasury was putting up phoney arguments ("bogus employment", "fairness"), and was too scared to argue the real issues. Finished up by suggesting that all the major businesses in his constituency would be up in arms about this, just at a time when we are exiting Brexit, they need max skills and flexibility etc etc. He sat up at that point.

So when the fight comes, it will need more than just a bunch of freelancers marching around Parliament Square. IPSE, REC, FCSA etc will need to mount a robust defence, and loop in as many concerned Plcs as they can. Unlike public sector, there is 2 years to mount this campaign so if we all melt away meekly, we only have ourselves and our complacency to blame.

[malvolio]

...

So when the fight comes, it will need more than just a bunch of freelancers marching around Parliament Square. IPSE, REC, FCSA etc will need to mount a robust defence, and loop in as many concerned Plcs as they can. Unlike public sector, there is 2 years to mount this campaign so if we all melt away meekly, we only have ourselves and our complacency to blame.

I think you'll find they are already well into that campaign and have been for a while. Only now is there a glimmer that HMG are listening and the press have taken notice. Both are prerequisites for us contractors to get anywhere, because until that happens MPs simply won't have a Scooby about the whole subject. As you may have noticed...

[Swamp Thing]

I think you'll find they are already well into that campaign and have been for a while. Only now is there a glimmer that HMG are listening and the press have taken notice. Both are prerequisites for us contractors to get anywhere, because until that happens MPs simply won't have a Scooby about the whole subject. As you may have noticed...

Agreed Mal, although I just see IPSE et al mounting a defence at the moment. I think they will need to build consensus and support outside of their traditional networks and aggressively take the fight to HMG if they are to succeed.

[malvolio]

Agreed Mal, although I just see IPSE et al mounting a defence at the moment. I think they will need to build consensus and support outside of their traditional networks and aggressively take the fight to HMG if they are to succeed.

I think making an independently researched business case that gives HMG the cost of doing what they're aiming to do counts as aggressive. And there are a lot of bodies in the same battleground.

But yes, it needs two things really; hard-nosed buggers to beat HMG over the head and lots of support form the contractor workforce.

[eek]

And don't forget the VAT.
I had 30 mins with my local MP last week, taking him through exactly this point with a number of worked examples. I explained to him that I would deliberately choose to earn less as a PAYE, not the £100K equivalent per this example. Been there and earned +£100K as a perm and the work-life balance went to sh1t; never again. Therefore the tax receipts to Treasury would be less compared to the contractor model. he eventually understood this, but not before he opined that surely I was working just like Uber? FFS.

So I then took him thru contracts and working practices (MOO, RoS, SDC) - yes, after 20 mins he was still listening - and then he understood the difference. He's an intelligent guy, but I realised what a mountain we must all climb when the basics have to be gone thru again and again.

I told him that Treasury was putting up phoney arguments ("bogus employment", "fairness"), and was too scared to argue the real issues. Finished up by suggesting that all the major businesses in his constituency would be up in arms about this, just at a time when we are exiting Brexit, they need max skills and flexibility etc etc. He sat up at that point.

So when the fight comes, it will need more than just a bunch of freelancers marching around Parliament Square. IPSE, REC, FCSA etc will need to mount a robust defence, and loop in as many concerned Plcs as they can. Unlike public sector, there is 2 years to mount this campaign so if we all melt away meekly, we only have ourselves and our complacency to blame.

Not VAT again...

There is a reason why certain people want IPSE to create a set of infographics explaining why and how we work the way we do and why its different. Sadly IPSE have never create said posters but we really do need them...

[washed up contractor]

The Government has responded to the petition you signed – “Do not extend IR35 legislation to the private sector.”.

Government responded:

The government will consult on how to tackle non-compliance with the off-payroll working rules in the private sector, drawing on the experience of recent public sector reform.
The Government recognises that many individuals choose to work through their own limited company. There are many legitimate, commercial reasons for people to do this and for businesses to engage them in this way. The off-payroll working rules, more commonly known as IR35, have been in place since 2000 to ensure that, where individuals would have been employees if they were providing their services directly, they pay broadly the same tax and National Insurance as other employees. It is fair that two individuals doing the same job in the same way pay broadly the same tax and National Insurance, even if one of them structures their work through a company.

As highlighted by reports from the Office of Tax Simplification and the House of Lords, it is clear that IR35 is not effective enough. To improve compliance, the Government introduced reforms in the public sector from April 2017. Individuals working through their own company in the public sector are no longer responsible for operating the off-payroll rules. Instead, where an individual’s company is directly engaged by a public sector body, the public sector body is responsible for determining whether or not the rules apply, and deducting any necessary employment taxes on payments to the individual’s company. Where this engagement takes place through an agency, the public sector body is responsible for determining whether or not the rules apply and informing the agency of this decision, in order that any necessary employment taxes can be deducted by the agency.

This is not a new tax on the self-employed. IR35 only applies to those who work like employees and would have been employed were they not working through a company. Genuinely self-employed individuals continue to be unaffected, as has been the case for over 15 years.

The Government is monitoring the impact of its reform of IR35 in the public sector. Initial evidence suggests that it has been successful in improving compliance. More people working through their own company are paying the right tax. However, the cost of non-compliance in the private sector is still growing and will cost taxpayers £1.2 billion a year by 2022/23. Therefore, a possible next step would be to extend these reforms to the private sector.

To take account of the needs of businesses and individuals who would implement any change, the Government will carefully consult on reform in the private sector, drawing on the experience of the public sector reforms, including through external research due to be published in the new year.

HM Treasury

HMT FUD right there.

It is fair that two individuals doing the same job in the same way pay broadly the same tax and National Insurance, even if one of them structures their work through a company.

What, when one is a public sector employee so does not create one single new penny of tax and NI revenue to HMT but the other, a contractor does? Is it 'right' when one is not an employee of the company requiring the work done so may only be at the client for a short term, has to make their own provisions for a pension, account for VAT, periods of no income or 'employment,' has no employment 'rights'........ ah **** it. Glad Im retiring in the New Year.

[billybiro]

And yet I look at the gig economy or Sports Direct and see people on zero hour contracts or worse who are paying tax like employees and yet don't have any more rights than we do.

Mark my words, within about 5 years, both contractors and employees will be largely in the same boat. There's a homogenisation that's been happening between the two markets and the forthcoming private-sector-IR35-determinisation is just a small part of that. Where we'll all be in the future is having the lack of job security of a contractor, the lack of "rights" of a contractor, all whilst having to pay tax/NI as an employee.

Zero hour contracts are the start of this within the employment sector. Expect this method of engagement to become more and more prevalent across every industry. At the same time, contractors, who are already effectively on "zero-hour" contracts (i.e. can be terminated at anytime with no notice) will have their "lucrative" tax burdens squeezed to elicit more and more money for HMRC.

Welcome to the future.

[craigy1874]

Mark my words, within about 5 years, both contractors and employees will be largely in the same boat. There's a homogenisation that's been happening between the two markets and the forthcoming private-sector-IR35-determinisation is just a small part of that. Where we'll all be in the future is having the lack of job security of a contractor, the lack of "rights" of a contractor, all whilst having to pay tax/NI as an employee.

Zero hour contracts are the start of this within the employment sector. Expect this method of engagement to become more and more prevalent across every industry. At the same time, contractors, who are already effectively on "zero-hour" contracts (i.e. can be terminated at anytime with no notice) will have their "lucrative" tax burdens squeezed to elicit more and more money for HMRC.

Welcome to the future.

Jesus I bet you are fun at a party!