new IR35 tool

[Alex]

And the irony is that PSBs pay contractors out of money raised from taxation anyway, so the difference this clusterfk of bureaucracy will make to the overall tax take is minuscule.

[daemon]

Alex said:

And the irony is that PSBs pay contractors out of money raised from taxation anyway, so the difference this clusterfk of bureaucracy will make to the overall tax take is minuscule.

Yup - big headline from HMRC "new taxation policy recovers £400 million"

Not so big headline from PSBs "PSBs now spending £600 million a year more on contractors".

[daemon]

Alex said:

daemon said:

Isnt all this being promoted as an "opportunity"? If PS organisations are less reliant on contractors, it means they're spending less, so can employ more permanent staff / pay more?

It costs a lot of money to recruit and train permanent staff, and you have to keep paying them when activity is low or the project is finished. Why do you think contractors exist?

Uh huh. I know all this. However it is being cited as an "opportunity" for PSBs to become less reliant on contract / temp staff.

Sadiq Khan is very keen on this for TfL for example

https://www.ft.com/content/a1b5d18c-481f-11e6-8d68...

“We have already removed more than 100 IT contractors, saving TfL £2m and will look to replicate these savings elsewhere. Where it makes sense for us to employ people on a permanent basis, we are doing so, and this consideration is part of the current business review.”

Edited by daemon on Thursday 9th February 13:19

[alfie2244]

So who would become the employer, the PSB, Umbrella Co or the Agency?

[Wilmslowboy]

Suggestion that 3/4 of the 20,000 government IT contractors will look to move to the private sector.

It will interesting to see what happens with day rates in the private sector......as a buyer of these services I've seen rates stay flat but the quality collapse over the past years.

There was a time a £500 a day PM was the equivalent to a £70k pa perm (a 35% to 40% premium once fully weighted costs are taken into account) . Today we have £40k perm staff leaving to take up £500 a day contract roles - a 100%+ premium.

Bit of a shame for the government contractors caught up in this, however the whole mkt had become a bit mad......with an absolute ignoring of IR35 rules.

Edited by Wilmslowboy on Sunday 19th February 17:50

[Countdown]

alfie2244 said:

So who would become the employer, the PSB, Umbrella Co or the Agency?

AIUI the contractor would still be self employed or operating via LtdCo. However, previously, they were supposed to do something called a "deemed calculation"(?) and pay whatever the calculation said in tax and NI.

Under the new rules the PSB deducts this amount of tax/NI and hands it over to HMRC. and HMRC credit it to the Contractors account. Possibly when the Contractor submits his tax returns this will count as prepaid tax or something?

[Eric Mc]

I've read that the RTI system that is used by HMRC to process PAYE and NI data for employees will not be able to handle this type of "non-employee" PAYE and NI (the individuals will not be included in the payroll calculations for PAYE and NI as, despite what HMRC would like, they are still not ACTUAL employees - only DEEMED employees.

HMRC has not yet said how it will handle all the additional PAYE and NI coming in from employers which will be in excess of what their RTI submission will have notified to HMRC. I can foresee a total shambles here.

[Countdown]

Not all payments go through RTI. For example we have a PSA where we handover extra tax because of employee benefits. I'm guessing that PSBs would use something similar to pay these deductions over and then HMRC do some kind of reconciliation ?? I think HMRC are issuing guidance later this month.

[Eric Mc]

They are cutting it rather fine.

[alfie2244]

Shambles, cutting it fine........a very good assessment Eric.

[Bikerjon]

Wilmslowboy said:

Suggestion that 3/4 of the 20,000 government IT contractors will look to move to the private sector.

Is it as easy as that though? When I was a contractor it often felt like there was a bit of a barrier between public sector and private sector work i.e. as someone who always worked in the private sector (banks mostly) I found it a pointless exercise trying to apply for public sector contracts.

I wonder if there's any similarities to when the banks force all their contractors to take 10% cuts when times are a bit lean? It's happened many times and there's always a lot of bluster with contractors threatening to move on, but then reality bites and suddenly a 10% cut is somewhat better than the prospect of £0 per day.

[daemon]

Bikerjon said:

Wilmslowboy said:

Suggestion that 3/4 of the 20,000 government IT contractors will look to move to the private sector.

I wonder if there's any similarities to when the banks force all their contractors to take 10% cuts when times are a bit lean? It's happened many times and there's always a lot of bluster with contractors threatening to move on, but then reality bites and suddenly a 10% cut is somewhat better than the prospect of £0 per day.

No similarities, no.

What happened then was, contractors took the 10% cut, then moved on in a matter of weeks to a new gig.

The problem here is the risk of a retrospective investigation by HMRC. Thats with you for 7 years.

No way i'm taking that chance. I resign here 17th March, last day 24th March, in to my account 31st March.

All the projects here manned by contractors have now had their risk status to RED, as they're expecting an exodus.

[ecs]

daemon said:

Isnt all this being promoted as an "opportunity"? If PS organisations are less reliant on contractors, it means they're spending less, so can employ more permanent staff / pay more?

I'm getting public service contracts pitched to me by recruiters with £100+ added onto my day rate as it's assumed that they'll be inside IR35. Seems like it's not going well if that were their intention!

[Bikerjon]

daemon said:

No similarities, no.

What happened then was, contractors took the 10% cut, then moved on in a matter of weeks to a new gig.

Hmm they really didn't, although everyone talked about it! There's always the few that would go straightaway, but the vast majority stayed on and in some cases even had to face a further rounds of rate cuts.

I realise this is a legislation thing rather than a client business decision, but I was really wondering if there are any similarities between contractors attitudes to leave when the tables are turned. In my experience most do not leave but may make a lot of noise along the way! I guess many will have to give 1 months notice, so the true picture may emerge in just a few days time then?

[Alex]

Bikerjon said:

Hmm they really didn't, although everyone talked about it! There's always the few that would go straightaway, but the vast majority stayed on and in some cases even had to face a further rounds of rate cuts.

I realise this is a legislation thing rather than a client business decision, but I was really wondering if there are any similarities between contractors attitudes to leave when the tables are turned. In my experience most do not leave but may make a lot of noise along the way! I guess many will have to give 1 months notice, so the true picture may emerge in just a few days time then?

That's the stupid thing about blanket rate cuts; you lose your best contractors, but the mediocre ones stay.

The last time it happened to me, I told them that I would leave immediately, and they "exempted" me from the cut. They also quietly exempted whole teams working on perceived critical projects.

It's a stupid policy anyway. The bean counters pat themselves on the back for saving 10% on the contractor budget, but the cost in resentment and morale is very high. The contractors that stayed no longer had any loyalty to the client.

[daemon]

Bikerjon said:

I realise this is a legislation thing rather than a client business decision, but I was really wondering if there are any similarities between contractors attitudes to leave when the tables are turned. In my experience most do not leave but may make a lot of noise along the way! I guess many will have to give 1 months notice, so the true picture may emerge in just a few days time then?

Of the 7 or so contractors i am having conversations with here ALL are leaving if they're deemed inside IR35.

Theres 3 of us on a smallish but critical high profile project here, and we're all going. Thats everyone on the project going.

Out of the rest of the pool of contractors, I think there will be some stay but

(a) they'd be very foolish to just let the contract roll on
(b) they're maybe working close to home anyway so its still better than working away.
(c) to a lot of people, half a cake is better than no cake at all.

I'm just not prepared to risk the retro investigation. Not that i cant defend my outside of IR35 stance quite easily, but i dont fancy a full blown invasive investigation maybe dragging on for years.

[daemon]

ecs said:

daemon said:

Isnt all this being promoted as an "opportunity"? If PS organisations are less reliant on contractors, it means they're spending less, so can employ more permanent staff / pay more?

I'm getting public service contracts pitched to me by recruiters with £100+ added onto my day rate as it's assumed that they'll be inside IR35. Seems like it's not going well if that were their intention!

Oh i know.

It'll be "HMRC recovers £300 million in IR35 tax", but noone will acknowledge the PSOs spending £300+ million to cover it

Its robbing Peter to pay Paul.

[alfie2244]

daemon said:

Of the 7 or so contractors i am having conversations with here ALL are leaving if they're deemed inside IR35.

Theres 3 of us on a smallish but critical high profile project here, and we're all going. Thats everyone on the project going.

Out of the rest of the pool of contractors, I think there will be some stay but

(a) they'd be very foolish to just let the contract roll on
(b) they're maybe working close to home anyway so its still better than working away.
(c) to a lot of people, half a cake is better than no cake at all.

I'm just not prepared to risk the retro investigation. Not that i cant defend my outside of IR35 stance quite easily, but i dont fancy a full blown invasive investigation maybe dragging on for years.

Make that 8.

[Countdown]

I seem to recall from othrer threads the tax benefits of being Self employed vs PAYE weren't that supposed to be that great.

Are contractors going to end up paying significantly more tax under this regime?

[FredClogs]

I've done my own test.

It's called the la la la test.

I close my eyes put my fingers in my ears and shout la la la anytime someone mentions IR35, it's done me proud up to now.