Discussion
Countdown said:
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?
We're not self employed per se.Are contractors going to end up paying significantly more tax under this regime?
We operate through limited companies called Personal Service Companies.
http://www.contractorcalculator.co.uk/what_is_a_pe...
Typically we take a just-below-the-threshold amount out as a small wage, then the rest as dividends, meaning much less tax.
Also, currently my travel expenses (approx £2,000 a month) currently come out of my PRE tax income, whereas under IR35 it would be POST tax - effectively losing me the tax benefit on the expenses.
Being inside of IR35 would cost me several thousand a month extra in tax - for which i would not be getting any extra benefits.
I am afraid I have a bit of a shock for you Countdown; the rules on travel expenses changed from 6 April 2016. You have not been able to claim travel and subsistence differently to a person paying PAYE since last April.
Being inside IR35 won't give you direct benefits (other than the warm glow of paying higher taxes to help maintain a civilised society) and paying the same tax rates as employed colleagues do, although it could indirectly lead to you getting the employment rights which workers (not employees) are entitled to - especially after the recent Pimlico Plumbers case.
I think the change will do three things;
1) push more people into employed roles so they can benefit from the full array of employment benefits such as sick pay and pensions
2) drive up rates of pay demanded from those who are 'self-employed' through a PSC
3) cause people to leave the public sector
Being inside IR35 won't give you direct benefits (other than the warm glow of paying higher taxes to help maintain a civilised society) and paying the same tax rates as employed colleagues do, although it could indirectly lead to you getting the employment rights which workers (not employees) are entitled to - especially after the recent Pimlico Plumbers case.
I think the change will do three things;
1) push more people into employed roles so they can benefit from the full array of employment benefits such as sick pay and pensions
2) drive up rates of pay demanded from those who are 'self-employed' through a PSC
3) cause people to leave the public sector
nick5michaels said:
I am afraid I have a bit of a shock for you Countdown; the rules on travel expenses changed from 6 April 2016. You have not been able to claim travel and subsistence differently to a person paying PAYE since last April.
?Whos this aimed at?
As a PSC i legitimately claim expenses from my business address and client site, and any subsistence / overnight costs associated.
This has NOT changed as of April 6th 2016.
IF i was operating via an umbrella company, then correct, i couldnt claim travel and subsistence.
nick5michaels said:
1) push more people into employed roles so they can benefit from the full array of employment benefits such as sick pay and pensions
2) drive up rates of pay demanded from those who are 'self-employed' through a PSC
3) cause people to leave the public sector
1) If people chose to leave contracting to go back in to permanent then of course thats their perogative to do so. However i'd imagine most will simply focus on the private sector.2) drive up rates of pay demanded from those who are 'self-employed' through a PSC
3) cause people to leave the public sector
2) It wont drive up rates for people operating through a PSC. They simply wont accept inside IR35 contracts. It WILL however drive up contract rates of contracts deemed inside IR35 to compensate.
3) Yes
nick5michaels said:
Being inside IR35 won't give you direct benefits (other than the warm glow of paying higher taxes to help maintain a civilised society) and paying the same tax rates as employed colleagues do, although it could indirectly lead to you getting the employment rights which workers (not employees) are entitled to - especially after the recent Pimlico Plumbers case.
Whilst the market may move that way eventually, right now you'd be getting no benefits for that massive extra tax outlay.All the negatives, none of the benefits.
daemon said:
?
Whos this aimed at?
As a PSC i legitimately claim expenses from my business address and client site, and any subsistence / overnight costs associated.
This has NOT changed as of April 6th 2016.
IF i was operating via an umbrella company, then correct, i couldnt claim travel and subsistence.
IIRC Countdown deleted a post querying the loss of £00o's in expenses but I may be going senile.Whos this aimed at?
As a PSC i legitimately claim expenses from my business address and client site, and any subsistence / overnight costs associated.
This has NOT changed as of April 6th 2016.
IF i was operating via an umbrella company, then correct, i couldnt claim travel and subsistence.
As I see it at the moment - feel free to correct if wrong:
Inside IR35 Through Ltd = max £5k expenses (accounts, insurances etc) + PAYE tax and NI deducted by payer, no holiday / sick pay.
Inside IR35 through Umbrella = No expenses + PAYE tax and NI deducted + NO holiday pay / sick pay etc + umbrella admin fee.
Directly employed = PAYE / NI etc + Holidays / sick pay, employment rights etc which may be OK for some if local but not if 130 miles away and hotels 4 nights a week.
There are other issues around V.A.T., retrospective HMRC inspections + the fact that the determination tool not yet available with most contracts having 28 day notice periods and or monthly payment terms yet cut off point is 5th of April.
PSB's will be responsible for making IR35 IN / OUT determinations yet the payer (agency) will have to pay the penalties if the decision turn out to be wrong!
From what I have heard, many agencies or contractors still don't know what to do and appear to be hoping it will go away or be deferred..... Complete shambles IMO and future Public sector work is looking very unlikely and 28 notice will be issued 24th Feb.
What about the restrictions placed on travel cost claims as set out in the decision of the Samadian Case?
Although Dr Samadian was genuinely self employed (i.e. not operating through an intermmediary company), the case does set out in detail what type of travel costs can be claimed and, most importantly, what travel costs cannot be claimed by those who operate their own business.
Although Dr Samadian was genuinely self employed (i.e. not operating through an intermmediary company), the case does set out in detail what type of travel costs can be claimed and, most importantly, what travel costs cannot be claimed by those who operate their own business.
I now believe the new tool will be available 8th of March - so insufficient time to get a determination and leave before 5th April if on 28 day notice and get paid if on monthly payments! 100% notice issued on Friday now.... Farcical.
Edited by alfie2244 on Tuesday 21st February 11:16
Eric Mc said:
What about the restrictions placed on travel cost claims as set out in the decision of the Samadian Case?
Although Dr Samadian was genuinely self employed (i.e. not operating through an intermmediary company), the case does set out in detail what type of travel costs can be claimed and, most importantly, what travel costs cannot be claimed by those who operate their own business.
It does for the self-employed, but not for a director-employee operating through his own PSC, no?Although Dr Samadian was genuinely self employed (i.e. not operating through an intermmediary company), the case does set out in detail what type of travel costs can be claimed and, most importantly, what travel costs cannot be claimed by those who operate their own business.
bigandclever said:
Eric Mc said:
What about the restrictions placed on travel cost claims as set out in the decision of the Samadian Case?
Although Dr Samadian was genuinely self employed (i.e. not operating through an intermmediary company), the case does set out in detail what type of travel costs can be claimed and, most importantly, what travel costs cannot be claimed by those who operate their own business.
It does for the self-employed, but not for a director-employee operating through his own PSC, no?Although Dr Samadian was genuinely self employed (i.e. not operating through an intermmediary company), the case does set out in detail what type of travel costs can be claimed and, most importantly, what travel costs cannot be claimed by those who operate their own business.
The problem with PSCs and why the revenue is really not all that able to go after them and has turned to putting the responsibility for tax status and tax collection onto the end clients (if they're public sector) is that LTD companies can just be shut down or emptied of any money at the drop of a hat and HMRC might create good case law but they never actually end up getting any money.
It's a flawed system. With the removal of the dividend tax credit and dividend tax coming into play and the scrapping of the FRS VAT they're slowly finding the tools to chip away at contractor earnings, they know it's a fine line, a tightrope walk that they're on - as do we.
I currently work for a local authority, my first public sector position, which is just my luck!
I've always been in finance in the past, and I can honestly say my current role is as far outside of IR35 that I've ever been.
However, I know I'll be tarred with the same brush and be put in IR35.
The whole thing is farcical. Personally I can't afford to just walk out though I know many will be.
We will get none of the benefits yet all the cost, so the LA can have their cake and eat it.
Absolute joke......
I've always been in finance in the past, and I can honestly say my current role is as far outside of IR35 that I've ever been.
However, I know I'll be tarred with the same brush and be put in IR35.
The whole thing is farcical. Personally I can't afford to just walk out though I know many will be.
We will get none of the benefits yet all the cost, so the LA can have their cake and eat it.
Absolute joke......
alfie2244 said:
I now believe the new tool will be available 8th of March - so insufficient time to get a determination and leave before 5th April if on 28 day notice and get paid if on monthly payments! 100% notice issued on Friday now.... Farcical.
Dont forget your PSO doesnt "have" to use the new IR35 tool. It is merely one option available to them.Edited by alfie2244 on Tuesday 21st February 11:16
Uncle John said:
Personally I can't afford to just walk out though I know many will be.
The question you need to be asking yourself is "Can i afford not to?"There is a real and significant risk that just flipping from an outside IR35 stance to being deemed inside IR35 will trigger some sort of investigation of your tax affairs by HMRC.
If your happy with that level of risk, and you're happy that HMRC could investigate you - which could take several years end to end - and the level of stress / worry / intrusiveness that brings and them then billing you for ££,£££s then fine. Personally i would rather s
t on my hands and clap.People who remain in contract and deemed inside IR35 are effectively saying "i previously deemed myself outside of IR35, however when my agency / PSO looked at my contract they deemed me inside of IR35 and i am happy to accept that". That is just a huge red flag to HMRC as far as i can see.
daemon said:
Uncle John said:
Personally I can't afford to just walk out though I know many will be.
The question you need to be asking yourself is "Can i afford not to?"There is a real and significant risk that just flipping from an outside IR35 stance to being deemed inside IR35 will trigger some sort of investigation of your tax affairs by HMRC.
If your happy with that level of risk, and you're happy that HMRC could investigate you - which could take several years end to end - and the level of stress / worry / intrusiveness that brings and them then billing you for ££,£££s then fine. Personally i would rather s
t on my hands and clap.People who remain in contract and deemed inside IR35 are effectively saying "i previously deemed myself outside of IR35, however when my agency / PSO looked at my contract they deemed me inside of IR35 and i am happy to accept that". That is just a huge red flag to HMRC as far as i can see.
I'm a cup half full kind of person, but see this particular point as a front page headline on "The Sun" or "Daily Mail" for example, designed to sensationalise the worst case scenarios.
alfie2244 said:
I now believe the new tool will be available 8th of March - so insufficient time to get a determination and leave before 5th April if on 28 day notice and get paid if on monthly payments! 100% notice issued on Friday now.... Farcical.
This is purely anecdotal but is doing the rounds, but supposedly it was released yesterday (private beta, don't share the URL, etc) and crashed when 25 people tried to use it at once Edited by alfie2244 on Tuesday 21st February 11:16
Uncle John said:
Yep point taken, however while there is a risk, I think it's a small one. There are ever more limited resources at HMRC and they simply could not investigate every single person now deemed inside IR35 by a tool that's designed to catch 95% of people. I think they'll be popping the champagne just due to the fact they have extra revenue coming in.
I'm a cup half full kind of person, but see this particular point as a front page headline on "The Sun" or "Daily Mail" for example, designed to sensationalise the worst case scenarios.
Whilst i applaud your optimism and wish you all the best, if, out of the 24,000 contractors in PSOs at the minute, say, 10000 flip over into inside IR35 contracts - and have SIGNED to say they're inside IR35 - then if theres a potential of £30,000 per person to be recovered, theres £300 million at stake.I'm a cup half full kind of person, but see this particular point as a front page headline on "The Sun" or "Daily Mail" for example, designed to sensationalise the worst case scenarios.
If you were HMRC would you let that go, given thats simple low hanging fruit ready to be picked off?
And thats not just my personal subjective view, thats the common industry view held by Bauer & Cottrell, IR35 reviewer Qdos and contractor trade group IPSE
http://www.contractoruk.com/news/0012890ir35_inspe...
Alex said:
I'm in a private contract, but if I was in a contract with a PSO and they deemed me to be inside IR35, I would insist on changes to my working practices until they agreed I was outside IR35. If they wouldn't do that, I would walk.
Thats exactly our approach. "More than happy to continue working, however only in an outside of IR35 capacity, and happy to make whatever adjustments necessary to working practices to ensure that can happen"Otherwise its Adios Amigo!
daemon said:
Alex said:
I'm in a private contract, but if I was in a contract with a PSO and they deemed me to be inside IR35, I would insist on changes to my working practices until they agreed I was outside IR35. If they wouldn't do that, I would walk.
Thats exactly our approach. "More than happy to continue working, however only in an outside of IR35 capacity, and happy to make whatever adjustments necessary to working practices to ensure that can happen"Otherwise its Adios Amigo!
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