Contractors: IR35 & general discussion
Discussion
wormus said:
bigandclever said:
Oh. OK then.
Which bit(s) are you disagreeing with. Because, I'll be honest, I can't remember you saying anything in this thread that I agree with and you're flat-out wrong on some of the points you've made.
You’re entitled to your opinion and it doesn’t really matter if you agree with me or not. You talk about your experiences and I’ll talk about mine. Which bit(s) are you disagreeing with. Because, I'll be honest, I can't remember you saying anything in this thread that I agree with and you're flat-out wrong on some of the points you've made.
Edited by bigandclever on Friday 22 November 14:51
Somehow, they have transpired to determine that all but one contractor here in a particular business unit is inside; and yet, even round the desks I'm sat at today, every contractor can answer the CEST questions honestly and come up with the opposite view. And we're the ones who've been working like this for years and years and know what we're about, and know how we actually operate, not some HR person who's had a couple of hours with an HMRC rep.Oh, and the silver bullet for the contractor found outside? He had some work done on his behalf by another worker (not substitution one-for-one, just subbing out some coding ... a "helper" in HMRC-parlance). The guy didn't come on-site, was paid by the contractor, client didn't even know it had happened. I guess we'll find out soon enough what the definition of "a significant amount of the work for this engagement" means. Sad thing is, we could *all* do that now, I've got loads of stuff I can farm out because it's boring but needs doing, and if that's all it takes to get an outside-determination, I'll do it. It'd be a moot point though, because the client have already stated they won't be using contractors in the same way from April, it's PAYE umbrella or perm. Most contractors here will capitulate I reckon.
wormus said:
Problem with this thread is some want this to be an echo chamber for how unfair life is. I do sympathise and it’s going to have a significant impact on many contractors, I know it is on mine and I genuinely feel sorry for them, they are people with commitments like I have. But the market will adjust and new opportunities will appear. The money will likely go down but many will still be better off inside IR35 on the same rate than going perm so whilst you’re employed and have your health it’s not all bad?
I agree with that, we're all mates on here 
bigandclever said:
Well, it sort of does, because you've put yourself (in this thread) in the position of someone who is making these determinations and I am one of those impacted by such determinations. And I can categorically state that some of your points are the same as those at one of my client's, and I've explained to them how they're wrong too Somehow, they have transpired to determine that all but one contractor here in a particular business unit is inside; and yet, even round the desks I'm sat at today, every contractor can answer the CEST questions honestly and come up with the opposite view. And we're the ones who've been working like this for years and years and know what we're about, and know how we actually operate, not some HR person who's had a couple of hours with an HMRC rep.
Look at it from your clients side. Given that HMRC seem to be willing to ignore CEST when it suits them; going with permanent staff or contractors under an umbrella generates the least risk to the business. Somehow, they have transpired to determine that all but one contractor here in a particular business unit is inside; and yet, even round the desks I'm sat at today, every contractor can answer the CEST questions honestly and come up with the opposite view. And we're the ones who've been working like this for years and years and know what we're about, and know how we actually operate, not some HR person who's had a couple of hours with an HMRC rep.wormus said:
Guvernator said:
Not to mention decimating the whole side industry that has built up around contractors over the years.
Contractor Accountants, there are at least half a dozen I know off the top of my head who employ hundreds of people to look after contractors - gone.
Contractor Mortgage and financial advisers, the last firm I used had contractor in their company name - gone
Contractor Insurance firms - gone
Also the money I currently earn doesn't go under my mattress, it goes straight back into the economy but I'm already making plans to massively tighten my belt and spend a lot less. Times that by thousands of contractors.
Add it all together and the net effect will be less tax revenue but no one cares as long as those sneaky tax dodging contractors get their comeuppance.
As has been stated several times, this is simply not true. Just because the money is not spent on you, does not mean that it isn’t spent and HMRC gets to collect revenue through many different means. PAYE, NI, CT, CGT, the list is endless.Contractor Accountants, there are at least half a dozen I know off the top of my head who employ hundreds of people to look after contractors - gone.
Contractor Mortgage and financial advisers, the last firm I used had contractor in their company name - gone
Contractor Insurance firms - gone
Also the money I currently earn doesn't go under my mattress, it goes straight back into the economy but I'm already making plans to massively tighten my belt and spend a lot less. Times that by thousands of contractors.
Add it all together and the net effect will be less tax revenue but no one cares as long as those sneaky tax dodging contractors get their comeuppance.
And when in a couple of years companies have to rely on offshoring totally because all the experienced people are no longer available they will find projects will fail. (I know this as I am currently in charge of an offshore team in engineering and if we didn’t have uk contractors bailing them out the project would fail, no question). Therefore, there is a risk the uk operation will go out of buisness, meaning all the staff lose their jobs too. Result!
The problem with HMRC, and many many HR departments, is they are convinced everyone will just roll over and accept a 25% pay cut because there is nowhere else to go. Hence the dumb calculation is everyone stays where they are, earns the same, but pays more tax.
People just shutting down and retiring, people taking their skills overseas, and people spending much less, flexible workforce destroyed as no one will travel for work now, hence some big jobs unable to be done in uk now at all etc, with the loss of all that tax revenue, is totally ignored. Truly pathetic, the financial wisdom of a 5 year old. It’s the politics of envy, nothing more, nothing less and will bring in zero, in fact tax take will reduce.
ITP said:
HMRC can’t collect tax from foreign countries workers. Even if I go staff, like has been said, I will just spend a lot less, hence less tax. The chances are I will source a contract abroad, HMRC can’t recover tax I pay to the Norwegians, or Dutch whom I will pay tax to instead.
And when in a couple of years companies have to rely on offshoring totally because all the experienced people are no longer available they will find projects will fail. (I know this as I am currently in charge of an offshore team in engineering and if we didn’t have uk contractors bailing them out the project would fail, no question). Therefore, there is a risk the uk operation will go out of buisness, meaning all the staff lose their jobs too. Result!
The problem with HMRC, and many many HR departments, is they are convinced everyone will just roll over and accept a 25% pay cut because there is nowhere else to go. Hence the dumb calculation is everyone stays where they are, earns the same, but pays more tax.
People just shutting down and retiring, people taking their skills overseas, and people spending much less, flexible workforce destroyed as no one will travel for work now, hence some big jobs unable to be done in uk now at all etc, with the loss of all that tax revenue, is totally ignored. Truly pathetic, the financial wisdom of a 5 year old. It’s the politics of envy, nothing more, nothing less and will bring in zero, in fact tax take will reduce.
Crikey. The whole world is going to collapse because some contractors might have to pay a bit more tax?And when in a couple of years companies have to rely on offshoring totally because all the experienced people are no longer available they will find projects will fail. (I know this as I am currently in charge of an offshore team in engineering and if we didn’t have uk contractors bailing them out the project would fail, no question). Therefore, there is a risk the uk operation will go out of buisness, meaning all the staff lose their jobs too. Result!
The problem with HMRC, and many many HR departments, is they are convinced everyone will just roll over and accept a 25% pay cut because there is nowhere else to go. Hence the dumb calculation is everyone stays where they are, earns the same, but pays more tax.
People just shutting down and retiring, people taking their skills overseas, and people spending much less, flexible workforce destroyed as no one will travel for work now, hence some big jobs unable to be done in uk now at all etc, with the loss of all that tax revenue, is totally ignored. Truly pathetic, the financial wisdom of a 5 year old. It’s the politics of envy, nothing more, nothing less and will bring in zero, in fact tax take will reduce.
Guvernator said:
deckster said:
Crikey. The whole world is going to collapse because some contractors might have to pay a bit more tax?
Nope making the perfectly valid point that HMRC calculations about how much extra tax they are going to make from IR35 were done by a 5 year old on a post it note.Maybe tax will have to increase across the board to cover the amount HMRC ‘calculated’ would pour in when it mysteriously doesn’t materialise.
ITP said:
Guvernator said:
deckster said:
Crikey. The whole world is going to collapse because some contractors might have to pay a bit more tax?
Nope making the perfectly valid point that HMRC calculations about how much extra tax they are going to make from IR35 were done by a 5 year old on a post it note.Maybe tax will have to increase across the board to cover the amount HMRC ‘calculated’ would pour in when it mysteriously doesn’t materialise.
If the overall tax take falls then that will hurt the Govt. If projects fail that will hurt Companies which haven't applied IR35 correctly (or paid enough to compensate Contractors). If the world DOES collapse (metaphorically speaking) then it serves people right for applying such an unfair tax regime. But that's NOT a racing certainty, despite what some people are clearly hoping.
The reality is somewhere in between. Some (maybe even most) Contractors who fall within IR35 will be worse off. Those who are outside won't be. And Companies will pay the going rate to attract staff, whether that's inside or outside.
wormus said:
ITP said:
but the only loser will be HMRC..
They won’t even notice. Their only concern is compliance. Besides, the work will still get done and the tax will be paid by somebody else.But as you say, everyone here will be ‘compliant’. That’s all that matters, cutting off your nose to spite your face is the phrase here in reality.
wormus said:
They won’t even notice. Their only concern is compliance. Besides, the work will still get done and the tax will be paid by somebody else.
This is pretty much the truth unfortunately. Back slapping all round, another tick in the box then they'll pick another target to go after. You can bet it won't be the big corporations who are the real culprits as that's too much hard work. It will be another group of small businesses or individuals.Problem is everyone's quite smug when it's not happening to them but it will happen eventually. Ever increasing taxes are pretty much a guarantee these days.
Guvernator said:
Nope making the perfectly valid point that HMRC calculations about how much extra tax they are going to make from IR35 were done by a 5 year old on a post it note.
And most of what i read seems to indicate that their figures are based on a contractor taking £x and an employee taking the same £x Gross - of course the tax difference will be substantial.In my industry, at my old clientco, a PM would get £320 contract or £45k PAYE - so that £320k = £77k - so of course Joe Public thinks that there is a huge tax difference - reality is, there isnt.
ITP said:
There you go again, assuming all the work will still be done in the uk. The tax in many cases won’t be paid by someone else to HMRC. It will be gone to overseas companies and spent there too by their employees. Plus people who stay will cut back spending. So they may notice when the billions they think they are going to get doesn’t arrive. I thought the whole reason for doing it was to increase tax take?
But as you say, everyone here will be ‘compliant’. That’s all that matters, cutting off your nose to spite your face is the phrase here in reality.
Again I can assure you this isn’t the reality. The work will get done and for every contractor who won’t do the work, retires or goes overseas, there are 10 more to take their place, in the IT industry anyway. Where that’s not the case for example due to specialist skills, rates will increase. I saw it before when I was contracting back in 2001 and the bust followed the dot com boom. It’s what made me go perm.But as you say, everyone here will be ‘compliant’. That’s all that matters, cutting off your nose to spite your face is the phrase here in reality.
ITP said:
There you go again, assuming all the work will still be done in the uk. The tax in many cases won’t be paid by someone else to HMRC. It will be gone to overseas companies and spent there too by their employees. Plus people who stay will cut back spending. So they may notice when the billions they think they are going to get doesn’t arrive. I thought the whole reason for doing it was to increase tax take?
But as you say, everyone here will be ‘compliant’. That’s all that matters, cutting off your nose to spite your face is the phrase here in reality.
Think you are missing the point somewhat. Not all contractors are on massive pay. A care worker on £20K a year going through a PSC is actually financially worse off than a care worker who is employed. on £20k (by about £300). Guess what; the employee actually generates more tax revenue for HMRC than the PSC does.and of course the employee has paid holiday etc. But as you say, everyone here will be ‘compliant’. That’s all that matters, cutting off your nose to spite your face is the phrase here in reality.
wormus said:
The work will get done and for every contractor who won’t do the work, retires or goes overseas, there are 10 more to take their place, in the IT industry anyway.
If that was true then most IT salaries would be pitiful rock-bottom figures. Where I work (outside of the south-east) there is huge competition between employers for good software engineers, business analysts and automated testers, with plenty of salaries in the 50/60/70k+ ballpark. A good permanent employee package including benefits, pension and employers NI easily amounts to ~£100k.Olivera said:
wormus said:
The work will get done and for every contractor who won’t do the work, retires or goes overseas, there are 10 more to take their place, in the IT industry anyway.
If that was true then most IT salaries would be pitiful rock-bottom figures. Where I work (outside of the south-east) there is huge competition between employers for good software engineers, business analysts and automated testers, with plenty of salaries in the 50/60/70k+ ballpark. A good permanent employee package including benefits, pension and employers NI easily amounts to ~£100k.The only place where 10 people are waiting is overseas.....
Olivera said:
If that was true then most IT salaries would be pitiful rock-bottom figures. Where I work (outside of the south-east) there is huge competition between employers for good software engineers, business analysts and automated testers, with plenty of salaries in the 50/60/70k+ ballpark. A good permanent employee package including benefits, pension and employers NI easily amounts to ~£100k.
The whole market is in the same boat and will adjust accordingly. People still need to work and the best paying contracts will attract the best people. We’ve never had any problems attracting good people but we pay good market rate. Countdown said:
ITP said:
Guvernator said:
deckster said:
Crikey. The whole world is going to collapse because some contractors might have to pay a bit more tax?
Nope making the perfectly valid point that HMRC calculations about how much extra tax they are going to make from IR35 were done by a 5 year old on a post it note.Maybe tax will have to increase across the board to cover the amount HMRC ‘calculated’ would pour in when it mysteriously doesn’t materialise.
If the overall tax take falls then that will hurt the Govt. If projects fail that will hurt Companies which haven't applied IR35 correctly (or paid enough to compensate Contractors). If the world DOES collapse (metaphorically speaking) then it serves people right for applying such an unfair tax regime. But that's NOT a racing certainty, despite what some people are clearly hoping.
The reality is somewhere in between. Some (maybe even most) Contractors who fall within IR35 will be worse off. Those who are outside won't be. And Companies will pay the going rate to attract staff, whether that's inside or outside.
Every time I think I've finished my client asks me to do something else, but it's really small jobs now.
plasticpig said:
ITP said:
There you go again, assuming all the work will still be done in the uk. The tax in many cases won’t be paid by someone else to HMRC. It will be gone to overseas companies and spent there too by their employees. Plus people who stay will cut back spending. So they may notice when the billions they think they are going to get doesn’t arrive. I thought the whole reason for doing it was to increase tax take?
But as you say, everyone here will be ‘compliant’. That’s all that matters, cutting off your nose to spite your face is the phrase here in reality.
Think you are missing the point somewhat. Not all contractors are on massive pay. A care worker on £20K a year going through a PSC is actually financially worse off than a care worker who is employed. on £20k (by about £300). Guess what; the employee actually generates more tax revenue for HMRC than the PSC does.and of course the employee has paid holiday etc. But as you say, everyone here will be ‘compliant’. That’s all that matters, cutting off your nose to spite your face is the phrase here in reality.
In these cases what do you think the chances are of companies taking on all these people as staff instead of through agencies? I’d say very low, and the agencies who supply them will probably just move on if they are hit with liabilities themselves as an employer. What happens then?
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