Contractors: IR35 & general discussion
Discussion
The tax burden on people operating though a PSC has grown enormously in the past 20 years. Many tax breaks and allowances have been removed, there's the tax on dividends (and a much smaller tax-free allowance), National Insurance contributions used to be capped but now they are uncapped, some things that you used to be able to claim for as allowable business expenses are now no longer allowable or else attract a Benefit in Kind, all sorts. And those are just the ones I can think of off the top of my head.
Edited by Clockwork Cupcake on Wednesday 21st October 20:34
wormus said:
markyb_lcy said:
They are an employee, of their limited company.
Nobody in this position, in their right mind, would pay themselves salary instead of dividend over and above the £8k or whatever it currently is.
Which is why they introduced IR35Nobody in this position, in their right mind, would pay themselves salary instead of dividend over and above the £8k or whatever it currently is.
Stop over-simplifying things.
Clockwork Cupcake said:
The tax burden on people operating though a PSC has grown enormously in the past 20 years. Many tax breaks and allowances have been removed, there's the tax on dividends (and a much smaller tax-free allowance), National Insurance contributions used to be capped but now they are uncapped, some things that you used to be able to claim for as allowable business expenses are now no longer allowable or else attract a Benefit in Kind, all sorts. And those are just the ones I can think of off the top of my head.
If tax isnt a significant material benefit then why are Contractors so resistant to IR35 when the only impact of IR35 is to apply tax on the same basis as somebody who is PAYE?Edited by Clockwork Cupcake on Wednesday 21st October 20:34
Countdown said:
If tax isnt a significant material benefit then why are Contractors so resistant to IR35 when the only impact of IR35 is to apply tax on the same basis as somebody who is PAYE?
Because it isn't. It is seeking to tax contractors the same as somebody who is PAYE but with none of the benefits or rights of being so. And to remove some of the rights and allowances of running a limited company too, as an added kick in the teeth. It's seeking to give the worst of both worlds whilst having the affront to call it "fair". And some people, it seems, believe it is too.
Countdown said:
If tax isnt a significant material benefit then why are Contractors so resistant to IR35 when the only impact of IR35 is to apply tax on the same basis as somebody who is PAYE?
I suppose it’s down to contractor PAYE being slightly different to a staff PAYE when being contractor PAYE has:No rights
7 day notice period
No flexi time - staff work additional hours and get 2 days off a month / PAYE expected to do the same additional hours to complete work but no days off and no additional pay over day rate
No sick pay
No health / dental plans
Pay for their own training
Take un paid days to complete required training for role
Uncertainty of contract renewal yearly
Uncertainty of 7 day notice period being used at any time during contract
Rates reduced where staff salary in same position remains untouched
No career progression
No company pension with enhanced benefits
If positions are deemed to be a staff position surely companies shouldn’t be allowed to continue to use contractors under “temporary worker regulation” for long periods without giving full employee rights or the opportunity of employment.
Countdown said:
If tax isnt a significant material benefit then why are Contractors so resistant to IR35 when the only impact of IR35 is to apply tax on the same basis as somebody who is PAYE?
The tax benefits have been eroded over the years - the situation is very different regardless of IR35. I don’t know any employees who pay employers NI from their salary. So I t’s not the same basis as an employee. markyb_lcy said:
wormus said:
markyb_lcy said:
They are an employee, of their limited company.
Nobody in this position, in their right mind, would pay themselves salary instead of dividend over and above the £8k or whatever it currently is.
Which is why they introduced IR35Nobody in this position, in their right mind, would pay themselves salary instead of dividend over and above the £8k or whatever it currently is.
Stop over-simplifying things.
The fact you see dividends as your income vs salary (which everyone else receives through PAYE) is exactly the reason they introduced it - tax avoidance. Or please correct me if you do live on 8k salary per year?
Clockwork Cupcake said:
Because it isn't. It is seeking to tax contractors the same as somebody who is PAYE but with none of the benefits or rights of being so. And to remove some of the rights and allowances of running a limited company too, as an added kick in the teeth.
It's seeking to give the worst of both worlds whilst having the affront to call it "fair". And some people, it seems, believe it is too.
So if it’s so unfair, go perm or run a proper business.It's seeking to give the worst of both worlds whilst having the affront to call it "fair". And some people, it seems, believe it is too.
Clockwork Cupcake said:
I am running a proper business and I don't want to go perm. If I wanted to be someone's b
h I would take the wage slave collar.
All I'm asking for is for people not to st on my cake and tell me it's chocolate icing. 
So get yourself an outside IR35 contract and you’re all good. You have choices, no point moaning that you don’t like the ones presented to you.h I would take the wage slave collar. All I'm asking for is for people not to s
t on my cake and tell me it's chocolate icing. I don’t like paying 42% on most my salary and 62% at the marginal rate over 100k. I suck it up though.
Edited by anonymous-user on Wednesday 21st October 21:39
wormus said:
Yes it is, stop over complicating things.
The fact you see dividends as your income vs salary (which everyone else receives through PAYE) is exactly the reason they introduced it - tax avoidance. Or please correct me if you do live on 8k salary per year?
with the removal of tax-free allowance on dividends the taxation of salary vs dividends is more or less equal nowadays, It used to be quite different. but the reason contractors pay themselves minimum wage is about NI avoidance more than tax avoidance.The fact you see dividends as your income vs salary (which everyone else receives through PAYE) is exactly the reason they introduced it - tax avoidance. Or please correct me if you do live on 8k salary per year?
WhiskyDisco said:
wormus said:
Yes it is, stop over complicating things.
The fact you see dividends as your income vs salary (which everyone else receives through PAYE) is exactly the reason they introduced it - tax avoidance. Or please correct me if you do live on 8k salary per year?
with the removal of tax-free allowance on dividends the taxation of salary vs dividends is more or less equal nowadays, It used to be quite different. but the reason contractors pay themselves minium wage is about NI avoidance more than tax avoidance.The fact you see dividends as your income vs salary (which everyone else receives through PAYE) is exactly the reason they introduced it - tax avoidance. Or please correct me if you do live on 8k salary per year?
You'd have to be a total mug to organise your tax affairs in such a way as you pay more tax than you are legally required to pay. Pretty much every small business owner pays themselves a modest salary and keeps the rest in the company, and draws it down as dividend when the company has the funds to allow it. That's just good business and being tax efficient.
wormus said:
So get yourself an outside IR35 contract and you’re all good. You have choices, no point moaning that you don’t like the ones presented to you.
I don’t like paying 42% on most my salary and 62% at the marginal rate over 100k. I suck it up though.
I would imagine much easier to suck it up when you're getting a company subsidised pension, training, sick pay, the assurance of a full time permanent job, a reasonable notice period, potential for flexi leave, career progression, potential for a health plan and dental plan, employee rights, company policies and processes to protect you, etc.I don’t like paying 42% on most my salary and 62% at the marginal rate over 100k. I suck it up though.
Not so much fun if you have that level of taxation and none of those benefits.
OH and on top of that i'd have to pay employers National Insurance out of my day rate too @ approx 14%.
Edited by Deep Thought on Wednesday 21st October 21:51
Gazzab said:
Countdown said:
If tax isnt a significant material benefit then why are Contractors so resistant to IR35 when the only impact of IR35 is to apply tax on the same basis as somebody who is PAYE?
The tax benefits have been eroded over the years - the situation is very different regardless of IR35. I don’t know any employees who pay employers NI from their salary. So I t’s not the same basis as an employee. Deep Thought said:
I would imagine much easier to suck it up when you're getting a pension, training, sick pay, the assurance of a full time permanent job, a reasonable notice period, potential for flexi leave, career progression, potential for a health plan and dental plan, employee rights, etc.
Not so much fun if you have that level of taxation and none of those benefits.
I don’t disagree.Not so much fun if you have that level of taxation and none of those benefits.
wormus said:
Deep Thought said:
I would imagine much easier to suck it up when you're getting a pension, training, sick pay, the assurance of a full time permanent job, a reasonable notice period, potential for flexi leave, career progression, potential for a health plan and dental plan, employee rights, etc.
Not so much fun if you have that level of taxation and none of those benefits.
I don’t disagree.Not so much fun if you have that level of taxation and none of those benefits.
If they want to tax me like an employee, then surely we get the benefits too? No?
Oh, and i added in EmployERs national insurance @ 14% as something i'd also be expected to pay....
So all of the tax you pay AND Employers National Insurance and NONE of the benefits of being an employee?
Deep Thought said:
Yet you're suggesting we, like you "suck it up"?
If they want to tax me like an employee, then surely we get the benefits too? No?
Oh, and i added in EmployERs national insurance @ 14% as something i'd also be expected to pay....
So all of the tax you pay AND Employers National Insurance and NONE of the benefits of being an employee?
But these are the costs of running a business and every business pays them. The government doesn’t pay for perks of employees, the employer does. So your problem is by levelling up, you’ve found your day rate is no longer competitive and you’re probably better off working for a bigger employer who pays all those perks and ERS contribution (NI & pension) for you.If they want to tax me like an employee, then surely we get the benefits too? No?
Oh, and i added in EmployERs national insurance @ 14% as something i'd also be expected to pay....
So all of the tax you pay AND Employers National Insurance and NONE of the benefits of being an employee?
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