Contractors: IR35 & general discussion
Discussion
Sambucket said:
Alex said:
This has very little bearing on IR35. Each contract should be assessed individually.
I note you concede it has some bearing. I agree there are other weightier additional points to also consider.MOO, Substitution, SDC
If one pillar exists then case law states outside IR35.
I repeat, only one needs to exist.
Guvernator said:
The CEST tool is heavily biased towards giving an inside assessment, some of the questions are ridiculous, I don't know any contractor who isn't under some form of SDC for instance. It's designed to cast as wide a net as possible so yes for 90% of people, contracting is finished. Even when the CEST tool gives an outside assessment, there is zero guarantee that HMRC will stick by it.
Genuine question - why do you say it is biased and which questions are ridiculous?I agree about the SDC point - but being an Employee vs self Employed doesn't turn on a single question. It's an overall assessment. Employers will be looking at the overall context of the relationship before deciding whether somebody is inside or outside. And that's why the people most worried about this are the ones doing exactly the same job as a permie but pretending to be self employed.
This is a case of HMRC and the banks wanting to have their cake and eat it.
HMRC: "Employed for tax purposes"...
Er hang on, you want equal tax for the same jobs sitting next to each other right? Ok well one is secured via employement rights, perm, pension, mat / paternity pay, medical. The other has none of those things. So not equal, hence the difference in pay. So thats why different amounts get paid.
Banks: Oh we don't have head count for all the contractors that would go perm.
Well .. you do. You just need to get some over paid Managing Director to push cash from "dodgy consulting and other weird expenses budget that we frig in our arcane budget system" over to resource for perm salary increases and extra roles.
As in money is there, if contractors are so "average and expensive" then replacing them with perm offers (quite easy to do at the moment I would say, I am perm-curious myself) then that SAVES money. Oh, all the add ons and extra hassle means contractors are actually not that expensive after the headline day rate is looked past?
What *won't* happen is proper contracts and due diligence on their resource planning. So instead shift everyone to "in" PAYE, try to skim off the extra cost but paying the old Ltd Co rate to the new SPV used to pay contractors, then they will pay net of that Employer NIC. Cue losing everyone, pause for 6 months and then re hire back in new people with less experience for the accountancy demanded rate up-shift.
Madness. But banks go in and out business areas like crazy anyway so killing off 3000 people in IT wont be any worry for them. The whole industry is only reactionary anyway, hence the herd mentality into the Credit Crisis. The concerns from anyone awake in Snr Mgmt were ignored as everyone was doing it and they needed the free PnL
HMRC: "Employed for tax purposes"...
Er hang on, you want equal tax for the same jobs sitting next to each other right? Ok well one is secured via employement rights, perm, pension, mat / paternity pay, medical. The other has none of those things. So not equal, hence the difference in pay. So thats why different amounts get paid.
Banks: Oh we don't have head count for all the contractors that would go perm.
Well .. you do. You just need to get some over paid Managing Director to push cash from "dodgy consulting and other weird expenses budget that we frig in our arcane budget system" over to resource for perm salary increases and extra roles.
As in money is there, if contractors are so "average and expensive" then replacing them with perm offers (quite easy to do at the moment I would say, I am perm-curious myself) then that SAVES money. Oh, all the add ons and extra hassle means contractors are actually not that expensive after the headline day rate is looked past?
What *won't* happen is proper contracts and due diligence on their resource planning. So instead shift everyone to "in" PAYE, try to skim off the extra cost but paying the old Ltd Co rate to the new SPV used to pay contractors, then they will pay net of that Employer NIC. Cue losing everyone, pause for 6 months and then re hire back in new people with less experience for the accountancy demanded rate up-shift.
Madness. But banks go in and out business areas like crazy anyway so killing off 3000 people in IT wont be any worry for them. The whole industry is only reactionary anyway, hence the herd mentality into the Credit Crisis. The concerns from anyone awake in Snr Mgmt were ignored as everyone was doing it and they needed the free PnL
Edited by BluePurpleRed on Thursday 21st November 11:45
BluePurpleRed said:
Er hang on, you want equal tax for the same jobs sitting next to each other right? Ok well one is secured via employement rights, perm, pension, mat / paternity pay, medical. The other has none of those things. So not equal, hence the difference in pay. So thats why different amounts get paid.
BluePurpleRed said:
This is a case of HMRC and the banks wanting to have their cake and eat it.
HMRC: "Employed for tax purposes"...
Er hang on, you want equal tax for the same jobs sitting next to each other right? Ok well one is secured via employement rights, perm, pension, mat / paternity pay, medical. The other has none of those things. So not equal, hence the difference in pay. So thats why different amounts get paid.
The lack of employee benefits can be compensated for quite easily by paying a higher day rate. Nobody (apart from "bitter permies") have an issue about Contractors being paid higher day rates. IR35 wont stop Contractors from being paid higher day rates. Nobody has said "Equal pay for same jobs". This is about the tax benefits of being self-employed.HMRC: "Employed for tax purposes"...
Er hang on, you want equal tax for the same jobs sitting next to each other right? Ok well one is secured via employement rights, perm, pension, mat / paternity pay, medical. The other has none of those things. So not equal, hence the difference in pay. So thats why different amounts get paid.
I don’t think that the loan charge is helping the reputation of contractors. Whilst I am horrified as to how hmrc have treated those who used such schemes, I am not surprised. I was offered the ‘opportunity’ to join one of these schemes 10 years ago but could see that a) it was immoral (imho) b) was not without risk and c) was simply pressing the greed button. It’s scary to think about such a massive retrospective tax bill. I had a large team of contractors with many using such schemes. A few asked me for advice once they started to see it becoming an issue, none of them took my advice. They are all having to deal with the loan charge issue now. I don’t think this situation helps with hmrc, government or public sympathy to the IR35 debacle.
Gazzab said:
I don’t think that the loan charge is helping the reputation of contractors. Whilst I am horrified as to how hmrc have treated those who used such schemes, I am not surprised. I was offered the ‘opportunity’ to join one of these schemes 10 years ago but could see that a) it was immoral (imho) b) was not without risk and c) was simply pressing the greed button. It’s scary to think about such a massive retrospective tax bill. I had a large team of contractors with many using such schemes. A few asked me for advice once they started to see it becoming an issue, none of them took my advice. They are all having to deal with the loan charge issue now. I don’t think this situation helps with hmrc, government or public sympathy to the IR35 debacle.
That was my take on the loan charge as well but if you read into it more you will see some people were forced into using it.And the whole retrospective way that HMRC have clamped down on it affects us all, if it remains then it gives them carte blanche to change any tax law they wish and then demand huge back taxes from anyone, it's like changing a motorway speed limit to 30 and then fining everyone over the previous 6 months who had gone over 30.
Bluedot said:
That was my take on the loan charge as well but if you read into it more you will see some people were forced into using it.
And the whole retrospective way that HMRC have clamped down on it affects us all, if it remains then it gives them carte blanche to change any tax law they wish and then demand huge back taxes from anyone, it's like changing a motorway speed limit to 30 and then fining everyone over the previous 6 months who had gone over 30.
I have read up and don’t believe contractors were forced into using them. And the whole retrospective way that HMRC have clamped down on it affects us all, if it remains then it gives them carte blanche to change any tax law they wish and then demand huge back taxes from anyone, it's like changing a motorway speed limit to 30 and then fining everyone over the previous 6 months who had gone over 30.
https://www.tax.org.uk/media-centre/blog/technical...
I don’t disagree re the scary 20 year retrospective but I am not sure this creates a precedent. These are loans that remain unpaid.
Bluedot said:
That was my take on the loan charge as well but if you read into it more you will see some people were forced into using it.
And the whole retrospective way that HMRC have clamped down on it affects us all, if it remains then it gives them carte blanche to change any tax law they wish and then demand huge back taxes from anyone, it's like changing a motorway speed limit to 30 and then fining everyone over the previous 6 months who had gone over 30.
Who was "forced" to use it?And the whole retrospective way that HMRC have clamped down on it affects us all, if it remains then it gives them carte blanche to change any tax law they wish and then demand huge back taxes from anyone, it's like changing a motorway speed limit to 30 and then fining everyone over the previous 6 months who had gone over 30.
And (IMO) the effect is "retrospective" because of the underlying nature of the scam. The loans were never intended to be repaid because they were effectively salary.
The scale of the £s are scary though. I guess it could go something like this:
Day rate £700. 220 days a year. Say for 10 years.
Will have paid 10% (?) fee to the off shore scheme provider. Approx £15k a year ie £150k over 10 years. That’s ‘gone’.
Avoided (?) tax equal to approx 35% (?) of total invoiced ie £54k pa or £540k over ten years.
Then there is interest to add?
How does anyone manage to repay such huge sums!?
Day rate £700. 220 days a year. Say for 10 years.
Will have paid 10% (?) fee to the off shore scheme provider. Approx £15k a year ie £150k over 10 years. That’s ‘gone’.
Avoided (?) tax equal to approx 35% (?) of total invoiced ie £54k pa or £540k over ten years.
Then there is interest to add?
How does anyone manage to repay such huge sums!?
Countdown said:
Who was "forced" to use it?
And (IMO) the effect is "retrospective" because of the underlying nature of the scam. The loans were never intended to be repaid because they were effectively salary.
And (IMO) the effect is "retrospective" because of the underlying nature of the scam. The loans were never intended to be repaid because they were effectively salary.
Gazzab said:
I have read up and don’t believe contractors were forced into using them.
https://www.tax.org.uk/media-centre/blog/technical...
I don’t disagree re the scary 20 year retrospective but I am not sure this creates a precedent. These are loans that remain unpaid.
Don't get me wrong, I saw the adverts for them and even had a call once with one of them but stayed using my Ltd company, they always struck me as highly dubious.https://www.tax.org.uk/media-centre/blog/technical...
I don’t disagree re the scary 20 year retrospective but I am not sure this creates a precedent. These are loans that remain unpaid.
The APPG report mentions these schemes as being conditions of employment, maybe forced was the wrong term.
http://www.loanchargeappg.co.uk/wp-content/uploads...
"These arrangements were not entered as “aggressive tax avoidance” and were often a condition of employment, especially in the public sector"
Bluedot said:
Don't get me wrong, I saw the adverts for them and even had a call once with one of them but stayed using my Ltd company, they always struck me as highly dubious.
The APPG report mentions these schemes as being conditions of employment, maybe forced was the wrong term.
http://www.loanchargeappg.co.uk/wp-content/uploads...
"These arrangements were not entered as “aggressive tax avoidance” and were often a condition of employment, especially in the public sector"
I do t believe they were a condition for contractors. The APPG report mentions these schemes as being conditions of employment, maybe forced was the wrong term.
http://www.loanchargeappg.co.uk/wp-content/uploads...
"These arrangements were not entered as “aggressive tax avoidance” and were often a condition of employment, especially in the public sector"
When I was called by one of these firms it was very much sold as a magic risk free totally safe tax avoidance scheme. Only took me a moment to say no.
I had to bin off an interim recruitment chap who was helping me recruit a big team as I found he was selling such a scheme to many of my team.
Bam89 said:
Even if IR35 is by some miracle not as big an issue as originally thought, Corbyn has got a hike in dividends tax rates ready and waiting for all us lucky people
1. Additional CT is not an issue, I don't mind paying more CT, it's the expenses that is a massive issue for me.2. Corbyn ain't getting in!
worsy said:
Bam89 said:
Even if IR35 is by some miracle not as big an issue as originally thought, Corbyn has got a hike in dividends tax rates ready and waiting for all us lucky people
1. Additional CT is not an issue, I don't mind paying more CT, it's the expenses that is a massive issue for me.2. Corbyn ain't getting in!
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