Contractors: IR35 & general discussion
Discussion
wormus said:
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.
How will they collect all of those from the contractor side industry's when they no longer exist?How will they collect more from me when I'll be earning a lot less?
The £100m extra a year or whatever they have quoted they anticipate getting from IR35 is simply not true.
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.
- higher tax %’s but with lower rates and less roles
- work going off shore
- work going to large multi national consultancies.
- net effect lower tax income for hmrc.
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.
Are the gains from Contractors moving to PAYE going to be offset by losses from work transferred offshore? I highly doubt it, but it's theoretically possible.
Guvernator said:
wormus said:
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.
How will they collect all of those from the contractor side industry's when they no longer exist?How will they collect more from me when I'll be earning a lot less?
The £100m extra a year or whatever they have quoted they anticipate getting from IR35 is simply not true.
- the money they are paying you might get saved resulting in higher dividends = more CT and IT for HMRC
- the money they are paying you might get paid to Accenture instead = more CT, IT, and VAT for HMRC
Wormus' point is that the money is still circulating in the economy. it doesn't disappear, it will still be used in transactions and each transaction is likely to result in a tax charge.
Theoretically, at a macro level, if the Economy slows down because the work done by Contractors stops completely, there will be a fall in GDP which [b]could/b] result in a fall in HMRC tax take but I doubt it.
Countdown said:
At the risk of sounding stupid, if 10 people are all in the same role, then why would you do 10 different assessments as opposed to one role-based assessment?
Not stupid 
The definition of 'reasonable care' is ambiguous (or at least not defined), which doesn't help. But, the ramification of getting it wrong is that if HMRC decide that 'reasonable care' hasn't been taken, then the client breaches a requirement of the legislation (section 61T(6)(c)) . This transfers the tax liability back up the chain to the client, and also could trigger an extension of the enquiry window to six years due to ‘carelessness’ under Section S36(1) TMA 1970. If the error was deliberate this could extend to 20 years (S36(1A)). So in principle, being lazy now could cost the client a lot further down the road.
Individual assessments should, in theory, limit enquiries to only four years.
Anyway, point is, it's daft that the client wouldn't spend the 5 minutes it takes using the CEST tool (
kbigandclever said:
Not stupid
The definition of 'reasonable care' is ambiguous (or at least not defined), which doesn't help. But, the ramification of getting it wrong is that if HMRC decide that 'reasonable care' hasn't been taken, then the client breaches a requirement of the legislation (section 61T(6)(c)) . This transfers the tax liability back up the chain to the client, and also could trigger an extension of the enquiry window to six years due to ‘carelessness’ under Section S36(1) TMA 1970. If the error was deliberate this could extend to 20 years (S36(1A)). So in principle, being lazy now could cost the client a lot further down the road.
Individual assessments should, in theory, limit enquiries to only four years.
Anyway, point is, it's daft that the client wouldn't spend the 5 minutes it takes using the CEST tool (utter wk flawed as it is) or getting proper advice on an individual basis to negate the risk of being assessed as not taking 'reasonable care' at some point in the future.
Thanks for the explanation - I appreciate it. However I still dont understand why I would need to do 10 individual assessments for one role if 10 people are in that role.The definition of 'reasonable care' is ambiguous (or at least not defined), which doesn't help. But, the ramification of getting it wrong is that if HMRC decide that 'reasonable care' hasn't been taken, then the client breaches a requirement of the legislation (section 61T(6)(c)) . This transfers the tax liability back up the chain to the client, and also could trigger an extension of the enquiry window to six years due to ‘carelessness’ under Section S36(1) TMA 1970. If the error was deliberate this could extend to 20 years (S36(1A)). So in principle, being lazy now could cost the client a lot further down the road.
Individual assessments should, in theory, limit enquiries to only four years.
Anyway, point is, it's daft that the client wouldn't spend the 5 minutes it takes using the CEST tool (
kTo try and explain it another way, when I complete the CEST I use the Job description/Person Spec. This is going to be the same for all 10 people. Do I need to go through CEST 10 times, or can I just do it once and then photocopy the answer?
The latter solution is basically a blanket assessment but, based on what people have said, this is not allowed?
- the money they are paying you might get paid to a permie instead = more income tax/NI for HMRC
No - a permie normally pays less tax as it’s a much lower ‘salary’. In my experience up to 66% less.
- the money they are paying you might get paid to Accenture instead = more CT, IT, and VAT for HMRC
No Accenture and the like are much better at avoiding tax than single person Ltd co’s
super7 said:
PurpleTurtle said:
PostHeads123 said:
Most big companies though have IT teams in other places in the world and most can redirect work there, their is still incompetent offshoring about but also a lot of companies are now very mature with this model so the skills are there and just as good as in the UK. End of the day in a lot of companies its the business that determines IT budget, the business in most cases don't see the IR35 change as an issue they see it as a way to cut costs. I agree what they are doing with IR35 is stupid as it will probably cost HMRC revenue and the UK jobs, but it is what it is. Contractors can walk if they want fine but it wont solve anything for them, permies are sitting there waiting for the noise in the job market so they can jump in and pick up the roles.
Utter bks. I've been with the same end client for a very long period of time. They have outsourced via one of the large consultancies, their team in India has people with 6 years' experience on our application who still struggle to get the absolute basics right day to day. As for their newer people - utterly dreadful. Their communication with our business is mind-bogglingly woeful, not even on the same page of business knowledge.
That's why, 6 years on, me and several UK colleagues are still there, preventing our outsourcers from causing widespread damage to business critical apps and have just been extended for another year, currently discussing my day rate under a brolly.
ks, off shore isn't just India these days, it can be lower cost locations like Poland or Toronto. Also if you are thinking offshore is all India look at what nationalities mostly head up the big tech companies Google etc. I have a lot of non-UK based IT staff working for me who are on-par if not better (more committed to getting the job done) than UK contractors, not saying UK contractors are bad I was one for many years, but we are in a different climate now, and the view that the best tech heads is UK contractor is laughable. Smaller companies without a global work force might suffer but the big companies with global work forces have options. I agree the whole IR35 is a mess and is unfair but I just putting it out there how the big companies think about the changes vs how the contractor views it. Gazzab said:
I might be being dumb but how does the umbrella contract have any IR35 relevance? As I understand it you won’t have an IR35 assessment, you won’t have a limited company, you will be paye with the umbrella, you will pay a % to the umbrella, you may have to ‘buy’ benefits (eg pension and holiday) and you may have a retrospective review by hmrc into your outside IR35 time with the client (hmrc have made a hollow promise on this).
You are correct, IR35 won’t have any relevance under an umbrella PAYE scheme - but it’s relevant in the sense that some end clients are moving all contractors to such arrangements, and ultimately, as I said, the net position for the contractor is equivalent to an inside IR35 contract. Yes you get certain statutory rights, but you’re paying for them out of the end client’s fee.Also I doubt the upstream contract between agency/umbrella and end client will change one bit, so the nature and true cost of your service provision to the end client hasn’t changed at all.
Countdown said:
Are the gains from Contractors moving to PAYE going to be offset by losses from work transferred offshore? I highly doubt it, but it's theoretically possible.
What gains? I made around £110k as a contractor last year, now I'm looking at perm roles that will pay max 50k. No way will the tax I'm paying now be matched by the tax I'm paying next year.
Liokault said:
Countdown said:
Are the gains from Contractors moving to PAYE going to be offset by losses from work transferred offshore? I highly doubt it, but it's theoretically possible.
What gains? I made around £110k as a contractor last year, now I'm looking at perm roles that will pay max 50k. No way will the tax I'm paying now be matched by the tax I'm paying next year.
Countdown said:
Liokault said:
Countdown said:
Are the gains from Contractors moving to PAYE going to be offset by losses from work transferred offshore? I highly doubt it, but it's theoretically possible.
What gains? I made around £110k as a contractor last year, now I'm looking at perm roles that will pay max 50k. No way will the tax I'm paying now be matched by the tax I'm paying next year.
Edited by Gazzab on Friday 22 November 14:22
Countdown said:
Thanks for the explanation - I appreciate it. However I still dont understand why I would need to do 10 individual assessments for one role if 10 people are in that role.
To try and explain it another way, when I complete the CEST I use the Job description/Person Spec. This is going to be the same for all 10 people. Do I need to go through CEST 10 times, or can I just do it once and then photocopy the answer?
The latter solution is basically a blanket assessment but, based on what people have said, this is not allowed?
In reality, you probably can, who would ever know? Doesn't make it lawful.To try and explain it another way, when I complete the CEST I use the Job description/Person Spec. This is going to be the same for all 10 people. Do I need to go through CEST 10 times, or can I just do it once and then photocopy the answer?
The latter solution is basically a blanket assessment but, based on what people have said, this is not allowed?
Each of the people assessed is entitled to understand how the client has come up with the assessment of in or out; they're entitled to contest it; and, if necessary, they're well within their rights to litigate. Of course, we all know that the client would just bin the contractor off at the first sign of any dissent, but there is a process. Can't clients at least try to look like they're doing it right instead of firing up the photocopier?
bigandclever said:
Blanket, role-based assessments are literally the opposite of demonstrating 'reasonable care' has been taken. And they are unlawful.
Businesses with people who actually understand the ramifications for getting the decisions wrong are very much performing individual assessments.
No I can assure you this is incorrect Businesses with people who actually understand the ramifications for getting the decisions wrong are very much performing individual assessments.
wormus said:
bigandclever said:
Blanket, role-based assessments are literally the opposite of demonstrating 'reasonable care' has been taken. And they are unlawful.
Businesses with people who actually understand the ramifications for getting the decisions wrong are very much performing individual assessments.
No I can assure you this is incorrect Businesses with people who actually understand the ramifications for getting the decisions wrong are very much performing individual assessments.
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
Countdown said:
Liokault said:
Countdown said:
Are the gains from Contractors moving to PAYE going to be offset by losses from work transferred offshore? I highly doubt it, but it's theoretically possible.
What gains? I made around £110k as a contractor last year, now I'm looking at perm roles that will pay max 50k. No way will the tax I'm paying now be matched by the tax I'm paying next year.
Stop laughing at the the back.
bigandclever said:
Oh. OK then.
Allow me to explain - if an organisation builds widgets and it says “in order to build our widgets, we need our workers personally to be here every day, work as team on this assembly line and we will train them how to build the widgets” it can be implied that by default under the need to control and direct, everyone on that assembly line will be inside IR35 so long as the role they are all doing has been carefully assessed. They can have individual assessments but the outcome will be the same for all of them.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
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?
Gazzab said:
Banks are cutting day rates by 25% to fund the umbrella paye and the extra tax. Add to this the lack of expenses and it’s a massive hit (for those lucky enough to find any work!)
Are they? I'm just about to start a contract with a bank who have more or less publically announced that contractors will be umbrella only from {date} moving forward, the day rate I asked for was pretty much the top of what my type and level of role can get in my location and they made me an offer at that rate without any negotiation. For my role and location I've been looking since September and there is definitely alot less opportunities on the go but I haven't noticed any big change in rates being advertised/discussed with agencies for the roles that have come up.
I've just registered with a umbrella and looking forward to closing out the ltd company and moving forward to be honest, the PAYE tax is what it is.
Good luck to everyone looking.
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