Contractors: IR35 & general discussion

[hyphen]

Countdown said:

I don't disagree - but I also think it will increase the salaries of the permies.

Because if IT employ somebody who Finance/HR think falls inside IR35, and IT offer a higher salary to compensate the Contractor, it's still a PITA for Finance to record them on the monthly FPS submissions to HMRC. In short IR35 makes it an administrative ballache employing Contractors who should be permies.

Best hire a few contractors to build them a system to reduce the administrative ballache then

[Olivera]

Piersman2 said:

All of my contracts have been on distinct projects with fixed timescales, scope, etc... so I'm not overly concenred with this change

It depends on the industry, but in software the fixed time/scope/budget model is an absoutely antiquated way of developing software - almost everywhere replaced this a long time ago with a more flexible and adaptive agile methodology.

[anonymous-user]

Piersman2 said:

All of my contracts have been on distinct projects with fixed timescales, scope, etc... so I'm not overly concenred with this change, however, if I WAS in effectively a BAU role I might be a bit more nervous.

Take a look at some of the case law and you’ll see working on a fixed term contract is not enough. You need to demonstrate you are in control on how your service order is delivered and where. A good indication is you won’t get paid unless the work is completed to an acceptable standard and any defects will be fixed at your own cost. In other words you don’t get paid for just turning up.

You also need to demonstrate the work doesn’t need you personally to do it and you can provide an alternate worker at your discretion.

In reality these tests will show up those who are disguised employees.

[Countdown]

egomeister said:

Not really, you said "In terms of “lack of benefits” - isn’t that mitigated by the higher hourly/daily rates?" Personally I don't consider flights, accommodation and working away from home for weeks/months to be a lack of benefits.

I'm getting a bit confused as to what we're discussing. By lack of benefits" I meant sick pay/holiday pay/pensions contribution. The flights/accommodation/working away from home isn't unique to Contractors and the response is the same for both - that's what you/I/anybody gets paid for (regardless of whether we are contractor/permie/whatever)

egomeister said:

Edited to add: Let me be clear, I have no time for permietractors who stay doing the same role for years on end to the point that no-one realises they are not employed. I also have contempt for companies that hire graduate & low experience limited company contractors (i'm looking at you JLR...). These scenarios are both clearly making a mockery of the disguised employment rules.

Agreed

[deckster]

wormus said:

Take a look at some of the case law and you’ll see working on a fixed term contract is not enough. You need to demonstrate you are in control on how your service order is delivered and where. A good indication is you won’t get paid unless the work is completed to an acceptable standard and any defects will be fixed at your own cost. In other words you don’t get paid for just turning up.

You also need to demonstrate the work doesn’t need you personally to do it and you can provide an alternates worker at your discretion.

In reality these tests will show up those who are disguised employees.

This is absolutely true and, in my experience (over 20 years in the industry, 10 years as a contractor) almost all contractors fall into the 'disguised employee' bucket according to this definition. The number who are actually in business on their own account, deliver discrete pieces of work, and get rewarded on the same basis is close to zero.

The flip side, of course, is that the SIs don't do that either. Every statement of work that I've ever read (or, indeed written) might be structured along the lines of "we will deliver this" but when you get down to it, it's actually a contract that says "we will give you this many days at X rate". Just like almost every contract for services used by individuals. I know just as many consultants from Accenture or the like that are 'part and parcel' of large organisations as I do contractors.

[Piersman2]

Olivera said:

Piersman2 said:

All of my contracts have been on distinct projects with fixed timescales, scope, etc... so I'm not overly concenred with this change

It depends on the industry, but in software the fixed time/scope/budget model is an absoutely antiquated way of developing software - almost everywhere replaced this a long time ago with a more flexible and adaptive agile methodology.

I've been implementing ERP systems for over 20 years, and continue to do so to this very day. To me, working in an environment which uses agile would be a indicator that the role is more akin to BAU and therefore more likely to be inside IR35. I largely ignore adverts which stipulate Agile as I can't be bothered to try and implement a system where the client thinks Agile is a suitable approach.

[egomeister]

wormus said:

Piersman2 said:

All of my contracts have been on distinct projects with fixed timescales, scope, etc... so I'm not overly concenred with this change, however, if I WAS in effectively a BAU role I might be a bit more nervous.

Take a look at some of the case law and you’ll see working on a fixed term contract is not enough. You need to demonstrate you are in control on how your service order is delivered and where. A good indication is you won’t get paid unless the work is completed to an acceptable standard and any defects will be fixed at your own cost. In other words you don’t get paid for just turning up.

You also need to demonstrate the work doesn’t need you personally to do it and you can provide an alternate worker at your discretion.

In reality these tests will show up those who are disguised employees.

I think there is a blind spot for the HMRC on the practicalities of how work is delivered. Again, I can only speak from my personal experience where most of the work I've done for my customers has been commercially and technically sensitive, time critical and highly integrated into the greater work load. I've requested that I be able to work externally before and quite justifiably been met with pushback on the basis of data security and the level of interaction required with others to actually deliver in a timely manner.

Being on site is a realistic necessity to delivering the work, rather than an opportunity to exert control over how and when I work. Likewise with substitution - there are other people who could do my work, but there aren't necessarily other people who could pick it up mid job and deliver the quality on the same schedule I would have.

These rules have a clear danger or stifling a competitive advantage that we have internationally, and in my case damaging an industry where we are genuinely world class.

[Olivera]

wormus said:

Take a look at some of the case law and you’ll see working on a fixed term contract is not enough. You need to demonstrate you are in control on how your service order is delivered and where. A good indication is you won’t get paid unless the work is completed to an acceptable standard and any defects will be fixed at your own cost. In other words you don’t get paid for just turning up.

You also need to demonstrate the work doesn’t need you personally to do it and you can provide an alternate worker at your discretion.

No, you don't need to satisfy all of that. Direction+Control and the right to substitution are two key indicators, but they are not absolute.

If I put a recent contract engagement of mine truthfully into the CEST tool (for example)

Right to substitution - no, not without vetting of some sort
Can I choose where/when to work - mixed
Do I have to put things right at my own expense - yes (within reason)
Am I under direction+control - no
Am I paid per day - yes

The CEST tool reports back 'unable to determine status'. So there are many factors at play.

[egomeister]

Countdown said:

egomeister said:

Not really, you said "In terms of “lack of benefits” - isn’t that mitigated by the higher hourly/daily rates?" Personally I don't consider flights, accommodation and working away from home for weeks/months to be a lack of benefits.

I'm getting a bit confused as to what we're discussing. By lack of benefits" I meant sick pay/holiday pay/pensions contribution. The flights/accommodation/working away from home isn't unique to Contractors and the response is the same for both - that's what you/I/anybody gets paid for (regardless of whether we are contractor/permie/whatever)

Sure, it's not unique, but I know for a fact on previous permie roles there is no way I could absorb the costs I do as a contractor. It's not realistic to expect someone to relocate every six months as an employee - as a contractor I accept that possibility, on the basis that the financials stack up to justify it. I've seen some permanent employee roles where the employer covers relocation, usually international but I don't think any of my employers have done it for permie domestic based staff, and certainly not for temp workers.

[Piersman2]

wormus said:

Piersman2 said:

All of my contracts have been on distinct projects with fixed timescales, scope, etc... so I'm not overly concenred with this change, however, if I WAS in effectively a BAU role I might be a bit more nervous.

Take a look at some of the case law and you’ll see working on a fixed term contract is not enough. You need to demonstrate you are in control on how your service order is delivered and where. A good indication is you won’t get paid unless the work is completed to an acceptable standard and any defects will be fixed at your own cost. In other words you don’t get paid for just turning up.

You also need to demonstrate the work doesn’t need you personally to do it and you can provide an alternate worker at your discretion.

In reality these tests will show up those who are disguised employees.

And on the flip side you need to assess ALL the various conditions that the HMRC have included in their definitions of employee vs non-employee. When IR35 came in I looked at the complete list of indicators, pros and conned them, and stuck with outside IR35. I was prepared to have a sensible argument with any inspector if need be, I never did need to, they flushed out enough people that really were sitting in staff roles to largely satisfy HMRC. Since then HMRC have taken a few to court, lost a lot, won a few, but mainly they've pursued people where it's been pretty clear they should be in IR35 or were taking the piss in some other way.

All this regulation is doing is putting the onus on the client to make the assessment of in or out of IR35. Some clients will bottle it, some will be more savvy. It'll largely settle back down to situation normal within a year or so, or people will have to adapt. The contractor market is not going away in a hurry.

Hwever, as someone else has mentioned above, I do struggle to understand how the big four can continue to provide personnel outside of IR35 as the rules apply to the contract conditions, and personnel being delivered on a time&expenses basis on no different to a normal contractor. They seem to be somehow excluded from any suggestion of IR35 assessments.

[zippy3x]

Olivera said:

No, you don't need to satisfy all of that. Direction+Control and the right to substitution are two key indicators, but they are not absolute.

If I put a recent contract engagement of mine truthfully into the CEST tool (for example)

Right to substitution - no, not without vetting of some sort
Can I choose where/when to work - mixed
Do I have to put things right at my own expense - yes (within reason)
Am I under direction+control - no
Am I paid per day - yes

The CEST tool reports back 'unable to determine status'. So there are many factors at play.

Which I assume is HMRC speak for "You'll definitely win your case at the tribunal, but please use this uncertainty to declare yourself inside IR35"

[zippy3x]

Piersman2 said:

I've been implementing ERP systems for over 20 years, and continue to do so to this very day. To me, working in an environment which uses agile would be a indicator that the role is more akin to BAU and therefore more likely to be inside IR35. I largely ignore adverts which stipulate Agile as I can't be bothered to try and implement a system where the client thinks Agile is a suitable approach.

getting off topic, but that's not really correct. The underlying ethos of agile is to keep timescales and cost fixed, while allowing change to the specification.
It is therefore entirely the same from an IR35 point of view.

[zippy3x]

Countdown said:

Possibly I'm being over-simplistic but the new "rules" don't physically change the number of workers available to do a job - the rules just mean that tax has to be deducted at source. This means the "Contractor" has 3 options

1. Accept that tax is paid earlier (based on the posts above this tax would have been paid anyway but possibly as CT or via self-assessment)
2. Take a permie role.
3. Insist on a higher day rate (because the role is specialist, essential, and the Employer wants the flexibility of a contractor compared to a permie on 1 week's notice).

Not even close.

1) Accept the increased competition for remaing outside IR35 roles (may result in lower rates for a while)
2) Network more aggressively. (convince former clients with whom you'll have a good working relationship to give you the working conditions to allow you to get an outside IR35 decision from the CES tool)
3) explore fixed price contracts
4) take time off with financial buffer acquired from years of successful contracting - sorry "contracting"

then maybe

5) take a permie role.

for the record, i don't see industry upping inside IR35 roles anywhere near enough to make them attractive.

and finally......

Countdown said:

As has been pointed out above - for people like SOL111 who are genuine contractors the rules won't make any difference.

i believe this to be incorrect. SOL111 might be fine because he's working for a small company, but were he working for a large one, there is every chance that he'd be covered by some blanket "everyone is in" decision

[Piersman2]

zippy3x said:

Olivera said:

No, you don't need to satisfy all of that. Direction+Control and the right to substitution are two key indicators, but they are not absolute.

If I put a recent contract engagement of mine truthfully into the CEST tool (for example)

Right to substitution - no, not without vetting of some sort
Can I choose where/when to work - mixed
Do I have to put things right at my own expense - yes (within reason)
Am I under direction+control - no
Am I paid per day - yes

The CEST tool reports back 'unable to determine status'. So there are many factors at play.

Which I assume is HMRC speak for "You'll definitely win your case at the tribunal, but please use this uncertainty to declare yourself inside IR35"

HMRC have employed scare tactics all along with IR35, right from the start they've tried to slant all their indicators and comms to push people towards declaring themselves inside IR35. A lot did to start with, but as the contracts became more IR35 friendly more people reverted back to outside IR35.

At the moment it's up to the individual to make their own assessment against the various indicators... not one of the indicators is a golden bullet for, or against, IR35. All the indicators are just a weight on either end of a balance and for me I've never worked a contract where the balance tips heavily one way or another. For me it's always come down to the fact I'm working on implementations projects where once the project is implemented and my deliverables complete I'm out the door to tip the balance towards outside IR35.

[bonerp]

CEST tool is utter arse. Mine came out unable to establish status - yet I've been checked independently as outside.
So IR35 by the chicken clients will force contractors under it (as an easy way out) and reduce my income by 20-25%, align me to permies yet I'll still have no benefits or employee protection.

Well done HMRC you must be proud of ruining an industry and industries ability to recruit flexible workforce.

What gets my pip is contractors are leaving and going permie, which means lower salaries, no vat, corp tax income either. So HMRC income will be considerably reduced in large chucks of the industry whilst stifling flexible working.

When I'm out of work for weeks at a time, my higher earnings protect me due to the nature of the beast. No one pays my sick days or holidays, except me.

Another tory annihilation of workers in the UK.

Edited by bonerp on Friday 19th July 11:38

[Mr Pointy]

wormus said:

SOL111 said:

Sounds like some permie bitterness coming out there but ultimately your large corp sympathising doesn't alter the fact that they pay crap wages and do everyone out of tax.

Contractors have alread been hit with dividend tax, which more than makes up for the job insecurity etc. This is just taking the piss on a whole new level.

It's like being a private landlord. The changes are fine if you've a business portfolio of 100's but not for the one man band. Government is set up to bolster the already rich and drain the rest.

Sounds like some contractor bleating about unfairness there. I don’t feel bad for you I’m afraid if you find yourself within IR35, about time you paid your way. If you are on the outside good luck to you. Somebody has to pay for the public services you and your family enjoy.

Corporate permie jobs do pay very well thanks if you operate at the right level. It just takes a little effort and intellect

I presume if you're happy with contractors paying the same tax as employees you're also strongly in favour of them having the same benefits?

[Piersman2]

bonerp said:

CEST tool is utter arse. Mine came out unable to establish status - yet I've been checked independently as outside.
So IR35 by the chicken clients will force contractors under it (as an easy way out) and reduce my income by 20-25%, align me to permies yet I'll still have no benefits or employee protection.

Well done HMRC you must be proud of ruining an industry and industries ability to recruit flexible workforce.

What gets my pip is contractors are leaving and going permie, which means lower salaries, no vat, corp tax income either. So HMRC income will be considerably reduced in large chucks of the industry whilst stifling flexible working.

When I'm out of work for weeks at a time, my higher earnings protect me due to the nature of the beast. No one pays my sick days or holidays, except me.

Another tory annihilation of workers in the UK.

For me it's a real nail in the coffin of me voting Tory again in a hurry. Even Blair/Brown supported the contractor more than this shower, and that's despite IR35!!

What gets me with this change is that it seems to be a direct attack on the small individual contractor, making them more expensive or simply forcing them out of the market.

The question is why? Follow the money. If independent contractors are forced out of the market who fills the gap the client will still need filled? The big four mainly would be my guess as they seem to have largely escaped any mention alongside IR35.

It does make me wonder just how close the relationship is between the big four and those in positions of influence in government.

[wombleh]

zippy3x said:

getting off topic, but that's not really correct. The underlying ethos of agile is to keep timescales and cost fixed, while allowing change to the specification.
It is therefore entirely the same from an IR35 point of view.

I think it's the difficulty of showing and contracting fixed deliverables in an agile approach. Intent is to turn up each morning and be allocated tasks from a backlog. You're effectively paid to be there for x amount of time as a developer (although I've seen multi skill teams which makes that even worse as the contract can't even specify a role) and work on whatever is needed. That seems like fairly strict direction, as opposed to being left to develop a bit of code to a certain spec.

I do big projects with an engineering organisation and fully expecting them to make a complete hash of this, most likely their prime agency will try a huge land grab and work will grind to a halt for six months until they sort it out.

[deebs]

Mr Pointy said:

I presume if you're happy with contractors paying the same tax as employees you're also strongly in favour of them having the same benefits?

I currently contract with yearly company turnover of ~100k. If I go permie, my likely best salary would be ~50k. Using moneysavingexpert's income tax calculator (I'm in Scotland) says on £50k I would pay £9,042 income tax and £4,964 over a year, so a combined £14,006. My company paid more than that in corporation tax alone last year.

Perhaps I'm not a usual case but if the contractor market disppears and I'm forced back into permament posts I can't see who benefits.

ETA: I meant to quote the poster saying "it's about time you contractors paid your way...." !

Edited by deebs on Friday 19th July 12:02

[GT03ROB]

Mr Pointy said:

wormus said:

SOL111 said:

Sounds like some permie bitterness coming out there but ultimately your large corp sympathising doesn't alter the fact that they pay crap wages and do everyone out of tax.

Contractors have alread been hit with dividend tax, which more than makes up for the job insecurity etc. This is just taking the piss on a whole new level.

It's like being a private landlord. The changes are fine if you've a business portfolio of 100's but not for the one man band. Government is set up to bolster the already rich and drain the rest.

Sounds like some contractor bleating about unfairness there. I don’t feel bad for you I’m afraid if you find yourself within IR35, about time you paid your way. If you are on the outside good luck to you. Somebody has to pay for the public services you and your family enjoy.

Corporate permie jobs do pay very well thanks if you operate at the right level. It just takes a little effort and intellect

I presume if you're happy with contractors paying the same tax as employees you're also strongly in favour of them having the same benefits?

The contractor gets whatever benefits he/she wishes to endow upon him/herself...… it's in the rate. He/she has the choice..... sick leave - rate covers it, pension - rate covers it. That's the way it works.