Contractors: IR35 & general discussion
Discussion
zippy3x said:
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 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).
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" decisionMany contractors as older, certainly the demographic seems to be older then permanent staff as you have to be experienced or have a niche skill.
Lots of my peers are early 50's. I'm 53 and I'm taking early retirement. I was going to retire at 55 but this will impact the market for a while so why bother dealing with it if you can afford to retire? I'm not the only one on my project doing the same.
IT isn't the glamorous adrenaline filled industry it appears to be
so the option of doing f
k all other than tinkering with cars is very appealing!wombleh said:
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.It is therefore entirely the same from an IR35 point of view.
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.
In brief, it's fine to be told what to do, but not how to do it. As such, being allocated a task of a backlog is fine.
Think of a plumber installing a new bathroom for you. It's fine to tell him where you want the shower, bath, sink toilet etc. but you wouldn't expect to tell him where to run the water and waste pipes, of how best to grout the tiles.
If your downstairs look sprung a leak while he was working, you'd obviously get him to fix that (for extra cost) and that would not make him your employee.
My point around agile is that the contractor is there for a fixed duration and therefore more likely to be there for a project.
deebs said:
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...." !
this is EXACTLY my point. Revenue incomes will be significantly reduced, off payroll staff will no longer exist which will damage business capability (companies don't want or need a 100% permie base) and thousands of peoples livelihoods ruined. WHY?! And all the time offshore companies reap the reward by employing staff at a lower rate with less skills and money not remaining in the UK, who wins? Noone.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 said:
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.
Nonsense.You & others want to tax contractors the same as employees but you would never guarantee that the rate you pay will fully offset the loss of benefits - or are you saying that you write to each contractor asking them to ensure their rate fully covers these & that you are happy to pay it?What you want is the benefit of using contractors (flexibility for instance) without having to cover the benefit costs of an employee. You're just as greedy as the contractors.
deebs said:
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...." !
You're definitely not alone. My worst year's corporation tax was more than my best year's permie tax (Income and NI).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
Usually it's around double.
I don't see anyway I'd work inside IR35.
wormus said:
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'd like to abuse you. But MEH CBACorporate permie jobs do pay very well thanks if you operate at the right level. It just takes a little effort and intellect.
Edited by wormus on Friday 19th July 08:11
I'm a engineering consultant, ltd company contractor, been doing it for 10 years.
What I've realised in that 10 years is that few people have the skills that I have and I'd under priced myself when I was a permie, partly due to where we wanted to bring up our kids. Partly through stupidity.
I'd happily be inside IR35. Just up hourly rate by £7.24 and I'm fine with that.
Happy to pay more tax. I'll just pay more into my pension and pay less tax.
Mr Pointy said:
GT03ROB said:
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.
Nonsense.You & others want to tax contractors the same as employees but you would never guarantee that the rate you pay will fully offset the loss of benefits - or are you saying that you write to each contractor asking them to ensure their rate fully covers these & that you are happy to pay it?What you want is the benefit of using contractors (flexibility for instance) without having to cover the benefit costs of an employee. You're just as greedy as the contractors.
98elise said:
zippy3x said:
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 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).
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" decisionMany contractors as older, certainly the demographic seems to be older then permanent staff as you have to be experienced or have a niche skill.
Lots of my peers are early 50's. I'm 53 and I'm taking early retirement. I was going to retire at 55 but this will impact the market for a while so why bother dealing with it if you can afford to retire? I'm not the only one on my project doing the same.
IT isn't the glamorous adrenaline filled industry it appears to be
so the option of doing fk all other than tinkering with cars is very appealing!I also forgot working abroad, or remotely for clients abroad. I assume that as they fall outside HMRC's jurisdiction the responsibility to determine IR35 status falls back to me.
I think this is another thing the jealous permie brigade forget, contractors move around. I live in the north west, but I've worked in London for maybe 7 of the last 10 years with a couple of years in South Wales and a couple of short term contracts in Europe. We move where the work is.
While it sounds trite to say, "I'll just leave the country" as it's an often overused trope, it's definitely something on my radar
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. 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.
Corporate permie jobs do pay very well thanks if you operate at the right level. It just takes a little effort and intellect
If a worker doesn't want to be tied down, and the "client" accepts it, a zero hours employment contract is genuinely the best way to achieve this.
bonerp said:
deebs said:
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...." !
this is EXACTLY my point. Revenue incomes will be significantly reduced, off payroll staff will no longer exist which will damage business capability (companies don't want or need a 100% permie base) and thousands of peoples livelihoods ruined. WHY?! And all the time offshore companies reap the reward by employing staff at a lower rate with less skills and money not remaining in the UK, who wins? Noone.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
Whoever else receives it will pay tax on it instead.
Piersman2 said:
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.
Except their consultants are all employees and therefore paying PAYE. You can do the same if you are prepared to deduct at source and pay yourself a wage instead of dividends etc.GT03ROB said:
Not at all. Work out the cost of providing the same benefits if they are important to you. You have a rate accept or decline. Compare with being staff. If staff is better for you do that. If the only jobs on offer are contract then that's still the market rate. There is a market rate for staff & contract, it's up to each person to evaluate if that rate is good for them in either capacity.
Sure, it's how the market works. I've no issue with that in essence. My biggest problem is with how it is likely to load additional cost onto business and skew the market in an area where the current UK setup is highly successful in comparison to our regional competitors.Mr Pointy said:
Nonsense.You & others want to tax contractors the same as employees but you would never guarantee that the rate you pay will fully offset the loss of benefits - or are you saying that you write to each contractor asking them to ensure their rate fully covers these & that you are happy to pay it?
What you want is the benefit of using contractors (flexibility for instance) without having to cover the benefit costs of an employee. You're just as greedy as the contractors.
I’m failing to understand how the amount you pay into the public purse (which is used to pay for public services) relates to how much paid holiday you can take? HMRC doesn’t care about how many benefits you get, only that you are taxed on them. What you want is the benefit of using contractors (flexibility for instance) without having to cover the benefit costs of an employee. You're just as greedy as the contractors.
Do you think you should get a tax break because your one man company chooses not to offer annual leave and sick pay? In the normal world that comes from company profit.
zippy3x said:
Think of a plumber installing a new bathroom for you. It's fine to tell him where you want the shower, bath, sink toilet etc. but you wouldn't expect to tell him where to run the water and waste pipes, of how best to grout the tiles.
It's the difference between going into the bathroom every morning and tell the plumber what he is doing that day against agreeing the spec for the bathroom in terms of where things go and leaving them to it. The former is what a plumber would do with their apprentice so looks to be a fairly different arrangement to the latter.
No argument you need to agree what you're doing with the client but it's how closely they then control and direct that work that seems tricky with agile.
egomeister said:
GT03ROB said:
Not at all. Work out the cost of providing the same benefits if they are important to you. You have a rate accept or decline. Compare with being staff. If staff is better for you do that. If the only jobs on offer are contract then that's still the market rate. There is a market rate for staff & contract, it's up to each person to evaluate if that rate is good for them in either capacity.
Sure, it's how the market works. I've no issue with that in essence. My biggest problem is with how it is likely to load additional cost onto business and skew the market in an area where the current UK setup is highly successful in comparison to our regional competitors.wombleh said:
It's the difference between going into the bathroom every morning and tell the plumber what he is doing that day against agreeing the spec for the bathroom in terms of where things go and leaving them to it.
The former is what a plumber would do with their apprentice so looks to be a fairly different arrangement to the latter.
No argument you need to agree what you're doing with the client but it's how closely they then control and direct that work that seems tricky with agile.
Agile is simply a different way of adding and removing tasks. Fundamentally at any point in time the backlog is a spec that needs delivery. Tomorrow it might be different, but at that point in time it will the "the" spec that needs delivering.The former is what a plumber would do with their apprentice so looks to be a fairly different arrangement to the latter.
No argument you need to agree what you're doing with the client but it's how closely they then control and direct that work that seems tricky with agile.
From a developers point of view (s)he will get a two week block of work to complete. This is basically no different to waterfall. Who does which tasks, in waterfall is never planned for the entire project.
Either way frequency of task changes are irrelevant, it's just down to "what" vs "how".
Of course in the classic IR35 way, "what" and "how" have no definition.
zippy3x said:
Think of a plumber installing a new bathroom for you. It's fine to tell him where you want the shower, bath, sink toilet etc. but you wouldn't expect to tell him where to run the water and waste pipes, of how best to grout the tiles.
Plumber supplies his own toolsPlumber usually chooses what time and on what days he's coming in to work
Plumber can send somebody else if he chooses
Plumber isn't working alongside an employee doing exactly the same job
Plumber may well have 2/3 clients at the same time.
Plumbers aren't worried that HMRC are going to treat them as inside IR35
wormus said:
Piersman2 said:
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.
Except their consultants are all employees and therefore paying PAYE. You can do the same if you are prepared to deduct at source and pay yourself a wage instead of dividends etc.GT03ROB said:
There is a potential issue in this for sure. I work O&G and it's highly cyclical. Most companies work with contractors to smooth these humps & troughs. I don't think there is a clear picture how it will work going forward. But what is also clear is that many of the so called contractors are effectively employees. When I have employees & contractors I treat them the same, there is no right of substitution, they don't rework their errors at their own cost, they do the job how & when I want it done, we supply all their computers, I could go on..
Yep, it can be massively unclear. I've encountered a lot of those factors, but they are often just the practicalities of efficiently delivering an engineering solution which HMRC and the government in general seem blind to. My work could rarely be boxed up into a neat little package and tied with a bow as its too integrated with the work of others.My most regular customer strikes a decent balance for this stuff given the nature of their work. Generally:
- They don't specify hours. I tend to align with their standard hours for the practicalities of delivering the work but I take a long weekend every two weeks to ease travel.
- I have a right of substitution but it would be impractical to implement and still deliver the work.
- Reworking errors. Where is the line drawn in an engineering process between the natural development process and an error? Whenever I've made a clear screw up I've tended to not bill for the time to sort it out, but day to day evolution is the nature of the beast.
- How the job is done. They have ultimate say - they are the customer. However, I am generally left to my own devices and they'll only object if it's something they feel strongly about.
- Own equipment. I use their computers etc. They would feel very uncomfortable letting data leave the network, so again in practical terms it is also required for security purposes. I'd be happy to use my own kit.
- Meetings/company stuff - I'm only involved in those which are directly related to my work.
- Canteen. Staff pay a discounted rate, externals full price.
In the context of a practical and efficient way to deliver the service to the customer, I think that's about as autonomous as I can realistically get. I've no doubt this would be considered inside the new rules, which is why I consider it to be a money grab by people who don't or are unwilling to understand the realities of business needs.
GT03ROB said:
egomeister said:
GT03ROB said:
Not at all. Work out the cost of providing the same benefits if they are important to you. You have a rate accept or decline. Compare with being staff. If staff is better for you do that. If the only jobs on offer are contract then that's still the market rate. There is a market rate for staff & contract, it's up to each person to evaluate if that rate is good for them in either capacity.
Sure, it's how the market works. I've no issue with that in essence. My biggest problem is with how it is likely to load additional cost onto business and skew the market in an area where the current UK setup is highly successful in comparison to our regional competitors.From April 2020, the IR35 determination falls to you as the end client, with 4 basic options:
1) Continue as 'contractors' but you tell them they are within IR35 and make the appropriate payroll withholdings.
2) Hire them as employees on permanent/FTC contracts and take the risk of having to make payouts in a downcycle.
3) Hire them on zero hours contracts, effectively a hybrid of the above.
4) Let them go and resource the work differently somehow.
.
.
.
5) Profit!
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