Contractors: IR35 & general discussion

[FredClogs]

Countdown said:

HMRC website said:

A worker is involved in off-payroll working when they work for a client through their own intermediary, often a personal service company (PSC), but would be an employee if they were providing their services directly.

If you're doing the same work as a permie then (afaics) there's no justification for arguing that you dont fall within IR35.

Is exactly this sort of gibberish that clearly shows the revenues misunderstanding of their own legislation and the reason why they've failed to win the majority of Ir35 cases that have gone to tribunal. Also evidenced by the nonsense of them giving exemptions to their own contract staff...

https://www.contractorweekly.com/contractor-column...

[Tim330]

anonymous said:

[redacted]

The agency or( client if direct) have to deduct employees and pay employer NI. They aren't allowed to take the employers NI out of the fee due to the contractor but I expect most will issue new contracts at reduced rates post April 2020 so the contractor will pick up the employers NIC.

[SOL111]

Tim330 said:

The agency or( client if direct) have to deduct employees and pay employer NI. They aren't allowed to take the employers NI out of the fee due to the contractor but I expect most will issue new contracts at reduced rates post April 2020 so the contractor will pick up the employers NIC.

They might try it but sod that.

New career time for me if clients start pulling a fast one.

[vindaloo79]

FredClogs said:

Is exactly this sort of gibberish that clearly shows the revenues misunderstanding of their own legislation and the reason why they've failed to win the majority of Ir35 cases that have gone to tribunal. Also evidenced by the nonsense of them giving exemptions to their own contract staff...

https://www.contractorweekly.com/contractor-column...

It would be nice if someone with an outside IR35 HMRC was willing to make the wording (as anonymised as necessary) public. It would surely provide something of a basis from which to start negotiating and writing new contracts come the renewals.

[deebs]

I contract currently, outside IR35 via ltd company. In the new world , what difference would being under an umbrella make instead of the ltd company?

Inside or outside, the umbrella run payroll and PAYE is paid? If operating under umbrella, why would the inside or outside question be relevant?

Sorry for the idiots query.

[Pit Pony]

Countdown said:

If flexibility is the key factor for Employers why not just employ people on Fixed Term Contracts (or even on 1 week notice periods)?

This will come down to a financial decision - a balance between what day rates the Contractor can charge and how much extra tax they will face vs the amount they can earn under PAYE

I'd be happy to work under a fixed PAYE contract, with a one week notice period, as long as my net income was close to what it has been for the last 10 years.
But given that I've worked away from.home living in temporary accommodation during the week, and travelled an average of 20k a year to service those contracts, there is no way that any of my clients are going to offer the salary that would fit my aspirations.

None of my hiring managers have ever heard of IR35 and haven't the management skill to deal with contractors differently.

I'm just putting my head in the sand......

No really.

[hyphen]

swamp said:

I'm not sure what everyone is worried about. HMRC advertise their own contract roles outside of IR35...!

The big banks and telcos will do the same. The agencies will buy an insurance policy and contractors will carry on as normal.

+1

London has one of the largest financial centers in the world, and it's already under pressure from other countries due to Brexit. HMRC won't be allowed by the government to hit it too hard.

HR in large companies will put out some web based compliance courses for their management, and will ensure the correct boxes are ticked.

The large recruitment companies will also not be afraid of HMRC and get guidance on what they need to follow - as a minimum.

But hopefully it will reduce the non clearly project based contractors. I imagine a lot will be pressured, and cave in, to becoming employees.

Edited by hyphen on Wednesday 17th July 22:37

[mikef]

ChevronB19 said:

Totally genuine question, asked purely from my own ignorance - what’s the problem with this?

My own company in the City, massive global blue chip, where I started as an interim manager (aka contractor), today communicated zero contractors from the date this comes in. I suspect we won’t be alone

That’s likely to be an issue for some contractors

[troika]

Tim330 said:

manracer said:

Can anyone explain this to me please, I appear to of missed this aspect?

I also can't wrap my head around how IR35 expects me to be treated similar to an employee with regards to employee tax, yet also pay CT et al?

For contracts caught by ir35 the client deducts the tax and NI as if it were paying staff. They then pay your ltd nett of tax and NI which you can then pay to yourself. At the year end your accountant will account for the tax already paid for this contract so you won't pay tax twice. There won't be any CT to pay on an ir35 caught contact as all the money should be paid as salary so no profit for CT.

Presumably you can still whack £40K a year into a pension with full tax relief?

[hyphen]

mikef said:

ChevronB19 said:

Totally genuine question, asked purely from my own ignorance - what’s the problem with this?

My own company in the City, massive global blue chip, where I started as an interim manager (aka contractor), today communicated zero contractors from the date this comes in. I suspect we won’t be alone

That’s likely to be an issue for some contractors

Very surprised to hear of this total ban,

What do you see happening? Are you offering contractors permie roles, or hiring on mass.

How will you cope with the loss of some of your best staff?

[98elise]

troika said:

Tim330 said:

manracer said:

Can anyone explain this to me please, I appear to of missed this aspect?

I also can't wrap my head around how IR35 expects me to be treated similar to an employee with regards to employee tax, yet also pay CT et al?

For contracts caught by ir35 the client deducts the tax and NI as if it were paying staff. They then pay your ltd nett of tax and NI which you can then pay to yourself. At the year end your accountant will account for the tax already paid for this contract so you won't pay tax twice. There won't be any CT to pay on an ir35 caught contact as all the money should be paid as salary so no profit for CT.

Presumably you can still whack £40K a year into a pension with full tax relief?

Not as a company contribution though, unless the umbrella lets you, As I understand iit some expect you to pay it into their scheme.

I'm glad I'm getting out!!

[troika]

98elise said:

troika said:

Tim330 said:

manracer said:

Can anyone explain this to me please, I appear to of missed this aspect?

I also can't wrap my head around how IR35 expects me to be treated similar to an employee with regards to employee tax, yet also pay CT et al?

For contracts caught by ir35 the client deducts the tax and NI as if it were paying staff. They then pay your ltd nett of tax and NI which you can then pay to yourself. At the year end your accountant will account for the tax already paid for this contract so you won't pay tax twice. There won't be any CT to pay on an ir35 caught contact as all the money should be paid as salary so no profit for CT.

Presumably you can still whack £40K a year into a pension with full tax relief?

Not as a company contribution though, unless the umbrella lets you, As I understand iit some expect you to pay it into their scheme.

I'm glad I'm getting out!!

Surely it would be outrageous not to allow legitimate pension contributions into a SIPP? Mind you, I’d put nothing past them. We’re just planning our road trips for next spring now the better half will pack it in!

[Mr Pointy]

I'm staggered at the number of posters who are presumably working via their own limited companies & don't have a clue about the impact these changes are going to make, nor have any understanding of even the basics of what working inside IR35 means.

What have your accountants been doing for the last year? Surely they have warned you?

For those about to be affected maybe start reading some of the articles on this site:
https://www.contractoruk.com/

[ninja-lewis]

hyphen said:

swamp said:

I'm not sure what everyone is worried about. HMRC advertise their own contract roles outside of IR35...!

The big banks and telcos will do the same. The agencies will buy an insurance policy and contractors will carry on as normal.

+1

London has one of the largest financial centers in the world, and it's already under pressure from other countries due to Brexit. HMRC won't be allowed by the government to hit it too hard.

HR in large companies will put out some web based compliance courses for their management, and will ensure the correct boxes are ticked.

The large recruitment companies will also not be afraid of HMRC and get guidance on what they need to follow - as a minimum.

But hopefully it will reduce the non clearly project based contractors. I imagine a lot will be pressured, and cave in, to becoming employees.

Edited by hyphen on Wednesday 17th July 22:37

The Government reckons that applying the public sector rules to the entire private sector will capture £1.3 billion by 2022-23. To put that in perspective the 8% Bank Surcharge on Corporation Tax was introduced a few years ago and in 2017-18 raised £1.8 billion from major banks alone.

Businesses will be wary of the Criminal Finances Act (Corporate Criminal Offence) and the Senior Accounting Officer regime, which makes the designated person personally liable to fines if the firm. Non-Compliance with Laws and Regulations (NCLAR) has further implications for regulated firms. Banks being pulled up for non-compliance is not a good look these days in front of investors, customers, the press or Parliament these days.

A number of major institutions (HSBC, Morgan Stanley, M&G Investment as recent high profile examples) have already stated that they will cease to engage limited company contractors in the coming months.

[hyphen]

ninja-lewis said:

The Government reckons that applying the public sector rules to the entire private sector will capture £1.3 billion by 2022-23. To put that in perspective the 8% Bank Surcharge on Corporation Tax was introduced a few years ago and in 2017-18 raised £1.8 billion from major banks alone.

Businesses will be wary of the Criminal Finances Act (Corporate Criminal Offence) and the Senior Accounting Officer regime, which makes the designated person personally liable to fines if the firm. Non-Compliance with Laws and Regulations (NCLAR) has further implications for regulated firms. Banks being pulled up for non-compliance is not a good look these days in front of investors, customers, the press or Parliament these days.

A number of major institutions (HSBC, Morgan Stanley, M&G Investment as recent high profile examples) have already stated that they will cease to engage limited company contractors in the coming months.

Just googled HSBC, they are threatening to terminate contactors who don't go permie but haven't yet done so. Only way you can tell if they are serious is when they do let em go, as currently the threat of it means they will sign them on favourable terms.

HSBC have also said they will keep them if they work via a 3rd party , so some workaround already in progress?


https://www.contractoruk.com/news/0014079hsbc_stop...

Also RBS seems more willing to work with the new rules, and won't be the only one...

https://www.contractoruk.com/news/0014155royal_ban...

Edited by hyphen on Wednesday 17th July 23:43

[bga]

ninja-lewis said:

A number of major institutions (HSBC, Morgan Stanley, M&G Investment as recent high profile examples) have already stated that they will cease to engage limited company contractors in the coming months.

I’m also in FS and we are moving away from contractors in all locations where we have a significant technology presence. This includes UK but much larger number in US & Europe.

We either convert contractors or replace with new perms. We are about 18 months into it now and there has been no detrimental effect (actually the opposite, based on current metrics - though they are imprecise) to losing the contractors who didn’t convert.

[hyphen]

bga said:

I’m also in FS and we are moving away from contractors in all locations where we have a significant technology presence. This includes UK but much larger number in US & Europe.

We either convert contractors or replace with new perms. We are about 18 months into it now and there has been no detrimental effect (actually the opposite, based on current metrics - though they are imprecise) to losing the contractors who didn’t convert.

Has the number of sick days gone up

[Pit Pony]

ninja-lewis said:

The Government reckons that applying the public sector rules to the entire private sector will capture £1.3 billion by 2022-23. To put that in perspective the 8% Bank Surcharge on Corporation Tax was introduced a few years ago and in 2017-18 raised £1.8 billion from major banks alone.

Businesses will be wary of the Criminal Finances Act (Corporate Criminal Offence) and the Senior Accounting Officer regime, which makes the designated person personally liable to fines if the firm. Non-Compliance with Laws and Regulations (NCLAR) has further implications for regulated firms. Banks being pulled up for non-compliance is not a good look these days in front of investors, customers, the press or Parliament these days.

A number of major institutions (HSBC, Morgan Stanley, M&G Investment as recent high profile examples) have already stated that they will cease to engage limited company contractors in the coming months.

What about BAe Systems, Rolls Royce Plc, Collins Aerospace, JLR, GE, Siemens? ASSYSTEM?
Bae at Barrow are looking for 30 Manufacturing Engineers on Contract, right now. If they don't get them, I would assume that they may not be able to keep to the schedule for delivering next generation newclearsubboats. Being Engineering companies they will be playing their cards close to their chests.

I've suggested to a few other Engineering contractors that we merge 10 or 15 LTD companies into one, and go into April with a whole new business plan. Not one has expressed an interest at all.

If you look at it now.
We send CVs not brochures.
We attend interviews not sales meetings.
We find it difficult to do work off site (often due to security issues, often due to needing to have access to the shop floor)
We nearly always use IT of the client. I've been using my own laptop about 20% of the time, but i can't use it to get information off the clients servers.
They get stty if you don't work the hours they work.
They try to manage you like permies.
Hiring managers don't realise you could substitute you for someone similar.

We need to work as the consultants we aspire to be.
The only way to do that. Is
Get rid of CVs
Stop having interviews.
Offer fixed price work packages
Swap who is on site.
Do more work off site

Or

Go paye and insist on a different rate. (Higher)

[mikef]

hyphen said:

What do you see happening? Are you offering contractors permie roles, or hiring on mass.

Hiring en masse. A high proportion of candidates are looking to give up contracting

hyphen said:

How will you cope with the loss of some of your best staff?

They really aren’t, they are typically brought in as staff augmentation for specific 1-off projects, then BAU is in-house, on- and off-shore

[SOL111]

mikef said:

My own company in the City, massive global blue chip, where I started as an interim manager (aka contractor), today communicated zero contractors from the date this comes in. I suspect we won’t be alone

That’s likely to be an issue for some contractors

Interesting.

How are these companies going to manage resource now?

It wouldn't work in aerospace. Right now there are no major projects running, hence not many contractors. If companies like Airbus hired permanent staff during peak periods, they'd have major redundancy issues in periods like now.

It's something that used to happen before contracting and they suffered as a result. After all, who wants to work under a revolving door environment when you have mortgages to pay?

I'm sure there's rationale but am wondering if these blue chip companies you're talking about really needed contractors in the first place, if they're happy to drop it from their resource plans.