Contractors: IR35 & general discussion

[Gecko1978]

oh and compliance came back and advised don't do the training....funny as training is so everyone in the industry avoids commuting insider trading guess its not as important now.

[LM24Nut]

I've been contracting in London since 2013 and in IT. I'm a Ltd Co contractor and my current day rate at my gig is £600.

I may get trashed here, but the following blurb from me is how I understand contracting with regards to date rates.

In the main, a contractor should not cost an "employer", overall, more than his/her permie equivalent. A permie's cost is broken down as:

- Salary
- Training
- Holiday pay
- Sick pay allowance
- Benefits such as Bupa, Gym memberships...blah...whatever you can remember from your permie days
- Pension contribution
- Employer NI contribution
- HR overheads
- Payroll overheads
- Insurance overheads

My understanding is that all of the above is bundled up as a fixed day rate and that rate is what's offered to the contractor. The contractor is then left to deal with his/her tax/insurance/payroll affairs. So, if your permie equivalent is on 70k per year salary then it's most likely that his/her overall cost to the business is over 100k per year.

Indeed, we like to compare ourselves with plumbers etc. but those businesses/tradesmen do not follow the permie rules of their business customers, and not to mention that such tradesmen would have many customers.

So now that most of you hate me, you can hate me more based on the next bit of blurb from me.

We, as contractors, often state that we have no rights and can be dismissed at a moments notice and so IR35 is unfair. But that "risk" is part of the day rate, the privilege for the Client to get rid of you at a moment's notice is part of the day rate - no HR overhead.

The way I look at it, most of us are carrying out the same duties as permies and follow the permie rules laid down by the client. I'm surprised that it has taken this long for .gov.uk to clamp down on it all.

My opinion is that many contractors will shift from the Ltd Co PSC arrangement and simply carry on via a brolly. I've calculated my hit, if it comes, but I'll still clear way more than the permie equivalent.

I suspect the losers will be the accountancy firms and .gov.uk who will no longer benefit from free VAT collection, Corp Tax and SA tax (which includes tax on divis).

Edited by LM24Nut on Friday 20th September 18:35

[Countdown]

If you’re “taking a hit” then somebody, somewhere, is getting more. And that person will be getting taxed on it. So gov.uk won’t be losing out.

[anonymous-user]

LM24Nut said:

I've been contracting in London since 2013 and in IT. I'm a Ltd Co contractor and my current day rate at my gig is £600.

I may get trashed here, but the following blurb from me is how I understand contracting with regards to date rates.

In the main, a contractor should not cost an "employer", overall, more than his/her permie equivalent. A permie's cost is broken down as:

- Salary
- Training
- Holiday pay
- Sick pay allowance
- Benefits such as Bupa, Gym memberships...blah...whatever you can remember from your permie days
- Pension contribution
- Employer NI contribution
- HR overheads
- Payroll overheads
- Insurance overheads

My understanding is that all of the above is bundled up as a fixed day rate and that rate is what's offered to the contractor. The contractor is then left to deal with his/her tax/insurance/payroll affairs. So, if your permie equivalent is on 70k per year salary then it's most likely that his/her overall cost to the business is over 100k per year.

Indeed, we like to compare ourselves with plumbers etc. but those businesses/tradesmen do not follow the permie rules of their business customers, and not to mention that such tradesmen would have many customers.

So now that most of you hate me, you can hate me more based on the next bit of blurb from me.

We, as contractors, often state that we have no rights and can be dismissed at a moments notice and so IR35 is unfair. But that "risk" is part of the day rate, the privilege for the Client to get rid of you at a moment's notice is part of the day rate - no HR overhead.

The way I look at it, most of us are carrying out the same duties as permies and follow the permie rules laid down by the client. I'm surprised that it has taken this long for .gov.uk to clamp down on it all.

My opinion is that many contractors will shift from the Ltd Co PSC arrangement and simply carry on via a brolly. I've calculated my hit, if it comes, but I'll still clear way more than the permie equivalent.

I suspect the losers will be the accountancy firms and .gov.uk who will no longer benefit from free VAT collection, Corp Tax and SA tax (which includes tax on divis).

Edited by LM24Nut on Friday 20th September 18:35

From what you describe, you sound like you’re about to take a 25-30% pay cut on your gig. So at best you’ll be earning about the same as a permie, on your gig. Assuming there are gigs for you to apply for and you get one. You may spend 6m with no gig and instead watch daytime TV. Wishing you’d gone permie. Good luck.

[Gecko1978]

Countdown said:

Gecko - If it's a BAU role then the "Contractor" isn't constantly looking for work so would you agree that these types of roles are within the scope of IR35?

It would depend on the context, I do project work which is not BAU, but for example you might do a maternity cover role that would be BAU were it not a short term, but unlike a project the work I suppose is repeatable BAU stuff. Does the fact a perm person does it make it inside IR35. I don't know, but I stopped doing BAU work over 10 years ago to work on projects as the variety was more interesting.

[wombleh]

deebs said:

I work as a project manager in change /IT, last few years as a contractor, in the Edinburgh area. Been on the look out for a new contract for a while but appears the market is very very slow.

Is anyone else looking? What's your experience?

Are you looking just around the Edinburgh area? Interested as I was looking at moving up there but only having one city in commuting distance seemed to limit opportunities a bit, which I guess is what you're seeing.

Still seem to be a lot of roles advertised down south.

[deebs]

wombleh said:

deebs said:

I work as a project manager in change /IT, last few years as a contractor, in the Edinburgh area. Been on the look out for a new contract for a while but appears the market is very very slow.

Is anyone else looking? What's your experience?

Are you looking just around the Edinburgh area? Interested as I was looking at moving up there but only having one city in commuting distance seemed to limit opportunities a bit, which I guess is what you're seeing.

Still seem to be a lot of roles advertised down south.

Yes to be fair I'm only looking at one city. I've a couple of alerts set up on sites that automatically have a +50 mile range which means they show Glasgow, and a few more contract adverts seem to have shown up there, relatively that is.

[LM24Nut]

wormus said:

From what you describe, you sound like you’re about to take a 25-30% pay cut on your gig. So at best you’ll be earning about the same as a permie, on your gig. Assuming there are gigs for you to apply for and you get one. You may spend 6m with no gig and instead watch daytime TV. Wishing you’d gone permie. Good luck.

Nope, read what I wrote. Good luck.

[visitinglondon]

LM24Nut said:

wormus said:

From what you describe, you sound like you’re about to take a 25-30% pay cut on your gig. So at best you’ll be earning about the same as a permie, on your gig. Assuming there are gigs for you to apply for and you get one. You may spend 6m with no gig and instead watch daytime TV. Wishing you’d gone permie. Good luck.

Nope, read what I wrote. Good luck.

Indeed that is a strange conclusion.

But from someone who seems to have an agenda, so should perhaps be ignored.

[GT03ROB]

LM24Nut said:

I've been contracting in London since 2013 and in IT. I'm a Ltd Co contractor and my current day rate at my gig is £600.

I may get trashed here, but the following blurb from me is how I understand contracting with regards to date rates.

In the main, a contractor should not cost an "employer", overall, more than his/her permie equivalent. A permie's cost is broken down as:

- Salary
- Training
- Holiday pay
- Sick pay allowance
- Benefits such as Bupa, Gym memberships...blah...whatever you can remember from your permie days
- Pension contribution
- Employer NI contribution
- HR overheads
- Payroll overheads
- Insurance overheads

My understanding is that all of the above is bundled up as a fixed day rate and that rate is what's offered to the contractor. The contractor is then left to deal with his/her tax/insurance/payroll affairs. So, if your permie equivalent is on 70k per year salary then it's most likely that his/her overall cost to the business is over 100k per year.

Indeed, we like to compare ourselves with plumbers etc. but those businesses/tradesmen do not follow the permie rules of their business customers, and not to mention that such tradesmen would have many customers.

So now that most of you hate me, you can hate me more based on the next bit of blurb from me.

We, as contractors, often state that we have no rights and can be dismissed at a moments notice and so IR35 is unfair. But that "risk" is part of the day rate, the privilege for the Client to get rid of you at a moment's notice is part of the day rate - no HR overhead.

The way I look at it, most of us are carrying out the same duties as permies and follow the permie rules laid down by the client. I'm surprised that it has taken this long for .gov.uk to clamp down on it all.

My opinion is that many contractors will shift from the Ltd Co PSC arrangement and simply carry on via a brolly. I've calculated my hit, if it comes, but I'll still clear way more than the permie equivalent.

I suspect the losers will be the accountancy firms and .gov.uk who will no longer benefit from free VAT collection, Corp Tax and SA tax (which includes tax on divis).

Edited by LM24Nut on Friday 20th September 18:35

It may vary from industry to industry..... but I think that is a fair assessment of the situation in most.

[98elise]

Gecko1978 said:

zippy3x said:

rsbmw said:

Regardless of how hard you work to make it appear that you are a business providing a service, you are ultimately a guy hired for his personal skillset just like employees.

So just like a plumber, or chippy or plasterer?

oh I also have more than 1 client at one time its fking tiring to be honest but if that is what it takes to add to the outside IR35 status happy to.

I hear alot of this perm rates comparable, I don't know where the industry is where this is the case but I see perm roles at the 60 to 90k range v my day rate at around twice that. I just don't see it as comparable where I get 55% of 90k or say 50% of 180k

Is that just the base salary though? In my permie days I would get about 6 weeks paid holiday, a car allowance, pension, bonus, a training allowance, share options, sick leave etc.

My salary vs day rate is also double, but the total package brings that close, especially when you factor in any downtime.

[Countdown]

LM24Nut said:

I've been contracting in London since 2013 and in IT. I'm a Ltd Co contractor and my current day rate at my gig is £600.

I may get trashed here, but the following blurb from me is how I understand contracting with regards to date rates.

In the main, a contractor should not cost an "employer", overall, more than his/her permie equivalent. A permie's cost is broken down as:

- Salary
- Training
- Holiday pay
- Sick pay allowance
- Benefits such as Bupa, Gym memberships...blah...whatever you can remember from your permie days
- Pension contribution
- Employer NI contribution
- HR overheads
- Payroll overheads
- Insurance overheads

Edited by LM24Nut on Friday 20th September 18:35

How can a Contractor have a “permie equivalent”? I thought the two roles were substantially different which meant that one HAD to be done on a self-employed basis and the other on an “Employee” basis?

LM24’s post seems to suggest that, yes, there can be similar roles, however the Contractor merits a higher day rate and other benefits because he chooses to sacrifice a range of benefits the Employer provides for Employees, as well as saving the Employer various employment costs.

[anonymous-user]

visitinglondon said:

Indeed that is a strange conclusion.

But from someone who seems to have an agenda, so should perhaps be ignored.

I’m only teasing and I certainly don’t have an agenda. I’m only trying to help.

The best explanation I’ve found is here

https://www.itcontracting.com/how-to-be-ir35-compl...

All factors are considered but the main one is control and direction. Put simply, if you go into an office every day and are given work to do, you will be inside IR35, same of you are backfilling a perm role.

[GT03ROB]

Countdown said:

How can a Contractor have a “permie equivalent”? I thought the two roles were substantially different which meant that one HAD to be done on a self-employed basis and the other on an “Employee” basis?

LM24’s post seems to suggest that, yes, there can be similar roles, however the Contractor merits a higher day rate and other benefits because he chooses to sacrifice a range of benefits the Employer provides for Employees, as well as saving the Employer various employment costs.

Remarkably easily. In the UK we use contractors alongside staff personnel. There is no difference between the two based on day to day work. The only difference is in how they are paid & how they are administered (eg: training, "career' planning, etc..).

[Countdown]

GT03ROB said:

Countdown said:

How can a Contractor have a “permie equivalent”? I thought the two roles were substantially different which meant that one HAD to be done on a self-employed basis and the other on an “Employee” basis?

LM24’s post seems to suggest that, yes, there can be similar roles, however the Contractor merits a higher day rate and other benefits because he chooses to sacrifice a range of benefits the Employer provides for Employees, as well as saving the Employer various employment costs.

Remarkably easily. In the UK we use contractors alongside staff personnel. There is no difference between the two based on day to day work. The only difference is in how they are paid & how they are administered (eg: training, "career' planning, etc..).

Isn't that exactly the thing that IR35 is supposed to prevent?

[GT03ROB]

Countdown said:

GT03ROB said:

Countdown said:

How can a Contractor have a “permie equivalent”? I thought the two roles were substantially different which meant that one HAD to be done on a self-employed basis and the other on an “Employee” basis?

LM24’s post seems to suggest that, yes, there can be similar roles, however the Contractor merits a higher day rate and other benefits because he chooses to sacrifice a range of benefits the Employer provides for Employees, as well as saving the Employer various employment costs.

Remarkably easily. In the UK we use contractors alongside staff personnel. There is no difference between the two based on day to day work. The only difference is in how they are paid & how they are administered (eg: training, "career' planning, etc..).

Isn't that exactly the thing that IR35 is supposed to prevent?

Yes, but much as the contractors maintain they are businesses the vast majority are not they are exactly as I describe.

[Countdown]

GT03ROB said:

Yes, but much as the contractors maintain they are businesses the vast majority are not they are exactly as I describe.

Seems like we're in violent agreement

[Countdown]

Briefing from RSM on new rules

[zippy3x]

Countdown said:

Briefing from RSM on new rules

Doing my good deed for the day here. If you're a contractor, save yourself an hour of wrist slashing boredom and pass on this video.

This video is all about the labour supply chain and organisations responsibilities therein. They briefly touch on IR35 status determination, but it consists of "put it in the CEST tool, by the way the CEST tool is rubbish"

Edited by zippy3x on Tuesday 24th September 18:52

[deebs]

zippy3x said:

Doing my good deed for the day here. If you're a contractor, save yourself an hour of wrist slashing boredom and pass on this video.

This video is all about the labour supply chain and organisations responsibilities therein. They briefly touch on IR35 status determination, but it consists of "put it in the CEST tool, by the way the CEST tool is rubbish"

Edited by zippy3x on Tuesday 24th September 18:52

I had a look at the CEST tool again the other day based on a new contract I'm trying to *ahem* win. After a couple of questions , it asked if the client would be able in any circumstances reject a substitute. I answered no, and then it asked something along the lines of: if a substitute was to be used, who would pay the substitute: my business, or the client/agency. It had an additional bit of info that said, if it's the client /agency the intermediary legislation (IR35) applies to this engagement.

I thought that's a clever wee nudge , you can smash most reviews out the park with that, will they accept a subbie, yes, then who will pay the subbie you or the client. 3 questions and your goose is cooked.