Contractors: IR35 & general discussion

[anonymous-user]

hyphen said:

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?

HSBC and NHS have gone the same way because it’s just too hard to make the distinction between who is in and who is out. The liability of the tax bill falls on the employer which for large organisations is millions. No CFO wants that so it’s easier just to say no.

Cest tool centres around two main areas

1. Substitution
2. Control and direction

In layman’s terms:

If you as a contractor can find a substitute for yourself and the client will not challenge you’re ok. They cannot for example interview the replacement.

If you can choose what hours you work and where you work and are paid to achieve an objective you are also ok. If you have to be at a desk and are handed work, you are not.

Believe me HMRC are serious about this. It doesn’t come down to fault or opinion, the guidelines maybe woolly but they are clear in their intent. If you look like a perm, you are inside. Lifestyle choices for being a contractor don’t come into it.

Edited by anonymous-user on Thursday 18th July 07:23

[Countdown]

wormus said:

HSBC and NHS have gone the same way because it’s just too hard to make the distinction between who is in and who is out. The liability of the tax bill falls on the employer which for large organisations is millions. No CFO wants that so it’s easier just to say no.

100% this, on top of which, IIRC, HMT levies fines on Public Bodies if they’ve not complied with the Off-Payroll Guidance. It’s something along the lines of 5x the amount they have paid the Contractor.

[Tim330]

troika said:

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!

I'm sure I read that it will no longer be possible to make a company contribution to your sipp on ir35 caught contracts post April 2020. You can still make a personal contribution but then you only get it the tax back on self assessment not the employees NIC. You may be able to use the umbrella scheme to contribute to a pension before NIC deductions but I certainly won't be opening another pension scheme.

[BIG MOLE]

One of the most concerning things to me is how ignorant most clients and their HR departments are about IR35 in general.

I am currently negotiating a new contract with a an engineering client and when I pointed out that the contract they had presented me with pretty much made me an employee, their response was something along the lines of “IR what”? This, from a client who I know has traditionally used contractors a lot.

Whilst discussing what changes needed making to the contract, I asked them what they thought of the changes coming next year? They didn’t have a clue what I was talking about.

This is not a little backstreet company. This is a very successful offshore engineering specialist that has been around for decades.

[essayer]

From a financial services perspective we’ve massively dropped the number of contractors, especially U.K. - many have gone permanent but a few are holding out, suspect they’ll be done once the projects they work on are in a stable state.

Don’t forget the bigger picture of FS and FS IT in a big push to reduce costs right now. all the major players are reducing infra in favour of cloud compute, and preferring off-the-shelf/SaaS products to building their own (even for the most critical functions).

Licence a product or pay a development team £2m/yr?

[troika]

Tim330 said:

troika said:

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!

I'm sure I read that it will no longer be possible to make a company contribution to your sipp on ir35 caught contracts post April 2020. You can still make a personal contribution but then you only get it the tax back on self assessment not the employees NIC. You may be able to use the umbrella scheme to contribute to a pension before NIC deductions but I certainly won't be opening another pension scheme.

Amazing how hostile they are making this environment. I’ve no issue with it where it’s clearly a sham but for genuine contractors it’s harsh. For some of the most experienced (and best) people it is the catalyst for early retirement. My wife will finish in December. Some really great people she knows are also retiring early (late 40’s / early 50’s). She would happily carry on, she is outside 35, doesn’t want a permanent contract as she values her flexibility and lack of politics but it seems clients will automatically lump everyone inside 35 whatever the actual position, as they don’t want any possible risk or exposure.

[Countdown]

troika said:

Amazing how hostile they are making this environment. I’ve no issue with it where it’s clearly a sham but for genuine contractors it’s harsh. For some of the most experienced (and best) people it is the catalyst for early retirement. My wife will finish in December. Some really great people she knows are also retiring early (late 40’s / early 50’s). She would happily carry on, she is outside 35, doesn’t want a permanent contract as she values her flexibility and lack of politics but it seems clients will automatically lump everyone inside 35 whatever the actual position, as they don’t want any possible risk or exposure.

What do people define as "genuine contractors" as opposed to people who are the same as "agency temps"?

[SOL111]

Countdown said:

What do people define as "genuine contractors" as opposed to people who are the same as "agency temps"?

I buy my own hardware, analysis software, work from home and do a job that noone at my client's site can do. I consult on matters that are outside of my client's expertise.

I only visit my client for an occasional meeting. I can choose how and when to do the work and often pass work onto an associate if my other work has priority.

Additionally, if I don't do a good job and my client doesn't like it, I have to put it right at my own expense.

[troika]

SOL111 said:

I buy my own hardware, analysis software, work from home and do a job that noone at my client's site can do. I consult on matters that are outside of my client's expertise.

I only visit my client for an occasional meeting. I can choose how and when to do the work and often pass work onto an associate if my other work has priority.

Additionally, if I don't do a good job and my client doesn't like it, I have to put it right at my own expense.

That’s for starters. You also run your own company with (not inconsiderable) associated cost, regulation and administration. Can’t see many agency bods doing all that.

[Pit Pony]

BIG MOLE said:

One of the most concerning things to me is how ignorant most clients and their HR departments are about IR35 in general.

I am currently negotiating a new contract with a an engineering client and when I pointed out that the contract they had presented me with pretty much made me an employee, their response was something along the lines of “IR what”? This, from a client who I know has traditionally used contractors a lot.

Whilst discussing what changes needed making to the contract, I asked them what they thought of the changes coming next year? They didn’t have a clue what I was talking about.

This is not a little backstreet company. This is a very successful offshore engineering specialist that has been around for decades.

Based on the fact that I'm about to take on a major financial commitment, I've just done the sums, on a contract working for a subsidiary of a well known East Midlands Aerospace company.
Taking all my travel into account, if I went permie on current rate it would cost client £6k in NI plus the same again in pension, and i would be worse off by £6k.

The problem is that up to now that permie salary has been lower by at least £15K.

I have however started the conversation with my hiring manager's boss, about his understanding of the new rules.
He knows nothing, but i guess will go and do his own investigation.
What I think will happen is that suddenly in April 2020 the whole engineering contractor market will explode into turmoil. Big Engineering firms will be faced with massive disruption.
THE SOLUTION in the short term.for me is clear. If client deems contract is inside IR 35 I hold out for more money or suck it up.
In the long term this may force me to overcome some procrastination issues I've had about changing the way I work.

[Pit Pony]

SOL111 said:

Countdown said:

What do people define as "genuine contractors" as opposed to people who are the same as "agency temps"?

I buy my own hardware, analysis software, work from home and do a job that noone at my client's site can do. I consult on matters that are outside of my client's expertise.

I only visit my client for an occasional meeting. I can choose how and when to do the work and often pass work onto an associate if my other work has priority.

Additionally, if I don't do a good job and my client doesn't like it, I have to put it right at my own expense.

It's how to translate the clients real needs into a contract that works like that, that is where most engineering contractors would struggle. ????????????????????????????????????????

What the hiring manager really wanted was another member of staff, but he only needs them for a few months, because of an exceptional change in workload. Or there's a headcount freeze. Or he can't find a permie with the skill set he needs quickly enough. I swear that my current contract was gained on a combination of having the skills. But also that I could start within 2 weeks. I kicked the contract back and demanded a max of one week notice on either side. To allow me to jump ship quickly if i wanted to.

[Countdown]

SOL111 said:

Countdown said:

What do people define as "genuine contractors" as opposed to people who are the same as "agency temps"?

I buy my own hardware, analysis software, work from home and do a job that noone at my client's site can do. I consult on matters that are outside of my client's expertise.

I only visit my client for an occasional meeting. I can choose how and when to do the work and often pass work onto an associate if my other work has priority.

Additionally, if I don't do a good job and my client doesn't like it, I have to put it right at my own expense.

So that suggests you'd meet the "Control and direction" aspects highlighted in Wormus' email above. I assume you could also subcontract the work to others.

In which case I cant see how you would fall inside IR35?

[SOL111]

Countdown said:

SOL111 said:

Countdown said:

What do people define as "genuine contractors" as opposed to people who are the same as "agency temps"?

I buy my own hardware, analysis software, work from home and do a job that noone at my client's site can do. I consult on matters that are outside of my client's expertise.

I only visit my client for an occasional meeting. I can choose how and when to do the work and often pass work onto an associate if my other work has priority.

Additionally, if I don't do a good job and my client doesn't like it, I have to put it right at my own expense.

So that suggests you'd meet the "Control and direction" aspects highlighted in Wormus' email above. I assume you could also subcontract the work to others.

In which case I cant see how you would fall inside IR35?

Exactly.

Fortunately my client is considered small so won't be affected but if they were larger then I could fall foul, if the client didn't know how to deal with the IR35 thing and got scared of HMRC's bully tactics.

[And then she]

vindaloo79 said:

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.

BIG MOLE said:

One of the most concerning things to me is how ignorant most clients and their HR departments are about IR35 in general.

I am currently negotiating a new contract with a an engineering client and when I pointed out that the contract they had presented me with pretty much made me an employee, their response was something along the lines of “IR what”? This, from a client who I know has traditionally used contractors a lot.

Whilst discussing what changes needed making to the contract, I asked them what they thought of the changes coming next year? They didn’t have a clue what I was talking about.

This is not a little backstreet company. This is a very successful offshore engineering specialist that has been around for decades.

The contract wording is relatively unimportant and can be looked past - it's the actual conduct between the 'contractor' and the client that makes the difference.

Edited by And then she on Thursday 18th July 14:26

[egomeister]

SOL111 said:

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.

Contractors?

[And then she]

SOL111 said:

Countdown said:

What do people define as "genuine contractors" as opposed to people who are the same as "agency temps"?

I buy my own hardware, analysis software, work from home and do a job that noone at my client's site can do. I consult on matters that are outside of my client's expertise.

I only visit my client for an occasional meeting. I can choose how and when to do the work and often pass work onto an associate if my other work has priority.

Additionally, if I don't do a good job and my client doesn't like it, I have to put it right at my own expense.

From your description, you are definitely a contractor, conducting a business-to-business relationship with your clients, so have nothing to worry about from the forthcoming changes.

The people who will see a change, and quite rightly so, are the IT/HR/etc. bums on seats in disguised employment. I would expect that several of the more outraged posters on this thread fall squarely within this description.

For context, I work in a large white-collar business which has 50-100 "contractors" working in the UK offices, and I'm (partly) responsible for applying the new IR35 rules to this population. I'm expecting at least 90% to fall within IR35 and we'll either offer employment or instruct the agency to deduct PAYE. We've not finalised our remuneration strategy yet, but any employments would need to fit within existing paybands and there is very little appetite to increase contract rates to 'compensate' anyone who remains as a contractor.

[hyphen]

egomeister said:

SOL111 said:

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.

Contractors?

[Olivera]

And then she said:

The people who will see a change, and quite rightly so, are the IT/HR/etc. bums on seats in disguised employment. I would expect that several of the more outraged posters on this thread fall squarely within this description.

For context, I work in a large white-collar business which has 50-100 "contractors" working in the UK offices, and I'm (partly) responsible for applying the new IR35 rules to this population. I'm expecting at least 90% to fall within IR35 and we'll either offer employment or instruct the agency to deduct PAYE.

What qualifies you to make that employment status assessment? Genuine question. Only an assessment made by an employment law solicitor is satisfactory.

[hyphen]

And then she said:

From your description, you are definitely a contractor, conducting a business-to-business relationship with your clients, so have nothing to worry about from the forthcoming changes.

The people who will see a change, and quite rightly so, are the IT/HR/etc. bums on seats in disguised employment. I would expect that several of the more outraged posters on this thread fall squarely within this description.

For context, I work in a large white-collar business which has 50-100 "contractors" working in the UK offices, and I'm (partly) responsible for applying the new IR35 rules to this population. I'm expecting at least 90% to fall within IR35 and we'll either offer employment or instruct the agency to deduct PAYE. We've not finalised our remuneration strategy yet, but any employments would need to fit within existing paybands and there is very little appetite to increase contract rates to 'compensate' anyone who remains as a contractor.

If these are contractors you are wanting to hand perm roles to, then they were not hired on projects with a limited scope, but working as BAU.

It's this IR35 abuse growth by employers such as the one you work for that has led to the crack down.

So why did your employer choose contractors over permies? What advantages did they see, that they will now be losing.

[And then she]

Olivera said:

What qualifies you to make that employment status assessment? Genuine question. Only an assessment made by an employment law solicitor is satisfactory.