Opinions on IR35 and its impact on contractors?

[paul789]

Old vs young, north vs south, leave vs remain, contractors vs permies - this kind of squabbling really takes the focus off the really important issue: our totally inept political class.

Personally, I’ve experienced a lot of automatic contracor compempt from permies. The demand side of the equation is usually ignored.

[cerbfan]

anonymous said:

[redacted]

That's not the main point though is it, other reasons to be a contractor at least for me is the ability to move around and work for various different clients instead of being stuck within the one work place for one company. Able to take a holiday whenever I want and not have to worry about having to much or to little time off. Don't get lumbered with the hassle of appraisals and all the other mandatory company meetings etc that employees have to go through. Basically just get left to get on with your work. Also have the freedom to do what you like with your income instead of having to put a mandated amount into a pension and get part of it in the form of a company car etc.

Obviously there are tax and rate advantages however this goes towards accountants fee's, insurances, putting money away in case you're off sick, holiday pay etc etc. I don't see how it can be viable to carry on being a contractor if I have to go PAYE.

I also don't see how it will work either when I do a lot of short term contracts at the moment, 2-8 weeks say, are they all going to have to take me on as a short term employee, that's going to be a lot more hassle for them as well as a much reduced rate for me.

[Clockwork Cupcake]

cerbfan said:

That's not the main point though is it, other reasons to be a contractor at least for me is the ability to move around and work for various different clients instead of being stuck within the one work place for one company. Able to take a holiday whenever I want and not have to worry about having to much or to little time off. Don't get lumbered with the hassle of appraisals and all the other mandatory company meetings etc that employees have to go through. Basically just get left to get on with your work. Also have the freedom to do what you like with your income instead of having to put a mandated amount into a pension and get part of it in the form of a company car etc.

Obviously there are tax and rate advantages however this goes towards accountants fee's, insurances, putting money away in case you're off sick, holiday pay etc etc. I don't see how it can be viable to carry on being a contractor if I have to go PAYE.

Exactly.

There is this perception that freelancers are all on the tax fiddle, and that it's the only reason they work that way. And that is an overly simplistic view. Almost as simplistic as comparing gross salary to gross rate.

[daemon]

Gargamel said:

Finally ... Contractors will get to pay a more appropriate amount of tax relative to income, instead of avoiding the top band altogether via 'dividends'

If they're truly inside IR35 then i've no issue with that. Its the local government bodies that took / are taking a blanket approach and deeming everyone inside IR35.

[daemon]

mcg_ said:

Oh no maybe you’ll have to start paying the tax you should be after all these years.

If you’re outside IR35 there nothing to worry about.

I've no issue with that, however lots of places are too spineless to actually do it any way other than on a blanket approach.

Theres no "worry" anyway. Just move to an outside IR35 contract. Simples.

[alfie2244]

daemon said:

Gargamel said:

Finally ... Contractors will get to pay a more appropriate amount of tax relative to income, instead of avoiding the top band altogether via 'dividends'

If they're truly inside IR35 then i've no issue with that. Its the local government bodies that took / are taking a blanket approach and deeming everyone inside IR35.

This ^

[jammy-git]

alfie2244 said:

daemon said:

Gargamel said:

Finally ... Contractors will get to pay a more appropriate amount of tax relative to income, instead of avoiding the top band altogether via 'dividends'

If they're truly inside IR35 then i've no issue with that. Its the local government bodies that took / are taking a blanket approach and deeming everyone inside IR35.

This ^

So? Isn't that why people are contractors? So when the conditions aren't favourable they can just switch to another client or decide to bring in someone else to do that work for them?

[Clockwork Cupcake]

anonymous said:

[redacted]

Tax evasion is illegal. You are thinking of tax avoidance.

Non-smokers *avoid* the tax on tobacco - dirty cheating tax avoiders!

[ninja-lewis]

cerbfan said:

That's not the main point though is it, other reasons to be a contractor at least for me is the ability to move around and work for various different clients instead of being stuck within the one work place for one company. Able to take a holiday whenever I want and not have to worry about having to much or to little time off. Don't get lumbered with the hassle of appraisals and all the other mandatory company meetings etc that employees have to go through. Basically just get left to get on with your work. Also have the freedom to do what you like with your income instead of having to put a mandated amount into a pension and get part of it in the form of a company car etc.

Everything you describe there can be achieved through Fixed Term Contracts and PAYE too.

[Countdown]

HannsG said:

jammy-git said:

I run my own business, so I think I'm somewhat qualified to give my opinion.

It doesn't matter if you're on a project or not, if you fall within IR35 then you should be paying the appropriate tax.

If you feel like there are more risks involved with being a contractor within IR35 then ask for the corresponding recompense.

If it gets passed. Most definitely I'll push for 2500 a day...

Any opinions on that?

That's what my company pays (usually to partners of one of the Big 4 accountancy firms.)

If you're good enough, and they need you enough, they'll pay.

[daemon]

jammy-git said:

alfie2244 said:

daemon said:

Gargamel said:

Finally ... Contractors will get to pay a more appropriate amount of tax relative to income, instead of avoiding the top band altogether via 'dividends'

If they're truly inside IR35 then i've no issue with that. Its the local government bodies that took / are taking a blanket approach and deeming everyone inside IR35.

This ^

So? Isn't that why people are contractors? So when the conditions aren't favourable they can just switch to another client or decide to bring in someone else to do that work for them?

Because we've a situation in local government now whereby people in specific roles ARE genuinely outside of IR35, however the local authority has imposed (against HMRC published advice) a blanket ruling that "all contractors are within IR35". And yes, most people have left. Those who did stay have got higher rates to do so (25% seems typical), so whilst HMRC might claim they've "recovered extra tax income", all they've done is rob one government body of funding to pay another.

[cerbfan]

ninja-lewis said:

cerbfan said:

That's not the main point though is it, other reasons to be a contractor at least for me is the ability to move around and work for various different clients instead of being stuck within the one work place for one company. Able to take a holiday whenever I want and not have to worry about having to much or to little time off. Don't get lumbered with the hassle of appraisals and all the other mandatory company meetings etc that employees have to go through. Basically just get left to get on with your work. Also have the freedom to do what you like with your income instead of having to put a mandated amount into a pension and get part of it in the form of a company car etc.

Everything you describe there can be achieved through Fixed Term Contracts and PAYE too.

That's just a pain in the neck though for me and the company I'm working for. They just want to easily take me on to go offshore and do a job for them, I just send them an invoice and they then pay it. The last thing they will want to do is take me on as a member of staff and add me onto the payroll for 3 weeks and have to pay tax etc. Also my tax bill will become a right mess with P60's from loads of different places, probably end up on emergency tax code half the time. Also I'd be expected to get my own training courses still not having one long term employer who will pay for it, so would I now have to pay for this out of my taxed income, seeing these can average out at £1500/year that is a lot of extra cost.

The whole thing is a complete mess and they are going to seriously screw the system up. Its not like they have not already got their pound of flesh out of me and most other contractors already this year with the flat rate VAT system change that has cost me over £5K.

Also I see this as having a knock on effect on accountants as well, many small accountants rely on contractors for a lot of their turnover so that will be their businesses suffering also.

[bigandclever]

anonymous said:

[redacted]

In 20 years of contracting I have never been offered the option of working as a self-employed resource to a client. It has always been a b2b, limited company to limited company relationship.

Maybe I’m speshul (but I doubt it).

[Clockwork Cupcake]

bigandclever said:

In 20 years of contracting I have never been offered the option of working as a self-employed resource to a client. It has always been a b2b, limited company to limited company relationship.

Maybe I’m speshul (but I doubt it).

Same here.

Most clients won't touch self-employed due to the fact that they are worried that they will be deemed to be an employer and have to sort out all the PAYE and NI.

I think the most insidious aspect of IR35 is that you can be deemed to be a disguised employee for tax purposes but not for employment benefits / rights purposes *at the same time*.

I bet that if the situation was that being inside IR35 meant that the client had to pay your Employers NI and put you on the payroll, and give you holiday and sickness benefits, clients would be as vehemently resistant to it as contractors are.

Edit: Just to add, I have had repeat work with clients where the agency lock-in has expired and we have been free to go direct b2b who have insisted on getting an agency involved as it "makes it all simpler".
The agency were literally laughing all the way to the bank on that one - money for nothing.
But usually with repeat work, the client is happy to go direct b2b and divvy up the cost saving between us.

Edited by Clockwork Cupcake on Saturday 18th November 16:53

[daemon]

anonymous said:

[redacted]

As has been said already, you DO.

Companies wont engage with you unless you are via your own LTD company (or through someone elses via an Umbrella Company) as they don't want you on their books as then they'd have to pay Employers NI, pension contributions, pay you holiday pay, pay you sick pay, and give you equal employment rights to employees.

Contractors fill a very important role for companies. We're expected to be fully flexible on location, train ourselves, be fully skilled, get to the location at our own cost and stay there as long as required. We also have to pay our own pensions and set aside money for holiday periods and downtime. Once we're not required, they can drop us like a hot potato AND quite possibly spend weeks or months "on the bench"

The advantages have always been being able to offset your expenses, training, accountancy costs and very obviously better paid but it is by no means risk free or guaranteed.

Take away those advantages and whos going to do all that running about under PAYE but still with none of the employee rights, holiday entitlement, pension contibutions, sick pay, etc?

[Dr Jekyll]

daemon said:

Because we've a situation in local government now whereby people in specific roles ARE genuinely outside of IR35, however the local authority has imposed (against HMRC published advice) a blanket ruling that "all contractors are within IR35". And yes, most people have left. Those who did stay have got higher rates to do so (25% seems typical), so whilst HMRC might claim they've "recovered extra tax income", all they've done is rob one government body of funding to pay another.

Hate that phrase.

If it's 'extra' how can it be 'recovered'? They change the (interpretation of) rules to increase the tax take and then talk about the extra cash being 'recovered' as if it was theirs in the first place.

They really believe all the money in the country belongs to them and any penny in the hands of someone who actually earned it is a problem to be solved.

[anonymous-user]

If those advantages are taken away and the work needs doing, another solution will emerge

Either a contracting organisation that charges more, to cover the impact of the tax or someone on payroll

If it costs the organisation more to get the work done and or the people doing the work earn less, hey ho. Life will likely go on

[Clockwork Cupcake]

Dr Jekyll said:

If it's 'extra' how can it be 'recovered'? They change the (interpretation of) rules to increase the tax take and then talk about the extra cash being 'recovered' as if it was theirs in the first place.

They really believe all the money in the country belongs to them and any penny in the hands of someone who actually earned it is a problem to be solved.

Exactly this. They believe that all money is theirs and they are letting you keep some of it. Ergo, if you succeed in legally paying less tax then you have "stolen" it from them and they have "lost" that tax.

Also, have you noticed that everyone in favour of other people paying more tax seem to think that they themselves either pay enough tax or else too much? You seldom get people saying "blimey, I don't pay enough tax. I should make a voluntary extra contribution to HMRC".

Edited by Clockwork Cupcake on Saturday 18th November 17:45

[Dr Jekyll]

JPJPJP said:

If those advantages are taken away and the work needs doing, another solution will emerge

Either a contracting organisation that charges more, to cover the impact of the tax or someone on payroll

If it costs the organisation more to get the work done and or the people doing the work earn less, hey ho. Life will likely go on

Or the project won't be viable.

[Dr Jekyll]

anonymous said:

[redacted]

It isn't a question of either/or, it's a question of whether you can do the borderline projects as well as the ones the tax man can't throttle at birth. Having skilled people sitting at home when they could be working is the problem.