Opinions on IR35 and its impact on contractors?
Discussion
robinessex said:
Did any of the idiots in HR, ( Human Rejects ) who instigated this, get shown the door?
HR lol... Don't make me laugh. In one of my previous contracts, all recruitment was tupied over to a new bid winner.
It was mayhem. Contracts being changed with new rates, termination dates being incorrect. None of this pre agreed, the contracts themselves were more to do with clerical staff rather than IT project bods.
My contract went back and forth around five times before I was happy with it.
I would say when the bid winner came in around 30% of contractors walked out within a week.
It highlighted how unprepared and uneducated massive organisations are about IR35 and change in general.
Contractors are not 'play things' and like perm staff who roll over and bark as and when they are told to. Our contracts are the reason why we come to work.
If you can't get that right with a new supplier coming in there is no hope with change in legislation.
Projects will fall back and it will cost the UK economy. Guaranteed
robinessex said:
Did any of the idiots in HR, ( Human Rejects ) who instigated this, get shown the door?
No, absolutely not. Quite ridiculous. They weld a massive amount of power in this particular organisation so they were quite able to scupper the lot and cost their local council millions in doing so.daemon said:
Generally speaking the conversation goes like this :-
Company :- "we really like what you do, would you consider a permanent role here on a generous package?"
Contractor :- "Erm, well I hadn't really thought about going perm, but i'd listen to an offer"
Company :- "Great, we'd like to offer you (what usually amounts to a third or half of what said contractor is getting as a contractor). What do you think?"
Contractor :- "Sorry, no. I'd prefer to stay contracting"
Company (now miffed) :- "Oh. Right, well we cant afford to keep you as a contractor".
Any offer to make a contractor perm rarely ends well as it usually results in said company being irked at the contractor refusing their kind and generous offer.
I don't get involved. I shut down any tentative conversations with a "Sorry, no I'm not interested in going perm". I'm currently negotiating my fourth extension where I am which would take me through to the end of next May and i'll cheerfully walk away when they no longer need me but not in any way getting involved with a "fixed term contract" or permanent role as it would (as a contractor colleague found out) be on 1/3 of what i'm earning currently.
I can assure you that we've most definitely *not* been offering 1/3-1/2 of what they'd be making as a contractor. Not full contract rates, due to the wider rights/benefits, but not a million miles away (unless, of course, they are milking Ltd status in ways they should not)... and we don't show them the door because we're irked about the refusal but don't renew indefinitely because we take on contractors as temporary resources. It is never about affordability.Company :- "we really like what you do, would you consider a permanent role here on a generous package?"
Contractor :- "Erm, well I hadn't really thought about going perm, but i'd listen to an offer"
Company :- "Great, we'd like to offer you (what usually amounts to a third or half of what said contractor is getting as a contractor). What do you think?"
Contractor :- "Sorry, no. I'd prefer to stay contracting"
Company (now miffed) :- "Oh. Right, well we cant afford to keep you as a contractor".
Any offer to make a contractor perm rarely ends well as it usually results in said company being irked at the contractor refusing their kind and generous offer.
I don't get involved. I shut down any tentative conversations with a "Sorry, no I'm not interested in going perm". I'm currently negotiating my fourth extension where I am which would take me through to the end of next May and i'll cheerfully walk away when they no longer need me but not in any way getting involved with a "fixed term contract" or permanent role as it would (as a contractor colleague found out) be on 1/3 of what i'm earning currently.
As for the comments about substitution, HMRC are apparently looking at what the reaction would be (not what the contract says can be proposed) and as I client there is no way on earth that we'd accept a substitute. Indeed, I struggle to think of many IT environments in which a client organisation would entertain the idea of a sub turning up...
LooneyTunes said:
As for the comments about substitution, HMRC are apparently looking at what the reaction would be (not what the contract says can be proposed) and as I client there is no way on earth that we'd accept a substitute. Indeed, I struggle to think of many IT environments in which a client organisation would entertain the idea of a sub turning up...
Would be interesting to hear what any of the ‘big boys’ (IBM, HP, Steria, PwC, EY, I’m just throwing names out) would say about that. They chop and change the resource they provide to the client all the time. LooneyTunes said:
I can assure you that we've most definitely *not* been offering 1/3-1/2 of what they'd be making as a contractor. Not full contract rates, due to the wider rights/benefits, but not a million miles away (unless, of course, they are milking Ltd status in ways they should not)... and we don't show them the door because we're irked about the refusal but don't renew indefinitely because we take on contractors as temporary resources. It is never about affordability.
I did say "generally" as that's generally what happens. But speaking of your situation - you were compensating them for going in to PAYE then were you?
Even if you're there or there abouts relative to their day rate, a contractor is paying nowhere near the tax via a LTD co compared to PAYE hence i'd be surprised if is coming out at much more than 50% comparatively speaking.
I think last year I (well, my ltd co) paid something like 12% tax. None of this 40% nonsense
Edited by daemon on Sunday 19th November 22:24
Edited by daemon on Sunday 19th November 22:25
LooneyTunes said:
As for the comments about substitution, HMRC are apparently looking at what the reaction would be (not what the contract says can be proposed) and as I client there is no way on earth that we'd accept a substitute. Indeed, I struggle to think of many IT environments in which a client organisation would entertain the idea of a sub turning up...
HMRC are "apparently" looking at a lot of things, but the reality is they've very few inspectors, relative to the amount of contractors in this area. Also contrary to their belief, their word is not "law".The trick is to get your contract reviewed, verified and insured by the likes of QDOS.
https://www.qdoscontractor.com/insurance
They've represented contractors in 1,300 IR35 investigations and have won 99.8% of the time if it should go to court. Their tax advisors are ex HMRC inspectors too.
https://www.qdoscontractor.com/ir35/investigations
bigandclever said:
LooneyTunes said:
As for the comments about substitution, HMRC are apparently looking at what the reaction would be (not what the contract says can be proposed) and as I client there is no way on earth that we'd accept a substitute. Indeed, I struggle to think of many IT environments in which a client organisation would entertain the idea of a sub turning up...
Would be interesting to hear what any of the ‘big boys’ (IBM, HP, Steria, PwC, EY, I’m just throwing names out) would say about that. They chop and change the resource they provide to the client all the time. 
Even IF it does become an issue all that will happen is that people like me will contract to the likes of IBM, HP, Capita etc and they'll put us out on site and take a big margin on top.
bigandclever said:
Would be interesting to hear what any of the ‘big boys’ (IBM, HP, Steria, PwC, EY, I’m just throwing names out) would say about that. They chop and change the resource they provide to the client all the time.
We all know there is a difference between the big boys and the one man bands... and, given the focus on IR35, that this thread is really addressing the latter. Simple fact is that most firms engaging one man band contractors are engaging the specific individual not whichever mate they can rustle up to stand in for them. Similarly there exist differences to risk taking and being proper functioning companies.daemon said:
So you were compensating them for going in to PAYE then were you?
Even if you're there or there abouts relative to their day rate, a contractor is paying nowhere near the tax via a LTD co compared to PAYE hence i'd be surprised if is coming out at much more than 50% comparatively speaking.
I think last year I paid something like 12% tax. None of this 40% nonsense
The offer on the table was more than fair but, no, it would not extend to compensating for a effective 12% tax rate vs 40%. If folk are going low base/high dividend, paying the wife, leaving cash stacked up in the company, or any of the other ruses some contractors have been rumoured to use, then permanent employment might not be right for their lifestyle.Even if you're there or there abouts relative to their day rate, a contractor is paying nowhere near the tax via a LTD co compared to PAYE hence i'd be surprised if is coming out at much more than 50% comparatively speaking.
I think last year I paid something like 12% tax. None of this 40% nonsense
Nobody is suggesting that you should stop doing what you're doing, but don't get upset when someone offers opinions that don't align with your view of the world. I'm simply sharing what a user of contract resource is seeing in the market.
As for all your other posts about insurance or contracting via the likes of an IBM... let's not worry, it'll all be fine.
LooneyTunes said:
The offer on the table was more than fair but, no, it would not extend to compensating for a effective 12% tax rate vs 40%.
Hence why i was telling you that your offer was most likely 50% of what they were currently getting as contractors - you were offering them a bill less than their headline day rate, but they'd be paying a lot more in tax....LooneyTunes said:
If folk are going low base/high dividend, paying the wife, leaving cash stacked up in the company, or any of the other ruses some contractors have been rumoured to use,
And all perfectly legal 
LooneyTunes said:
then permanent employment might not be right for their lifestyle.
Exactly. 
LooneyTunes said:
Nobody is suggesting that you should stop doing what you're doing, but don't get upset when someone offers opinions that don't align with your view of the world. I'm simply sharing what a user of contract resource is seeing in the market.
Why on earth would I be getting upset?? I merely told you why moreoften contractors decline your kind and generous offer of permanent employment.LooneyTunes said:
As for all your other posts about insurance or contracting via the likes of an IBM... let's not worry, it'll all be fine.
It will be fine because those of us who want to stay in contracting will either take on inside IR35 work at a much higher rate, take an outside IR35 contract (and if their wise get it QDOS validated and insured) OR contract for a big consultancy (seeing that happen already) OR take a permie role somewhere.Sorry if that upsets you....
LooneyTunes said:
Simple fact is that most firms engaging one man band contractors are engaging the specific individual not whichever mate they can rustle up to stand in for them. Similarly there exist differences to risk taking and being proper functioning companies.
You can think whatever you want, but contractually you are not. Not if the contract is worded correctly. It's saddening to hear client attitudes like yours but it doesn't wholly surprise me unfortunately.
LooneyTunes said:
The offer on the table was more than fair but, no, it would not extend to compensating for a effective 12% tax rate vs 40%. If folk are going low base/high dividend, paying the wife, leaving cash stacked up in the company, or any of the other ruses some contractors have been rumoured to use, then permanent employment might not be right for their lifestyle.
Were it more than fair, it probably would have been accepted. I suspect, rather, it was what you would have paid a permie of that level anyway. And, let's be honest here, if they'd wanted to be a permie they wouldn't be contracting. I don't know where that 12% comes from - sounds like daemon is yanking your chain there. My tax burden (business and personal) is nowhere near that low.
But on the subject of taxation, people seem quick to say that contractors should be taxed as employees if they are treated as ones, but shouldn't they then also have the same benefits and protections as employees too (including paid holidays and sick pay)? And shouldn't they be able to dispense with the financial and administrative burden of having to run a limited company? And, specifically, shouldn't their (deemed) employer then be paying the Employer's NI instead?
Didn't think so.
Edited by Clockwork Cupcake on Sunday 19th November 23:10
daemon said:
I think last year I (well, my ltd co) paid something like 12% tax. None of this 40% nonsense
Not sure how you're managing 12%. I've been contracting as a Ltd company for over 20 years, and for the last 10 I've got into the habit of tucking away 30% of each invoice as it gets banked (ignoring VAT which is dealt with separately) to cover company and personal tax liabilities. Seems to work out about right each year as corporation and personal tax payments become due.Clockwork Cupcake said:
LooneyTunes said:
Simple fact is that most firms engaging one man band contractors are engaging the specific individual not whichever mate they can rustle up to stand in for them. Similarly there exist differences to risk taking and being proper functioning companies.
You can think whatever you want, but contractually you are not. Not if the contract is worded correctly.Even without the proposals to explicitly place the responsibility for determining IR35 status on the client/employer, organisations will be looking very closely at their contracts. The corporate criminal offence makes it a criminal offence if they fail to prevent an associated person criminally facilitating the evasion of a tax. Agreeing to sham causes would fall under that.
Any contractor thinking they can rely on some 'correctly worded' contracts to obscure their true employment relationship will find themselves in the same boat as those who pretended that their earnings were really a 'loan'.
Clockwork Cupcake said:
But on the subject of taxation, people seem quick to say that contractors should be taxed as employees if they are treated as ones, but shouldn't they then also have the same benefits and protections as employees too (including paid holidays and sick pay)? And shouldn't they be able to dispense with the financial and administrative burden of having to run a limited company? And, specifically, shouldn't their (deemed) employer then be paying the Employer's NI instead?
Didn't think so.
Actually that's exactly what some of us are suggesting and what the courts are increasingly deciding in gig economy cases. Also while someone may turn out out to be an employee, they may still be a worker with some of those rights.Didn't think so.
Bloody hell, is IR35 still causing consternation, it was the big topic in the pages of freelance informer 15 years ago when i packed up my company and went contracting overseas!
still makes bugger all sense to me, just looks like a convoluted set of rules and grey areas to try and catch someone out no matter if they are up to something dodgy or not!
still makes bugger all sense to me, just looks like a convoluted set of rules and grey areas to try and catch someone out no matter if they are up to something dodgy or not!
ninja-lewis said:
Clockwork Cupcake said:
LooneyTunes said:
Simple fact is that most firms engaging one man band contractors are engaging the specific individual not whichever mate they can rustle up to stand in for them. Similarly there exist differences to risk taking and being proper functioning companies.
You can think whatever you want, but contractually you are not. Not if the contract is worded correctly.Even without the proposals to explicitly place the responsibility for determining IR35 status on the client/employer, organisations will be looking very closely at their contracts. The corporate criminal offence makes it a criminal offence if they fail to prevent an associated person criminally facilitating the evasion of a tax. Agreeing to sham causes would fall under that.
Any contractor thinking they can rely on some 'correctly worded' contracts to obscure their true employment relationship will find themselves in the same boat as those who pretended that their earnings were really a 'loan'.
Part of what makes me think that IR35 is starting to bother some contractors is that we've recently had a couple of them ask to change clauses to positively impact any IR35 contract analysis (even though the reality of how they work means they would fail many real world tests).
More recent than Autoclenz, RS Dhillon and AIUI from a briefing I was sent, GP Dhillon Partnership v HMRC [2017] UKFTT 17 and MJ Quinn Integrated Services Ltd v Mr G Jones UKEAT/0301/16/JOJ[2017]) apparently don't help contractors who think that a paper analysis is all that matters...
I wonder how many of those on here have used the HMRC's ESS to check their tax status? https://www.tax.service.gov.uk/check-employment-st...
Bearing in mind HMRC has said that it will stand behind the results where questions are answered accurately, I'd assume contractors are doing it as a matter of routine, but I rather suspect they're not. HMRC doesn't store the results, but you can get a personalised report at the end of the process if you wish.
Clockwork Cupcake said:
LooneyTunes said:
Simple fact is that most firms engaging one man band contractors are engaging the specific individual not whichever mate they can rustle up to stand in for them. Similarly there exist differences to risk taking and being proper functioning companies.
You can think whatever you want, but contractually you are not. Not if the contract is worded correctly. It's saddening to hear client attitudes like yours but it doesn't wholly surprise me unfortunately.
LooneyTunes said:
The offer on the table was more than fair but, no, it would not extend to compensating for a effective 12% tax rate vs 40%. If folk are going low base/high dividend, paying the wife, leaving cash stacked up in the company, or any of the other ruses some contractors have been rumoured to use, then permanent employment might not be right for their lifestyle.
Were it more than fair, it probably would have been accepted. I suspect, rather, it was what you would have paid a permie of that level anyway. And, let's be honest here, if they'd wanted to be a permie they wouldn't be contracting. I don't know where that 12% comes from - sounds like daemon is yanking your chain there. My tax burden (business and personal) is nowhere near that low.
But on the subject of taxation, people seem quick to say that contractors should be taxed as employees if they are treated as ones, but shouldn't they then also have the same benefits and protections as employees too (including paid holidays and sick pay)? And shouldn't they be able to dispense with the financial and administrative burden of having to run a limited company? And, specifically, shouldn't their (deemed) employer then be paying the Employer's NI instead?
Didn't think so.
No "yanking of chains" BTW, I've very high travel costs relatively speaking (I live in NI an commute to and stay on the mainland most weekdays) so that offsets the tax a fair bit, also I wasn't including any VAT element - I don't view that as mine in the first place. I consider the ex-VAT rate to be my day rate.
ninja-lewis said:
Clockwork Cupcake said:
LooneyTunes said:
Simple fact is that most firms engaging one man band contractors are engaging the specific individual not whichever mate they can rustle up to stand in for them. Similarly there exist differences to risk taking and being proper functioning companies.
You can think whatever you want, but contractually you are not. Not if the contract is worded correctly.Even without the proposals to explicitly place the responsibility for determining IR35 status on the client/employer, organisations will be looking very closely at their contracts. The corporate criminal offence makes it a criminal offence if they fail to prevent an associated person criminally facilitating the evasion of a tax. Agreeing to sham causes would fall under that.
Any contractor thinking they can rely on some 'correctly worded' contracts to obscure their true employment relationship will find themselves in the same boat as those who pretended that their earnings were really a 'loan'.
I am in no way suggesting disguised employment. If people are "fiddling" it then it would in no way stand up to QDOS, HMRC or court scrutiny, however a high percentage of contractors are quite correctly outside of IR35.
LooneyTunes said:
More recent than Autoclenz, RS Dhillon and AIUI from a briefing I was sent, GP Dhillon Partnership v HMRC [2017] UKFTT 17 and MJ Quinn Integrated Services Ltd v Mr G Jones UKEAT/0301/16/JOJ[2017]) apparently don't help contractors who think that a paper analysis is all that matters...
I wonder how many of those on here have used the HMRC's ESS to check their tax status? https://www.tax.service.gov.uk/check-employment-st...
Bearing in mind HMRC has said that it will stand behind the results where questions are answered accurately, I'd assume contractors are doing it as a matter of routine, but I rather suspect they're not. HMRC doesn't store the results, but you can get a personalised report at the end of the process if you wish.
First step for me - and any contractor i know - with a new contract is to check the ESS tool, then apply the QDOS test to it and get a formal QDOS determination. If its outside of IR35, great, if its inside IR35 then i either ensure the rate works for me, or i'd look to another contract with another company.I wonder how many of those on here have used the HMRC's ESS to check their tax status? https://www.tax.service.gov.uk/check-employment-st...
Bearing in mind HMRC has said that it will stand behind the results where questions are answered accurately, I'd assume contractors are doing it as a matter of routine, but I rather suspect they're not. HMRC doesn't store the results, but you can get a personalised report at the end of the process if you wish.
This doesn't seem difficult?
The IR35 legislation is there to weed out disguised employment - you seem to think its some sort of "retribution" for ALL contractors who have been correctly applying the legislation to now force them to pay more tax under IR35.
Sorry, but its not.
LooneyTunes said:
Part of what makes me think that IR35 is starting to bother some contractors is that we've recently had a couple of them ask to change clauses to positively impact any IR35 contract analysis (even though the reality of how they work means they would fail many real world tests).
... which shows they're reading the contract, understand the implications and may well be getting it reviewed externally?Its not unusual for wording to be required to be tweaked in contracts. That's always been the case.
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