I will be worse off
But I was the UK's Lib Dem voter, not a Tory one.
Benefits recipients, “non-doms” (those living in Britain treated as foreigners for tax purposes), banks, and landlords weren't the only losers in George Osborne's recent budget. Although they weren’t explicitly mentioned, the chancellor put many contractors, including those working in IT, on his hit list by changing the …
And I'm sure there are a load of perms laughing their heads off and saying we deserve everything we get.
But consider this, how much did the UK gov give the big consultancies in contracts. How much corporation tax did they pay in relation and how much did they deliver vs not deliver. And then ask yourself who are the real tax avoiders and who are value for money consultants.
Once more the Tories looking after their mates and shitting on the hard working middle.
I didn't vote for the cnuts.
The article didn't mention that as freelance consultants we don't get sick pay either.
A bit of extra tax is one thing, but if they make it more complex and risky then contractors are more likely to seek refuge in permie roles as they will at least will get some perks like pension contributions/sick pay/redundancy entitlement/HR protection from unscrupulous managers/protection from unfair dismissal etc.
At which point, believe it or not, the government will get less tax, not more.
Really? Damn. I guess the Tories will just have to cut even more public services and sell off the NHS even faster. Of course that haste means they won't be able to negotiate the best deals, so their rich mates will be paid more and buy for less, but that's a sacrifice they're willing to make.
"I guess the Tories will just have to cut even more public services "
Great, I would rather choose to buy services I need rather than be forced to pay for those I don't.
"and sell off the NHS even faster"
Just to point out that the last Labour government privatised approx. 10 times the value of NHS services that the Conservative ever have.
"Great, I would rather choose to buy services I need rather than be forced to pay for those I don't."
Yes. How much are you prepared to pay for your childrens education, per mile rates for road usage, having fresh water tankered in, emptying your cesspit, personal bodyguards (no Police if you don't pay). And don't forget to make sure your fire insurance is paid and up to date with a company who has a fire appliance stationed near you. You don't want one from a rival turning up then watching your house burn down because you're not their customer.
I'm pretty sure that not only would you find your fully itemised bill for all the "public" service you get from your taxes would be higher, but those services you rarely use would no longer be there for you when you need them because everyone else will do as you do and not pay for the local seviceseither because they can't can't/won't afford them (hey, we can have an extra holiday!) or few use them often enough to be viable. £5 per head per visit to the local park maybe?
"Yes. How much are you prepared to pay for your childrens education"
I already pay quite a lot.
"per mile rates for road usage"
Already pay that via fuel duty.
"having fresh water tankered in"
I already pay the water company for that based on what I use.
"emptying your cesspit"
See the above - I already pay based on water usage - except we have sewers down South.
"personal bodyguards (no Police if you don't pay)"
We already have private security patrols where I live.
"And don't forget to make sure your fire insurance is paid and up to date"
It is.
Not exactly. In a just and well-run world, they'd shut off services that yield marginal benefits, are excessively expensive, or that haven't been proved to actually work.
I kill me, I really do. If your politics work like they do in the US, shutting off those sorts of things would stop the flow of cash to their pockets or their crony's pockets. They'll just take the page out of the 0bama playbook, threaten to shut down all sorts of essential services, and hire new sentries in order to block the public from using facilities that don't cost anything to erect, and cost nothing to maintain. After all, being a heel pays big dividends and with the press in your back pocket, unlikely to generate a backlash.
Don't believe me? Google 'obama blocks world war 2 memorial'.
Then I guess you're living in the mountains growing your own food, laying your own road, educating any kids yourself, you've paid for every visit to hospital, you've always paid full price for your prescription pharmaceuticals or you're some right loonie in the US.
Grow up and recognise that you're part of a civilised group and that the teeny amount extra you pay for things like, road, water, sewage disposal, education, health etc etc make life a lot easier for all.
"and sell off the NHS even faster"
They're committed to making it free at the point of delivery, so what does it matter that the doctor you see is on the government payroll or not? Businesses can save money and cut risk by hiring consultants, why not let the government do the same?
The article didn't mention that as freelance consultants we don't get sick pay either.
Freelance consultants work for their own companies, so if you are unhappy with the amount of sick pay that you have negotiated with yourself, take your self aside for a quiet drink and talk it through until both you and yourself are content with the perks and remuneration that you get for working for yourself.
"Freelance consultants work for their own companies, so if you are unhappy with the amount of sick pay that you have negotiated with yourself, take your self aside for a quiet drink and talk it through until both you and yourself are content with the perks and remuneration that you get for working for yourself."
I agree totally, I treat myself as an employee of my company,I have to factor in 'down time' every year to cover wages, factor in sick days, pension contributions, etc... which means I pay myself much less than I would get as an employee of a big company, on a good year I have a decent dividend, on a slow year I pay none and be thankful I managed my business finances well enough to be able to cope with slow years..
That is the risk of running your own business.
"Once more the Tories looking after their mates and shitting on the hard working middle."
I give a lot of money to Tesco, but they're not my mate. Just because the government pays consultants doesn't mean they are friends with them. Same goes for government and its own employees.
"And if you work in a technical field in Germany you will find they are pretty much all fluent in English. Most of the technical terms are used as-is (i.e. English words)."
OK, good. The German for computer is "der Computer". Great. Now it's just all the other words that aren't technical you need to learn.
in Germany [...] most of the technical terms are used as-is
Yes, indeed. And in sharp contrast to France where they have a government department to come up with 'official' new words, such as ordinateur for computer, réseau for network, etc. Of course, being an official government edict, everyone in France completely ignores it :)
"Yes but English as a second language is a far more valuable commodity for Greeks and Spaniards compared to German, for example. There are far more places that speak English than German."
But a Greek with fluent German will be fine there. There are quite a lot of Greeks who have German language skills. The Greeks were working there well before the EU freedom of movement thing kicked in.
I don't think Spaniards and Greeks are busy comparing the tax regimes with an Excel spreadsheet before they decide upon the most favourable country to go to, they just want a damn job.
Those that speak English better start their job search in the UK and Ireland, those that speak German better start their job search in Germany, Austria, and Switzerland, and any of those countries will probably have better tax regime and/or working conditions than Spain or Greece.
Under "Zero Hour" contracts, an individual is considered as employed by the contract provider, but has no fixed hours of work. Employees under this contract have limited employment rights, often no corporate/employment benefits, and are paid on an hourly or daily basis. The employer is under no obligation to actually provide the employee with ANY paid hours or work, and often the employee is engaged exclusively meaning they can't seek work with another employer when no hours are offered.
So, in summary, be "employed" by a company with no guarantee of pay, hours of work, employed benefits, the right to claim any kind of income support and, often, not be permitted to seek work elsewhere without breaching the contract.
The DWP, by the way, considers this to be "gainful employment" and will/has insisted that those on JSA or DSA be moved into Zero Hours contracts when they are adjudged fit for work.
And we thought "work fare" was bad.
"I wonder of one person having more than one zero-hour contract is regarded as several people in 'employment'?"
Yes it is:
"Employment increased by 1.08m between January to March 2008 and June to August 2014, but only 26,000 were full-time employee roles." http://www.theguardian.com/business/2014/nov/12/one-40-jobs-created-recession-full-time-employee-tuc-employment
Wankers like Tesco will take people on zero hours contracts who can only work set hours; due to kids/other commitments. They will then call them up telling them they need to come in outside those hours and if they don't they'll loose all hours they may have coming up.
While zero hours contracts could be a good thing, they rely on companies being honest and decent, so we're all completly fucked. As my personal oppinion is more and more jobs will be tied to zero hours contracts, I'll be raising my son to work for himself/do whatever he enjoys and forget looking for a career within a company as they just won't exist.
The DWP, by the way, considers this to be "gainful employment" and will/has insisted that those on JSA or DSA be moved into Zero Hours contracts when they are adjudged fit for work.
Simple - start by moving the heads of the DWP, the Minister responsible for DWP and may be even the whole of the cabinet to Zero Hours contracts. And we must not forget the spouses/family members of MPs who work for them That should be fair
>it does fulfill its main purpose of stopping big companies renaming there employees contractors
You mean like Uber?
It would be fairly easy to put a lower limit on employee figures to which this may apply, but that would rather negate all that lobbying by the big boys, wouldn't it?
The the flip side, taxing corporations is basically a pragmatic measure. Going after the big boys is likely to fail but going after the little man will work every time. Also, the country is broke, so the pain is going to arrive sooner or later and we owe a lot more than the Greeks.
Would it be easier just to tax dividends and income at the same rate and ditch IR35?
@P.Lee
"Would it be easier just to tax dividends and income at the same rate and ditch IR35?"
Not everyone who gets income from dividends is a contractor using it to extract money from their company at a lower tax rate.
ANYONE with shares in a company (Depending on the type of share) will receive a dividend.
The thing that you have to remember is dividends are paid from companies profits, which are already taxed at 20% so if my company makes £1000 HMRC get £200 and I get the remainder up until the higher tax band at which point I pay them 25% of my dividend,
So my company gets £1000
HMRC Get £200 from my company
and another £200 from me (25% of 800)
So HMRC effectively get 40% from me (Thats the combined me & my ltd)
Of course this is a massive simplification, but the point that I wanted to get across is that contractors are not the tax evading entities that some permies think we are, we get paid more, but get NO benefits from our clients - no pension, no sick pay, no holidays, no redundancy, no real notice period.
If you look at how much an employee actually costs a company you can see why its cost effective for companies to use contractors to meet short to medium term need...
But it does fulfill its main purpose of stopping big companies renaming there employees contractors and thus oiling their way out of any responsibilities to their workforce.
It doesn't.
A few years ago, I was working for a company with an awful lot of contractors. Some of them had been there continuously for 10 years or more...
Vic.
No they don't.
In the Public Sector there are rules that say if you are in a contract for more than 6 months, paying more than £200 per day then you have to provide evidence to the client that your Tax and NI payments are compliant with IR35, either inside or outside.
If you work in the same general location (whether in the Public or Private sectors) for more than 2 years then you can no-longer claim travel and subsistance costs. Location is very broad, so 12 months with one London Client followed by 18 Months with another London Client would be caught by this rule (30 months in one location). If the commute doesnt fundamentally change (Next Client is in Leeds for example) then the rule applies.
Other than that there are no restrictions on how long you can contract with the same client, nor is length of engagement an indicator of your status under IR35.
Well done on the first half page of this article, which is a clear well written summary of the contractor position and the proposed changes. I'm a contractor, and think the modest tax increase is not unreasonable.
IR35 is a different matter. It is deliberately wooly and a classic piece of FUD. Muddy waters instead of clear rules. I don't mind which way the rules go as long as they are clear. Most contractors become contractors for the independence and extra cash, not the possibility of tax avoidance.
Regarding the Professional Contractors Group, now called the Association of Independent Professionals and the Self-Employed, many contractors believe this organisation no longer serves their interests.
". I'm a contractor, and think the modest tax increase is not unreasonable."
+1
Especially as at the same time they are making life increasingly uncomfortable for scroungers that don't want to work, and those that are unreasonably subsidised by the state by being in social housing when they could afford commercial rents, or have extra rooms that they don't need.
"Regarding the Professional Contractors Group, now called the Association of Independent Professionals and the Self-Employed, many contractors believe this organisation no longer serves their interests."
That's sad to hear. I was a member in the early days until I retired & served a term on the CC. The name change suggests it's widened its remit so it might have gained a larger membership at the expense of focussing on contracting issues.
"Most contractors become contractors for the independence and extra cash, not the possibility of tax avoidance."
This is true, but misses one point: Tax them more and they have less extra cash.
The rule of thumb my father, and others, have always used is that take-home pay (so after taxes, expenses etc.) from contracting should be approximately double that from permanent work. This is to compensate for the uncertainty. This extra money should be put aside so that you have something to fall back on when you run into a time when you cannot find a contract.
Now, if the taxes are higher, the rates will have to increase to cover this. If clients are unwilling to pay the extra, some contractors will look for permanent employment instead. The extra pay compensates for the risk, and if they can't get as much money, will it still be worth the risk?
The rule of thumb my father, and others, have always used is that take-home pay (so after taxes, expenses etc.) from contracting should be approximately double that from permanent work. This is to compensate for the uncertainty.
I work in a team dominated by contractors. When there are cut backs, the contractors take a small haircut on the day rate and one of the permies gets the boot, so 100% hair cut. Its the permies that have greater uncertainty than the contractors.
Don't get me wrong; I'm off contracting too next year, as its A) More lucrative, B) Skips over the permie BS like appraisals and comp reviews, and C) the tax system incentivises it so much, especially given my horrifically expensive and lengthy commute, the price of lunch, training, and computer equipment.
Contracting won't double my take home pay, but it will increase it substantially while removing some of the less enjoyable parts of working. It really is the way of the future.
when it comes to re-mortgaging. A good few lenders are using the new tests to make it really hard for contractors to get loans if the LTV is more than 50%.
I had this very experience around 9 months ago. In the end, I paid off a big chunk of my loan just to get the LTV down to 45%. Even then there was a lot of difficulty getting the money.
One BS even asked if my parents could act as guarantor. I told them what I thought of them and walked out. I'm over 50 for heavens sake.
Oh for the days of self-certification.
However, this often works out cheaper than basic rate income tax and national insurance contributions for the self-employed, totalling 29 per cent,
You forgot the larger component of NI, the Jobs Tax. If you're a one-man band, you're responsible for that, too. As I was when my main income was contracting (and may become again since I just lost my last job).
You're still better-off paying the dividend tax, thinking in terms of expenses, and paying the maximum through your payroll towards pension and charitable contributions.
" they do not receive company benefits such as pensions and employment benefits including the right to redundancy payments."
I'm a contractor and it really pisses me off when people trot out this type of statement.
You are an employee of your own company and that company provides your full package, salary, pension, redundancy cover, critical illness, medical, car, etc, etc, etc. That's one of the reason you get paid the day rate you do, because the rate covers more than just an hourly pay rate. If the company director chooses not to provided those benefits then punch them in the mouth.
As the article points out, you'll still be better off than your equivalent typically permie, and even on the lowly £43,000 starting point they quote you're still in the top 20% of earners in the UK.
I don't want to pay more tax. But I recognise how well off I am and I need to contribute to the greater good. Roll on the down votes.
Totally agree, I am a contractor and even if I paid ni and tax as an employee my salary is about double what I would earn as an employee, I choose how many weeks I work and life is cushty.
If you don't want to earn less put your daily rate up and stop moaning.
I also have the flexibility to do consulting on the side which I couldn't do as an employee, happy ££ days.
Upvote(s) for having a conscience and a realistic perspective!
I'm a contractor too - first time doing it, in fact - but for various reasons I decided not to go the ltd. route and instead go through a reputable umbrella company. As a result I pay a fair whack of tax, but I have no problem with this. I recognise that the NHS and other essential services exist because of taxation, and would rather they stayed around for a long time yet (questions of mismanagement aside.)
I understand that people don't want to pay tax - wouldn't everyone rather have the cash in their pocket? However, if you make the decision to avoid as much tax as you can and then require the services of institutions that would've been partially funded by those taxes... well then you're quite frankly a leech. It's a massive oversimplification but I think most people here will know where I'm coming from.
I'm not a contractor - but I run a small company, employing a number of people providing services which makes our competition typically sole contractors. Quite rightly, I legally, morally and justifiably, pay all the appropriate taxes, provide sick pay, holiday pay, redundancy etc. for our employees and have no problem doing so.
However, why should sole contractors be able to undercut us because - whether or not they account/budget/provide for all those other things - ALSO get the ability to pay less tax?
Too many times this debate focuses on contractors versus large employers. There's a huge number of small companies (non one-man-band) that are getting hit on both sides by the ability of those people (one-man companies) and large companies (on the other) to pay less tax. I can genuinely say that we would employ more people if it weren't for these particular tax breaks which are not available to us.
"I run a small company"
You don't say in what capacity. As an owner or as an employed manager? Is it a limited company?
If your company is limited and you own shares then you should be able to take dividends from it.
Those sole contractors should also be making provision for sick leave, time on the bench etc. Ideally they should be making a larger provision than you as their income may be more volatile than yours. They should also be making provision for training in new skills. If they don't make such provisions they're idiots - of which, admittedly, there is no shortage.
Depending on your turnover you might have had a disadvantage to sole contractors of being on the main rate of corporation tax or else an advantage against larger businesses if you were on the small business rate. However, those rates have converged over the last few years.
I suspect your main disadvantage is actually overheads. You don't say how many non-fee-earning staff are involved but there seems to be at least one: yourself. Sole contractors are 100% fee-earners (when working) and larger consultancies may be able to take advantage of scale and spread the cost of each non-fee-earner over more fee-earners. The big consultancies are probably also able to get away with larger fees. You're caught in the middle.
Don't most contractors pick up contracts through the jobsites which involve an agency? The agency take a cut so the end customer pays a lot more for the contractor than if they dealth with them directly.
Doesn't this limit the amount you can be undercut? Also, if you are employing people on a fixed salary (and not salary+dividend) aren't your labour costs lower? (I know you have pension contributions etc. to cover so I understand the differences aren't cut and dried).
"why should sole contractors be able to undercut us because - whether or not they account/budget/provide for all those other things - ALSO get the ability to pay less tax?"
The rules for a contractor operating a ltd company are EXACTLY THE SAME as the rules that apply to you operating your ltd company.
In fact if you are operating a ltd company and you are taking all of your personal income as wage through PAYE you're the one causing the problem that you are complaining about, the same rules apply to us both, how you choose to structure your remuneration from your company is up to you (As long as you stay within the law)
Actually, that's the fundamental unfairness in all these progressive tax systems. If I'm working the same hours and doing the same work as you are, one of us shouldn't be making more simply because his accountant is more clever.
However, why should sole contractors be able to undercut us because - whether or not they account/budget/provide for all those other things - ALSO get the ability to pay less tax?
Today's one man show is tomorrow's small company is later's medium company etc etc. Everyone has to start somewhere and thus it would be quite difficult to arbitrarily single out a ltd company because it has only one full-time employee. Although a sizable chunk will always be one man shows not all will. Why should they get punished just to appease you?
Large companies get to avoid all sorts so the burden has to fall somewhere. Sadly politicians seem to feel small and medium businesses fit the bill.
'" they do not receive company benefits such as pensions and employment benefits including the right to redundancy payments."
I'm a contractor and it really pisses me off when people trot out this type of statement.'
I think you're misreading the article here. The context is that contractors don't receive these from the engager; they have to make these provisions for themselves along with paying both employers and employees contributions. Bryce was making the exact same point as yourself.
Whilst the government bothered to engage with IPSE before the election, and then have delivered a budget that staunchly ignores every point they raised, the biggest disappointment is that the new proposals are unnecessarily complex.
It's taken a long time for many advisors to figure out what they changes are likely to mean, and even then we're left waiting for more clarity. How the various tax bands interact, what allowances will and won't be available and how contractors can efficiently deliver their services has become a mire of paperwork and fag packet maths. This is not a sign of an efficient taxation system, but one that is driven by political positioning.
Where I'm working, there is a serious shortage of skilled workers able to move company IT on to the new platforms and tools. On my team of 12 people, just two are British citizens and the company struggles to find people to expand the team further. This end of the workforce needs highly mobile, specialist workers who take the risks on behalf of the larger companies that bring in their skills and experience. However, the government treats the sector as being indistinguishable from day rate brick layers and offers us similar levels of support - i.e. none whatsoever.
Differences in attitude towards entrepreneurial and small businesses here and across the pond are highlighted by the startup and high tech scenes, but it appears that we're too busy counting the pennies to take lessons from more supportive regimes.
> the new proposals are unnecessarily complex
You write that as though it's a fault !
I've come to the conclusion that TPTB do this deliberately - if the rules are complex enough, then it leaves wiggle room in the "interpretation" which they can work out later (in their favour). Of course, if your interpretation differs from what they later decide it should be (having seen how people are interpreting the rules to the tax payer's advantage) then you are on the hook for penalties as well as the "underpaid" tax. Trebles all round.
@AC - Why arn't dividends taxed at the same rate as any other income?
Because politicians get them?
The concept is that the income has already been taxed (when it was company profit) so to tax it again would be double taxation (or triple if you include the VAT you'll inevitably pay on anything you buy with the income).
It's to encourage people to make sucessful businesses - but from the IT contractor market it gives an advantage to the small firm - one or two people who work together and share the profits - over the huge conglomerates.
It may be designed to encourage small firms but as we saw with the Xmas collapse of City Link far too many firms use it to avoid responsibility for staff and individuals use it to minimise their tax.
In my current shop we have two ex-2e2 staff as contractors who were kept on after the collapse, but the firm baulked at making perm'. Good workers, but if they are looking to expand into a services company they are keeping it very quiet.
VAT is not a tax for a Ltd. Company. Never look at VAT on your invoice, as it is not your company's. Keep it to one side, and pay it when it is due. If the Ltd. Company purchases anything liable for VAT, it can be removed from what is owed to HMRC.
I repeat, VAT is not your company's money.
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"The concept is that the income has already been taxed (when it was company profit) so to tax it again would be double taxation"So how is it any different from a salary?
It is different from a salary because it has already been taxed (as corporate profits).
When a company pays your salary, they pay no corporation tax on that amount because it is an expense. When you take dividends from a company, it comes from the profits of that company, which are taxed.
So to make someone pay full income tax on dividends would mean that corporation tax is paid (at 20%), then income tax (at 20%+ above your personal allowance). You would be taxed twice.
Although, to be honest, I think they should do away with taxing companies completely. Make all tax payable by individuals at standard income tax rates. It would remove a lot of loopholes and simplify the tax system immeasurably.
@AC
"The concept is that the income has already been taxed (when it was company profit) so to tax it again would be double taxation"
"So how is it any different from a salary?"
In many many ways..
For a start if a company earns 10k a year it still has to shell out 20% corporation tax on it, where as a 10K salary would attract no tax at all.
I think that the problem that you have, and the problem a lot of people (contractors included) have is with the concept of the company as an entity, when I work for a client I don't get paid, my company gets paid, my company then Pays its tax and expenses and I get paid a wage... every now and then what is left over AFTER TAX is paid to me as a dividend (Note if I get too much in dividends I go into the higher tax band and then pay additional tax on the dividend).
If you tax dividends at the same rate as PAYE income then contractors will effectivly be paying higher rates of tax than permies, at that point they will fold their companies and go down the simpler (but currently more expensive) self employment route.
You save on National Insurance contributions. As a Limited Company you have to pay your salary, plus employee 11% and employer 13% national insurance tax --- on top of the income tax (PAYE). So If you pay a dividend instead you don't pay the the NI nor PAYE if you stay within basic rate. But you can only pay from the profits, which are already taxed at 20%-ish.
"Why arn't dividends taxed at the same rate as any other income?"
The core issue is who pays for business risks, in this case employment risk. If you're a manager you may have a predictable work-load for business as usual but you might well have an unpredictable workload for project work and you will have a less-predictable-than-you'd-like workforce (sick leave, parental leave, resignations etc.). At any one time you could find yourself with insufficient staff to meet requirements or you could find yourself paying for more staff than you currently have work for. This is the risk. What do you do?
You could do nothing. This leaves you with more outgoings at some times whilst accepting that at others stuff which should be done can't be done.
You could recruit permanent staff when you have a shortage and make them redundant when you have an excess. This is going to cost extra in redundancy payments.
Alternatively you can off-load the risk onto someone else. Someone who takes the risk that their work and therefore income will be erratic. The someone else could be any size from a large body-shop to an individual freelancer. Taking risks like that is called business and one of the ways of recognising those risks is by taxing the returns from business somewhat less than those of employment.
Unfortunately there now seems to be an extra way, zero-hours contracts, shuffling all the risk onto employees who have slim advantages of employment and no chance of operating as a business. And that, in my view, is wrong.
@AC
"Why arn't dividends taxed at the same rate as any other income?"
Because wages are an expense to the company so the company does not pay corporation tax on them.
Dividends are paid from Company profit (AFTER Corp tax)
Basically before any shareholders get their hands on a dividend HMRC have already had a cut.
@Handy Plough
"Many contractors save avoid tax..."
TFTFY"
As does anyone with a cycle to work bike. A company pension, A student loan, An ISA, childcare vouchers or any kind of salary sacrifice benefit...
Tax avoidance is perfectly legal, why would any one pay more than they have to? Evasion on the other hand is not legal and I would encourage you to report anyone you know to be evading tax.
I never said it wasn't legal. That's your own moral compass clamouring for justification. Here's the thing; if it's morally wrong, as were constantly told, that Google and Apple 'avoid' paying corporate taxes, why is it OK when a consultant does the same. I'd guess it would be distasteful to you if it were a 'celebrity' or a banker or a lawyer were to do similar too. You lot are the biggest bunch of hypocrites out there. Which is considerably more distasteful that tax avoidance.
Utter nonsense. Apart from anything else, if you've read all of the Worstall columns on this site about the subject, Google et al are NOT avoiding or evading tax, they are in compliance with the EU regulations. Whether or not those regulations are fit for purpose is another question, but the point is that the Government can introduce the "Google Tax" and say they're doing something about it, which keeps the electorate happy even if it won't bring in any more money.
The latest budget taxes us more, the IR35 regulations are supposedly being tightened as well, yet you still accuse us of hypocrisy when all we are doing is trying to make a living as best we can, like everyone else. And anyone I've ever met who has your attitude towards contractors has it because they don't have the guts to try it themselves.
As an IT contractor for 17 years, the only thing I have in common with the permies around me is that my technical skills are similar. That's where the comparison ends. Attitude to training is different, attitude to delivery is different. Attitude to "doing it right" is different. Attitude to sickness, holidays, other benefits are different,
Above all, I prefer to manage my own career development, rather than whinge on about my "employer" not valuing me enough. I know my value... it has a pound sign in front of it. It can go up. It can go down. And that's all there is to it.
"As an IT contractor for 17 years, the only thing I have in common with the permies around me is that my technical skills are similar."
Maybe not even that. It's not unusual to be engaged as a contractor because there's a sudden need, either by virtue of a new business requirement or a resignation, for a skill none of the permies currently have. The attitude to training is a factor here.
Try being a public sector IT worker!
Last 5yrs 2 year pay freeze 3 years of 1% (we have just had last years pay award, it should have been paid LAST July!)
Next 5yrs 1% a year.
So doing the math's in 10 years we will have had a pay award smaller than what MP's have just given themselves in one go!
Pension contributions gone up by more than our pay awards so I'm actually taking home LESS than I was 5yrs ago.
Removal of pay progression. If I was to get promoted (nearly impossible) I would get a 10% pay rise and that's it.
Bunch of c u next tuesdays
with 10% cut whenever the company must be seen to be tough and rates not gone up in 8 years, with a big dip in the middle.
You do know that a final salary pention is worth 30% of you pay packet, if you have one of those.
in this world some win and some lose at different times, you can always jump the fence for the greener grass.
to be clear in the last decade i have been permie 3 times and had 8 contracts some returning after a break.
if you want unfair, try the our .com is being bought and we are making a fortune, as a thanks have a choclate orange on your way out. :¬) that was fun
"Try being a public sector IT worker!"
Been there. At least sort of except I was in science and at that time science grades were definitely the bottom of the pile. I think IT would have come under PTE which rates were jacked up because of recruitment shortages. We had wage freezes back then, they're not new. I eventually jumped into IT and the private sector and later into freelance.
Try being a worker for one of the big Services companies ...
Last 5 years, one pay rise (circa 1.8%) as all pay rises are related to annual performance and "good standard performer" hasn't qualified for a "compensation award" in more years than I can remember. Plus annual assessments appear to be "profiled" to reduce numbers of "above normal" and "outstanding" ratings and increase numbers of "performance in need of improvement" ratings (which of course lead to performance improvement plans which are basically meaningless and ultimately in turn lead to being managed out on grounds on insufficiently improved performance).
Next year? dunno, but profits for the most recent quarter were down by double digits for the umpteenth quarter in a row under the present CEO.
Pay progression? Unknown concept - even (rare) promotions are seldom supported by a pay rise.
Pension contributions : basically set your own above a floor level - but you'd better make the right choice for the DC scheme to be worth anything in the future.
Glad I've left it behind me now!
That's not just a feature of the public sector - I worked as a permanent employee with 3 different companies 2001-2009 for exactly the same salary throughout (and a consequent drop year on year in real terms). In 2009 I returned to contracting and found myself paid exactly half what I was earning as a contractor in 2001 (but significantly more than I was paid as a permanent).
So it goes.
I'm not unhappy to pay my share as a contractor, I'm unhappy that a large number of perm employees think it's OK to accuse any contractors of tax avoidance without knowing what they are talking about. Open resentment and bitterness towards contractors caused me to leave my last contract, due to a hiring freeze and some redundancies the atmosphere was horrible.
I used to use an Umbrella Company, and am now LTD. There are many reasons for this other than financial, for example I can register as a Microsoft Partner which gives me access to support and training to develop myself and provide better service to my customers. There are also additional costs, such as Professional Indemnity Insurance, required to work on many projects.
Why the hell do people in a standard job (PAYE) get arse f****d by all these people going around contacting making all this extra money from tax avoidance and the gov is happily helping them along.
So because I work a standard permanent IT support job in the NHS, all these contractors I am working with are being payed more, know less then me, more attentive to their social life when in work
and when they go one a bigger wod of cash in their pocket.
'Copywrite' unts.
They may not know less than you. They may know that "contracting" isn't the same as "contacting". They may know how to spell "paid" and "wad". Such knowledge helps with putting together CVs that don't get filed in the round container.
They may also know that out of their contract rates they have to pay not only income tax and employees' NI but also employers' NI and make provision for being "available" in due course. If they don't know that they'll find out the hard way.
Fair do's for pointing out the spelling mistakes but how many contractors pay employer's NI?
Most pay themselves the tax free allowance as salary and take the rest as dividend or leave it in the company until they fold it.
And Annoyed NHS Worker, top tip, quit. Come and enjoy the green grass* on this side of the fence.
* - colour and quantity of grass may differ to that perceived from previous permie position.
"but how many contractors pay employer's NI?
Most pay themselves the tax free allowance as salary and take the rest as dividend or leave it in the company until they fold it."
Citation required.
I pay myself a 'normal' wage and pay employers NI and tax etc. Anyone leaving money in a company until they fold it is probably breaking the law, tax evasion at the very least? ianal of course.
I do not have a citation to hand, but it is what my current accountant recommends and speaking to my peers it seems to be pretty standard.
Keeping money in the firm is perfectly legal, you pay tax on what you take out, not on what comes in.
If I decide to fold the firm I'll have to take advice, but I'm pretty sure that a decent lump can be taken as capital gains.
In my day that used to be referred to a taking the piss and, because of that, suspected of being an open invitation to the IR/HMRC to carry out an IR35 investigation.
Having been through the full cycle (assisted to some extent by having a pension from early retirement elsewhere) my experience was that company income paid:
- Regular reasonable salary incl. NI. and pension contributions.
- Smaller salary etc to Comp Sec (Comp Sec no longer required for small companies but back then had legal liabilities and taking on those deserves payment).
- Computer hardware & software.
- Travelling and accommodation for gigs away from home.
- Training which includes not only the cost of the course but travelling, accommodation and loss of fees during the course.
- All other expenses including phones, ISP, accountant, insurance and PCG membership.
- Dividends at less frequent intervals than salary.
- Continuance of salary etc. during time off sick (taken to hospital from site experiencing irregular heartbeat, off work for a fortnight).
- Continuance of salary etc. whilst "available" (clue: typical agency call is "Are you available on Monday?". Availability costs money.)
- Continuance of salary etc. for some time after the last contract.
- Eventual lump sum, I can't remember if that was within CGT limit.
"Most pay themselves the tax free allowance as salary and take the rest as dividend or leave it in the company until they fold it."
You know that NI is still paid when you earn less than the personal allowance? in fact the threshold is £155 a week, and frankly if they can live off that then I'm amazed.
With regards to your assertion that they "leave it in the company until they fold" some might to do that and qualify for entrepreneurs relief, but there would still be tax to be paid.
There is nothing in the law that stops contractors operating in this way to reduce their tax liability, and there is nothing stopping you doing the same, Quit work, register your ltd and start looking for work.
I advise speaking to an accountant first though as your current understanding of operating a ltd company will land you in a heap of shit at the moment.
"Not unless they have a useless accountant"
The more people there are taking the piss (aka the low hanging fruit) the better.
I try not to take the mickey and cross my fingers I don't get audited, because no matter how well you try and run your accounts they are bound to discover some rule infraction (or at least make your life hell whilst trying to find one if rumours from people subjected to an IR35 audit are true).
@patrick_bateman
Do you know how much you cost your company? ill bet with everything added up the cost to your company for you to be sitting there is about the same as the cost of the contractor sitting next to you.
What you are failing to understand is that the contractors day rate is not their money, its their companies money, there is a difference between my day rate and what I get to take home.
At the end of the day there is no getting round it, contractors DO earn more than permies (not as much as you may think) want to know the difference-
Who pays you for sick/holiday pay?
How much insurance are you required to carry to do your job?
Do you have to pay an accountant? (Ok we don't HAVE to do that but I think you'd be mental not to)
Can your employer tell you that next week you wont be needed any more (without paying you redundancy)?
If you are out of work can you claim job seekers allowance?
Does your employer train you and pay you for this time? (I know some might not)
Do you have to provide your own IT equipment & software licences to do your job? (depending on the client we have to)
If the regular paycheck is that bleedin' awful, perhaps you should go out contracting for a while just to see how easy it is.
But I don't think that will happen anytime soon, it is much easier to piss and moan about how bad things are working in a taxpayer subsidized industry.
@patrick_bateman: You sir are an arseclown. If all of those contractors know less than you, are completely inattentive to their work and yet earn more than you then you must be a complete simpleton for not joining them. According to you, you have the skills, work ethic, and would like to be on their pay.
In short, quit fucking whining and do something about it.
Any time you hear "I am from the government and I am here to help you", you should run, run away.
Attempts to extract more revenue from the remaining viable parts of the economy (i.e., private contractors, small business owners, sole proprietors and other working class heroes) simply means the government can no longer keep up its profligate life style without stealing more money. Mass surveillance programs, war machines, champagne receptions, bodyguards and international travel are VERY expensive. Starbucks and co said fuck off, go ask somebody else. That somebody else is you.
Personally, I call scam by politician. Engineer some concerted attempts to kill off the small businessman, wait for the inevitable revolt and then reject any future revenue generation plots on the grounds they are "bad for business". Cut more social services, rinse and repeat. Take your dividends and retire. Unfortunately, if you didn't or couldn't do the same you will be left holding the bag.
The sooner these lying, psychotic political shitbags are put out to pasture forever, the sooner the world will get back to rights. Increasingly convoluted tax regimes designed to shift people's money from one pocket to another are not the answer. Eventually, we will all be competing with leaner, hungrier economies that have learned from all of our past mistakes.
What is needed is a tax revolution, one that does not rely on electoral shell games and power politics.
Dismantling the current crap fests and designing automated transaction payment taxation systems is the way forward. I am not sure I will see that happen in my lifetime but, I do live in hope.
I've been contracting for more than 20 years. The nominal increase in dividend tax isn't so bad. However, the IR35 nonsense is pure stupidity. The troglodytes at HMRC that bang this drum need to stop banging it, as much as the Conservative MPs that listen to them. Nobody wants this tax. It doesn't make money.
If the Civil Service and public services were more efficient, and played by the private sector rules, then 50% of them would be unnecessary in months. My jaw hits the ground everytime I see a public service contract for IT services, or hear of the latest gross negligence on a multi-billion pound project with zero consequences for the civil servants at the heart of it. There are savings to be made there. Go get them.
I moved to USA from UK last year. One clear and obvious fact is that there is lots of money here. When people are earning a lot they are paying a lot of taxes too. I get the feeling that Osborne and co are just taking advantage of the population rather that building a growth economy. Rather than ripping off more growth making citizens and paying dole money, why not change the country for the better. Mind you, if he said he would tax everyone another 10% and guarantee Californian weather all year round in Blighty I'd pay it.
Yep, so far worked in Germany and The Netherlands, way better lifestyle, working environment and salary, plus age actually seems to work in your favor.
"In time, Bryce thinks some contractors will retire or move overseas as a result the changes and fewer will replace them."
Already happened as far as I can see, in 2009 after 17 years as a contractor I was on the dole in the UK for 6 months, and then in a low paid job for another 6 before leaving, I knew lots of people in a similar position who just gave up or left the UK, this coincided with, and was mostly due to, a flood of unskilled ICT's in the UK which has been running at a rate of just under 20,000 a year for around the last 10 years, what about clamping down on that massive tax dodge eh Georgie?
I even spoke to the Home Office about it, "The Government see ICT's as being invaluable in increasing British Companies competitiveness" was the reply I got, meanwhile when I was signing on the guy's at the table next to me could on several occaisions be clearly heard saying stuff like "I've worked in IT for 15 years but I was made redundant/contract cancelled, and the company is now using Intra Company Transfer workers", even spoke to agents who were laying off staff as large companies replaced their staff with offshore workers meaning they could no longer sell contractors into those companies.
Can't speak for the rest or Europe but the Germans and Dutch managers I've worked for have usually come up through the ranks and want a job done properly, in exchange they pay well and the cost of living means you can have a good life, the UK government has no regard for IT workers at all, I laugh my head off when they make claims about making the UK a tech hub, we were once upon a time but that was destroyed by predatory taxation and cheap labour.
I know quite a few very experienced guys in IT working outside the UK now, spoke to an aerospace engineer the other day who said it's the same in his industry, if you want experienced skilled people you have to make it worth their while to stay, nobody I know who left wants to come back.
Then Osborne is hiking your taxes.(*)
If you're a millionaire, then congratulations! You will be receiving juicy tax-cuts paid for by the poorest in society. Hooray, we're all in it together!
(*) - Oh, and don't expect any extra public services for it. They're being run down preparatory to declaring them "failed", and selling them off to Osbo and Cameron's old public-school friends. Ker-ching! Triples all round! (Except if you're not rich. Then fuck you.)
I’ve been a contractor since 1985 and can’t imagine working any other way. In the early days, you could work contract as a sole trader, but that changed when the agencies became liable for tax default by the contractor, though not if you had a good relationship with your agent. The good ones used to take you out for pub lunches every so often to make sure everything was running right and, I suspect, gain intel about the company. In those days, rates were such that you could be earning double or three times the basic salary of a permanent employee, but not now. Employed salaries have increased significantly, while contract rates have been essentially static for 10-15 years. There has been some increase recently, which is the clearest sign to me that the economy is picking up, but there’s a lot of catching up to do.
You can get a lot of flack from the permies at some sites. Petty jealousies about remuneration and difference in ability, or they just don’t want any contractor, as it can show them up and the games that are being played. It can be a real problem, but it’s usually the result of company culture / management failure. Not valuing their workforce, riding them hard with no encouragement or reward. You see that more and more these days, but find a well run company where people are respected, valued and encouraged to get the best result and you can make a real difference to a project. A good contractor will often have far greater experience and knowledge base due to the variety of companies worked for and projects worked on. Don’t expect any of that to cut any ice though. Contractors are often brought in only when a project is in serious trouble anyway, looking for someone to blame and an atmosphere you could cut with a knife J. If you find that, move on as it’s already too late to save the ship.
Although the (potentially) added income can be great, it was always more for me about the freedom and scope to find the sort of work that I really want to do. Full time employment just takes up far too much time. Ideally, a year or two contracting, followed by 6 months or a year off to catch up with fresh skills, work on some of my own projects etc seems the ideal way to live. The downside is that you can be in real trouble in a recession and there have been periods of up to 2+ years without regular work. Even that isn’t so much of a problem now, as you can buy and sell on Ebay etc to keep the wolf from the door. You just need to be very adaptable and prepared to take risks, which doesn’t suit everyone. What it has done for me is given me more choices, kept me up to date with the tech and allowed me to fit out a better equipped dev lab than many of the companies I work for. Still running a 12 year old car though, but so what ?…
Hah, well, my other car is nearly 21 years old and I still do most of the maintenance as well, though it seems that’s an old fashioned idea. I guess the point was that money and material goods are not the main driver. If there’s enough to pay the bills, keep the tech up to date and the occasional treat, that’s good enough, though the leccy bill can be astronomical if you keep machines running 24x7 :-).
The fundamental problem with employed status is that the system seems geared so that the majority only just keep up with the monthly outgoings. I see that as a kind of entrapment and severely limits the choices you can make. You have to accept that there are no long term careers in industry any more. No status to strive for either. For example, tube drivers with a few months training earning the same or more than an engineer with a lifetime of experience and ongoing requirement for continuing education. Not that I begrudge them, but why spend years learning and keeping current with a subject if you can achieve the same salary for less effort ?. Most work to live, not for it’s own sake. For most people, a mortgage + 2 kids + paye job = trapped in the mill for 20 years at least. No surprise that many tell the system to spin on it and go freelance. If you live frugally, you can end up with a wedge of cash to invest in projects or other business ventures. A springboard to something you really enjoy doing, rather than a mundane job with no choices. A bleak and insecure future stretching out to retirement…
Simple solution, get you next contract them move offshore - LEGALLY - for at least 6 months per year..
We are currently hiring in the Enterprise Solutions space, after 6 months orientation/probation in Europe, the successful candidate can move to the country of their choice.
Some other disadvantages that everybody has overlooked
I have to work for free for HMRC doing my own tax admin and vat processing, it takes time for which I am not paid to do.
If I want to send my self on a training course, its seen by HMRC as a personal development and therefore not tax deductible
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