Posts by Dr. Mouse

Re: It's not just the 25%

This jumped out at me when I read their spiel, too.

Self employed generally means a sole trader*. A Ltd contractor is outside that classification. Therefore of course the IR35 won't affect the genuinely self-employed, as the IR35 legislation (old or new) does not impact sole traders at all.

* Or, as you say, those in partnerships

"what normal people do instead of using the money to buy a Fucking Porsche Macan"

You really have a chip on your shoulder about the Porsche Macan, don't you? I'm guessing you want one by how much you mention it, but you really don't like those who have one, do you?

A contractor is running their own company. As with other people who run their own company, it is their choice how they run it. If they (unwisely IMHO) choose not to put any money aside to cover unexpected occurrences, they'll go out of business when they happen, no longer be paid, and loose their Porsche Macan (along with their house). However, this is up to the business owner. It is their responsibility to prepare for unexpected changes in circumstances, and their choice how or whether they do so. This is no different to someone betting their Macan on a game of roulette: It's their choice to do so, and they must live with the consequences if they loose.

An employee has all this responsibility taken care of for them by their employer.

Wrt being let go at short notice: "So can employees (albeit with notice pay, but many contractors have notice periods in their contracts too)"

Under employment law or is very difficult to get rid of someone for no reason. The employee has various avenues to deal with this. Also, contractor notice periods are meaningless as a client has no obligation to provide any work during the notice period: they can give, say, 2 weeks notice then provide no work for those 2 weeks. No work = no pay.

Wrt liability for mistakes: "So can employees. It's very rare that either are actually sued"

The bar is much higher for being able to sue an employee, basically requiring gross negligence or criminal behaviour. However, I know a few contractors whose previous client has demanded they come back and fix a bug, free of charge, after their contract has ended. This has left them out of pocket, but they are contractually obliged to do so.

"the majority of contractors are insured against the risk so there's no actual risk."

As stated below, that is a mitigation of the risk not a removal of it. I have car insurance to cover me in case my car is stolen. That doesn't remove the risk, it mitigates it.

Wrt changing market conditions benching us: "This happens to employees too."

Again, it is much more difficult to get rid of an employee. In this case, it would be redundancy, which would give a payout and stop them hiring someone else to fill that role in the near future. Most firms will keep an employee on if they only expect a month or 2 without work for them (they'll find something for them, but they are not really needed to cover the workload), sometimes longer. A contractor who is no longer needed is gone.

Wrt client deciding not to pay: "Happens to employees too. In both the contractor and the employee case it rarely happens."

Again, there are strong protections against this happening to employees, and it happens more often than you are aware to contractors. I've had a invoices paid over a month late at times, and I know more than one contractor who has had to end a contract due to non payment and ended up having worked for free for over a month.

As for a client going bust, employees are top of the list when it comes to getting paid on insolvency. Contractors are at the bottom with all the other suppliers. It is likely that an employee will get paid, it is unlikely that a contractor will.

"your contracting rate should include cover for when you're unable to work, holidays etc"

It does, but this is still a risk which we must account for.

Similarly, I build in some extra to cover me in case my client refused to pay my invoice, which mitigates that risk. I build in the costs of professional indemnity insurance, to mitigate the risk of being sued for making a mistake.

The fact that we do something to mitigate these risks does not mean they are not risks. It is up to us to plan and budget for them, but they still exist.

Re: I do wonder..m

If the market conditions mean it is no longer tenable for me to work as a compliant Outside IR35 contractor, I will have to consider alternatives. These include inside IR35 contractor, umbrella contractor, FTC and permie.

However, I will not do so with my current client, or any recent client. The risk of a tax investigation (even one I'm sure I'd win) is too great. I wouldn't even consider it if they offered a large rate rise because of this. I would look for an alternative gig elsewhere.

This means the company involved lose any experience and knowledge I had of the project. If contractor do this en masse, the government may achieve their obvious aim of eradicating Ltd contractors and forcing all of them on to PAYE, but the companies involved will be damaged. The more contractors they lose, the more damage they will suffer.

Many predict that the outcome of these regulations will actually be lower total tax receipts to the treasury, when you consider contractors retiring (only pension income to tax, if that), contractors going perm (on lower salaries than their rates), companies damaged by loss of contractors (lower corp tax), accountancies going out of business (contractor accountancy is big business), and many others.

"Risk? What risk? You're a contractor, not an entrepreneur."

We can be let go at a moment's notice.

We can be held financially liable for mistakes or bad work.

Market conditions can change, benching us for months at a time.

If we are sick, we get nothing.

Clients can decide not to pay us.

Clients can go bust, leaving us unpaid.

Agents can decide not to pay us.

Agents can go bust, leaving us unpaid.

That's just a few off the top of my head. I can list more if you want.

"As someone who has long been a salaried employee in an environment where freelancers have dodged taxes and ponced off taxpayers, IR35 can't come quickly enough"

Are you aware that IR35 already exists? Even before the public sector reforms, the rules were there and they are not changing in terms of who is inside or outside.

The only change to the rules coming in is that it becomes the end client's responsibility to determine a contractor's IR35 status, and their liability for taxes if they get it wrong. However, a contractor who is outside IR35 now will still be outside after.

If HMRC think that someone is incorrectly operating outside IR35, they can always investigate... Oh, wait, they do that and consistently get proved wrong in court (or even before court).

These regulations will not just have the effect of stopping "fake" contractors. It will have the effect of denying real contractors from being able to operate as real contractors, and force them to pay more tax than they legally owe. It is no different to what the situation would be if your employer continued to tax your wage on an "emergency" tax code in spite of them having the docs to show what you should be on, except that there is no real right to appeal and no way to claim back the extra tax you've been forced to pay over what you should.

Re: Anonymous Contractor

This, 1000 times this!

How long before ASDA, for instance, starts offering to pay a slightly higher rate if people choose to become "Inside IR35 Contractors"? They receive a higher rate, but no holiday pay, no sick pay, no pension contributions, no staff discount. People will take it because of the higher pay. I know some who have said they would, even knowing they would no longer receive those benefits, because they are living hand to mouth and are, basically, desperate.

How long after that until ASDA chooses to force everyone into that situation?

An "Inside IR35" role* is a staff role. It should be treated as such, with all relevant rights and benefits. Allowing "Inside IR35 Contractors" is allowing employers to opt out of providing employment rights and benefits, which should not be allowed.

* I mean a truly Inside role, not just one a company has assessed to be inside to avoid any tax liability risk.

Re: Anonymous Contractor

Most contractors (I know) do this.

However, they do this within their company, so that their company can provide them with holiday and sick pay. Inside IR35 this is, effectively, impossible.

Let's take an example of a person who works for one whole year then is sick the entirety of the next.

An employee (with a reasonable employer) gets, say, £50k both years, and pays relevant taxes on this.

A contractor outside IR35 earns £100k profit and draws £50k in the first year, paying relevant taxes. He then has enough to draw £50k in the next year, again paying relevant taxes.

A contractor inside IR35 has to draw the whole £100k in the first year, being clobbered by the extra tax on that. The second year, he has to pay for his own sickness out of the over taxed amount, and cannot offset the fact that he was unable to earn anything that year against other tax years.

Re: Anonymous Contractor

It doesn't affect all contractors. It affects employees posing as contractors.

You are correct, the law doesn't. We genuine contractors should not be affected by that.

However, there is a large difference between "should" and "will". A large number of companies are deciding not to engage contractors through their limited companies anymore whether they are inside or outside IR35 in reality. They don't want the extra work and risk involved. This does affect genuine contractors, whether their current client is one of those companies or not. It is shaking up the entire market.

Let's take a quick example: Let's say that the govt made you liable for any tax owed by a self-employed plumber who came to do a job at your house. You had to evaluate him, check he was paying the correct taxes, and if he wasn't you could be clobbered with his tax bill.

On the other hand, you could go to a large plumbing company. They would charge more, but you would have no extra work to do and no tax liability.

Which would you go for? The one which takes a large amount of your time and effort to evaluate and which could land you with the massive expense and disruption of a tax investigation, with the possibility of a large extra tax bill?

So, even though we genuine contractors should not be affected, as the law does not apply to us, we will be affected due to the massive disruption to the market for our services.

(By the way, look at the example and see who benefits in that hypothetical...)

Re: Aboyt effing time too

The annoying thing is that he, as well as BJ and many others, pushed for IR35 to be scrapped before coming to power. In fact pretty much all politicians have said it's a complete mess at one point or another, but give them a sniff of power and they crumble and rub their hands with glee at all the money* HMRC promise will come from it.

* By "all the money", IIRC they are expecting £3bn over 5 years, or £600m/year. For 2017/18, total tax take was £690bn, which puts this as less than 0.1% increase in total receipts. Adding a tenth of a penny to each income tax band would raise more! It's a drop in the ocean, even if it yields as much as they say and doesn't cause any drop in receipts due to damage to businesses...

Ah, but HMRC are basically saying that those contractors are employed: Their working practices are the same or very similar to an employee. In fact, the IR35 legislation calls them "disguised employees" (That's the IR35 regs currently in force).

So, by bringing in laws around it, the government is legitimising "disguised employment" and saying they don't care about it as long as they get their pound of flesh (tax). These "disguised employees" are, by definition, employees and therefore should be entitled to employment rights.

It is not a huge stretch to see Amazon or ASDA starting to take on "resources" as inside-IR35 contractors. As the government has effectively given its blessing for this way of working, it would then take an employment tribunal for these "contractors" to get the rights they deserve, and that's assuming the employment law stays the same...

Re: When is a duck not a duck?

This is where terminology is vague in general.

To me, self-employed would mean operating as a sole trader. You, personally, get paid by your clients. You can then deduct some legitimate expenses, but are then taxed as income on all profits remaining. Many tradesmen operate on these terms, but most freelancers/contractors don't.

So it could be quite correct for HMRC/the govt to say these rules won't affect the genuinely self-employed, as these are not even covered by the IR35 legislation as it stands, let alone the new rules. Many will be affected by these rules even where they are provably operating outside IR35, but that doesn't affect the truthfulness of that statement because they are not self employed, they are employed by their company...

AFAIK, no, it's not law yet. It's draft legislation, supposed to come in the budget.

That's part of the problem, it's difficult to prepare for a new law coming into force in a couple of months when the final legislation still hasn't been finalised. How do we know something important isn't going to change at the last minute, something which will render the vast amount of time and money put into preparations completely wasted?

Re: He's threatening Italy as well

You've misinterpretted what I said. I suspect on purpose.

"the democratic result is leave. So why do you matter more than everyone else?"

I am not saying that I do. I'm saying what I wanted: To live in the UK, with the UK a member of the EU. I don't want to just live in an EU member state. I didn't say that my wishes were more important, just explaining what they were to demonstrate that they are not fulfilled by me moving to an EU state.

"Isnt it a bit arrogant to think you dont want harm to the country but the majority of the people do?"

Again, not what I said nor what I intended to say. I am sure that no one wants to damage the country. I believe that Brexit will damage it, so do not want to do it. This does not mean I think those who want Brexit do want to damage it, they just don't believe Brexit will damage it.

"if someone feels so strongly that they wish to be in an EU country with Schengen and the currency then that isnt here anyway"

But, if they want to live in the UK, and that be an EU country with Schengen and the Euro, they are perfectly at liberty to say so and to campaign and work towards making that happen. Just as those who wanted out of the EU were entitled to campaign to leave, and those who want to rejoin and entitle to campaign to do so. It's a core part of democracy.

"if the UK cant even get a simple majority support to remain why would we vote to rejoin"

I believe that there will be enough negative consequences of leaving, and that many of the purported benefits will fail to appear. Because of this, I believe there is a reasonable chance that there will be a shift in favour of being in the EU within a few years of leaving, and it would only take a small shift for the majority to be in favour of being inside. Even with having to adopt the Euro/Schengen etc, if Brexit goes badly enough I can still see it happening. I hope it doesn't, I hope it goes well and I have to admit that I was wrong, but even the most ardent Brexiteer should be able to see there is a risk of all sorts of negative consequences.

Re: He's threatening Italy as well

We will need trade deals because we won't have any, and the global system is heavily weighted in favour of trade deals. We will need one with the EU, particularly, because it contains all of our closest trading partners. We (businesses in the UK) cannot instantly set up new supply lines and attract new customers. Having to trade as a third country with the EU will do immediate damage to a large number of businesses in the UK.

AFAIK, there are no countries operating with no international trade deals. There was one, tiny nation, but they recently struck a deal. There are certainly no first world countries operating without.

I know we are currently taking of trade deals with other countries. However, none of these will be able to instantly replace being part of the single market, let alone all the ones we already have as part of the EU. Even if they eventually bring us the same value as the single market, the short term damage is likely to send businesses to the wall.

Also, although we are talking of deals, none can be signed until after we leave the CU. Once we do that, we are instantly without any deals, which puts us in a weaker position. I don't doubt that there are countries out there which will take advantage of this weakness and demand further concessions beyond what has already been discussed. We won't have to agree to them, of course, but... Only country without a trade deal in a global economy designed for trade deals...

Re: He's threatening Italy as well

So why didn't those who wanted out leave? There are even more countries outside the EU than inside.

There's a simple answer. I want to live in the UK, but I want the UK to be a member of the EU. This is no different to those before the referendum who wanted to live in the UK but didn't want the UK to be a member of the EU.

Quite frankly, this is the most annoying comment a lever can give. It's hypocritical in most cases, as the vast majority of leavers could have left the UK to live in a non EU country but chose not to, and mainly for the reasons above. Or also assumes that the reason is that the remainer loves the EU, whereas normally it's just a matter of not wanting our country to harm itself, which we believe leaving the EU will do. This is way more irritating a response than the usual ignorant-but-sincere "the EU force us to do xyz" when xyz had nothing to do with the EU, because it doesn't require knowledge to work out the answer, just a tiny amount of thought about their own position before the referendum. A tiny amount of empathy based on their own experiences.

So no, I won't just go to live in another EU country (even though, through second citizenship of another EU country, I'm one of the lucky few who could relatively easily). I'll continue to live in the UK, continue to try to do what I think best for my country. If everything goes well with Brexit, I'll acknowledge my mistake. If things go badly, as I expect they will, I'll continue pushing for us to be members of the EU (and don't be surprised if I say "I told you so")

Re: He's threatening Italy as well

The point is that a one small guy can be bullied by a large one, but a large group is less likely to be.

The EU failed to reach an agreement, but didn't have to agree to anything they didn't like. We may get an agreement, but we will probably have to agree to many terms we do not like to do so in a reasonable time, and we will do so because we (or at least our govt) will be desperate to get that agreement.

Re: Result = huge damage and less tax income

Not seen much mention of the 20% VAT the gov will lose out on

Personally, I haven't mentioned it because it's near irrelevant in my own engagements. The companies I contract out to are generally VAT registered, so will offset that against the VAT they charge their customers.

Re: I am a genuine business, yet I'm now getting hassled by my clients!!

I think this is why we are seeing the responses we are.

A blanket inside (or outside) decision is definitely not taking "reasonable care". Nor are role-based determinations.

However, choosing not to use a particular supplier, or type of supplier, is just a business decision. This doesn't come under the new regs. It is purely a choice not to engage that supplier (the contractor's Ltd company), like choosing not to use BT for your phone line. They could still choose to use another one supplying the same resource (an umbrella company, for instance, with services supplied by the same contractor) just as they could choose to use a company reselling BT phone lines. It neatly side steps the new rules altogether and requires no more care (legally) than choosing which brand of loo roll to use.

Note that I'm not saying I agree with this approach, just that this is what I believe to be the reasoning.

Re: Result = huge damage and less tax income

Remember, however, that they will find a way to make it LOOK like they've done a good job. For instance, they will point to a slight rise in personal income tax and national insurance, while completely ignoring the massive decrease in corporation tax which completely removes any benefit. The CT drop will be blamed on something else. HMRC will be able to pat themselves on the back and the country will be poorer in several ways.

Re: I am a genuine business, yet I'm now getting hassled by my clients!!

HMRC determines roles are inside IR35

And here's the rub. As has been demonstrated time and again, HMRC's interpretation of IR35 is wrong.

Contractors are prepared to take the chance that they have to defend themselves. Many companies are choosing not to take the chance that they have to defend their decision.

And this was HMRC's plan all along. They don't want to get the decision right, they just want to scare companies into cowing to their ill-informed opinion. They want to bully people into ignoring the law. So far, they are succeeding in many cases, but please remember that's what they are doing.

Re: I Can't Stop Myself

by calling it "autopilot" that then leads to deaths as the fucking idiots who bought into it don't understand it is not a fucking "autopilot"

But it is. In fact it's more advanced than most autopilots, which just maintain speed, heading and altitude (even if that flies you into a building/mountain)

Re: I Can't Stop Myself

So, by your reasoning, cruise control should've been banned when the guy in the RV engaged it and went into the back to make a cuppa? Maybe we should ban ABS because some guy thought it'd stop the car quicker than physics allowed and crashed? In fact, let's ban all automated assembly lines because some guy got complacent and injured his hand getting it caught in the conveyor belt...

I have read the manuals for Tesla's cars. I lost count of the number of times there were big, bold warnings to pay attention and be ready to take over. The car even warns you if you take your hands off the wheel. Yet so many people are ready to blame the system rather than the morons who misuse it.

This guy took his attention completely off the road and was dealing with his dog. If he did that in any car, he'd crash. Yet, because it's a Tesla on Autopilot, it's suddenly the car at fault rather than the nut behind the wheel?

"Contractors earning good money and worried about paying too much tax"

I'll start by pointing out that I'm no fan of Corbyn or Labour, this is no defence of them or their policies.

However, there is a big difference between "paying too much tax" and "paying more tax".

As I've stated elsewhere, my greatest objection to IR35 is that it penalises contractors, and only contractors. A director/owner of a private Ltd is entitled to set his own salary and to declare whatever proportion of the companies profits he wishes as dividends. Being declared inside IR35 is basically saying "Yeah, but you're not a director/owner of an Ltd, you're just saying that to avoid paying tax". It would be calling me a liar (and couldn't be further from the truth in most cases I know of).

I would be happy with an increase to CT and/or dividends tax, limits to the amount of profit which can be declared as dividends, or even rules which force dividends paid to employees/directors to be run through PAYE as salary, as long as they applied across the board and did not call me a liar or a tax dodger.

On top of this, the way many clients are handling this will force all contractors to pay too much tax (i.e. more tax than they should owe) by banning Ltd contractors or declaring them all "inside" even when they are clearly outside.

So, no, I don't want to pay "too much tax" (more tax than I owe based on my circumstances), but I'm fine paying more tax.

Yep. Also in the running:

- increase the dividend tax

- replace shareholders with employees in your suggestion

- bring in a rule saying that any dividend paid to a director or employee must be run through PAYE as if salary (with a credit for corporation tax already paid)

All of these are simpler and fairer than IR35, while having the same or very similar effect on tax revenues.

I think the difference comes down to impressions.

A person would not consider someone a tax avoider for not paying car tax on a car they don't own, but they might consider it avoidance not paying any tax because you have a Plugin Hybrid, even though you never plug it in and there are no emissions benefits when running it on petrol alone.

Tax avoidance is usually used to mean someone who doesn't pay tax which they don't owe but people think they should owe. This is why I put 'tax avoidance' in quotes, because I don't consider it tax avoidance, I consider it paying the correct amount of tax.

It's also why the rules and reforms here bother me. It's nothing to do with paying more tax. It's the fact that, as there are a set of rules specifically targeting contractors, the govt and those who support the rules believe we are avoiding paying tax which we should owe, even though we don't owe it. It says that they believe we are doing something unethical, when I pride myself on being a good and ethical person.

I would be perfectly happy if the govt decided to increase CT and/or the dividend tax. I would continue to pay what I owe. I will never be happy, though, with rules aimed specifically at me and my compatriots which attempt to class us as "tax dodgers", and even less so with rules which look like they could completely destroy the contractor industry.

"There will be no contractors, because that's 'tax avoidance'"

How is that any different to current Tory policy, which is pushing the same idea that contracting is 'tax avoidance'? Their policies will see exactly the same result you claim of "Corbynism".

A shadow minister(?) said that. However, he then backtracked later and said they were just going to review it, not commit to scrapping it.

IMHO we've heard all this before. None of them are going to cancel, delay or amend the reforms. Contractors are easy targets, both in terms of public opinion and lack of resources to lobby or fight. We'll be screwed over, any market making significant use of contractors will face massive disruption, but HMRC will count it as a success even when tax receipts drop significantly. Everyone involved will lose out, but the government will fudge the figures to try to prove they haven't.

Re: Yeah right...

"the tories sitting where New Labour was (centre left)"

You're kidding, right? They are only centre-left if you are looking from an American PoV (where they have right-wing and further-right wing as a reference scale). They're not even centre-right anymore with the nutjobs they have in charge now!