back to article Thin-lipped chancellor tight-lipped on contractor-nudge-onto-payroll plan

Chancellor of the Exchequer George Osborne failed to mention IR35 even once during his Autumn Statement to MPs on Wednesday at lunchtime – despite the government recently floating new rules to crackdown on freelancers' tax arrangements. In the small print of Osbo's statement – which in classic style was published after the …

  1. Your alien overlord - fear me

    "Entirely missing from the document, however, is any mention of the government's promise to bring in a legally binding broadband service obligation by 2020, as pledged by PM David Cameron earlier this month."

    That'll be passed in law in April 2020 so the Labour gov't will have to sort it out when they get elected in May 2020 - nice one Davey.

    1. Velv Silver badge
      Mushroom

      You think we'll be here in 2020?

    2. Dan 55 Silver badge

      It's an EU directive, it might even have been passed into a national law already.

    3. ToddR

      I hope your tongue is in your cheek!

      1. DiViDeD Silver badge
        Joke

        Well, it's somebody's tongue, certainly.

        El Reg really needs a joke icon for jokes that should remain silent.

  2. Seanmon

    Thin-lipped chancellor announces death of UK contractor market.

    I honestly think that Osbo's notion of "a contractor" is one of those senior level civil service or quango directors who have the big salary and the job security, yet style themselves "consultants" and take advantage of every tax benefit going.

    Yer normal jobbing contractor, meantime, generally has no option but to travel, stay away from home, shell out on hotels etc. Isn't this the point of contractors? We're flexible, we can go where we're needed, stay until the job's done and quietly go away. Well I for one won't be doing that anymore.

    (And no grousing about how much we get paid please. I've been lucky enough to be able to work pretty consistently over the past couple of year, and I have not made any more than any other reasonably senior IT or project manager)

    1. Blane Bramble

      Re: Thin-lipped chancellor announces death of UK contractor market.

      @Seanmon

      No, he knows *exactly* what an IT contractor is. It's a self-employed, usually competent and skilled individual who competes directly with the large IT consultancies who donate so much money to political parties, and therefore must be punished to ensure he does not get the same tax benefits that the large companies do.

      1. Anonymous Coward
        Anonymous Coward

        Re: Thin-lipped chancellor announces death of UK contractor market.

        Hi

        While I agree with you, 'self employed' was an argument I had with various financial idiots, as I was a directoress of a limited company, subject to the companies act, and should be treated the same as big companies, in this case size does not matter.

        Have an upvote.

      2. Dan 55 Silver badge

        Re: Thin-lipped chancellor announces death of UK contractor market.

        With this lot from Eton in charge it's entirely believable that they think there are a bunch of people who are too mobile and earn too much money and it should be stopped.

        1. ToddR

          Re: Thin-lipped chancellor announces death of UK contractor market.

          Dan,

          You are trying to make Osbourne and Cameron sound like socialists, which thankfully they aren't!

          1. Voyna i Mor Silver badge

            Re: Thin-lipped chancellor announces death of UK contractor market.

            "You are trying to make Osbourne and Cameron sound like socialists, which thankfully they aren't!"

            You either haven't read Marx or did not understand him.

            Marx said that capitalists (Etonians in this case) seek to monopolise industries and then create a monopoly of employment in an area, thus being able to drive down wages. In Silicon Valley a recent case showed that companies like Apple were doing exactly this as a kind of cartel, setting the wages at a mutally agreed level to keep them down. It's reasonable to assume that the big IT contractors want to act as the gatekeepers of work, thus monopolising opportunity and driving down wages at the expense of dividends. The worst MD I ever worked for once told me that if he could have a monopoly he would of course do so. (He hadn't spotted that if a monopoly arises, there is an incentive to go around it, which is what Uber is trying to do with black cabs, for instance.)

            In a socialist system "the labourer is worthy of his hire", i.e. if a business is prosperous wages should be high as without the workers the capitalist just has idle assets. You can argue at length that the Labour Theory of Value is wrong, but it is still a cornerstone of socialism.

            Dan55 is right.

            1. Arctic fox
              Headmaster

              @Voyna i Mor Re: "seek to monopolise industries "

              Indeed. The Grandad of capitalism Adam Smith observed and commented upon a similar context during what we might refer to as the late mercantalist period.

              “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”

              When it all comes down to it the modern "Managerati" see it as in their interest to have prices as high as possible and wages as low as possible and they do not much care what methods they use to achieve this if they think that they can get away with it. The bastards are, in reality, the biggest enemies of the free market in our society.

          2. Anonymous Coward
            Anonymous Coward

            Re: Thin-lipped chancellor announces death of UK contractor market.

            No. He's trying to make them sound like c*nts.

            Which obviously they are.

    2. Chris Neale

      Re: Thin-lipped chancellor announces death of UK contractor market.

      I'd say it's pretty disingenuous to say that you don't get paid well.

      All contractors where I work earn considerably more than permies doing the same role.

      But contracting comes with plenty of risk and no securities such as pension contributions/sick pay/holidays/redundancy etc.

      So it's a trade off. Pays yer money, takes yer chance.

      But it looks like Gorgeous George might be narrowing that gap but not giving out any breaks to balance it. Maybe he's got a mate who runs an umbrella agency?

      1. Anonymous Coward
        Anonymous Coward

        Re: Thin-lipped chancellor announces death of UK contractor market.

        I spent 8 months contracting last year while I relocated, assuming I was in work for the full 12 months and the only days I didn't work were holidays then my monthly "take home" was 40% more than the permi role I moved back into.

        That said:

        a) there were some gaps including a 3 week enforced furlough over Christmas

        b) this didn't allow for sick days (which I didnt take any)

        c) this didn't include pension contributions or any other employment benefits

        d) this didn't include any allowance for training

        e) this didn't include the costs of running the ltd company

        once I factored all of that in I felt like there was a true financial risk premium in the 10-15% range, probably less, but that it also came with a significant risk of career stagnation.

        I think developers or infra engineers who are easily transferable probably do quite a bit better than that - but my experience was that the true gap wasn't nearly as big as I'd expected.

        1. Anonymous Coward
          Anonymous Coward

          Re: Thin-lipped chancellor announces death of UK contractor market.

          I used to have a game I played on the way to the train...

          what day of the week do I actually stop paying out to the government, , Wednesday 12:00 pm was the norm then.

        2. Anonymous Coward
          Anonymous Coward

          Re: Thin-lipped chancellor announces death of UK contractor market.

          Dear other AC (who contracted for 8 months), thank you for one of the most useful comments of the year.

      2. d3vy Silver badge

        Re: Thin-lipped chancellor announces death of UK contractor market.

        "I'd say it's pretty disingenuous to say that you don't get paid well.

        All contractors where I work earn considerably more than permies doing the same role."

        If you work out how much your company pays per day for you in salary, NI, pensions, provision for holiday, provision for sick leave and public holidays the rate a contractor gets and the rate you get are not that dissimilar.

        It's also worth noting that although a contractor day rate may be £x00 that's not their money, its their companies money which is taxed, then taxed again when they pay themselves...

        I know you weren't having a go about salary/day rates I just wanted to highlight the differences are not as big as they seem.

        1. Anonymous Coward
          Anonymous Coward

          Re: Thin-lipped chancellor announces death of UK contractor market.

          "its their companies money which is taxed, then taxed again when they pay themselves..."

          Company *profits* will be taxed, unless you're storing income across years only dividends will be double taxed. Since the loophole relies on corporate tax + dividend taxation being less than total employment taxes, that's hard to complain about. This years changes in tax on dividends were obviously designed to neutralise that loophole, something few contractors seem to have noticed.

        2. DavCrav Silver badge

          Re: Thin-lipped chancellor announces death of UK contractor market.

          "...its their companies money which is taxed, then taxed again when they pay themselves..."

          Could you please name these two taxes? You mean Corporation Tax and Capital Gains Tax, then you could always pay yourself a wage like most people in the country. Then you only get taxed once, Income Tax. What is that you say? You prefer dividends because the tax rate is lower? Then shut up about being double taxed.

          1. d3vy Silver badge

            Re: Thin-lipped chancellor announces death of UK contractor market.

            @dav

            Could you please name these two taxes? You mean Corporation Tax and Capital Gains Tax, then you could always pay yourself a wage like most people in the country. Then you only get taxed once, Income Tax. What is that you say? You prefer dividends because the tax rate is lower?

            Certinally, corporation and income.

            Corp tax is 20% (same as a permie on basic rate) we get the same 10600 allowance.

            We then don't pay income tax until we hit the higher rate threshold because the money has already be taxed.

            And no youre wrong, if we just paid ourselves a wage we would still have corp tax to pay... But with the added bonus of two lots of NI, employers and employees.

            The whole point of what I was saying earlier is that there isn't a massive difference in the % of tax that contractors and permies pay, what that tax is called varies, and of course the day rates are a bit higher but the suggestion that we don't pay tax is wrong... We don't pay INCOME tax (until we hit the higher rate) but we pay the same % in corp tax as you do in income tax.

            1. Seajay#

              Re: Thin-lipped chancellor announces death of UK contractor market.

              "And no youre wrong, if we just paid ourselves a wage we would still have corp tax to pay..."

              How does that work? Corporation tax is paid on profits not revenue so if your company receives some money for your services then pays it all to you it makes no profit and pays no corpration tax, surely?

              1. Dan Wilkie

                Re: Thin-lipped chancellor announces death of UK contractor market.

                Dividends are also paid from Profits though. And the tax structure from dividends is changing iirc next year as well so the gap will close quite a bit more.

                I know the contract I'm currently on pays my ltd co the same as they would pay in salary to a permie, my take home does work out slightly higher, I think my take home works out about the same as a permie on ~£5k a year than they're paying for me.

                That said, I found out my 12 month contract is terminating in December after 2 and a half moonths, and last time I was 6 weeks between contracts so there's that :\

                *** Edit *** I should also clarify that I know plenty of contractors who take home a lot more than their permanent alternatives, so it's possible that I'm just not very good at this whole contracting thing as I've only been at it a year.

            2. LucreLout Silver badge

              Re: Thin-lipped chancellor announces death of UK contractor market.

              @D3vy

              We don't pay INCOME tax (until we hit the higher rate) but we pay the same % in corp tax as you do in income tax.

              Only on profits, which is the main difference: a permie pays it on all incoming cash flows. There's an awful lot can and is deducted as expenses, ranging from travel & training, to lunch & laptops, via mileage allowance, and then double the whole lot down by paying the wife. [1]

              The effective tax rate - total income divided by tax paid - can be significantly lower than you're implying. On the off chance you don't already know that, then you really need a better accountant. My effective tax rate is about 1.5 times what it will be when I switch to the "duty free" route, as my contractors like to call it.

              [1] - Yes, its not as simple as it once was, and you can't just pony up half the balance, but you can save many thousands in taxes.

  3. Sam Haine

    El Reg, if there are any changes to IR35 then could you get Dominic Connor's take on it please? His articles on employment practices are always informative.

    1. Anonymous Coward
      Anonymous Coward

      could you get Dominic Connor's

      FX: Sound of pin dropping

      I think Mr Connor's gone the same way as various writers valued by the Reg readerati of late. At the expense of rolling out the "not as good as it used to be" moan, the Reg over the past couple of years has had a trajectory that's starting to look a bit less intelligent, less well informed, less rebellious, and - well - more corporate, albeit with the usual lashings of bad-pun infested headlines.

      Maybe it's time for The Register to be put out of its misery, and somebody to come up with a new thoughtful & cynical tech site?

  4. Anonymous Coward
    Anonymous Coward

    Who are you trying to kid?

    Obviously contracts vary - and there do seem to be adverts out there for contractors to basically earn the same as perms but with zero security - those employers want their cake and eat it.

    Where I work at the moment and previously, contractors doing the same role, same hours, similar work earn approx. 3x their salaried colleagues - they all know their stuff and all work hard.

    BUT...

    They've been here longer than the permies (no job insecurity for them). Their salaries aren't included in the maths for salary bands, so they artificially deflate the average salary for the role.

    They aren't doing anything illegal with tax, they aren't evading tax, but the corporation tax/income tax/making full use of tax allowances is just avoiding tax - something permies can't do. They are doing the same as Google/Amazon/IKEA et al, and of course we all know how we feel about that.

    These and others are the reasons for animosity between contractors and their salaried colleagues, sometimes we hate them for it, sometimes we just take the p155. The underlying feeling is "it's not fair", which is a bit petty but it leaves me happy that Osbo is doing something about it. Although not as happy as when the loop holes are closed allowing aggressive tax avoidance by the big corporates.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2019