back to article HMRC's IR35 tweaks have 90% of UK's IT contractors up in arms

Around 90 per cent of UK government IT contractors will rebel against proposals by HMRC to clamp down on self-employed workers not paying the correct employment taxes. The taxman is currently consulting on whether to shift responsibility for compliance with the intermediaries legislation, known as IR35, from the individual …

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Taxman says pay your tax.

90% of people affected do not comply.

Taxman changes rules to make you pay your tax.

People affected up in arms, say they will raise prices to compensate.

Er... okay. You do that. But pay your fecking taxes too.

And if you all paid your taxes, the government would be able to afford the increase in wages that their own contractors demand.

(P.S. Yes, I have been a self-employed IT worker in the past too - I paid everything I needed to pay and factored it in as a cost of doing business. That's what you DO.).

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"Taxman says pay your tax.

90% of people affected do not comply."

You work for the Daily Mail as a headline writer in your spare time?

Taxes are being paid, according to the law using a valid Ltd company mechanism that allows contractors to be paid via dividends, which incur tax, btw. This is the same benefit a company will enjoy. This allows other companies to benefit from their services. It is cheaper for them to use a contractor in this method, and allows for an excellent flexibility around on demand skills.

By making a contractor effectively be an employed person, without benefits in kind, who actually wins here? No sick, holiday pay, or protections, but hey!

No one would contract, or at least, no one would contract in this country. The amount to gain from IR35 isn't enough to offset the loss in value to all services who benefit from contractors.

TLDR - fair tax is being paid already. HMRC have a warped view of why LTD companies are not valid for longer term contracts.

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Taxes are being paid, according to the law using a valid Ltd company mechanism that allows contractors to be paid via dividends

just to be devil's advocate but technically Apple and Amazon et al comply with the law. doesn't mean it's right, just shows that the law is sometimes insufficient

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Anonymous Coward

I read the HMRC consultancy document and it's full of "fairness" as being the goal of this, but ignores that contractors are taxed as employees without the benefits, and also ignores double taxation: you pay tax at source, payroll tax as it comes back out and corporation tax on retained profit.

Not saying the current laws are "right" or properly fit for purpose, but what they are proposing is nonsense.

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Ermmm ... quite.

So, Lee, I take it from your comments that you are an ex-contract service provider 'cos you did not quite understand the basic concept of higher risk and higher reward to cover ya for the less sunny stretches between gigs.

Look, we all have moments when the logic shuts down, so I'll work on the assumption that this has happened to you. Fear not, it passes.

Do you seriously feel it reasonable that a permie should see about the same take-home as a contract worker, in exchange for a considerably higher risk-burden and simply non-existent benefits?

If you were from HMRC (Wait! You're not, are you??) I would understand the reasoning glitch. Please tell me you're from HMRC ....

These rules are so bloody stupid that a colleague and I (actually three of us, but the 3rd is a sanity check direcror appointment) have pooled revenue streams and admin to form a non "personal services company". We manage to stay outside IR35 by active management of our efforts, and through collaborative provision of services etcetera. Well, *WE* stay outside IR35, but that has not stopped HMRC from taking a flyer anyway. Rebuffed, so job done for a while.

What's the result here? Well, we're sodding off to an ex-colony to Do Our Thing. Odd bit is they welcome us and go as far as to provide tax breaks to help things along. Who'd've thought?

I feel much better now. Thanks Lee.

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I agree with AC.

Spot on!

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Anonymous Coward

I agree with the first guy, and don't bring the Daily Mail into it. Everyone should pay their taxes, including wealthy IT contractors. I used to be one and I paid myself a proper salary. Yes, I earned less, but it was the correct and legal thing to do.

There is a place for contractors, and it shouldn't be to employ people full-time without giving them the benefits a normal employee is entitled to. Contractors should earn inflated wages, out of which they should pay corporation tax as well as tax on salaries for any employees (usually just the one). The inflated wages reflect the short-term nature of such engagements: if employers were to go to consultancies or professional services organisations they would pay loads more for the same work. Contractors need to account for time spent not working or having to travel to jobs etc. Prices should reflect this.

The issue here is employers who are using the system to take/keep people off the payroll. A lot of contractors are, frankly, shit, and have narrow/basic skillsets. The good ones suffer because of this, because rates are low as a result, and they're getting worse. I don't find it appealing at all any more, given I can earn more overall as a full-time worker.

I'd rather have a situation where skilled people can set themselves up as a business, deliver value for money at a rate which doesn't cheat the revenue (and hence all of us) and earns them a decent amount of money that makes that rate viable.

As a user of contractors I'd be happy to pay good money for someone who can come in, get up to speed quickly, deliver the service efficiently and effectively, and get out. I'd rather not have to go through several people with inflated CVs to discover that they're shite and time-wasters.

Downvote away if you want. I think the system's broken and needs to properly reflect the role of the contractor rather than putting them into a dodgy tax situation for the benefit of an employer who doesn't want to do his bit.

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As a contractor myself, I do pay my fecking taxes. I pay the fecking taxes that the fecking law requires me to. Not a fecking penny more, not a fecking penny less.

Do you pay more fecking taxes than the fecking law requires you to? I bet you fecking don't.

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Anonymous Coward

isn't enough to offset the loss in value

So basically it's a system designed to reduce the amount of cash changing hands to reduce the exposure to taxes, for employers as well as contractors? Still failing to have sympathy for the plight of tax loophole users here, undercutting employees but trying to get paid more than them at the same time!

btw my contractor contract gives me holiday and sick rights. Perhaps you lot need to negotiate better?

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> just to be devil's advocate but technically Apple and Amazon et al comply with the law. doesn't mean it's right, just shows that the law is sometimes insufficient

Yes, legally, they comply with the law, in a completely legal fashion. They have done nothing illegal, nothing against the rules and therefore nothing wrong. That's my opinion anyway, as someone who abides by the law and therefore does nothing wrong :)

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Tax is theft whatever way you dress it up, but the sheep keep paying it. As money is a false concept and all money made out thin air as debt, you are that wage slave, sorry to burst all your bubbles...

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Anonymous Coward

"By making a contractor effectively be an employed person, without benefits in kind, who actually wins here? No sick, holiday pay, or protections, but hey!"

Agreed!

As a contractor running my own Ltd, I factor in holiday pay, sick pay, no income between clients into my accounts...

Unlike an employee, I am not earning the same every month, I can go months without any income into my business, but my business still needs to pay me a wage so I can pay my bills!

When you figure out the costs, and the other losses you have by being a contractor, you will see that contractor rates are quite low really, and agencies take pretty hefty cuts!

EDIT

But anyway, since this is only for government contractors by the sound of it, I am not worried myself, I turn down most government contracts as they are usually in horrid locations where I wouldn't risk parking my car...

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Re: I agree with AC.

And - again - if the risk is there but the rest is the same then you raise your prices to compensate. Exactly what you're threatening to do is exactly what this is designed to do - get you to pay more tax, thus charge more to cover yourself, which encourages companies to use permanent staff rather than contract staff.

Permanent staff are a) better are clearing the job queues for longer periods, b) easier to tax, c) not subject to third-party, shell-companies and other schemes (not suggesting they are illegal or even immoral) in order to shufty tax around.

The point of this, and the threat of contracted staff "becoming permanent staff" or even moving out of the country? That's the whole idea. Less contracted staff is much easier to tax and manage and audit, which is why the taxman likes it and wants to go that way.

As it is, you yourself have created a shell company and made them jump through hoops. That costs. From your point of view, sure, it's a solution. From the taxman's point of view, you buggering off to another country (anything you try to take with you or send back that might amount to a wage would be taxed) is actually in his favour, and someone will have to hire several permanent staff generating equivalent tax income to replace you.

I've played the game and IR35 was my warning to get the hell out of there. And, yes, at several points I was actually doing exactly what IR35 was designed to stop - disguised employees. When there was a low point and I fell back on long-term customers with long-term demands, it did come down to me, working for them, via a contract, for a year or more. That wasn't to say I wasn't actively seeking other clients, or doing bits here and there, but exactly what the taxman DIDN'T want, that's what happened, and that's why IR35 came in.

I used to calculate my own tax returns. I'm a mathematician, by education. I gave up and - after a while - went permanent. I can't say it hurt my career or my clients at all (in fact, my second employer after that was a client who bought me full-time from another employer because they couldn't do without me and couldn't hire an equivalent).

When the taxman is actively working against what you're doing, it's pretty much a one-way street. You're going to get taxed, sooner or later. This may not be to your direct benefit, but that's what tax basically is anyway.

It's ignorance to assume that tax laws are formed to make your life easy or allow you to live and work exactly how you would like. They are formed to tax you, and to discourage behaviour they don't want you to be doing (even if it's not "illegal"). They don't want you working long-term in full-time positions as a contractor for a pittance of clients. It gives them lots of hassle, and was historically used for tax evasion.

If you can prove that's not you, then you're sorted.

If you can't, then you're going to get taxed.

If that tax is unavoidable because of the way you do business, you need to raise your prices.

If that prices you out of the market, it prices all of your direct competitors too.

If you need to change the way you do business because of that, that's what the tax is DESIGNED to do.

Hate it, by all means. I mean, it's tax. Please do.

But it's doing exactly what it was designed to do: Make you prefer permanent employment or move out of that particular taxation method - both of which mean their lives are simpler and the tax has done its job.

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"P.S. Yes, I have been a self-employed IT worker in the past too - I paid everything I needed to pay and factored it in as a cost of doing business. That's what you DO."

You describe yourself as a former self-employed IT worker. That implies that you were a sole-trader. If so you were in a different category from freelancers employed by their own limited companies and the taxation regulations on the two are not the same. The reason that so many freelancers have to use limited companies is that tax regulations make clients very reluctant to engage them as sole-traders. Given that the use of limited companies is something that has been engendered by HMRC and, before them, the IR, it is to say the least, hypocritical that they do not them recognise the companies as real businesses.

If they don't want to accept the situation they created themselves they should go back to the drawing board and create some other form of taxable entity which they are prepared to accept exists, which gives clients security and also recognises the reality that freelancers are working as businesses, taking the employment risks that would otherwise fall on the clients and, therefore being entitled to make provision for covering those risks and being entitled to reward for taking them.

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Is that you, mom?

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"Contractors should earn inflated wages, out of which they should pay corporation tax as well as tax on salaries for any employees (usually just the one)."

Taken overall your comment is right but your use of "wages" here is the sort of thing which causes confusion to non-contractors - especially HMRC. There are two entities in play here. One is the company, the other is the worker.

The company outsources work from the client. This is exactly the same arrangement as Capita or any other outsourcer has. For this the company is paid a fee under the contract just as any other outsourcer does (and also collects VAT on behalf of HMRC, a service for which it is entitled to charge HMRC exactly nothing!). From this fee it pay any costs of doing business, including salary but also purchases, accountancy fees, etc. Note that that term "salary" actually covers employers NI payments and is also paid when there are no incoming payments from clients, either between engagements or as holiday or sick pay. The company also handles employee's PAYE tax and NI contributions, as does any other company, again at no cost to the beneficiary, HMRC). What's left is taxable as corporation tax. Some of it can be paid out as dividends but if the company is being run sensibly some of the fees will be retained in the company's bank account against payments for potentially long periods but it still gets taxed as profits until such time as it has to be paid out. This buffering is key to the whole system. An agent's opening gambit on the phone is usually "Are you available?". "Available" means out of contract. In order for a client, direct or via an agent, to have resource instantly available means that at any one time a proportion of the freelance population is on the bench. Staffing a client department with sufficient employees to provide such availability against the risk of a sudden requirement in-house would be an unacceptable expense. It's this transfer of risk from client to freelancer that makes the freelancer a business and thus entitled to be treated in the same way as any other business.

The worker gets paid a salary from which income tax and NI contributions are paid. This is what's commonly referred to as "wages". Calling the gross fees wages is misleading and is what enables HMRC to con those who don't know better that they're being "fair".

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"btw my contractor contract gives me holiday and sick rights. Perhaps you lot need to negotiate better?"

In other words you're exactly the sort of disguised employee that IR35 was designed to tax. You are not the typical freelancer - although when you fall out of contract you'll realise that things are a bit more complicated than you think. Are you a first-timer?

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Re: I agree with AC.

"if the risk is there but the rest is the same then you raise your prices to compensate."

If you're raising rates to compensate but then treating the entire sum as personal income and being taxed accordingly by overcharging your client on rates you're allowing HMRC, via yourself, to fleece them. Most freelancers would find it impossible to get away with that.

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FAIL

@Lee D

Lee,

diddums, please remem to put all of the toys back in your pram...

Regards,

Jay

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WTF?

@Rono666

Rono,

so presumably you never make use of public roads, hospitals, doctors surgeries, parks, libraries, schools (if you have sprogs, I hope you don't)?

Because you would be either a blathering hypocrite or a leach that is happy to use stuff paid for by OTHER PEOPLES tax, wouldn't you now?

So how successful is your company ooi?

Regards,

Jay

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Apple and Amazon et al comply

Indeed they do. The difference is Apple and Amazon et al can employ the best tax lawyers in the business, HMRC then say "thank you very much" and scuttle away with their tail between their legs.

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Anonymous Coward

btw my contractor contract gives me holiday and sick rights. Perhaps you lot need to negotiate better?

Erm...you had best learn to negotiate better, actually...perks like that != contract

Enjoy your IR35 status

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A little addendum

... just a note around a comment from someone on how we service provider/contract wonks should mebbe be negotiating better for sick benefits and holiday. Eh? Say again? Whaaaa...?

Dude (name* escapes me, but it's NOT Lee), seriously, if you are getting benefits of employment factored into your contract, then you are causing the policy and rule wonks at HMRC to have veritable wet dreams. Why? 'cos you are then EXACTLY what they believe all of us to be - in bloody 'disguised employment'. The only difference is that yours is a fixed-term employment engagement with mildly crappier benefits than the perm permies.

So, IMO any external service provider (KPMG, Bob the Builder, Wonks Inc, hell, anyone who is yanked in to do a job then cut loose) ... should provide a service charged at an agreed rate, with agreed mutual responsibilities, and for an agreed timeframe/and/or set of deliverables. No bloody holiday or sick pay or pension or whatever.

If we wanted the security/tedium (pick one) of a perm engagement, we'd bloodywell get perm engagements. Not contract. We take risk. We (ok, some of us) do damned good work. Some of us, of course, do crap work and take the p155. I am, of course, not one of the p155takers (seriously).

I love a good rant in the aftermorning!

*Ah ... 'twas an AC. There. My memory is not as bad as my counsellor said it is. I think. Where was I?

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Re: @Rono666

Just shows how stupid you are, money is made of thin air then you don't have to pay, as before taxes roads were built, but you are locked into the religon that is money just like government they need you more than you need them. Carry on keeping the system going. Also read up on money creation might open your eyes, bet you won't as you won't like what you see, and if you choose to ignore it that makes you ignorant.

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btw my contractor contract gives me holiday and sick rights. Perhaps you lot need to negotiate better?

Well it depends on how you view such 'rights.

My contracts, as do I suspect do those of many contractors, provide an allowance for absence by prior agreement and sickness; however, this is where the substitution clause kicks in. A client can either accept that I will be absent for a period of time and so we work the project plan and activities around my absence or require that I substitute someone to cover my absence...

However, I very much doubt you are billing your client for your absences, as getting paid whilst not actually working, is a benefit of employment. So I suspect that either your contract is with an intermediary ie. an agency, who are paying you through a PSC/umbrella company or it falls under the existing provisions of IR35. Perhaps you can enlighten everyone and clarify the structure of your business and contractual arrangements.

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Anonymous Coward

Can someone explain to me how it works in the UK?

In the US, I was a contractor until two years ago. I always found my own contracts through my network of contacts, took only long term gigs, never once relied on an agency. I negotiated the rate they were willing pay for me, and they told me what intermediaries they dealt with. They wouldn't deal directly with a single person corp like mine. I'd tell the intermediary "I've negotiated $125/hr from X, I want you to pay me $115/hr corp to corp". $10/hr for basically passing paperwork through is more than they deserve, but I ended up giving them between $7 and $20 per hour to do this depending on the leverage they had. Better deals when there are multiple intermediaries to choose from, worse deals when there was an exclusive arrangement.

So big corp X I was contracting for paid the intermediary corp who paid my corp which then paid me. I paid myself a salary of $60K a year. I was audited once by the IRS, they asked how I calculated that but the way the laws are here you just have to pay yourself a "reasonable" salary. It doesn't have to be as much as you could possibly get, just a salary that someone doing work similar to yours could conceivably make in a full time job. So paying myself minimum wage is out, but I didn't need to pay myself everything I made, either. The hourly rate I was getting from contracting was approximately 50-100% higher than what I could have got for full time employment doing the same. I know this because I was offered to become permanent more than once. Adding in the long breaks between gigs (mostly by choice) I calculated once that I made about $150K a year on average during the time I contracted.

I paid employment taxes (both sides, 15.2% in the US) on that $60K along with the regular income taxes, and paid regular taxes on the rest that was taken as dividends of the corporation. I quit contracting and went full time two years ago because I got an interesting job offer, and it was becoming more and more difficult to find contracts myself. Too many of the big companies were putting processes in place where no one had any authority to say "I want this guy for this work" so my way in was shut. They now have to forward a list of requirements to their body shops who will find people for them, taking a 30-50% cut off the top themselves of course.

From reading people's posts here, it seems the below is how things work in the UK. Please correct where I'm wrong:

1) before IR35, many/most people were taking 100% of their income as dividends and paying no employment taxes at all

2) companies are paying about the same or not much more to contractors than they pay to permies, so they liked hiring contractors as they could avoid paying for benefits and contractors liked it because they could dodge employment taxes

3) with IR35 in effect you have to take 100% of your income as salary, and have little or no room to take anything as dividends, removing the monetary advantage of being a contractor instead of permie

4) because contractors were willing to work for essentially the same salary as permies before because it saved them a lot of money, companies got used to the rates for contractors and permies being the same, so it is not always easy for contractors to ask for more, thus many are forced to go back to being permies

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"Contractors should earn inflated wages, out of which they should pay corporation tax as well as tax on salaries for any employees (usually just the one)."

I dont believe that you used to a be a contractor. Ill tell you why.

You are suggesting that contractors should receive "inflated wages" technically (and a contractor would know this) we do NOT receive "wages" from our clients. In fact *WE* receive nothing from our clients our company gets paid a day rate and we are paid by our companies (in the form of dividends and a small wage)

You suggest in your post that "I used to be one [contractor] and I paid myself a proper salary. Yes, I earned less, but it was the correct and legal thing to do."

However your logic here is flawed. Contractors DO pay the appropriate LEGAL taxes - thats why HMRC are having the consultation, because they need to find a way to change the amount of tax that contractors are liable for - if the current situation was illegal it wouldn't be a consultation it would be a series of investigations and prosecutions.

The fact that you paid yourself a normal wage when you were a contractor suggests that you in fact were not a proper contractor and were the type of person that IR35 aims to capture. A proper contractor has to plan for times out of work, holidays, luls between contracts, sickness etc this is achieved by leaving money (a "war chest") in the company accounts. Paying more tax than you HAVE to is simply bad planning on your part (I assume that you didnt engage an accountant of IFA as they would have told you the same). *

* PS If you really want to you can phone HMRC and ask them to tax you more, you can do it right now, Tell them that you dont want your 11k personal allowance, they will be more than happy to issue you with a new tax code.

No? You dont want to do that? Well STFU then.

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"btw my contractor contract gives me holiday and sick rights. Perhaps you lot need to negotiate better?"

Small point, thats not a contractor contract then.

A contractors contract is a business to business contract between the contractors limited company and the client. It is impossible to include Sick pay and holiday rights in a B2B contract because neither of the entities involved is a person.

The fact that you dont know that makes me suspicious about whether you are in fact a contractor - thats basic contracting 101 - EVERY contractor knows that.

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Re: I agree with AC.

@Lee D

"the threat of contracted staff "becoming permanent staff" or even moving out of the country? That's the whole idea. Less contracted staff is much easier to tax and manage and audit"

I disagree, while it might be easier for HMRC to administer that cannot be their end goal, if it is then it is very short sighted. I am a contractor, last year my combined payments to HMRC in various taxes came to around £25-30k, I am a web developer I have 15 years experience and I am sure I would have no issues walking into a new permanent role tomorrow if desired, however my salary as a permie would only be 45-50k (that would mean a combined tax & Ni payment of around 15K a year assuming I dont avoid any taxes by paying into pensions etc)

So HMRC stand to lose £10-15k Just for me if I stop contracting.

I'd also point out that HMRCs involvement in my finances (from an admin point of view is minimal) my accountant does everything elecronically and I pay everything online by debit card or by BACS if the amounts are large enough... So saying they want to make things easier is unlikley to be true.

It is important to note that contractors DONT form limited companies for the sole purpose of avoiding tax, Its called a limited company for a reason - you have limited liability so if my company is sued, or goes bankrupt it does not mean that I am on the street with my wife and kids... Alot of clients and agencies WILL NOT hire a contractor unless they are operating a limited company with the relevant insurance... so we are pretty much forced to take the Ltd route. Dont blame us if that then opens up several different *legal* options to us for how we deal with our remuneration.

Realistically what needs to be done is for there to be a legal entity between a Limited company and a sole trader. Something that gives the legal protections of a Ltd but has a clearer tax structure.

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Re: Can someone explain to me how it works in the UK?

@Anon

"Please correct where I'm wrong:

1) before IR35, many/most people were taking 100% of their income as dividends and paying no employment taxes at all"

I was about to write a big explanation, but Im going to sum it up as "No, that is not right."

Essentially the thing to remember is that we have to pay Corporation tax (20%) on ALL profits then a further 7.5% on all dividends (Rising to around 30% when we hit the higher rate threshold)

2) companies are paying about the same or not much more to contractors than they pay to permies, so they liked hiring contractors as they could avoid paying for benefits and contractors liked it because they could dodge employment taxes

In a way yes, but in another more important way, no.

Companies like it because they can hire contractors with specific skills to complete a project then bin them off when they are no longer needed. For example, they might hire someone who knows SSRS to create a reporting suite for them, then once its done end the contract. Hiring a permie with the same skills would mean an ongoing cost beyond the end of the project for someone whos skills are no longer needed within the company.

3) with IR35 in effect you have to take 100% of your income as salary, and have little or no room to take anything as dividends, removing the monetary advantage of being a contractor instead of permie.

No, you dont have to take 100% as salary, you do lose a lot of control over how much you can take and when though... One thing I as a contractor do is plan my renumeration to stay under the higher tax band.. I do this by leaving money in my company until I need it...

As an example Im pretty much at the higher rate now so if I take £1000 as a dividend I have to pay £300+ as tax If I can deffer taking that money out of the company until april I will only pay £75 when I take it out...

4) because contractors were willing to work for essentially the same salary as permies before because it saved them a lot of money, companies got used to the rates for contractors and permies being the same, so it is not always easy for contractors to ask for more, thus many are forced to go back to being permies

Thats not really how rates are decided... but your not a million miles off. It is difficult to ask for a higher rate when there is another contractor willing to under cut you (and there always will be :) )

With regards to contractors going back to being permies, even with the additional tax I'd still be better off as a contractor (I'd have to be very careful when planning to account for sick time and time between contracts, but realistically Im not personally considering stopping contracting. I suspect the only people who are will be the ones who are not proper contractors anyway (ie they are just disguised employees)

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Anonymous Coward

That makes you a disguised employee, not a service provider, and fair game for the HMRC. Perhaps you should negotiate less?

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Re: Ermmm ... quite.

"Do you seriously feel it reasonable that a permie should see about the same take-home as a contract worker, in exchange for a considerably higher risk-burden and simply non-existent benefits?"

Hell, yes.

Nobody FORCED you to become a contractor, and we all know why you did...

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Re: Ermmm ... quite.

@Keith

Nobody is forcing you to stay on payroll with your employer.

Contractors operate businesses, businesses remunerate owners and directors in many ways which are subject to different tax rates. Get over it.

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Re: @Rono666

Yes THEY DO!

They pay: road-tax, NI, PAYE (just like you) and Corporation Tax as well (something you don't have to pay).

So get YOUR FACTS STRAIGHT, before posting garbage here and acting like a twat!

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Re: Can someone explain to me how it works in the UK?

1. UK has different tax (lower) rates for dividends compared with "earnings" (Salary or wages or emolument).

2 If you take sensible dividends, [say one fifth of total billings] e.g. between paying BOTH company shareholders (self and wife, as wife does the books) a dividend (for risk of running company) and then

3 Pay salaries/wages for employment part as contractor where Salary is 'comparable ' with or above an actual employee, you have no IR35 worries.

4 It is the distortion of 'remuneration' by paying Minimum Legal Hourly Wage to employee part and taking large dividend, that IR35 tries to catch.

5. You also need to demonstrate independence and ability to work without supervision and contract should allow you to provide a substitute, if 'contractor cannot attend' for contracted period; or contract says contractor may work at his own pace and has no need to comply with any time request of customer [ a form of 'direction' that turns you into an employee if you MUST attend at customer's direction].

6 I bill out at 5/2 times a permanent employee's 'salary'. Company would for employee incur 3/2 times stated gross employee salary with taxes, insurance, holiday, social security and pension costs . So I cost a goodly amount more than the advertised amount for my job as a salaried employee; but then the advert does not pull in a capable replacement so I continue in contractual employment.

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Anonymous Coward

"Taxes are being paid, according to the law using a valid Ltd company mechanism that allows contractors to be paid via dividends, which incur tax, btw."

...Except that many so-called contractors have for years been really stretching the definitions of dividends and expenses, to the point of being legal only as a technicality.

The 'done thing' when I first started contracting in the city was to pay yourself a 'salary' which was just under the national insurance threshold, and pay yourself the rest of your income as a mixture of dividends and expenses ... except that most people simply made up lots of non-existent expenses.

This never sat well with me, so started out paying a proper living salary from the beginning - as those of us earning decent incomes surely need to contribute _something_ to the national insurance system! And making up expense claims, to me at least, is outright fraud.

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yes it is so nice of them to work at a 20% discount below their market rate, which must be the case if they think they can hike prices by 20% overnight to pay tax they haven't been paying. If they can do that, then what on earth are they complaining about?

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In terms of the criminal law, arresting and jailing people - as happened once with Nissan UK - no Amazon have seemingly not done that sort of wrong. What Amazon has done is perpetrated an ethical wrongdoing, possibly in conjunction with elected governments (and unelected ones like the EU) - and that is what they deserve to have publicised. Some people, at least for a time, boycotted some of these tax-dodging companies.

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There aren't any plans to illegally take money off people. If you are a genuine service provider not caught by IR35, then what are you worried about?

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It now takes as little time for the Daily Mail to be referred to as it takes for someone to mention Hitler!

I think the point is that it's been decided that the public sector itself will determine whether or no a person it is paying to do work is doing so as an employee or not. Actually I think the difference between an employee and a company is a lot more than whether or not there is a paper company set up for the contractor to work under.

I've read the legal advice given to contractors, and it is pretty obvious they are exploiting a load of legal loopholes, the valid Ltd company you mention is in fact a paper entity setup to exploit loopholes in employment law and taxation.

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more complicated as in being unemployed do you mean? Why not look for a new job/contract in that instance?

Otherwise I agree, adverts and articles saying 'go contracting and make it exactly like being an employee' do make cynics like me think that IT contractors are in disguised employment - which I accept is not always the case. I've seen my company contract in expert IT knowledge, but I've also seen them but a bottom in the seat next to me to churn out bog standard .net code from a spec - it was hardly some sort of expert knowledge, it was maybe 18mths experience for a very average programmer. Anyway, if that wasn't disguised employment hiding behind a paper company, dunno what was.

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Meh

Why only IT?

How about MPs, footballers, etc. Lots more juicy tax there.

Stop taxing smart people.

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Re: Why only IT?

What, only tax stupid people?

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Anonymous Coward

Re: Why only IT?

"What, only tax stupid people?"

Sounds good. Set individual tax rate to be inversely proportional to IQ. Or may be set the tax exempt threshold proportional to the IQ.

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Flame

Re: Why only IT?

What, only tax stupid people*?

Should have said- Stop extra-taxing smart people**

*Some might say only stupid people pay tax... usually smart, expensive accountants.

**HMRC seem to make the distinction. A contract plumber, accountant or ball-kicker isn't subject to IR35, but 'Because IT' seems to be a magic 'Pay More' reason. The same Tax-Reduction methods are available to all (Dividends, etc) but only IT workers have to jump though the hoops.

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Re: Why only IT?

Interesting point re: "because IT"... a quick noodle in Private Eye soon reveals very highly paid people earning money through single person companies by providing various consultancy services to national and local government. Maybe one should describe oneself "merely" as a professional services consultant and only discuss one's IT knowledge in the interview?

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J P

Re: Why only IT?

It's not just IT - see my post below - but the second leg of the test (is there an intermediary, ie company/partnership which you, broadly, control) is where eg accountants tend to get out of the scope. Either that, or the individuals doing the work under consultancy contracts are employees, so there's no tax to find. There are documented cases where IR35 was potentially in point for non-IT contractors; see eg http://www.taxjournal.com/tj/articles/student-loans-chief-advised-account-tax-under-ir35-40091

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Re: Why only IT?

" 'Because IT' seems to be a magic 'Pay More' reason."

Indeed. In the printing industry they seem not to bat an eyelid about engaging sole-traders because that's how freelance graphic designers work.

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Anonymous Coward

Re: Why only IT?

Although I wouldn't make it illegal not to vote, I think it would be quite interesting for those who don't vote to have a higher tax burden as they are clearly content to be used as milch-cows by whatever government everyone else elects. This would either increase political engagement or tax revenues, so it's basically a plan with no drawbacks.

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