HMRC opens consultation to crack down on off-payroll working in private sector

I'm more concerned about getting caught in the cross-fire. My work is about as far outside IR35 as it's possible to be - mutiple customers every month, flexible working arrangements, most of my customers haven't even met me, no direction or control etc etc.

However, given the odd letters I received from my public sector customers when the new laws were introduced, I'm concerned about how some companies may clamp down completely on external consultants like me 'just to be on the safe side'.

I agree that 'something' needs to be done, it's just that everything HMRC see to do is too heavy-handed.

"Most contractors wont agree but I think a bigger upheaval is needed to make it fair for both parties."

OK, here's a proposal to make it fair. Do away with the limited companies. One set of tax rules for everyone including, of course, tax for benefits in kind. Security of employment, e.g. as a permanent employee of HMRC, is seen as a highly valued taxable benefit. The extra tax gained by taxing such benefits in kind can then be used to reduce the income tax rates in general including those for freelancers.

'make it fair for both parties.'

Tired of corporations getting a free pass on tax issues versus plebs (see below). Sure there's always the bad apple tech contractor. But most are just trying to get through their day.

UK tax makes me want to return to low-tax Dubai / Singapore / Hong-Kong Expat work. But 3 kids dogs/cats? Not happening...

https://www.theregister.co.uk/2018/05/18/aria_technology_open_justice_victory/

Your definition of "loophole" is rather odd, I feel.

For instance, the christmas party guy, if he's submitting false receipts for his accounts and pocketing the cash, is not exploiting a "loophole", but is instead committing fraud and embezzling funds.

The per diem is entirely valid. Someone working abroad will encounter higher costs than if they were working at home. The fact that he's a contractor doesn't change this.

And as for the last, I reckon you should get a better accountant.

If through earning over 80k in one tax year they assessed you for 16.5% flat rate VAT remember you should be able to charge the 20% VAT back onto your clients.

and your alternative is?

"Taxation is theft."

No, taxation is _slavery_. I'm pretty sure that's what it's called when what you supposedly earn doesn't belong to you.

Re: Not a contractor (any more) . . .

Their statement

However, HMRC said it also believes "that the available evidence shows that the public sector reform has been effective in tackling noncompliance with the off-payroll working rules".

tells you all you need to know. The extra budget cost of paying the increased rates in order to retain key staff that would otherwise have left are not considered when contemplating the "effectiveness".

Re: Risk vs Reward

THIS.

The test for employment vs. self employment should be made the same for both employment rights and tax purposes. If your client isn't paying you statutory holiday pay and pension contributions, you are self-employed and should be taxes as such. If they are, you are employed, and your client is liable for deducting your taxes at source and providing at least the minimum statutory benefits.

Anything else effectively amounts to expecting a employees to pay employer's taxes.

Re: Risk vs Reward

I rather think that HMRC are suffering from a lack of vision here. Their objective is to maximise tax revenue. I would suggest that engineering an environment where economic growth is fostered rather than hindered would work better in the long term than hounding people over what amounts to minor amounts of money.

Re: Risk vs Reward

Does anyone know whether HMRC have ever responded to this frequently-made point about benefits?

Re: Risk vs Reward

Why should less favourable compensation terms of a contract between two parties be tax deductible? The risk taken between the parties is by mutual agreement and by choice.

It is fair to ask for more pay when signing up to a contract with less favourable terms (as you mention no holiday, no benefits, short to no notice period and so on) but that is between the contractor and the client and does not require HMRC to subsidise/encourage this via tax policies.

Specific HMRC tax deductions (for business risk for eg ) should result in an increase in tax revenue in the long run which is of benefit to the country (and not one individual).

A contractor wanting more pay in lieu of benefits does not need to be specially tax deductible.

Similarly employers wanting to avoid paye/employer liabilities is not something HMRC should make specially tax deductable to encourage. It is usually one customer, for long durations, distinguishable from a paye only in these liability benefits.

This is very different to the risks taken to start a genuine business, where there is a genuine attempt to gain multiple customers. It is clearly distinct from paye employee beyond just compensation terms.

It is of no economic benefit for HMRC to justify a special tax consideration as there will be almost no distinct growth potential in revenue/employment creation as there is no intent in these cases for the contractor to do so.

Such a deduction will not increase HMRC revenue take over time (by increasing economic activity).

Whether IR35 is appropriate or suitable is a different point.

So no I don't think *any* risk is an automatic entitlement to reduced tax outlay. I haven't seen any of these single customer contractors taking anywhere close to the types of risk a typical business takes.

Re: Speaking as tax-dodging contractor scum

Good idea, they could call it dividend tax and start it at, say, 7.5%

Re: Speaking as tax-dodging contractor scum

“Hey could just get rid of Flat-rate VAT”

They effectively have done thanks to the rate hike for ‘limited cost traders’!

Re: Shooting themselves in the foot

" Permie pay is a lot less than contract rates."

Not after you include pension payments, annual leave, training costs, sickness, Christmas party etc.

Re: "most contractors would go permie"

What huge hit in take home. With all the current uncertainties added to the government increasing their cut your average contractor is probably on a lower total package than the permies in the equivalent role.

Re: "most contractors would go permie"

Who says it’s a “huge hit in take home”, after you’ve taken off everything we pay for compared to permies?

Re: "most contractors would go permie"

"Really? Do they actually have that option? Would they really take a huge hit in take home?"

Once you get past a certain age, for many, going permie without a horrendous commute Is not an option full stop.

Re: "most contractors would go permie"

Would they really take a huge hit in take home?

Oooh, bit of a giveaway there.

"However another consultation will only actually help anything if HMRC do what they didn't last time, which is actually listen to what people are saying."

Public consultations aren't held so HMG can listen to what's said. They're just held because they're held. It's a step that has to take place before HMG just goes ahead and does what it always intended to do.

"However another consultation will only actually help anything if HMRC do what they didn't last time, which is actually listen to what people are saying."

Oh, come on. Have you actually been part of any HMG consultative process? I have. Consultations take place so that the "we've had a consultation" box can be checked. The civil servants listen only insofar as what they hear enables them to carry out their masters' wishes within the law. None I have met were actually interested in what I had to say for its own sake. Certainly, none of them was prepared to countenance any kind of challenge to the prevailing groupthink orthodoxy.

Been there, done it. Downvoters: don't you dare unless you have equivalent direct experience.