back to article Tories may scrap IR35 tax rules for contractors

The Conservatives have pledged a "fundamental review" of the IR35 tax regime if they win the election, claiming it is unfair to freelance IT workers. The rules were introduced by Labour in 2000 to target the "disguised employment" loophole. Contractors would set up their own limited company and take a low salary to cut their …

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  1. Michael 77
    Paris Hilton

    10 years? more like 34 years

    Finance Act, part 2, 1976 -- Dennis Healey decreed that agencies might be responsible for contractors' tax -- so the agencies insisted on contractors using limited companies. They were all self-employed before that: Schedule D. Huge difference in that suddenly NI contributions (both sides) were cranked right up.

    Nice for the accountancy profession, tho'.

    Paris because she wouldn't charge NI, would she?

  2. Anonymous Coward
    Anonymous Coward

    Timing of IR35

    Ironically, IR35 was brought just before a really bad patch for many IT contractors. With some of my work abroad and with IR35 looming, I decided to wind up my company and took the next short contract in the UK as a temp. This allowed me to sign on afterwards and get my mortgage interest paid - something I could not have done if I had still had my limited company. Thanks Gordon.

  3. Anonymous Coward
    Anonymous Coward

    IR35

    .... stopped me contracting in 1999. In hind sight that was a mistake - my permie career has confirmed all of my fears about actually working for large companies. Nepotism, mediocrity and pretending to work long hours are rewarded whilst innovation and smart working ideas are ignored and typically buried.

    I could have saved my current employer literally millions though technology and process improvements......... they are clinging desperately to the "if it aint broke don't fix it" mantra. Whilst applicable in some circumstances just imagine how backward we would still be if we had pplied that to the wheel.

    It only takes one mediocre employee to be promoted to manager.... that then surrounds themselves with other mediocrity from the same click and a huge amount of damage is done that lasts for many, many years. Genuine talent has nowhere to go, so ultimately vote with their feet and filter out of the company, leaving just the dross behind.

    The worst part is, this is now pretty endemic in a lot of the large enterprise service companies. Of course as a contractor you are pretty much insulated from all of this.

    Contactors are also treated far better these days than when I first started in the mid 80's, back then, whilst nothing was ever mentioned specifically you were a 2nd class person within the company. Could of had something to do with the fact agencies were pretty unscrupulous back then and 60% margins were not unheard of!

    Anyway I digress! Back to IR35 - yes it should be scrapped. Even if it isn't, I for one am trying to get back into contracting.

  4. Anonymous Coward
    Anonymous Coward

    Evaision

    "Bought a new laptop? Bought by your pseudo company tax free.

    New car? Bought by your company, tax free. Petrol and lunches? Claim your tax back with the right bit of paperwork. My mate got receipts down the pub for entertaining me as a potential customer."

    Most of this is evasion or fraud which is totally different to avoidance. The ones who did this screwed it for the rest of us. Plenty of other laws to cover those issues. Yes I knew plenty who did this too and came across some who fiddled their VAT too and moaned when the got caught (and were still better off for having done so it the end).

    "Why bother doing it if you weren't trying to fiddle more money out the system?"

    Because I enjoyed contracting, the mixture of work and the challenges it set. I was generally brought in to sort things out or replace staff who had left and help recruit a replacement. Each job brought fresh challenges and allowed me to use my skills, learn some new ones sometimes. I was never one for the day to day grind and repetition.

  5. Anonymous Coward
    FAIL

    IR35 was planned for years by New Liebore

    Had they won the 1992 election (which at one point in the run up it was possible) then IR35 would have been introduced in some form or other.

    After Liebour won in 1997 it was resurrected by, yip you've guessed it, Peter Mandelson who was at a rah rah do of a big IT services (outsourcing) company in early 1998. The MD of said company proclaimed that with the right help [cue looking at Mandy] they would "crush the independant contractor, who were winning business by charging £300 - £700 a day when they were charging £1300-£2000 a DAY. They will rue the day they took us on." It was a long time ago and I don't remember the exact phrasing but it's close enough.

    The rest, as they say, is history.....

    PS Where is the Evil Mandy icon

    1. Anonymous Coward
      Flame

      Not surprised

      By the way, the government did recover 200M£, it just recovered it elsewhere - after IR35 came out within 2-3 years most of the contractors went permanent so their companies had to start paying the NI and the full tax on them.

      You are also quite correct that this has resulted in a near monopoly of Capita and Computacenter in the IT business with all the consequences. While the government may have won a few 100M in tax it has lost billions to overinflated large contractor rates.

      Actually lost is not the correct word here. Considering how much Capita gave back to Liebore it was not lost. At least to LieBore.

  6. Anonymous Coward
    Unhappy

    Terms & Conditions

    Some contractors have argued that less job security and fewer benefits (training, healthcare, holidays etc.) are a justification for them being able to operate in a lower tax regime. I would argue that that's why contractors have generally been *higher paid*. Which is the way it should be - it's the employers' responsibility to compensate the worker for lower T's & C's, not the rest of the PAYE-ing workforce to compensate contractors with *lower taxes*.

    Contractors spent years bragging to each other about *little* tax they paid by virtue of assorted tax avoidance/evasion measures - that seems to have been much reduced over the last few years, which might be an indication that the IR35 rules have worked.

    BTW, I'm a contractor who has always paid myself (only) fully as salary.

  7. James Fox

    Turkey voting for Christmas?

    I won't be crying if IR35 is abolished, but I've never been opposed to it in principle either - even though I am a contractor. I became a contractor to carry out varied work for multiple clients and opperate a company that allows my legimate expenses to be met and my income managed according to my discretion, within the current tax regime. All of this is exactly in accordance with IR35. I actually believe that if you want to sit at the same desk for years, manage other staff, be trained by your employer (etc...) then you should be treated like the permanent employee that you clearly might as well be. It's no coincidence that I've always found that those people who seem to want the latter are the bordeline dross that give contractors a bad name and I'm not sure I want to give them any further encouragement.

    Also, it's not just the subsitution clause, but it's not so complicated that a couple of hundred quid spent at the beginning of a contrat with a decent IR35 specialist lawyer can't keep things watertight. If you can't reconcile that kind of outlay then you really aren't acting like a business.

  8. Yet Another Anonymous coward Silver badge

    @£9.2 million raised?

    The 9.2M figure has been disputed aswell, it's the direct extra tax that was paid under IR35.

    It doesn't take into account all the people that were running this as a scam and switched to being regular employees - paying regular tax.

    Yes it unfairly hit IT, just as VAT rules unfairly hits builders not lawyers and accountants.

    But there were also a lot of scams going on - worked for one place where the CEO wasn't an employee, he 'just consulted'.

    1. ml100
      WTF?

      100% Salary

      Dont pat yourself on the back for being the stupidest contractor around - its your right to use the tax laws to your advantage; theres no benefit to you or paying more tax. HMRC wont send you a xmas card or remember your bithday.

    2. Anonymous Coward
      Anonymous Coward

      @James Fox

      You clearly didn't understand what IR35 was truely about.

      One of the key points about IR35 was it didn't matter about the actual contract between you and the client. Sure, key concepts such as substitution were important, but the criteria used by what was then the Inland Revenue were much greater in number and quite frankly a load of bollox.

      The Inland Revenue's approach was to apply a set of rules which fundamentally didn't apply to the knowledge based industry where people's skills are their brains and not their hands.

      Paying a few hundred quid for a decently worded contract did not offer you protection from HMRC and being able to back claim tax from your limited company.

      For you, being a contractor not to understand that, is for you, should be, a little worrying.

    3. Anonymous Coward
      FAIL

      You aren't running a company then

      I pay a modest salary and, at year end, pay a dividend.

      If I've had a good year (e.g. >80% utilisation) then it's a generous dividend. When it's a bad year (like last year) then the company can only afford a modest dividend.

      I'm running a business - it has ups and downs and I take financial advice from a professional accountant like every FTSE 250 company.

      My spouse does the invoicing, pays the bills and keeps the books and has some shares (far fewer than me). MPs have just OK'd themselves paying their spouses, as long as they do work this is OK. We had a VAT inspection - I was on a client site, my spouse dealt with the person from HMRC and answered all the queries. She invested in the business on startup and is involved in most business decisions.

      100% salary - so the shareholders never get a dividend ? Do any FTSE or "big name" private (non listed) businesses do that ? I'd rather donate money to charity and be tax inefficient.

  9. Chris Shaw
    Paris Hilton

    IR35 stopped tax avoidance...

    ... nope, just pushed people to EBT's, now that's tax avoidance.

    Permies who haven't been contractors always whine and moan, its funny the ones that were contractors, in my experience don't.

    IR35 should have been scrapped a long time ago, or apply it to *all* business', with *firm* rules, not subjective guidelines.

    I was contracting before 2000, I had three life destroying years as a permie, then went back to contracting and never looked back.

    Paris, because the rich and poor don't pay tax, just the working class.

  10. Alan Lewis 1

    IR35 planned...

    @AC

    You may remember the newsphoto's of GB settling in as Chancellor, back in 1998, with a pair of large (for then) 19" LCD monitors.

    The IT equipment was installed by contractors, who as IT people do, started "talking up" contracting to the in-party permies. And mentioned the tax avoidance that LTD Co contracting bought. Another chapter in the genesis of IR35; NuLabour's inherent, instinctive, policy of hate and spitefulness.

    @Pro-IR35 advocates. Ltd Co contracting enabled individuals to minimise their tax position, and maximise their take-home pay. The process is called tax AVOIDANCE, and is perfectly legal. You might find it morally wrong, but its simply good accounting. Tax avoidance is not just legal from the perspective of accounting rules, but also enshrined in legal precedence, when a Judge announced that no man can be compelled to pay a penny more to the state in tax than the absolute minimum. I recommend looking at

    Lord Tomlin in IRC v Duke of Westminster, 1936

    Lord Clyde, Ayrshire Pullman Motor Services & Ritchie v CIR ((1929) 14 TC 754)

    Commissioner v. Newman, 159 F.2d 848 (2d Cir. 1947)

    Lord Summer, The Commissioners of Inland Revenue v Fisher’s Executors. (1924-26) 10 TC 302

    Four broadly similar statements, all embedding in law the legal principle that tax avoidance is perfectly legal.

    Of course, Labour doesnt agree - if you listen carefully to some of the rhetoric over the last two years when ministers have spoken on the subject (eg bank bonuses, increased taxation), they use the word 'avoidance' deliberately, ie "tax avoidance is wrong" rather than "tax evasion is wrong".

    And tax evasion is. Evasion - ie not declaring income is evasion (cash in hand work, for example).

  11. Moonpig
    Paris Hilton

    Who introduced what?

    As I remember...

    back in 1996 I was working as an IT contractor for a building company working on Lords Cricket Ground Grandstand when the Tories brought in legislation to stop building sub-contractors being employed as limited companies. The deciding factors were the amount of risk taken by the subies and whose tools etc they used.

    Much the same sort of rules as IR35 but in a different industry. At the time my boss remarked that it would be IT next then other self employed professionals.

    During the election campaign in 1997 T. B. Liar and his gang promised to look at this ruling in much the same way as we are now being told IR35 may be looked at. Instead the ruiles were extended and became IR35.

    Now which bunch of bandits should I believe?

    Shower of shysters.

    Paris 'cos she too knows when she's being fed a load of cock

  12. Anonymous Coward
    Thumb Down

    IR35 needs to go

    The amount it has cost policing has far exceeded 9.5M - it is a massive sink hole for tax payers money - so by simple maths alone is needs to go.

    I love the company I currently work for as a permanent member of staff - but in the time I am here have automated so much of what is done here that soon it would be much better for me to consult for them, however because of these stupid IR35 rules it is most likely that I will get stung as part of it - lose 40% of pretty much everything nad basically be worse off - so I am currently stuck in a permanent position that there is little benefit for either party - tell me how that is better for the economy?

  13. Anonymous Coward
    Anonymous Coward

    Like MPs then?

    "The actual thing to understand is that it was avoidance not evasion, there is a bit difference and every man and his dog will do all they can to avoid tax. No rules were broken."

    They brought in theIR35 rules to try and tighten up the difference between the two.

    Those with psudo companies rather than being staff are trying to avoid paying tax that they know they should really be paying.

    Bit like MP's expense claims being to the letter of the law but not in the spirit of the law.

  14. stooz

    its not tax avoidance.

    its not a con to buy a PC and claim things against tax! permie - free PC, free Desk, free coffee, all paid by company incomes before tax.

    why should a contractor be different? my home pc, my coffee perks, my desk - should all be supplied the same way - out of pretax income.

    and dont go assuming is over paid IT people, there are many non IT roles that are effected, and IT roles dont have to pay £500 a day, most I can bid for these days pay the same rate as the permies who get a free month holiday and health car thrown in.

  15. SteyBrae

    Blowin' in the wind

    Tories to electorate: "What policy would you like us to have?"

    Electorate who are contractors: "Scrap IR35 rules for contractors."

    Tories: "If elected, we'll scrap IR35 ..."

    Electorate: "Yeh, right."

  16. Anonymous Coward
    Anonymous Coward

    Why yes, we obviously are all thieves

    "Many pushed through everything they could to claim tax back."

    Indeed, but there are other rules governing this. Always have been.

    "Bought a new laptop? Bought by your pseudo company tax free."

    Need a laptop for work? Fuck you, you have to pay for it post tax even though it is a business tool.

    Do you use a computer at work? have you paid for it?

    "New car? Bought by your company, tax free."

    I call bullshit. It becomes a company car so you are liable to taxes in exactly the same way as permies are (based on list price rather than actual value also) - plus you had to buy the thing in the first place and your insurance will laugh at you cos you don't own the car - you either get company insurance at big cash or you bend over when you have to answer "no" to the question "are you the owner and registered keeper"

    "Petrol and lunches? Claim your tax back with the right bit of paperwork. My mate got receipts down the pub for entertaining me as a potential customer."

    Petrol is fine, you can get this on expenses as a permie anyway. And, you may not know this but if you get a mileage allowance of less than 40p then you can claim tax back on the difference as permie or contractor scum.

    Entertaining again is fine, all businesses do it, however if you paid him back for the meal (either directly or by buying the meals next time) then you are both defrauding the taxman good and proper - but these rules are covered outside IR35 and count for everyone.

    "Why bother doing it if you weren't trying to fiddle more money out the system?"

    Do you have a personal tax allowance? Do you claim expenses from work? Do you have a company car? Company phone? Do you ever use company kit for personal use (like posting on here from work or personal phone calls)?

    If you do any of those then you are just as bad as contractors, but at least contractors have the cajones to go out and do something with their life rather than whining about how better skilled, better trained, more dynamic and less whiny people are getting paid more than you.

    1. Anonymous Coward
      FAIL

      Re: Blowin' in the wind

      Labour to electorate: "What policy would you like us to have?"

      Electorate: "We would like a referendum on the EU Constitution"

      Labour: "If re-elected, we will offer you a referendum, then after a subtle search and replace on the constitution ram it through without one."

      Electorate: "Ok, how about no income tax increases"

      Labour: "Yes, we'll promise you that, and then increase NI instead. In fact, after introducing an NI increase, we'll also increase income tax by getting rid of the lowest rate, then increase the highest rate as well."

      Electorate: "Ok, a simple one, how about no boom and bust"

      Labour: "Yes, we promise no boom and bust, then whilst the biggest boom in housing is going on we will fiddle with the measure of inflation we use to try and prove that there is no boom, when the dumbest idiot on the planet knows that we are in a boom. Finally, when the bubble finally pops, we will do our utmost to blame everyone else, when really it is our own pension fund thieving, cheap gold selling, low interest rates to promote housing boom, expenses thieving, EU rebate reversing, money grabbing policies that have wrecked this country for now and the next 50 years whilst we desperately try to pay back the biggest deficit the UK has had at any time when we aren't at war with the Germans."

      SteyBrae: Feel free to talk down the Tories as much as you want, but at least at the moment you only "think" that they are lying to you. With Labour, you know they are. It seems the politics of this country generally involve Labour wrecking the economy and the Tories fixing it. The last fix was incredibly painful (after IMF bailouts and the winter of discontent in 79), the next one is also going to be painful. Removing red tape may help to fix the economy, and IR35 is nothing more or less than red tape.

  17. Graham Bartlett
    Flame

    For the benefit of contractor haters

    IR35 is *NOT* just about whether the contractor pays full NI or whatever. If my accountant says "do this" then I'll do it and save money on tax - great. But that's not the big deal. The big deal is everything else IR35 says - the company has to give the contractor paid holidays, paid sick leave, and all the other benefits that a full employee gets.

    As stupid ideas go, this is pretty epic even for a government. Any competent company keeps a small pool of contractors on staff full-time. Sure, it costs them more, but the moment there's any kind of dip in work, they can axe the contractors at two weeks' notice. The resultant savings compared to making redundancies, or trying to find make-work for unneeded staff, are huge. So if there's a long series of successful projects in your company, it's quite likely you could be there for a few years, sure. But don't get too attached to the place, bcos you could be out of there with two weeks' notice at any point. Even if your work is great and your project is going swimmingly, if another project goes down then there'll be a permie replacing you and you're out the door. It's happened to me, and I spent the next 5 months trying to find another contract. But shit happens, and that's the deal with contracting.

    But the government, in its less-than-infinite wisdom, thinks this is a bad idea. Working at the same place for more than 2 years? Then *bang* you're an employee, unless you've been very careful writing your contract. But guess what? Everyone these days *does* know what the right phrases are for your contract, and what counts in your favour if you're outside IR35, bcos we're not totally stupid. So HMRC taking contractors to court has resulted in virtually no income for the government, and all contractors have used the right T's and C's or gone through umbrella companies.

    So who's benefitting from IR35? Not HMRC, bcos they're hardly seeing a penny extra. Not contractors, bcos they're having to tap-dance like dervishes to figure out what the law is every day. Not companies, for the same reason. No - the only people who've benefitted are lawyers and umbrella companies. And whilst I've no objection to them doing their jobs, I don't see the need for them to have a government-mandated license to print money.

  18. Anonymous Coward
    Anonymous Coward

    Ok...

    If you are taking home a hundred grand plus (as many IT contractors at the time did) and are paying NICs at the rate of someone on minimum wage because that is what you "pay" yourself, regardless of if you are paying both ees and ers, what you are doing is immoral. It may not have been illegal, but no matter what people may claim, it IS avoiding tax. Specifically it is avoiding the tax that funds the NHS, the whole point of the NHS is that people contribute according to their income, for the greater good. I don't know about anyone else here, but I want my binmen, milkman, cleaners, corner shop guy etc, to be healthy, because I need them. It pisses me off to see some of the richest people in the country claiming they are hard done by and that they need to avoid contributing to the health and well being of the rest of the society of which they are part.

    It's selfish, and it's wrong. No ifs, no buts, it's wrong.

  19. This post has been deleted by its author

  20. Jimbo Gunn
    Pint

    Seriously, Tory Dudes...

    If you want the Geek Vote scrapping IR35 only goes a 1/3rd of the way.

    You've also got to COME OUT against the Digital Economy Bill as it stands and cave in to the Free Beer movement.

    #fail

  21. Anonymous Coward
    Paris Hilton

    Not Everyone

    I am a contractor, have been for several years. And unlike many contractors I voluntarily pay myself a market rate salary which is on a par of permies that I work alongside. That means that I do pay more tax (in the form of National Insurance) than I might necessarily have to. I don't complain about it, I sleep easy knowing that I'm doing my bit for the less fortunate like pensioners and those who not as privileged as me with respect to the well paid work I have been fortunate to be associated with over many years.

    IR35 as it was drawn up was simply unfair. The government could very easily have implemented rules which went along the lines of "no matter where you get the income from the first £20K must be treated as salary" (replace with a higher/lower figure as required). That would mean that pensioners and those making a profit out of share dealing etc were actually paying their fair share, and it would affect everyone equally. Moreover, those who were earning more than that flat rate figure could potentially have arranged their affairs to take divvies etc.

    Where Gordon went wrong with IR35 was having Prawn Dimerillo draw up the rules and introduce it as a 95% tax attack on day one. Had they been a bit more patient they could have introduced it at say 40%, and then in successive budgets build it up. As it was they got everyone's backs up enough to form groups like PCG, who might not have come into being had Labour not been so spitefully stupid.

    Paris gets the vote because I feel like f***ing something in my disgust at IR35.

  22. Carl W
    Thumb Down

    @Fraser

    If you think that NI funds the NHS then I'm afraid you're a fool. It all goes into a big HM Treasury pot. Did you know that road tax doesn't fund the roads?

    And don't forget that contractors pay both employer's and employee's NI.

    1. Anonymous Coward
      Thumb Up

      Business decisions

      I pay a modest salary but below market rates. Why ?

      1) I have carried out 2 assignments where the companies went into administration and I have yet (2 years and counting) to get a penny (unsecured creditors don't fare well)

      2) The market is volatile. One year I worked 90% of working days, one year 40%

      If you're taking business risks then dividends that reflect business performance are really sensible - not just tax efficient. If you're paying a regular monthly dividend to avoid NI then you have a good point - it's just disguised salary.

  23. JL 1
    Megaphone

    Tax evasion

    IR35 was a legitimate reaction to wide spread tax abuse within the contracting industry. If the Tories win I shall lobby for certain parts of it to be retained. Contracting in the 1990s was a scam. So, your partner gets half the dividends? Laugh. You buy a motorbike on the company and sell it back to yourself at half cost within a year? Laugh. Your business LCD projector is 99% used for watching DVDs? Laugh. All a big long laugh... all the way to the bank. I do not doubt that contractors need allowances but the ability to pay dividends on 90% income... and claim every damn thing and then some? No way. As stated elsewhere, the bad guys spoiled it for the good guys. Problem is, ALL the contractors I knew were the bad guys and some still are.

    1. Anonymous Coward
      FAIL

      Laugh

      There is existing legislation in place that applies to all companies. You think that MPs are in a position to vote through complex addditional legislation on how companies should treat their expenses for tax reasons ? Laugh.

      Limited companies with 1, 2, 3 or 15 employees all have to adhere to the same rules. A spouse can be a shareholder. So can anyone else. MPs just voted to allow themselves to employ their own spouses... they are going to legislate against limited companies rewarding spouses ? Laugh.

      None of the contractors I know abuse the system, you obviously choose to mix with a different type of contractor.

  24. Anonymous Coward
    Big Brother

    Time to boot out Labour

    Stop the database state.

    Stop police being turned into Blakeys and bureaucrats.

    Stop ridiculous burdens like IR35.

    Encourage new business and stop public sectory parasitic bloat.

  25. Anonymous Coward
    Anonymous Coward

    @JL1

    Clearly you never actually knew any contractors, because what you have written is complete bollocks:

    "So, your partner gets half the dividends?"

    Dividends are taxed at a flat rate no matter who gets them. What you really mean is that contractors would employ their stay at home partner and pay them their tax free allowance to avoid tax/NI on what would now be £6500. However as virtually no-one stays at home and doesn't work these days that is fairly pointless.

    "You buy a motorbike on the company and sell it back to yourself at half cost within a year?"

    There are rules on selling assets - they have to be sold at a fair value, VAT has to be charged and any under-selling is treated as benefit in kind and taxed. Sure the taxman may not have found these but that is due to them not doing their job properly not the rules being unfair.

    "Your business LCD projector is 99% used for watching DVDs?"

    Again the taxman should look into these and apply a charge. Not to mention if you buy a big fuck off projector for your business and put it at your home then your house becomes a business premises - this will affect your mortgage, insurance, council tax, incur business rates and such - again it is up to the taxman and local authorities to go after this but them not doing their jobs is unrelated to IR35.

    "I do not doubt that contractors need allowances"

    Thank you. But we currently don't get them under IR35.

    "but the ability to pay dividends on 90% income... and claim every damn thing and then some?"

    There are already rules on this - abuse of the rules is, and always has been unlawful and subject to penalty. This is not the result of pre-IR35 and has not actually been resolved due to IR35. Just look at bosses of big businesses - they pay themselves a good screw I admit but they take far more in "other" remunerations - far more tax avoidance there than contractor scum.

    "Problem is, ALL the contractors I knew were the bad guys and some still are."

    As already pointed out - you obviously have never actually met any contractors, or you certainly have never listened to them anyway. And if contractors still are "the bad guys" then surely IR35 is just an expensive failure and should be scrapped?

    Or are you just jealous that you are not good enough to contract and yet you believe the bullshit that contractors spout about earning £100,000 pa and only pay 4% tax? Cos if you actually knew any contractors you would know they tend to big up their income and small down their liabilities - sort of freelance version of pissing up the wall.

  26. Macka

    @Fraser

    --"If you are taking home a hundred grand plus"--

    If I was "taking home" a hundred grand then that would be made up from a combination of salary + dividends. I would also be deeply in the 40% tax bracket and would be paying a large amount of tax. Btw, you do realise that all tax just ends up in one big pot don't you: your NI could be spent on anything, just as some of the tax on my earnings will go to the NHS. And yes, I keep my employee NI down (though I don't take the piss) but I also have to pay employers NI too which compensates for that.

    Anyway, as a contractor I would be worse off than a permie at this point because not only do the government tax me on my salary + dividends, but dividends still count towards company profit and the value that I have to pay Corporation Tax on. We're effectively taxed twice on the same money. I won't bore you with the numbers, but once a contractor falls into the 40% bracket the over all tax burden works out to be higher than an equivalent co-worker in a permanent position. Hence most Ltd company contractor's desperate scramble to keep themselves below 40% or at least delay it for as long as possible.

  27. The Jase

    Contractors vs permies

    "We don't get holiday pay, or sick pay, etc"

    That's why you're on the big bucks, to cover that.

    "We don't get pensions or training"

    I don't where you were working last, but neither do permies. permies have to stump up for their own training.

    "you get a desk and a pc and coffee, we have to buy it"

    You have to buy it when working from home, just as permies do, oddly enough. On site you get the desk, pc and coffee. Permies don't get to claim their travel, laptops or such like.

    Being a permie has advantages and disadvantages. Working for yourself has advantages and disadvantages. One disadvantage is having to operate a business (which means doing tax and such like properly).

    1. Macka
      FAIL

      Re: Contractors vs permies

      --"I don't where you were working last, but neither do permies. permies have to stump up for their own training"--

      What a load of bollocks. In 24 years I've never met or heard of a permie having to pay for their own training to do their job. Either you've let the 1st April get to your head or you're smoking something dodgy.

      --"You have to buy it when working from home, just as permies do, oddly enough. On site you get the desk, pc and coffee. Permies don't get to claim their travel, laptops or such like."--

      Do you even work in the same industry as the rest of us? I've known loads of people who home work, and their employer almost always gives them a work laptop if for no other reason than security. My wife worked for a local council and she got one. A lot of employers even pay for extra phone lines and internet connections to be set up. And if you're not claiming your travel expenses as a permie, well then your employer has done you up like a kipper.

  28. Frank Long

    When they act morally, I'll act morally

    I'm a contractor, have been for years. Used an umbrella company for my first contract in Germany. Paid almost £40k in taxes. I have little problem with that. I think returned to university, paid entirely out of my earnings as a contractor, following that, I attempted to set up a company, although I never officially registered it, more pitched the idea and put the structure in place before officially registering it.

    As the idea wasn't getting off the ground, I went job hunting, contract or permie. 3 months into the job search, I swallowed my pride and went down the Job Centre to sign on.

    "sorry mate, you're not entitled to anything".

    As I had invested in a small apartment in Eastern Europe, that remained unlet and was costing me a fortune and was unaware of the fact that only my previous two years national insurance counts towards the dole (nobody tells you these things, it's up to you to find out), I neither qualified for contributions, nor means tested benefits.

    I didn't qualify for housing benefit or coucil tax relief as my girlfriend, heavily indebted thanks to massive university fees, earned an income that was a good few grand under the national average.

    Obviously, they wanted me to sell my sole long term investment.

    I still had to pay full council tax in that time.

    So in my hour of greatest need, the government told me I was entitled to nothing.

    Now that I'm earning once again as a contractor, I'm going to do everything in my power to make sure that HMRC don't get a penny of my money. I'm going to give the government as much support as they offered me, i.e. none.

  29. ForthIsNotDead
    Pint

    I call...

    April Fool on this one...

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