back to article Industry reps told the UK taxman everything wrong with extending IR35. What happened next will astound you

The UK government disregarded a raft of concerns about extending IR35 to the private sector in its response to a consultation over off-payroll working rules, industry groups have said. Last week the Treasury published draft legislation intended to extend controversial IR35 changes to the private sector, which will make …

  1. Anonymous Coward
    Anonymous Coward

    up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

    Whereas many people, my kids included, are paying over 50% of their income just to rent a crappy one bedroom flat in a shared house.

    Explain again why I'm supposed to feel sorry for these poor contractors?

    1. fnusnu

      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

      Ah... the politics of malice, envy, and spite.

      Perhaps you should advise your children to look into contracting if you think it's so lucrative?

      1. TRT Silver badge

        Re: Perhaps you should advise your children

        Actually, they're not my children. They just live in my house, eat my food and make use of my household amenities. In return, I give them an allowance, but they have no holiday entitlement, and if they get sick, then that time gets deducted from their pocket money.

        1. Joe Harrison

          Re: Perhaps you should advise your children

          A good solution would be to increase your number of children. Your mortgage will then be a lot cheaper per head.

          1. d3vy Silver badge

            Re: Perhaps you should advise your children

            "A good solution would be to increase your number of children. Your mortgage will then be a lot cheaper per head."

            Ill be available from November to be contracted as child for mortgage spreading purposes, PM me for day rates *

            * Cash in hand or contract stating outside IR35 only.

            1. TRT Silver badge

              Re: Perhaps you should advise your children

              And then register as a children's hometown claim charitable status on the council tax. Genius!

        2. Anonymous Coward
          Anonymous Coward

          Re: Perhaps you should advise your children

          > In return, I give them an allowance, but they have no holiday entitlement

          You're doing well. Mine are expecting me to fund their holidays.

          1. Louis Schreurs

            Re: Perhaps you should advise your children

            Mine also demand health benefits, but as we do not live in the U$A, it is a mute demand, in my country that is taken care of in the most civilised manner in this world. Still it is a game of capitalists, banks, government and worst of all beancounters at insurance companies. But one of the most civilised and non-barbaric in the world, I insist.

        3. vulture65537

          Re: Perhaps you should advise your children

          You do not tell them what to play. They do not tell you what to do with the money.

      2. Anonymous Coward
        Anonymous Coward

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        It's the same old story.

        If you're poor and you complain about the rich, you have a chip on your shoulder.

        If you're rich and you defend those less well-off than yourself, you're a champagne socialist.

        It's almost as though the wealthy consider themselves above criticism or something.

      3. LucreLout Silver badge

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        Perhaps you should advise your children to look into contracting if you think it's so lucrative?

        He should; it is.

    2. doctorurbane

      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

      Once you get past the trainee level, if you want to stay a techie you have to become a contractor. The only permanent jobs around are for managers.

      1. Anonymous Coward
        Anonymous Coward

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        Sorry, but that’s complete nonsense.

        1. EnviableOne Bronze badge

          Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

          ever tried working in tech outside london or the M4 corridor?

          theres Helpdesk roles aplenty and senior roles, but very little in the middle

          1. geekguy

            Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

            I have to say thats not true, In the north in places like leeds and manchester there is plenty of opportunity.

          2. Where Did All The Usernames Go

            Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

            > ever tried working in tech outside london or the M4 corridor?

            Yes. I do now and always have.

    3. lglethal Silver badge
      Stop

      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

      AC you seem to have fallen into the old myth that because someone else has a mortgage there at fault for the lack of available properties. (Or your trolling)

      Very few contractors are going to have more than one house. Who you should be annoyed at are the property firms that buy up land to rent and never sell, and the government for allowing that to happen. Also the government for not instituting limits on the amount of residential property that can be purchased by an individual and for not allowing enough new housing developments to fulfill demand properly, or for allowing the firms who build those new housing developments to hold on to the property afterwards to rent.

      There are plenty of reason why your kids are paying 50% of their income in rent, but a contractor owning a house isn't one of them...

      1. Anonymous Coward
        Anonymous Coward

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        "AC you seem to have fallen into the old myth that because someone else has a mortgage there at fault for the lack of available properties ... There are plenty of reason why your kids are paying 50% of their income in rent, but a contractor owning a house isn't one of them..."

        Their post clearly was "a lot of people pay c.50% of their income on housing, so if you're only paying 20%, you're well off, and I struggle to feel sorry for you", rather than "there are no houses because contractors bought them all as holiday homes/to build their property empire".

        1. lglethal Silver badge
          Go

          Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

          Then I would consider the AC's anger as being entirely misplaced.

          Surely the anger should be directed at those who, through their actions, keep large numbers of residential addresses off the purchasing market, therefore driving up the prices of the scarce available units and causing house prices and rents to be so ridiculously high. And of course at the government who allows this to continue.

          Being angry because someone else who is also just a regular worker like yourself is paying a bit less for their mortgage is utterly daft. There are much better targets for your anger out there.

          1. ArrZarr Silver badge
            Facepalm

            Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

            It's not that they're paying less for their mortgage.

            It's that they're well paid enough so that it's only 20% of their income.

            1. Anonymous Coward
              Anonymous Coward

              Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

              It's typically both.

              The rent you pay has to cover your landlords mortgage. Doh.

              1. Wilseus

                Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

                "The rent you pay has to cover your landlords mortgage. Doh."

                I'm an (unintentional) landlord, and the rental income from my property after paying agency and other fees and 40% income tax on the rest does NOT cover the mortgage. That doesn't include paying back the £30K I had to borrow to get the house up to a let-able standard either.

                1. MonkeyCee Silver badge

                  Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

                  "and the rental income from my property after paying agency and other fees and 40% income tax on the rest does NOT cover the mortgage."

                  You've presumably told your bank, since that will probably result in the loan being called in, which will solve your problems :)

                  IIRC a standard BTL mortgage requires the rent to be 145% of the mortgage payment.

                  1. BrownishMonstr Bronze badge

                    Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

                    He said "unintentional". The banks should let people have normal mortgages to let, if it isn't for long-term. What happens if you buy a BTL mortgage but only intend to let it for a few years before you move in?

                    1. Wilseus

                      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

                      Yes. It's a normal residential mortgage.

              2. LucreLout Silver badge

                Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

                The rent you pay has to cover your landlords mortgage. Doh.

                It often will, but it doesn't have to.

                If I buy and rent out a £200k house to provide an additional pension when retired, my topping up the mortgage after your rent would be a very cheap savings scheme for me, as your rent is effectively paying in as well.

                I'm not a landlord, I have only half a house.

      2. LucreLout Silver badge

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        Also the government for not instituting limits on the amount of residential property that can be purchased by an individual

        Its the governments fault people are interested in buy to let. As a Gen Xer, when I started work I could retire on a private pension at 50. Gains and dividends in my pension grew tax free. Labours first act was to tax the arse out of them, thus reducing the gains. Their second act was to delay my retirement by 5 years out of spite, while no such extension to public sector pensions was legislated for.

        Fast forward to the current government and they bump the private sector retirement age by a further 3 or 4 years, and bring in caps on the amount that can be contributed each year, making it much harder to bring your retirement income up to a liveable level. Again no such age bump is applied to the public sector.

        Is it really any wonder that some people look at property and thought "Hmm, that provides a regular income from rent, sort of like a pension, but I get to control when I retire, not the government".

        When I started work I had to work a minimum of 28 years before I could retire. Having worked for 23 years, I still have to work another 14 years before I can take my private pension. Angry doesn't begin to cover it, and while I have not resorted to buying houses to rent, I can well understand why others have.

    4. Anonymous Coward
      Anonymous Coward

      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

      There are also people starving in Africa, so why should I feel sorry for you or your kids?

      See, your sword cuts both ways. Probably best to resheath it lest you get scuppered.

      1. Dr. Mouse Silver badge

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        There are also people starving in Africa, so why should I feel sorry for you or your kids?

        Brilliant, love it!

        I've had this argument with people who complain about our overseas aid budget. Everyone in this country is in (IIRC) the top 10% of people in the world for income (it may even be the top 1%, I can't fully remember). So why are people complaining that we are helping people worse off than ourselves. Even the homeless in this country are generally better off than a lot of people in Africa. I'll admit there are serious issues with how the money is allocated and with that money not reaching those who need it, but that doesn't mean we should be spending less on them.

        Back to the point, though, the problem of the OP's kids being barely able to afford crap accommodation is not the fault of contractors. There are many issues at play which are hampering the prospects of the younger generation. Address the causes, don't just have a go at others and belittle their problems.

        1. ridley

          Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

          Whilst I agree with the sentiment and I agree with foreign aid in principle, it does seem odd to borrow money so that you can give it away.

          1. MonkeyCee Silver badge

            Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

            " it does seem odd to borrow money so that you can give it away."

            The economics of running a country is almost opposite to the way you would run your own life, a business etc.

            For a start, countries are, in effect, immortal. They borrow money to invest in common/public goods (infrastructure, education, emergency services etc) that result in increased tax revenues.

            This is also behind foreign aid. Improving another country means they are going to buy more of your stuff, or are not going to collapse. The cost of a failed state is HUGE.

            Often the same people bitching about refugees and people fleeing failed states are also bitching about the money spent to try and avoid other places falling into the same pattern.

            If you live in one of the best countries in the world, then either accept that everyone else is going to want to live there unless you also help them make their country better. Doesn't have to be as good, just being able to meet your basic needs (food, shelter, clothing, security) and some opportunity.

            In practical terms, debt and spending are almost opposite in effect when the government does it.

            1. Mephistro Silver badge
              Thumb Up

              Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

              ^^^This!!! A thousand times!!!

    5. Anonymous Coward
      Anonymous Coward

      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

      Contractors don't need sympathy. We have the flexibility to change our model and move around.

      It's the permies that we need to feel sorry for when their jobs are shipped overseas / automated.

      Seems to me that the primary identifier for an IR35 worker is whether or not they have a similar role to a permie.

      Occurs to me that the easiest way to deal with that situation is remove the dead wood and replace with contractors since contractors don't bolt themselves to the ground and make demands. We just turn up, do our job and send in an invoice. Nice and simple. Very low admin.

      1. Anonymous Coward
        Anonymous Coward

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        Many contractors are ex-permies.

        1. Anonymous Coward
          Anonymous Coward

          Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

          "Many contractors are ex-permies."

          In my first contract (after being a permie for 7 years) I tended to act like a permie and came unstuck pretty badly.

          Working as a contractor is a totally different mindset and associated risks. I finally figured out that the permie 'job security' was a myth (ok, that was easy to figure out). What took a little longer was that my job security as a contract wasn't my current contract, it was my ability to get a new contract when the current one goes up the swanny (project ends/money runs out/I get bored etc.).

          Yes, the money is better, but your career becomes your own problem, along with your finances/taxes/skills-upkeep etc. etc. Also, try getting unemployment insurance on your mortgage if you are a contractor.

          1. Glen 1 Silver badge

            Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

            Your career was always your own problem.

            Look at the (permie) job ads, companies want to hire people who can already do the job. If they can already do the job, how is working for that company a step up?

            You either have a Peter principal type winging it (and either sinks or swims ), or it's the same job for better pay because it's closer to London - where all (UK) roads lead.

      2. dajames Silver badge

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        Seems to me that the primary identifier for an IR35 worker is whether or not they have a similar role to a permie.

        Having a rôle that is different from that of any permanent employee in the same organization is one factor, yes, but that's not the whole story.

        Permanent staff have tenure. Their employer can't simply get rid of them in lean months. They are entitled to paid holidays, sick pay, and other benefits -- such as pension contributions, healthcare and share options.

        Contractors typically work on short-term (e.g. 3 months) contracts that the client need not renew. They do not receive any of the benefits of an employee and must make provision of their own. Contractors therefore charge more than the take-home pay of permanent staff in similar rôles because they have to fund their own holidays, pensions, etc., and because they have to build up reserves to cover any unexpected idle or sick periods.

        I would say that the real test should be whether the putative contractor is actually responsible for the cost of holidays, sick leave, pensions, healthcare, etc., as those are benefits that come with employment.

        1. Anonymous Coward
          Anonymous Coward

          Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

          I think the real test for a contractor is independence, my companies client is not my employer, and I am not their employee, if they try to treat me as their employee, that is a fast track way to have the contract terminated and they loose my expertise.

          My company will provide planning, development, employee training, team management etc..

          My company decides when I work, where I work, how I work, not the client.

          My company provides the equipment I use where possible, and if not there must be a reason why I use the clients equipment or systems.

          1. Anonymous Coward
            Anonymous Coward

            Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

            A British automotive company I worked for uses contractors as they can be cheaper but it is also easier to get rid of them when needed. I would estimate 50% of their workforce (e.g. design, various forms of admin, manufacturing...all areas of the business) are contractors. To the point where one their two preferred companies to advertise the contracting jobs had an office onsite.

            The difference between permies and contractors was little. We did the same jobs, but just didn't have the benefits---holidays, sick pay, or even a company car. Some permies would be there for years, some waiting for the permie job if it ever became vacant.

            I think it's companies like these which the tax-man is attempting to fight, and rightly so. However, I believe the clients should be the one to foot the bill, not the contractors themselves.

            1. Anonymous Coward
              Anonymous Coward

              Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

              Yes this is JLR I imagine. Massive disguised employment through the likes of Caresoft. People running a crappy limited co. while earning £21 per hour no sick pay no pension, thinking they are doing ok. They should be getting the benefits of employment status as I saw people working for >5 yrs on that basis.

              Utterly shite employer. Reflected in the efficiency of their operations and the quality of their cars TBH.

              1. Anonymous Coward
                Anonymous Coward

                Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

                Try another British automotive manufacturer, closer North.

                I bet they all do it--one of their excuses for doing something dodgy* was "but they all do it".

                *Removing parts of the car, such as carpets and sound-proofing, and saying "they are in fact options which we don't charge the customer for" so the official weight can be lower than it actually is. I wonder if it would be possible to buy the car and say we don't want these options.

        2. LucreLout Silver badge

          Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

          Permanent staff have tenure. Their employer can't simply get rid of them in lean months.

          Sure they can. The consultation period is now 4 weeks and only triggers if you're making more than 100 redundant at a time. Tenure is something professors have, not employees. Your only job security, despite what a union rep may tell you, is your ability to attract a replacement employer at the time you leave your current role. Anything else is bullshit. And that applies to contract and FTE.

          Contractors typically work on short-term (e.g. 3 months) contracts that the client need not renew.

          Most of the contractors I work with have been at the bank longer than I have.

          1. BrownishMonstr Bronze badge

            Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

            IR35 has fucked over the wrong folks. It should be the clients paying this, not the contractors. I bet the Gov are hoping the contractors are gonna do their bidding for them.

            1. Richocet

              Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

              Guess who donates to the political parties. The clients or the individual contractors?

              Which one gets screwed?

              Can anyone see a correlation?

      3. LucreLout Silver badge

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        Occurs to me that the easiest way to deal with that situation is remove the dead wood and replace with contractors since contractors don't bolt themselves to the ground and make demands.

        I've hired a lot of contractors over the years. A lot. And they break down into two distinct groups - those that are good enough they can be confident of a regular supply of work, and the other group who are so thoroughly hopeless that they can't hold down a permie job.

        Guess which group is bigger? Yup, the latter. Thankfully, they're usually easy to identify at the CV stage due to regular void and lots of short term (sub 6 month) gigs with very few renewals along the way.

        Simply replacing FTEs with contractors won't work because there simply aren't enough good contractors.

    6. Anonymous Coward
      Anonymous Coward

      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

      >Whereas many people, my kids included, are paying over 50% of their income just to rent a crappy one bedroom flat in a shared house.

      In my 20's I paid over 50% of my income in mortgage (council tax, utility bills etc. on top) , it was significantly higher than if I had rented like my friends, however 30 years down the line...

    7. d3vy Silver badge

      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

      I fail to see the correlation between contractors being deemed as employees and the state of the housing market?

      But to answer your question : Because when you're kids get out of (I assume Uni) and they're halfway competent they might want to have a bash at contracting?

      PS. They're your kids - if you don't like their living conditions why don't you do something about it instead of blaming contractors?

    8. Anonymous Coward
      Anonymous Coward

      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

      Didn't you know?

      Tax dodging is bad for celebrities, MPs, and people in general, but it's cool for computer contractors who are basically employees pretending to run their own sham business.

      1. LucreLout Silver badge

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        Tax dodging is bad for celebrities, MPs, and people in general, but it's cool for computer contractors who are basically employees pretending to run their own sham business.

        Don't hate the player, hate the game.

        Anyone wanting to pay more tax is legally welcome to do so, and yet nobody does. Not one single champagne socialist over paid last year. The underlying reason is they know they can get better value for their money by spending it themselves rather than through the state sector.

        Everyone thinks tax cuts for themselves and tax rises for everyone else is good. Trouble is those positions are irreconcilable. All you can do is adjust your own tax rates (still just about possible as a permie all the way up to 100kish)

        1. Anonymous Coward
          Anonymous Coward

          Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

          A well-balanced reply to my largely trollish post!

        2. Richocet

          Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

          That is only true for a short-sighted or rather selfish point of view.

          To operate the defense force, MI5/6, police and legal system is far far better value for money via paying tax than than individuals spending it themselves.

      2. Dr. Mouse Silver badge

        Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

        computer contractors who are basically employees pretending to run their own sham business

        Some "contractors" really are disguised employees, this is true, and that's what IR35 is (supposed to be) there to combat.

        However, the vast majority of those who I've worked with (both when I was perm and since I started contracting) are independent consultants and in no way, shape or form "basically employees". We come in to a company to provide our expertise for a particular project and for a limited time. We provide training to staff, help to implement new systems and ways of working, provide advice to the bosses. We take full responsibility for our actions, knowing we could easily be sued for the smallest mistake. We have specialist skills which the client needs for a short time. We can have our contracts terminated at a moment's notice (although most of us rarely have this issue as we are rather good at what we do). We take work up and down the country. We have to manage our companies affairs, including accounts, tax, payroll, and take responsibility for those affairs. We have to regularly market ourselves and find more work, as well as bid for new contracts, keep an eye on market rates to ensure we are competitive. We must keep our own training up to date and ensure we don't fall behind the latest advances.

        Some permies have to deal with a few of these things, but most get it all handed to them on a plate. All they have to do is turn up, do what the boss tells them, and pocket the pay at the end of the month.

    9. N2 Silver badge

      Re: up to a 20 per cent pay cut overnight... For many, the cost of their current mortgage

      Well, they could always join the RN Submarine service

      After which, their crappy one bed room flat would feel like a palace.

  2. Dr. Mouse Silver badge

    Unsurprising

    While it's disappointing, it's also not even a little surprising. HMRC and the Government have their fingers firmly in their ears, convinced that they are right despite all evidence to the contrary.

    CEST is a joke. It ignores case law and establishes status based on HMRC opinions, which have been proven again and again in court to be wrong. It ignores one key status indicator (MOO), and even the key status indicators are not the be all and end all as recent cases have demonstrated.

    Businesses are unprepared. Many are considering blanket bans on contractors, which will hurt them, contractors and the exchequer. Many contractors are considering abandoning contracting and either going perm or retiring, which again will hurt businesses and the exchequer (permies are generally on lower pay, which will mean lower tax receipts).

    My own view on this is that if a "contract" is deemed inside IR35, it is a staff role and should be filled by staff. There should be no "inside IR35 contracts". Take on a (potentially temporary) staff member, pay them through PAYE, and give them all the rights and benefits which come with that. I will insist on that myself if I am ever presented with an "inside IR35 contract" (and chose to pursue it, which is not likely as I actually like being an independent consultant).

    Going a step further, the tax system could be reformed to make this a non-issue. Get rid of NI, bundle it in to Income tax, then tax all income under that rate. For dividends, credit the corporation tax back first, then just tax it as income. This would lead to a "fair" system, and it would be simpler, too. They'd probably need to legislate for everyone to get an increase equivalent to employers' NI (13.8% on all earnings over around £8k) as a one-off.

    Just for informational purposes, this would lead to the following tax rates being applicable to all (which is the current overall PAYE tax burden including employers' NI):

    Basic 40%

    Higher 49%

    Additional 53%

    1. Anonymous Coward
      Anonymous Coward

      Re: Unsurprising

      Sounds good to me. Unfortunately the big accountancy firms won’t let it happen as they make money out of things being complicated.

    2. Anonymous Coward
      Anonymous Coward

      Re: Unsurprising

      " I will insist on that myself if I am ever presented with an "inside IR35 contract""

      But surely you will then have to also accept the heavily reduced rates that an employee would earn compared to a contractor. Generally at least 50% less in my experience.

    3. Stratman

      Re: Unsurprising

      Get rid of NI, bundle it in to Income tax

      Don't upset the Pensioner Vote, we're a powerful lobby. NI was deducted from our contributions on the way in to the schemes. By adding it to income tax we'd pay it on the way out as well, a double whammy.

      We may be old but we ain't stupid. Any party proposing that would lose a lot of votes.

      1. Anonymous Coward
        Anonymous Coward

        Re: Unsurprising

        Whoarrrr, what a great idea......

        Boris.

        1. Roger Greenwood

          Re: Unsurprising

          ICYMI - the best Boris quote by a country mile (Marina Hyde):-

          https://www.theguardian.com/commentisfree/2019/jul/12/country-beta-males-alphas-latin-president-tweeting-enemies

          "Boris Johnson is the kind of guy who’d don Spider-Man pyjamas and scale a building in order to see less of his kids. Sorry, fewer."

    4. Roland6 Silver badge

      Re: Unsurprising

      >My own view on this is that if a "contract" is deemed inside IR35, it is a staff role and should be filled by staff...

      The issue isn't contracts that are assessed as being inside IR35 before being let and so are advertised as a fixed term contract of employment (and thus including all the usual benefits that brings), but with HMRC's after the event deeming a contract as being inside IR35.

      Personally, HMRC could simply the whole thing, by making the erring employer liable for the tax liability. So the contractor puts the invoices through their book as usual, however the company now had to pay tax on the (vat inclusive) invoice as if the invoice were net pay after deductions.

      Remember the real issue with IR35 is: who at the end-of-the-day is being made to pick up the bill.

      1. Dr. Mouse Silver badge

        Re: Unsurprising

        HMRC could simply the whole thing, by making the erring employer liable for the tax liability

        That's actually a big part of the reforms: It shifts responsibility for assessing the status onto the "employer"/client, and also shifts the liability for taxes if wrongly declared outside onto them*.

        The problems occur from the fact that:

        a) Clients don't understand IR35

        b) HMRC's status tool (CEST) doesn't correctly determine status

        c) Clients are risk averse

        d) There will be no (real) appeal against an inside determination

        e) There is no liability for the client if they wrongly declare a role inside

        * Actually it's a bit more complicated than that when it comes to standard structures involving agents etc, but it's close enough.

        1. Roland6 Silver badge

          Re: Unsurprising

          @Dr. Mouse - don't disagree with points a to e, just that HMRC haven't, in my opinion, given a good enough reason as to why the contractor should be liable for any monies HMRC deem are owed due to them deeming a contract to be inside IR35.

    5. Anonymous Coward
      Anonymous Coward

      Re: Unsurprising

      Sadly not, the tax system is far less equitable than that. You stop paying NI at about 45k, so the rates are 13% from 8-12.5k, 33% to 45k, 41% to 100k, 60% between 100 & 120 k) then 45% over 120k.

      And IR35 is hugely abused. I had three desktop people doing grunt work for me a while back, one folded his company every two years to do something dodgy with tax, one paid his money into his personal bank account, the third didn't even seem to attempt to pay tax. None had specialist skills, they were all contracting as they could earn more and avoid tax.

      1. neil-t

        Re: Unsurprising

        Sounds like you company was dodging paying employers' national insurance and avoided having to worry about pesky costs like sick pay, holiday pay associated with employing staff. If your company wanted to put these two folks out on the street they could do it the same day. The contractors have no rights so no employment legislation would have covered them.

      2. Dr. Mouse Silver badge

        Re: Unsurprising

        You stop paying NI at about 45k

        Nope. You pay a lower rate of 2% above around £45k. This would make the rates for employee-only tax & NI, simplified into just the main tax bands, basic 32%, higher 42%, additional 47%.

        Also, the percentages I mentioned included employers' NI at 13.8%. This increases them to the figures I mentioned (again simplified into the main tax bands): 40/49/53%.

        one folded his company every two years to do something dodgy with tax

        That won't work long term, HMRC can come for the directors personally if they've been dodgy, and the other 2 will have HMRC on their case soon enough if they've been evading taxes or not keeping the proper records. However, you seem to know a lot about their personal and company tax affairs... This is not something I discus with clients (or pretty much anyone), so either they've been bragging and will be caught even sooner (have you reported them?) or you're guessing.

        they were all contracting as they could earn more and avoid tax

        Some people do. That's what IR35 is there to stop. Don't tar us all with the same brush, though.

      3. LucreLout Silver badge

        Re: Unsurprising

        Sadly not, the tax system is far less equitable than that. You stop paying NI at about 45k, so the rates are 13% from 8-12.5k, 33% to 45k, 41% to 100k, 60% between 100 & 120 k) then 45% over 120k.

        I'm afraid you're wrong. Its 42% to 100k, then 67% to about 120k then 45%. You forgot to account for the last NI hike, and the tax free earnings withdrawal from 100k (£1 lost for every £2 over), which makes the effective tax rate suicidal - only an idiot would pay it rather than work fewer hours/days.

      4. Richocet

        Re: Unsurprising

        And the changes to the tax laws aren't going to address people who fold up their company periodically to avoid tax.

        This is a huge problem in Australia, usually with over $1m liability when a company is 'phoenixed'. The authorities are looking intently in other directions e.g. they knowingly permit it even though it's illegal.

        1. Dr. Mouse Silver badge

          Re: Unsurprising

          the changes to the tax laws aren't going to address people who fold up their company periodically to avoid tax

          AFAIK this isn't a huge problem in the UK as the tax man can go after directors and/or shareholders personally if the company folds but hasn't paid its tax bill. (Note I may be wrong on this, or there may have to be specific circumstances to allow this... IANAL)

          1. LucreLout Silver badge

            Re: Unsurprising

            AFAIK this isn't a huge problem in the UK as the tax man can go after directors and/or shareholders personally if the company folds but hasn't paid its tax bill.

            The reason people used to do it was to convert revenue into capital gains, for which there is a separate allowance and lower tax rate. The rules on this changed (again) a few years ago so it's not as common as it once was.

  3. Christoph Silver badge

    All the contractors will just go and work in Europe.

    Oh wait ...

    1. Anonymous Coward
      Anonymous Coward

      Actually there could be more truth in that than you realise as it suddenly becomes very attractive to relocate and change business model. Some of us old boys are eyeing up going concerns in Europe rather than business opportunities in the UK. I am referring to Plan B ideas of course but that could be supplemented with a couple of days teleworking or even on site in the UK.

      1. Anonymous Coward
        Anonymous Coward

        Not to mention that it's very cheap to set up in Estonia and pay even less tax.

        https://e-resident.gov.ee

        IR35 will ultimately remove taxpayers from the system.

        1. Dr. Mouse Silver badge

          IR35 will ultimately remove taxpayers from the system

          Even if it doesn't, it's highly likely that it will *reduce* the tax take. Every contractor who goes perm will result in less overall tax paid by them (permies are paid less) and the reduction in the flexible workforce will hamper growth and profits for companies, leading to lower corporation tax and others. It's a lose-lose situation.

          1. Brewster's Angle Grinder Silver badge

            "Every contractor who goes perm will result in less overall tax paid by them (permies are paid less)."

            Fair enough. But where does the missing money go? Because it could reach the exchequer via a different route.

            For example, if the company employs two half-baked permies instead of one skilled contractor, then the overall tax take could stay the same (or even increase - I can't be arsed to work out).

            Equally, the money might surface somewhere other than "payroll taxes". Although with pledges to further reduce corporation tax, it may be the money won't get to the treasury. But my point is just because you are paying less tax, doesn't mean there is less tax coming in. Complicated systems can be subtle and need detailed analysis.

            1. Dr. Mouse Silver badge

              I get your point that it's a complicated system and I haven't accounted for all the effects.

              However, I seriously doubt it will lead to any significant increases in tax receipts to the exchequer overall, and many predictions I have seen show a reduction in overall tax receipts.

    2. Anonymous Coward
      Anonymous Coward

      Who will fill the gap?

      When all the IT contractors give up or go abroad?

      The likes of TATA etc will be chomping at the bit and ready to bring thousands of so called IT experts over from India to do all that work instead of us. Naturally they will be charging the same rates as current contractors and UK businesses will sign up fo their deals as they know that they won't have to deduct Tax/NI from what they pay to those Indian experts.

      This sort of thing has been happening for around a decade but the imposition of IR-35 to the private sector will only accelerate the virtual take over of IT services by companies from South Asia.

      It makes me sad to say this but... Get out now people while you have a choice.

      My job went to India in 2016 so I took early retirement and would not want to even think of working in IT again.

      1. James Anderson Silver badge

        Re: Who will fill the gap?

        A coincidence that HMRCs main adviser on the contracting market is Accenture?

        Surly not, just because all these IR35 measures hamper independent contractors but

        leave the big consultancies alone.

        So you can engage a skilled experienced independent, but have to put up with all the IR35 liabilities,

        or for the more money you can get a wet behind the ears graduate skilled in wearing a grey suit -- but

        no agro from HMRC.

      2. Anonymous Coward
        Anonymous Coward

        Re: Who will fill the gap?

        > Get out now people while you have a choice.

        My job went to India in 2016 so I took early retirement and would not want to even think of working in IT again.

        Getting out now is poor advice; plan your get out: can you afford early retirement, is the early retirement/redundancy package likely to be worthwhile. Downsize now, there is nothing to indicate the old metrics have changed: IT is not favourable to the 50+ and (UK) unemployment among 50+ males is around 1-in-3, so keep taking the money while it's flowing, but keep plan B ticking over.

        I juggled start and end dates to enable me to take the voluntary redundancy package and walk into another job on the following monday - redundancy package went straight into the pension fund (tax free).

      3. Anonymous Coward
        Anonymous Coward

        Re: Who will fill the gap?

        Nah businesses are learning fast that using Indian / overseas outsourcing is a poor choice, because it's money spaffed up the wall. In fact a reasonable chunk of the work I do is because of overseas outsourcing. In most cases I find that hardware / infrastructure is massively overspecced and badly implemented. Overspecced kit is always a good thing, and erasing poor configuration and starting again isn't a problem. I don't charge any less for this type of work, but I do save a lot of time because I don't have to piss about speccing up kit (which is time that generally isn't billed out).

        Even places like People Per Hour are actively filtering them out with their exam they have to weed out the people using poor English.

        I encourage anyone that wants a good laugh to take that exam.

        The maths is comically easy and some of the examples of incorrect English are genius.

    3. Anonymous Coward
      Anonymous Coward

      I did and found it easy to fly into Europe. Far easier than traveling in the UK. Rates are generally good, you just have to familiarise yourself with the local tax. Working in Europe gave me the impression that the UK is really failing behind in terms of IT, transport, crime prevention, health care and in so many other areas.

      On a separate issue I've also noted that "Web Developer" has just been added to the list of critical skills, enabling outsourcing companies to import (bodyshop) more "developers" from overseas. I suspect the large IT consultancies have lobbied for this and maybe this government expects to be able to fill the future IR-35 skill shortage problems with foreign workers! They may discover, like many others have done its not quite as simple as that!

    4. Anonymous Coward
      Anonymous Coward

      >All the contractors will just go and work in Europe.

      Why Europe? I hear Belize is very popular, in certain circles, for reducing your tax burden.

      >Oh wait ...

      Yes and probably less onerous paperwork to fill out in Belize than the EU states, after England regains its sovereignty, too!

  4. Doctor Syntax Silver badge

    It's very likely that a few people will take the advice and go to employment tribunals. When that happens there'll cease to be grey area (or worse) contracts.

  5. Anonymous Coward
    Anonymous Coward

    The fix has to come from those affected

    HMRC will be classifying people in employment law as employees, but not giving them any of the associated benefits.

    But surely that's the point? HMRC wants to identify people who are being treated as employees, but paid as contractors by companies/contractors who are gaming the system. It's up to the companies to either hire the people, or for those people to put themselves on a proper contracting footing. It's not for HMRC to "give" benefits to fix this, they are just identifying abuses.

    1. James Anderson Silver badge

      Re: The fix has to come from those affected

      But these are not abuses. Generally IT contractors are cost more than permanent employees and genuinely do not want to be permies if only because they hated dealing with HR when they were in permanent employment.

      Many of the major retail chains are seriously abusing the system, but, because they are paying minimum wage or less HMRC is not interested as there is little or no extra money for them.

    2. Roland6 Silver badge

      Re: The fix has to come from those affected

      >HMRC wants to identify people who are being treated as employees, but paid as contractors by companies/contractors who are gaming the system. It's up to the companies to either hire the people, or for those people to put themselves on a proper contracting footing. It's not for HMRC to "give" benefits to fix this, they are just identifying abuses.

      Err no, it is purely a revenue grab by HMRC. If HMRC were really concerned about stopping companies gaming the system, they would include full (backdated) employee benefits in the penalty package to the erring employer.

    3. Franco Silver badge

      Re: The fix has to come from those affected

      "HMRC wants to identify people who are being treated as employees, but paid as contractors by companies/contractors who are gaming the system"

      They absolutely do not, because if they did the BBC would be in court right now. However, the BBC are being invited round for tea and biscuits to discuss what to do, whilst people who worked for the BBC as contractors (and who were told to work that way or leave) ARE in court.

  6. Vitani

    Two things

    Two major things jump out at me in this story;

    1. "repeated concerns have been raised about the fact HMRC will be classifying people in employment law as employees, but not giving them any of the associated benefits" - This seems bizare. Who would want to do a contract where you can be removed with zero notice, pay 20% corporation tax, 40-50% income tax, no paid holidays, no sick leave, no safety net? It sounds very much like an "at will" state in the US, maybe that's the point?

    2. "The measure is expected to bring in £3.1bn in additional revenues for the Exchequer between 2020 and 2024" - does this take in to account the drop in corporation tax which will happen when contractors leave the UK, or switch to perm roles? From what I've read there's about 1.5m contractors in the UK, so that works out as £516/year/contractor, which seems a little off to me ...

    1. Anonymous Coward
      Anonymous Coward

      Re: Two things

      "no paid holidays, no sick leave, no safety net"

      Contractors do get a safety net with all those benefits. In fact the benefits can be unlimited. They just need to speak to the owner of the company (themselves) to ask what benefits they can get. How are these benefits paid for? Well by the fact that contractors earn significantly more than the permanent employees. For instance in some areas of the country an employed web dev will get say £50k. However a contractor will be on at least, pro-rata, £104k. Previously the take home would be more due to dividends and NI lowering tax compared to PAYE.

      Even if the tax liabilities are adjusted based on IR35 and some of the conditions also then the day rate will remain the same and therefore there should be sufficient extra income compared to permanent that will cover Sickness Insurance, holiday periods, between contracts etc.

      1. Anonymous Coward
        Anonymous Coward

        Re: Two things

        The problem arises when you start looking at serious illnesses.

        If you are your companies sole employee that is generating the cash, if you take time off sick then the company coffers are no longer being filled up. In the short term that's fine - as you say we're supposed to budget the company accounts for that sort of thing, but if it's something serious then there is *no* safety net.

        We would have to declare our company bankrupt, issue p45's and apply for state benefits if we were to become long-term ill (6+ months).

        Plus, as soon as any contractor becomes sick for any length of time then their client is likely to terminate the contract and get someone else in - after all they hired you to do a job and you aren't doing it.

        1. Anonymous Coward
          Anonymous Coward

          Re: Two things

          No the problem doesn't arise then as you seem to think that an employer will cover you forever for long term sick, they won't. Often 6 weeks pay is very generous.

          Then, like everyone else they have to go on state benefits - contractor, employee no different. There is no golden safety net for permanent employees either.

          However an option available to both is to get critical illness cover at a suitable level. The contractor can put this through the company books though and get it cheaper.

          However like most people, most contractors wont, they'll risk it and hope they don't get ill long term.

      2. Roland6 Silver badge

        Re: Two things

        >For instance in some areas of the country an employed web dev will get say £50k. However a contractor will be on at least, pro-rata, £104k.

        However, the true cost to the employer of that employee (ie. the gross package) will be closer to £100k than £50k. It is frustrating just how many employees are ignorant of the true cost of their renumeration package.

        1. Anonymous Coward
          Anonymous Coward

          Re: Two things

          Exactly this. Particularly at the more senior levels a contractor is always cheaper than an employee.

          We do it for the flexibility - my gross pay this last tax year was 20% lower than the salary the client was willing to pay for a permie with similar experience. I'd be hard pushed to get significantly more without moving into the finance sector but I don't want to. On the plus side I can take as much or as little time off as I like and if the agent mis-sells the role I find something else. I can duck out of the politics. Not worry about cultivating the 'right relationships' to ensure my next review, and my career in general, goes well. Focus on doing well what I enjoy doing well...

        2. Anonymous Coward
          Anonymous Coward

          Re: Two things

          The true cost, like for like, is unlikely to be an additional 100% of salary. I have to do these calculations very often - including all sundry costs. So you are looking at much less than that but it varies per employee.

          However even if it was that high then that is where you get similarity in costs where the contractor can cover their own sundries, such as holiday and sickness and has much more flexibility on where to spend it plus the additional tax benefits and the extras you can put through the company accounts.

          I've done both and there are pros and cons to both but the income easily covered my holiday time and any sickness, it was just I had less flexibility as I would have to take holiday between roles unless on a long term contract when I would build it in to the contract or supply a replacement for that period.

          The biggest issue with contracting was travelling to jobs as I didn't want to travel too far in the latter stages (when I got older with family) so it limited my choices of roles. When I was younger it didn't matter because even permanent roles I would live where the job was.

          1. MonkeyCee Silver badge

            Re: Two things

            "The true cost, like for like, is unlikely to be an additional 100% of salary. "

            I suspect you're not costing it correctly then. While the costs for a good employee who stays for 5 years

            (or two on minimum wage) won't be an additional 100%, the turnover rate makes a huge difference.

            I've seen the costing for perm versus contract, and HR had conveniently left out how much they cost. Your time isn't free, and hiring new staff has a certain cost.

            Hr is more afraid that if you start getting contractors then they don't really get involved in hiring, they don't have manage holiday, and certainly don't have to manage firing or improving staff. So they can spend their days working bankers hours before someone realises that maybe the flabby middle of the company is what needs cutting, not the top or the bottom.

            1. Anonymous Coward
              Anonymous Coward

              Re: Two things

              No all costs were included, including office space, utilities etc. Do you think that getting a contractor in doesn't involve HR, agency fees, drawing up contracts, project specifications, contract reviews as well as additional expenses charged, etc. There's significant costs and flexibility pros and cons for both permanent and contractors. However for the end 'worker' the employee gets what they are given at the end of the month and has little to no say in employer costs. A contractor gets the full amount and also gets to decide whether to spend it on insurance, equipment, vehicle etc and how to manage the tax routes for that income.

              The conversation has diverted a bit from saying that contractors don't get sick pay and holidays, to saying well the costs of a contractor are only a bit more than the total cost of a permanent employee if we chose to spend the income on holiday and sickness cover.

      3. d3vy Silver badge

        Re: Two things

        "Contractors do get a safety net with all those benefits. In fact the benefits can be unlimited"

        Yes..but as I pointed out in the comments on the other IR35 article:

        Yes, contractors can and *SHOULD* be making these provisions themselves within their companies, I leave around 40% of the monthly net profit in the company at the moment to cover pensions, sick pay, holiday pay etc - not all contractors do this, im my opinion they are short sighted, but that is their choice to make.

        Many don't mind tax reform for contractors - honestly because I leave so much in the company "for a rainy day" my net take home actually goes *up* inside IR35 because I am forced to take all of the funds immediately instead of leaving them for when they are actually needed [1], what gets me is the loss of ability to claim travel expenses [2] and the loss of benefits - let me elaborate on the loss of benefits :

        The way that IR35 works is that if I am deemed to be "inside" then my company will not earn any income from my engagement with the client [3] instead my client will pay an umbrella company [4] who will pay the relevant tax and NI to HMRC and then pay me the remainder.

        This means that when I am engaged inside an IR35 contract my company does not have an income with which to make provisions for sick pay, holiday pay or just time that I'm out of work (Through choice or not).

        That is the issue that people have, its not just that we will be taxed as employees but without the benefits, working inside IR35 effectively removes our ability for our companies to provide these benefits to us.

        1. Effectively deferring the tax until I actually have the need to spend the money - same way as anyone with a pension effectively defers the tax from the point of saving until they draw it.

        2. I travel 120 miles a day because my client can't get perm staff who live near by, Ill just find work closer to home from April 2020 and save £400 a month on fuel.

        3. Actually there is a 5% allowance to cover accountancy fees and similar expenses.

        4. Or they can choose to put us on their own payroll, but I doubt many will want that admin overhead.

        1. NeilPost Bronze badge

          Re: Two things

          I travel 100 a hundred miles a day to/from work. Boo-boo... I’d love to be able to claim that as expenses as a permie.

          Slush-fund in the company or outside the company - again boo-hoo - it’s called budgetting and saving. Nothing about this stops you having a rainy day/sick fund, or ensuring your bills are current, your credit cards/band accoint is healthy or you are offsetting or overpaying on your mortgage and you have a full freezer/larder.

          1. Jimmy2Cows Silver badge

            Re: Two things

            You seem to have completely missed the pont.

          2. d3vy Silver badge

            Re: Two things

            "I travel 100 a hundred miles a day to/from work. Boo-boo... I’d love to be able to claim that as expenses as a permie."

            I didnt complain about it - I do it through choice, my point was that if I (and other contractors) did not do this then the client could be stuffed as they cant get permies from the local area and a permie isn't willing to sit for 3 hours a day on the M6.

            Also - there's nothing stopping your employer paying your travel expenses.. In fat Ill bet they do cover everything other than your daily commute.

            "Slush-fund in the company or outside the company - again boo-hoo - it’s called budgetting and saving"

            Except a big chunk of your slush fund is covered by your employer.... Maybe you missed the point that even if I leave the money in the company it STILL GETS TAXED when I do eventually take it out - its just that I get to choose when that is.

            1. Aspie73

              Re: Two things

              The M6 is relatively empty at 5am when I start my 60 mile there and at 6pm when I start my 60 mile back journey.

              I jumped ship from contracting to permie when they offered a company car and fuel card. I was easily bought!

              1. d3vy Silver badge

                Re: Two things

                Aspie73.

                Quite similar - I tend to set off at 6 because I just cant convince myself to get out of bed before 5.

                Company cars and fuel cards are one of the perks that my current client offers to get people in the door.

                I wonder if Ive ever cut you up on the motorway :)

        2. Anonymous Coward
          Anonymous Coward

          Re: Two things

          "I travel 120 miles a day because my client can't get perm staff who live near by, Ill just find work closer to home from April 2020 and save £400 a month on fuel."

          Why do you need to travel to the client each day, I presume you are in IT? If they client requires that then that would seem like you are much more likely to be inside IR35. If a client is requiring you to be somewhere on a daily basis then that seems like a temporary post rather than a contractor - I would expect a contractor to be given a schedule of work or project and be able to fulfil that at any time from anywhere within the terms of the contract.

          Sure there are some exceptions, for instance with some specialist equipment, which require hands on with the equipment but quite often the contractors I work with would use simulators and then come in to test at an agreed time.

          1. Sir Runcible Spoon Silver badge

            Re: Two things

            "Why do you need to travel to the client each day"

            My plumber would have had a hard time replacing my heating system if he'd work from home every day.

          2. d3vy Silver badge

            Re: Two things

            "Why do you need to travel to the client each day, I presume you are in IT? If they client requires that then that would seem like you are much more likely to be inside IR35. If a client is requiring you to be somewhere on a daily basis then that seems like a temporary post rather than a contractor - I would expect a contractor to be given a schedule of work or project and be able to fulfil that at any time from anywhere within the terms of the contract."

            Because the client turns over a huge amount of money in a very competitive industry and protects their IP incredibly tightly - no one takes work off site except a few permies who are trusted.

            Most of my engagements have required SC clearance and the clients have required on-site working on their equipment.

            All of this has been covered many times in QDos contract reviews and in all honestly while its a small factor in IR35 investigations its really not considered a problem.

            As an example.. HMRC have contractors working outside IR35 from their offices in telford using hardware provided by hmrc... if anyone is going to know the rules you'd *hope* it would be them :)

  7. Anonymous Coward
    Anonymous Coward

    Brexit angle

    Does IR35 comply with european law? Perhaps we can appeal to the European court of justice.

    1. H in The Hague Silver badge

      Re: Brexit angle

      "Does IR35 comply with european law? Perhaps we can appeal to the European court of justice."

      Not an expert, but pretty sure income tax, etc. is not governed by EU law, so countries can do what they want in this area. They just have to treat resident EU citizens in the same way as their own residents.

    2. katrinab Silver badge

      Re: Brexit angle

      In terms of the tax rules, yes.

      In terms of the employment rights, or lack of them; maybe not.

  8. Will Godfrey Silver badge
    Unhappy

    Surprised?

    Not in the least.

    Successive governments have a very long record of totally ignoring any comments they don't like.

  9. Pascal Monett Silver badge
    WTF?

    What the hell ?

    "make companies and recruitment agencies liable for ensuring contractors are not doing similar jobs to that of payroll employees"

    I'm sorry, how is a recruitment agency supposed to know what payroll employees are doing ? I have been in the position of calling on recruitment agencies and they only thing they are entitled to know is the profile of the position that is being offered.

    If recruitment agencies are supposed to be responsible for checking that they are not recruiting identical positions as payroll employees, then they need to have the list of all positions that exist in the organization that is recruiting, which is a ridiculous proposition.

    On top of that, there's the fact that you may very well have a sysadmin in the organization and need another one to spread the workload. This restriction means that nobody (in the public sector) can hire two people for the same job, even if one person is not enough to do the job.

    That simple clause is just abysmally stupid and should be retired from the law entirely. But hey, what am I thinking ? I'm not a politician, so I don't understand anything.

    1. MonkeyCee Silver badge

      Re: What the hell ?

      "and they only thing they are entitled to know is the profile of the position that is being offered."

      But that should tell you, no?

      If the contract is: Deliver X, in exchange for Y, it's a contract. If it's turn up for assigned duties between 0800 and 1700, it's employment by any other name.

      And yes, I've have accepted contracts, found someone to do the work, and had the client spitting tacks because they assumed by hiring my company they had hired me.

      If you want an employee, hire one. If you want a task done, hire a contractor. If you're going to try and be clever the law is not on your side.

      1. d3vy Silver badge

        Re: What the hell ?

        "If the contract is: Deliver X, in exchange for Y, it's a contract. If it's turn up for assigned duties between 0800 and 1700, it's employment by any other name."

        There's a difference between per job/project and time and materials contracts... Providing skilled resource to complete a task for x hours is common not just in I.T but pretty much every sector.

        The guy that cleans my moat and duck house charges by the hour for various services but he's most certainly not my employee.

  10. Reg Reader 1

    As usual and common across the world, the Government is going after the wrong group to increase its income through taxation. Government needs to be going after Corporations to increase its taxable income not us in the populace. The problem is that Corporations have bought and built very favourable tax laws and can afford to fight the Government in court. Then add in the graft and corruption at the highest levels, which is business as usual, and you know it'll be us getting screwed over. Of course, the problem isn't just taxation but how Globalization has played out. Governments everywhere know this isn't sustainable if we are to keep any semblance of our standard of living but the graft and corruption at the top make change unlikely.

    1. Graham 25

      "Government needs to be going after Corporations to increase its taxable income not us in the populace."

      Tthe population end up paying if a company has increased cost though. All taxes on companies end up being paid by a consumer one way or another.

      1. MonkeyCee Silver badge

        "All taxes on companies end up being paid by a consumer one way or another."

        By the fudging shareholders, in reduced profits....

        The principle that a person pays is correct. It's just that companies do their level best to ensure that it's customers and employees who pay, not the shareholders.

  11. msknight Silver badge

    Can someone clarify something please?

    It was my understanding that one of the key tests for being in IR35 is if you were contracting for the same customer for above a certain length of time.

    In the public sector this kicked in a while ago and we are currently in a state of transition with contractors filling the holes while a series of new permanent jobs have gone out for advertising.

    The opportunity to claim the perks of being a business (tax refunds, allowances, etc.) that are not open to permanent employees, while effectively "being" an employee to all intents and purposes (long time in the same position, with no other customers to speak of) is where the tax man seems to be targetting.

    From a lay outsiders perspective, this comes across as people who have been using self-employed status to claim tax benefits, being upset about being forced to be employees and unable to use these advantages. - (the same going for employers who have saved the benefits of the social responsibility to employees, eg, pensions, holidays, etc.)

    So... what am I missing here?

    1. Anonymous Coward
      Anonymous Coward

      Re: Can someone clarify something please?

      A contractor can change clients every 6 months. Say if they are (in IT or similar) project starting/completing only. How many businesses need a*new* phone app every 6 months? But many might need extra horsepower to start up their app.

      A contractor can move onto the next company, providing a service. An employee, needs to find a new place to work, quit the old one, etc. Much more complex, and harder to pull off. Retrain or lose their job. A contractor is able to provide a different service entirely, thought he job is the same.

      1. katrinab Silver badge

        Re: Can someone clarify something please?

        If you are writing phone apps for lots of different companies, you are not going to have a problem. If you work for a company that writes phone apps for lots of different companies, then you will have a problem.

        1. msknight Silver badge

          Re: Can someone clarify something please?

          That becomes the point.

          If you're working for a company that writes phones apps for lots of different companies, then you should be an employee of that company.

          If you're writing phone apps for lots of different companies, then you're a contractor or self employed.

          That's the thing that I'm having problems seeing... if you're a contractor and you're working for the same company for a year, doing the same work throughout that period, then you shouldn't be a contractor... you should be an employee.

          If you're doing different jobs/roles even though they are within the same "customer" then that's not something an employee would do... hence a contractor is the correct status.

          To my mind, an employee wouldn't be looking for a new job every six months... unless something had gone seriously wrong at their various places of work.

      2. James Anderson Silver badge

        Re: Can someone clarify something please?

        Yes but with a major IT project taking at the very least 18 months, and I have experience of modernisation programs planned over three years, you want your key staff to stay for the whole project life cycle. The chances are that the key staff you really want will be independent contractors.

        So the management now has a choice between getting the skills they really want and losing them every 6 months -- or -- settling for lesser talent as permanent employees who will at least see out the project (and its 50% overrun).

        1. d3vy Silver badge

          Re: Can someone clarify something please?

          "So the management now has a choice between getting the skills they really want and losing them every 6 months -- or -- settling for lesser talent as permanent employees who will at least see out the project (and its 50% overrun)."

          And then factor in the cost of their redundancy pay outs.

    2. Stork Silver badge

      Re: Can someone clarify something please?

      I think you are missing the contractor is taking on the risk of long term illness, training, some admin, as well as perhaps not being needed next week (depending on contract)

      1. msknight Silver badge

        Re: Can someone clarify something please?

        The contractor taking this risk while doing contracts is perfectly acceptable. But when they are doing the same job for a long period of time, then this is people (contractor/employer) effectively undermining the employee protections by negotiation.

        If employee protections were open to negotiation, rather than being mandated by law, then it could theoretically turn the whole job market into anarchy where everything is open to negotiation including holidays (or not) maternity pay (or not) paternal leave (or not) and all the other things we take for granted.

        This is primarily why I see merit in the government putting their foot down on this... all be it through the tax system... not so much for getting more tax from people... but for preventing the employment market from negotiating its way around laws and weakening employment legislation.

        1. msknight Silver badge

          Re: Can someone clarify something please?

          In other words... there's nothing wrong with the gig economy... as long as it really is the gig economy and a person really is "gigging."

          When the gig economy is used to work around employment laws/protections/etc. is when there's a problem.

        2. d3vy Silver badge

          Re: Can someone clarify something please?

          "If employee protections were open to negotiation, rather than being mandated by law, then it could theoretically turn the whole job market into anarchy where everything is open to negotiation including holidays (or not) maternity pay (or not) paternal leave (or not) and all the other things we take for granted."

          They absolutely are open to negotiation at the moment - its just that the government sets the minimum bar that companies should meet.

        3. James Anderson Silver badge

          Re: Can someone clarify something please?

          We are talking about the UK here aren't we?

          There is no employee protection, we had some when Harold Wilson put some in place but it had mysteriously disappeared by the millennium.

    3. JamieGannaway

      Re: Can someone clarify something please?

      Length of time is not the primary concern. The contractor used to decide if they are in or our of the legislation. Now the payer has to make the decision. HSBC, Barclays, RBS, Lloyds, TSB etc... alone would have well over 50k contractors collectively. They will get penalties / back tax if they make the wrong categorisation so now it is up to them to decide in the face of a very ambiguous CEST tool, and case law that has gone either way.

      1. msknight Silver badge

        Re: Can someone clarify something please?

        I see what you're saying.

        So the question in my mind is... with that amount of contractors, should they have/need that number legitimately, or are we looking at large scale negotiated avoidance of the trappings of permanent employees? ... hypothetical question, I don't know the answer.

        Basically, we're moving into the realms of morality.

        1. Anonymous Coward
          Anonymous Coward

          Re: Can someone clarify something please?

          "Basically, we're moving into the realms of morality"

          Thats where quite a few of the arguments end up.. and to be honest I dont care about the morality - if its legal its fine.

          Ill do what I have to in order to stay within the law to provide the most possible for myself and my family.

          1. msknight Silver badge

            Re: Can someone clarify something please?

            That's where another moral issue comes in.

            The case where everyone works as hard as possible... earns as much as they can, and then old age comes along, or an unexpected accident or illness happens, and private health care sucks their bank account dry.

            Now... ensuring that some of that money goes into the NHS (where only the uber rich could afford all the bills) to provide care for you in your hour of need ... sounds like value for money to me. So why avoid tax? I'm not talking on the legal basis here... but the moral one. Just because it's legal doesn't mean it's right.

            That's what flumouxes me about the people who don't want to fund social support systems and want to keep everything for themselves. It only takes something unexpected to wipe it all out at today's prices.

            1. d3vy Silver badge

              Re: Can someone clarify something please?

              "Now... ensuring that some of that money goes into the NHS (where only the uber rich could afford all the bills) to provide care for you in your hour of need ... sounds like value for money to me. So why avoid tax? I'm not talking on the legal basis here... but the moral one. Just because it's legal doesn't mean it's right."

              Ok, thats an argument that I can get behind - I completely see your point, in fact I'd go as far as to say that I agree with you... To an extent.

              My opinion is that the government runs the NHS and decides how much to pay in.. they also decide how much tax I *have* to pay, if they let me *legally* pay less tax then its fair game. Morality doesnt come into it... if it did then wouldn't you be obliged (as the moral person that I'm sure you are) to offer up some additional taxes to help the NHS?

              If you drop HMRC a line and tell them you want to pay a bit more to help out the NHS I'm sure they would oblige you.

              Morality shouldn't come into it at all... Morality changes from person to person and most people only consider things immoral if theyre not the one doing it.

              1. msknight Silver badge

                Re: Can someone clarify something please?

                Very good points.

                Yes, the government decides how much of our taxes to pay in. But we do have a ballot box cross we can bring to bear on them if they don't fund it properly... as will be the case in the next general election I feel.

                True, it will be mixed in with a wide variety of other subjects, weights and balances.

                Actually, HMRC are not obliging in that regard. They take their pound of flesh and nothing more. I am on PAYE for my day job, and I'm an unsuccessful author on the side. So unsuccessful, in fact, that I give them my earnings (I can earn an extra £3,000 a year on top of my PAYE before having to go completely self filing) ... and I've had rebates. Go figure.

                Yes... I'm that unsuccessful.

                Morality does change from person to person... very true... so I suppose you could call it the morality of the majority, and those using off shore bank accounts quickly feel the force of shame from society at large.

                1. Anonymous Coward
                  Anonymous Coward

                  Re: Huh?

                  Then why don't you pay 100% of your spare cash as tax? Or better, pay from your not spare cash? You can eat beans and give the rest to others.

                  The law can state if and how someone should pay tax. If it is vague or bias for one group, then people may complain it is vague or bias.

                  1. msknight Silver badge

                    Re: Huh?

                    > Then why don't you pay 100% of your spare cash as tax? Or better, pay from your not spare cash? You can eat beans and give the rest to others.

                    Already told you. They won't take it.

                    1. Anonymous Coward
                      Anonymous Coward

                      Re: Huh?

                      AFAIK there is a box on tax returns for a payment of tax. As in, you can put in a figure of tax you wish to pay. Why not put in more?

                      1. msknight Silver badge

                        Re: Huh?

                        They just refund you the overpaid tax the following year.

                        Your'e dealing with accountants, so stop being a troll.

                        1. d3vy Silver badge
                          Joke

                          Re: Huh?

                          Interestingly there was a consultation on allowing voluntary tax payments back in 2016 - Ive not been able to find the results after a few minutes searching.

                          You absolutely can make voluntary NI payments.. so that might be an option, if you do, let me know how much you pay and Ill consider it a joint payment (Because of the advice I offered above) and then I wont feel so bad about my effective tax rate ;)

                          1. msknight Silver badge

                            Re: Huh?

                            Good point... however, you can only pay voluntary NI payments to fill gaps in your own contributions that cover the previous 6 years ... so I still don't know of an arbitrary way to throw money at government accountants. Other than literally... of course.

                            https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

                            "Eligibility

                            You must be eligible to pay voluntary National Insurance contributions for the time that the contributions cover.

                            You can usually only pay for gaps in your National Insurance record from the past 6 years.

                            You can sometimes pay for gaps from more than 6 years ago depending on your age."

      2. d3vy Silver badge

        Re: Can someone clarify something please?

        "The contractor used to decide if they are in or our of the legislation. Now the payer has to make the decision"

        Exactly this - And whats the payer going to do?

        1. Take the word of the contractor and QDos that the contract falls outside IR35 and accept the liability if they are wrong.

        2. err on the side of caution and just say that all contractors are inside IR35 as it has no negative impact on the payer...

        So I can get a contract, have it reviewed and found to be outside IR35, the CEST tool (for all the use it is) can say that Im outside IR35 but the client can still decide that they dont want the risk so put me inside IR35... hardly an ideal situation.

    4. Anonymous Coward
      Anonymous Coward

      Re: Can someone clarify something please?

      I don't think time contracting for a single customer is a factor, at least I CEST didn't mention it when I checked. I was found to be outside IR35 when I checked, and I certainly won't take on a client where I would be deemed inside IR35

      1. d3vy Silver badge

        Re: Can someone clarify something please?

        "I don't think time contracting for a single customer is a factor"

        Your exactly right, Its not anything to do with that, its on a contract by contract basis, whether they contracts overlap, run consecutively or you have a six month break in between each one doesn't matter.

        It also has nothing to do with how long you spend at a client * - the contract itself isn't even that important in the determination - its the working practices.. If the client treats you as an employee - dictating hours, time off, what work to do and when (Though in a project based environment even this can be a grey area)

        * Though there is a separate 24 month rule which apples to expenses but not tax.

        1. Anonymous Coward
          Anonymous Coward

          Re: Can someone clarify something please?

          "its the working practices.. If the client treats you as an employee - dictating hours, time off, what work to do and when"

          And this is why I am a contractor, I like freedom to work how I want to work, I like the freedom to tell the client when I will and will not be available to provide services (although as a business owner I tend to always be on call if there is a problem with a clients systems)

  12. xeroks

    Gig economy

    My view on "why" the treasury are doing this is not just the initial hit of revenues. They know it won't be quite as big as these estimates because the contractors and companies will adjust their practices to fit, and will minimise the tax hit as far as possible.

    I reckon the main driver is that the treasury is more concerned about the potentially much bigger gig economy. It just takes someone to industrialise the admin/accountancy side of things:if low-hours and low-rate workers can engage in legal tax minimisation practices used by companies (and contractors), then the treasury will see a huge drop in income.

    1. Anonymous Coward
      Anonymous Coward

      Re: Gig economy

      This. Plus as soon as anyone realises they can circumvent the confusion by providing a "license to work", well, then they get to decide who works, and how much.

  13. Julian 8

    gig ecomony

    Makes me wonder what happens with the gig ecomonmy too.

    Uber drviers - clealy doing the same job as other "drivers"

    Agency nurses - cleany doing the same jobs as permenant nurses

    Cover teachers - just another teacher

    etc.

    Nurses worry me more. We have lost a lot through brexit already, so those who are agency nurses will take a pay cut of just leave and do something else

    Same with teachers, schools have x teachers and for whatever reason they need cover. Potentially removing more teachers where we need more

    User, while you may or may not use them, they will fall under this affecting the Generation Z from eating and Generation X from travelling around

    1. d3vy Silver badge

      Re: gig ecomony

      @julian8.

      I believe that most locum doctors operate through limited companies too.

    2. HmmmYes

      Re: gig ecomony

      If the locum DR or agency Nurse were working FT, at the same hospital, then, yes, they would have a problem.

      Theres no issue with temporary staff who move *between* different locations.

      People affected by IR35 have a simple solution - create a compnat of 2+ people and move them between customers.

      I find bleeting contractors who fail to understand how the tax system/compnay law works a bit annoying.

  14. mutt13y

    Not 20%

    I don't see how you get to 20%

    outside IR35 contractors pay 19% corporation tax and 7.5% dividend tax = 26.5%

    Inside IR35 20% income tax 12% NI = 32% (Because the salary is a deductible expense for the company)

    so far only 5.5% worse off.

    Now there is the matter of 13.5% Employer contributions but if the responsibility movs to the employer and they determine that the contractor is inside then they can pay the Employer NI themselves just like they do for all there other employees.

    Don't panic, Rates will just go up, same as they do now for inside working.

    1. mikepren

      Re: Not 20%

      They changed the rules on dividends, after the first 2k it's taxed as income.

      The main advantage of contracting are expense costs and liability.

      If you can't get expenses then you can't travel. That will hurt the economy at the same time that kids aren't moving due to the increased city living costs.

  15. Anonymous Coward
    Anonymous Coward

    Its about keeping the loophole open..... for the rich

    This isn't about shutting down loopholes.

    This has, and always has been, about stopping mere plebs like contractors using them.

    Companies in the UK are given a very beneficial tax treatment. Wanting the same tax treatment themselves contractors looked at the law and saw becoming companies was sensible.

    The problem for HMRC is then that they want to stop contractors using those rules - BUT NOT REMOVE THOSE RULES for the big boys.

    That is the heart of this unfairness - all we want is a level playing field to go in as an expert consultant, do what we know how to do and move on to the next contract, and pay taxes the same way as any other UK company. That includes the ability to keep money in the company, to invest in other projects, take on admin staff, or cover future gaps in work due to sickness or just the market.

    IR35 removes all of that and gives contractors the worst of both worlds - all of the costs of being an employee with all of the risks of being a company.

    I'm hoping that fixed fee scoped project work becomes more likely here - but clients honestly prefer the flexibility of being able to repeatedly change the scope and accept paying at a day rate, rather than hitting a contract renegotiation every time they want to add "a quick extra feature". Having a pricing structure that gives clients the flexibility they want shouldn't make us employees, it makes us service orientated businesses.

    1. mutt13y

      Re: Its about keeping the loophole open..... for the rich

      >The problem for HMRC is then that they want to stop contractors using those rules - BUT NOT >REMOVE THOSE RULES for the big boys.

      Exactly, and they would not have to put much of a dent in those rules to get the additional income they are after. I reckon if they increased Dividend tax by 1% they would make much more and be unambiguous.

    2. d3vy Silver badge

      Re: Its about keeping the loophole open..... for the rich

      "Companies in the UK are given a very beneficial tax treatment. Wanting the same tax treatment themselves contractors looked at the law and saw becoming companies was sensible."

      Actually, for liability reasons you'll struggle to find a company that will engage sole traders..

      You'll also struggle to get insurance as a sole trader up to the amounts required to work for some clients.

      Finally, If I was contracting as a sole trader, fucked up and got sued I'd rather not loose my house...

  16. Spanners Silver badge
    Facepalm

    "Last week the Treasury published draft legislation"

    Last week the Treasury published daft legislation

    FTFY

  17. JamieGannaway
    Alert

    Matthew Taylor has a good speech about the 'privileged' and the 'precarious'. This can't be a process of 'contractor bashing' as some comments have made out. Not all contractors are sitting on £1000k plus per day (while some are)... they do not deserve the wrath of anti capitalists.

    The industry needs to grow up for sure, contractors with it. A contractor can't be in a backfilled run the business role for years, be in the structure chart, with business cards and attend training and social events and be surprised that someone considers them as a disguised employee. Dave Chaplin from Contractor Calculator (https://www.linkedin.com/in/dave-chaplin-63113/) has some great advice on this as well.

    Are companies worried about their engagements with Accenture, Deloitte, PWC, IBM, Cognizant, Wipro etc... being caught inside IR35? No. That's because what they do is packaged as a service. Genuine contractors who offer a service, deliver via the same type of statement of work, who have payments linked to milestones and put some fees at risk could be considered as genuinely arms length contractors... and not off payroll workers (on contract instead of off payroll).

    Companies need the think about how they create a 'compliant' channel to cater for individual Limited Companies and single person directorships. To do this they need to know what they are doing, now they are doing it, and create an internal attestation process where 'hiring managers' stop treating contractors like their own staff.

    JAmie Gannaway

    Chief Product Officer

    www.deployed.co

    1. neil-t

      Agreed. It's going to take a while until companies understand that contrators are not employees. When work is put out to contract and contractors can bid via SoW contracts life will be a lot simpler!

    2. Charles Smith

      If the client is paying £1 Million per day as you suggest, I'll live with the tax.

  18. This post has been deleted by its author

  19. a_mu

    On line decision tool

    Do I understand that there will be an on line tool that can be used to see if the IR35 status ?

    and this is the decision point, the on line tool ?

    Interesting how you could write a law that depends upon a web site !

    1. d3vy Silver badge

      Re: On line decision tool

      Whats more interesting is that if you feed the conditions into the tool for IR35 cases that HMRC has lost in court (Ie they were legitamate contractors) it still tries to claim they are inside IR35.

      The tool isnt fit for purpose.

    2. NetBlackOps
      WTF?

      Re: On line decision tool

      And... telling all and sundry they have time to prepare for the changeover when said tool is to be delivered mere weeks before the changeover. Prepare?

    3. neil-t

      Re: On line decision tool

      HMRC's one was not UAT tested and consequently is a pile of rubbish. Qdos have a decent online status tool based on case law.

  20. MonsieurTM

    The shame is that contracting is needed: for the flexibility that provides employers. Once IR35 goes in, many of those roles formerly done by contractors will be shifted abroad, thus a net loss to the UK economy and the exchequer. Employers will have to fill some roles by making them permanent, which will cost the employer, as they will have to pay appropriate benefits as befits a permanent role. Thus employers are stung too. IR35 is extremely poorly thought-out legislation that punishes the British economy, brought in by MPs who simply seem to wish to bulldoze it through.

    1. Nerdie

      Well said

  21. matthewdjb

    When IR35 was first mooted back in 1999, we didn't know whether the client would have the liability or the contractor. However, there was a widespread fear that either way, it would lead to the end of contracting.

    Didn't happen.

    I now contract in abroadland. No tax relief on dividend income, so no dodging the NI equivalent. It's still worth contracting for the freedom and the uplifted income which over the years has reduced to around 50% more than a permie position.

  22. neil-t

    Thee is even more rich pickings for the HMRC vultures. IR35 investigations going back 6 years will yield even more money. Prime targets will be contractors who worked via Ltd then forced to go inside IR35 or perm. That should yield a good 6 figures sum per contractor.

  23. Charles Smith

    The Government will complain

    When the Government discovers it can no longer engage freelance IT staff, it will complain that the costs of consultancy companies are too high. A bit like the Treasury fiasco on Hospital Consultants and GP's.

    The lesson here is that HMRC is no longer controlled by the Government and MPs.

  24. Efer Brick

    In a recent Poll...

    100% of people thought other people should pay more tax.

    1. Nerdie

      Re: In a recent Poll...

      Contractors are paying more tax because they pay 20% VAT and 20% corporate tax and %7.5 dividend tax. See my latest post for details.

      What HMRC needs to do is go after Google, Amazon and Facebook. They earn billions in this country and pay almost no tax. (I remember one year Facebook paid 14k tax)

  25. Nerdie

    A contractor who earns 100k in a year generates 47.2k tax (VAT, corporate, dividend, income tax and NI)

    If the same contractor worked as permanent employee he\she would be paid 80k at best, because employment has additional costs as as employers NI and Pension contributions. This person would be paying 25.5k to the treasury as income tax + NI. The employer would be paying 11k per year as NI contribution.

    This is a loss of tax revenue 12k to the treasury per year per contractor.

    The Treasury is expecting to 3.1b revenue from this IR35 ruling do not have a clue about the tax rules.

    DO not feel sorry for the contractors, feel sorry for the lost revenue to the treasury which are meant to pay for schools, NHS and Police and other services!

  26. Nematode

    Don't like it? Take it to an employment tribunal!

    Yes. "Nuclear Option"! The only way to solve the injustice of being found as "employed" but having no employment rights. HM Gumment and HMRaidersofCash don't care

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