back to article Royal Bank of Scotland IT contractor ban sparks murmurs of legal action

IT contractors with the Royal Bank of Scotland (RBS) are mulling legal action following a decision to get rid of all freelancers ahead of controversial changes to UK off-payroll worker tax legislation next year. RBS confirmed to The Register that contractors will be allowed to continue to operate through their limited …

  1. Anonymous Coward
    Anonymous Coward

    Not the only one

    Working for a (considerably smaller) company in the same sector, all of our contractors are also being thanked for their service. The predicted stop of all projects has yet to me costed as far as I can see.

    AC obviously

  2. HmmmYes

    Hold on.

    The contractors are always saying that they are paid more as the company can get rid of them instantly.

    Now they are suing when a company gets rd of them.

    1. Fonant

      The company is not getting rid of them, it's offering them a 20% pay cut with no employment benefits to compensate.

      IR35 is a real mess. Let's hope the next government scraps it ASAP.

      1. LucreLout Silver badge

        IR35 is a real mess. Let's hope the next government scraps it ASAP.

        They won't.

        If its a Conservative government, well, this is sort of happening on their watch already. If its a mostly red coalition of chaos, they've already committed £1.5 Trillion pounds that they do not have in extra spending to nationalizing near on everything, so no way will they watch "their" tax income sail on by. If it were reversed under labour while taxes shoot up for permies, then you'd see everyone jump ship to contracting and they'd have to target it.

        I've already had to wave bye bye to my best contractors. We know they won't go perm (I've done my level best to find opportunities for them regardless), and we don't have the budget to offset the increase in costs. This is likely to pick up speed next year as more and more firms come to the same conclusions, which may make it difficult for some of the departing to attract other gigs.

        2020 is going to be a bumpy year for contracting, which is dissapointing as I was hoping to do that next.

        1. Anonymous Coward
          Anonymous Coward

          Never mind

          There are lots of other nearby countries to work in, unless someone takes free movement off the table.

          1. Anonymous Coward
            Anonymous Coward

            Re: Never mind

            > There are lots of other nearby countries to work in, unless someone takes free movement off the table.

            Yeah, right... You tried working in France in a recent years? Free movement for contractors has become a myth that has nothing to do with Brexit. I've a customer who has had to move certain projects out of France coz they can't get staffed by non French contractors without jumping through all sorts of legal hoops (basically setting themselves up as French companies). As I said this isn't a Brexit thing, the contractors I know involved with this include Germans, Austrians and Irish and that's before we get to people from outside the US. Hell they can't even easily use employees of the same multinational who live outside of France.

            1. A.P. Veening Silver badge

              Re: Never mind

              But that free movement isn't limited to France. There are enough opportunities in Belgium and The Netherlands.

            2. boltar Silver badge

              Re: Never mind

              Well done to the french. Its about time there was some legislation here that put UK workers first instead of hiring cheap labour from overseas.

              Yeah, mod me down hipsters and bien pensants - until you're the one who missed out on a role to someone who just flew into heathrow yesterday and doesn't even know what an NI number is much less IR35. You won't be so keen on freedom of movement then.

              1. Anonymous Coward
                Anonymous Coward

                Re: Never mind

                Except that it doesn't work like that. I can't go there and teaching them how to do the job, the lab engineers who wrote the SW can't either. So that doesn't help them get work. But the main issue you're missing is that the work just doesn't end up going to the office in France, it just buggers off to other places where things are more flexible. So in an attempt to protect a few peoples employment chances they've jeopardised the jobs of lots of people who work in that office.

            3. Nancy9

              Re: Never mind

              Perhaps your issue is specific only to you. I work in Paris and agency pays my UK LTD company. I can work in Paris because I am with an EU (French) family. I don't need to set up a French company.

          2. Gordan

            Re: Never mind

            Why move? There is a reasonable amount of remote work around.

          3. tip pc Bronze badge

            Re: Never mind

            Are the other nearby countries stopping uk citizens working there?

            1. Nancy9

              Re: Never mind

              "Are the other nearby countries stopping uk citizens working there?"

              They will stop UK citizens from working in the continent after Brexit.

          4. Anonymous Coward
            Anonymous Coward

            Re: Never mind

            I think it is actually a fee cut rather than a pay cut, there is a vital difference here.

            The client is saying they won't pay more for the contractor's services. As a contractor of 20 years standing I'm fine with that, after all, the market will value our skills according to the economic forces in hand.

            Anyone who is contracting their services and is unwilling to negotiate with their client when renewal time arrives has missed the point. We are in business for ourselves, we take this risk because we like the freedom to work with whom we please, when we please for the amount the market can pay.

            If my client refuses to pay what I am asking I leave, even if that means driving an Uber for a couple of months. I would humbly suggest my fellow contractors consider the same, unless they prefer to be a permie, then that's fine also, but suing your client because they won't pay you more than you require is really proving that you were not in business anyway.

            Suck it up or spit your dummy and walk. Your business, your choice.

            1. lukianp

              Re: Never mind

              Could not of put it better! We are our own business' with entities, this is the price of doing business. The rates may increase to substitute the availability of finding resources, it may not.

              1. ICL1900-G3
                Headmaster

                Re: Never mind

                Could not HAVE put it better.

                There is no verb 'to of'.

                1. John Doe 12

                  Re: Never mind

                  Who cares - this is a discussion about IR-35 not an English lesson. Did it make you feel so special and important to point out this minor error? Are you sitting there with a big satisfied smile on your face now? What a loser ha ha :-D

                  1. Stevie Silver badge

                    Re: Never mind

                    Well, carelessness in use of such a short snippet of English might send a shiver up the spine of anyone expecting to be reading code written by the same hand presumably with the same attention to detail.

                    I'd make a similar observation about documentation, but no-one writes it any more.

                    1. John Doe 12

                      Re: Never mind

                      I doubt that more than 20% of users on this forum are writing front-line code. Also how is making a quick comment on a forum the same as writing code anyway? All I see is a petty, pathetic asshole out to make a name for himself / herself over the most minor error. If this was an application letter for a job then perhaps nit picking makes a bit more sense.

                      1. enormous c word

                        Re: Never mind

                        Not knowing the difference between 'of' 've' and 'have' is a pretty fundamental mistake, my 10 year old can do better (not my 7 year old). Nobody remembers the original poster's *message* - just their mistake. If they'd of taken time to read of what they'd of written then we'd of taken more notice of what they'd of said and it would of made of more sense, wouldn't it of.

                      2. cambsukguy

                        Re: Never mind

                        I think the post was suggesting that, if someone writes a phrase such as that incorrectly it means (in their view) that that person simply doesn't know the correct grammar - I seriously doubt that someone changes their brain mode to use incorrect grammar for a forum post - the difference is that the poster may not re-read and proof a post as much or at all compared to (say) a job application cover letter.

                        I usually give a post a check for stupid grammar and spelling errors but little more (more this time perhaps).

                        It is worth noting that an MP recently asked those who 'mock' to remember that he (the MP) is a severe dyslexic and cannot easily ensure all his tweets (particularly) are error free.

                        There are also those who might not have English as a first language and thus might make more errors (although in my experience, most learn English grammar which exceeds our own education standards).

                        Perhaps the poster was simply like me, educated in the 'Comprehensive' system where what you say matters more than how you say it. I disagree with this, mainly because, while text speak such as m8 might be obvious, bad grammar and using the wrong words, can cause serious miscommunication and misunderstanding.

                        And, as a contractor, I am currently working to rescue a project utterly destroyed by bad design and slapdash coding by someone who doesn't take care in either their code or their communication.

            2. macjules Silver badge

              Re: Never mind

              +1 to that.

            3. MikeDuncombe

              Re: Never mind

              I woiuldn't have put it quite so stridently, but I do agree with you. I have been a contractor for many, many years. The public sector went through this isse a couple of years ago, and some contractors chose to go elsewhere, some to re-negotiate, some to suck it up. I did a bit of renegotiating and got my employer to accept paying the employer's NI, and went onto their payroll system so they could make sure that NI and Income Tax were correctly accounted for (let's not forget that the clamp down is because many people were taking the mickey and HMRC wants to make sure it's getting what it should). In the end, the change cost us both some money.

              It does seem a bit odd that you would enter into a contract with an employer and then on a law change, you sue the employer. Often, contracts allow for the eventuality that there may be law changes; but, in my experience, the remedy is limited to being able to walk away without penalty.

          5. enormous c word

            Re: Never mind

            Thats a little naive - you obviously never worked in Germany, Austria, France, or Belgium - Free Movement of Labour (in reality) means making it easier to herd unskilled labour around to do menial jobs for minimum wage. Skilled labour is valuable and therefore worth jumping through a few hoops - Brexit wont change that. Liberalism, Globalism and Corporatism are strange bed-fellows, dont you think?

        2. Rich 2 Silver badge

          Labour

          Labour won't scrap IR35 - They introduced the bloody thing in the first place

          1. Anonymous Coward
            Anonymous Coward

            Re: Labour

            Yes, that great financial steward, Gordon 'Brooding' Brown.

        3. Gordan

          Is that because of dictat from above that there are to be no contractors? I figure it must be because you will find most will be very happy to move to a statement-of-work arrangement.

          1. LucreLout Silver badge

            @Gordan

            Is that because of dictat from above that there are to be no contractors?

            Yes, I'm afraid it is, I had no choice and no leeway.

            I've spent a lot of time and effort on my recruitment and where I've made a mistake and got a type 2 contractor (contracting because they couldn't get or keep a permie role) then I've moved them on. My contractors are at the ninja end of the skill/effort set.

            I'm actively persuing other roles for them in my network of contracts and doing the best I can to see them in new gigs ASAP. Doing what we're doing is fine - it's part of business, but I don't personally agree with this sort of thing right before Christmas.

            1. Polhotpot

              Cuts for Christmas

              Although it might not seem it, it's actually better for people's wellbeing to make cuts before rather than after Christmas.

              The reason is that most people have their highest spending period over Christmas, and if they know their job isn't secure they can reduce their spending. If you wait until Jan/Feb, they often have a massive credit card bill from the festivities and are then told their income to pay it off is about to evaporate.

              1. LucreLout Silver badge

                Re: Cuts for Christmas

                If you wait until Jan/Feb, they often have a massive credit card bill from the festivities and are then told their income to pay it off is about to evaporate.

                I was more thinking we should have flagged this as happening a couple of months earlier, allowing a gradual transition as they find other gigs, which would make life easier for the contractors and much easier for me and my remaining permies.

                Announcing it with a 3 week hard stop is .... difficult, for everyone.

                1. cambsukguy

                  Re: Cuts for Christmas

                  Contractors should expect to be out of contract with short notice for longish periods because the nature of the system dictates it.

                  I have both walked off contracts with only notice at the very start (say 5 days, usually reduced to zero by mutual agreement) and later when things have changed unacceptably (such as a new Manager forcing Friday work when Mon-Thu was the original agreement).

                  Contractors should able to (easily) survive long periods without work because of the risk and the ability it gives to not take crap - I because a contractor only because of this latter need.

                  I suppose it is just possible to be in a situation of earning contractor income but still having so many legitimate drains on their income that are valid such that no 'buffer' exists. However, I suspect that that is rare to say the least and that 'broke' contractors (in my experience) nearly always drive expensive cars, take expensive holidays and have large mortgages.

                  It is hard to have sympathy for people who earn so much money - I have only even worked about 50% of the time since I was fifty and still don't want for money (yes, I paid for my own house, had two kids, got fleeced in a divorce and have a girlfriend without serious means of her own). I am not even a well paid contractor according to some of the numbers I see here, my rates always seems to be at the lower end of the numbers and nothing like the £600/day I see for working for banks or even more for working in the 'City' - I wouldn't know how to deal with that much money - I would have just stopped working even earlier I suppose.

          2. Nancy9

            Is that because of dictat from above that there are to be no contractors?

            From what I've seen so far, most companies in the UK are taking advantage of the new IR35 squeeze to also lower the daily rates. I've been a contractor since 1998 and I'm not biting.

            Why? 1) There is plenty of remote work - in Europe and 2) if you have 2 passports (such as myself) - there is plenty of work in the U.S. as well. 3) UK companies can always hire contractors through an agency that's a foreign company if they want to retain talent.

        4. Annihilator

          "they've already committed £1.5 Trillion pounds"

          I mean, that's demonstrably not true, but whatever keeps you happy.

          https://www.theguardian.com/politics/2019/nov/10/sajid-javid-five-year-labour-spend-plan-near-12tn

          1. LucreLout Silver badge

            I mean, that's demonstrably not true, but whatever keeps you happy.

            https://www.theguardian.com/politics/2019/nov/10/sajid-javid-five-year-labour-spend-plan-near-12tn

            You're using the wrong costings, which is why you've got this completely backwards.

            That was before he pledges, for instance, £100bn to nationalize OpenReach on top of existing spending. As the stock market has drifted higher over the month, due to expectations of a Tory majority, the cost of these pledges has risen substantially.

            Labour are making commitments to spend billions more on a daily basis with literally no clue as to where the money might come from to pay for it all. It's no good you coming here with links that are days old when they're comitting £100Bn before breakfast on a daily basis.

            1. Wicked Witch

              > As the stock market has drifted higher over the month, due to expectations of a Tory majority, the cost of these pledges has risen substantially.

              Surely that means that if Labour win the stock market will fall and the cost will go back down?

              1. LucreLout Silver badge

                Surely that means that if Labour win the stock market will fall and the cost will go back down?

                Nope, because the asset is valued on nationalisation day at market rate. A labour win would for the first time in history, produce a stock market bounce in utilities, because the betting (and in this instance it would be betting) would be that the EU courts would force them to compensate at prevailing market rate at a minimum.

                The rest of the market would crash because of their plans to steal progessively more of the shares and dividends from them for any listed company.

        5. Anonymous Coward
          Anonymous Coward

          Why not just make a proper determination of their IR35 status and keep them then, and structure their terms as outside IR35? Unless you are saying they were inside IR35 all along...

          1. LucreLout Silver badge

            Why not just make a proper determination of their IR35 status and keep them then, and structure their terms as outside IR35? Unless you are saying they were inside IR35 all along...

            I'm saying its a global megabank and senior though I am, I'm structurally far too junior to have any say in such matters.

            The fact is the law on these changes won't settle for a couple of years while cases make their way through the courts setting precedents, and in the mean time the bank continues to accrue exposure to back taxes. That may be a small risk, but all risks come with prices attached and RO's to manage them. Ours has decided it's less of a risk and cost to the business to do away with all our contractors across the board than the cost of capital to hold cover in reserve. That I may disagree with that is no more important to the people making that decision than if you disagree with it as an outsider.

            It's a harsh reality for me & my guys, but it is what it is.

            1. Anonymous Coward
              Anonymous Coward

              Ah I see where you're coming from. I am at the contractor end of a global megabank fiasco, where they have also said PAYE for everyone. Alas I am all the other contractors here are out the door in a few weeks. Shame as there are quite a number of projects that simply won't get done, some will have 0 resourcing without contractors as it stands let alone be under resourced.

              1. TolerantViews

                Depends how long those contractors can live without a salary/dividend versus the priority of the banks projects. Some people need to work to survive although I imagine there is a fair amount of deferred dividends needed to be drawn down first. I imagine the Indian outsourcers will be winners.

                1. MrReynolds2U

                  Then the banks are fucked... time to switch bank and stock investments maybe.

                  I've never had anything approaching what I consider a reasonable standard of work from Indian outsourced companies.

            2. LucreLout Silver badge

              It's a harsh reality for me & my guys, but it is what it is.

              It turns out its not what it was...... It's cost me most of my professional capital, and I've called in a fair few favors, but today I've managed to get extensions for my crew for a final 6 months.

              While I agree with the poster above who says its the nature of contracting, I like to at least try to treat people who work for me the way I'd like to be treated by the people I work for, whatever it says on your payslip.

              This means a likely gradual rundown of my contractors - they know when the end will now be - and an orderly and manageable transition for my permies as I'll be getting replacements as contractors leave.

              Best wishes for a similar good result to all the displaced folk out there.

          2. MikeDuncombe

            Few contractors are outside IR35

            In my (considerable) experience very few (if any) contractors actually fall outside IR35 - they work to all intents and purposes as if they were a permanent employee, reporting to a manager and doing what they are asked in the way they are asked.

      2. Anonymous Coward
        Anonymous Coward

        The company is not getting rid of them, it's offering them a 20% pay cut with no employment benefits to compensate.

        If the company can take them on as PAYE, doesn't that just prove that they shouldn't have been employing them as contractors in the first place? Sounds like RBS were doing exactly what HMRC created IR35 to stop.

        1. Jellied Eel Silver badge

          If the company can take them on as PAYE, doesn't that just prove that they shouldn't have been employing them as contractors in the first place? Sounds like RBS were doing exactly what HMRC created IR35 to stop.

          Nope. Think of it more like contractors being forced to outsource payroll to their clients, without any of the additional benefits an FTE might expect. Or be legally entitled to. Rest is kind of contractual semantics, ie a contractor hired on a 6 month project previously charged £x/hr & handled PAYE obligations via their own Ltd/LLP. Now, they'll be 'employees' of the client for 6 months, with less rights & benefits than any FTE cow-orkers.

          But that's all part of the fun, and where employment rights will likely get challenged, meaning more costs and headaches for both employer, and contractor. It's a clusterfunk.

          1. John Brown (no body) Silver badge

            "Now, they'll be 'employees' of the client for 6 months, with less rights & benefits than any FTE cow-orkers."

            That's the bit I don't get. If they are taken on as new hire employees, why don't they get the same conditions as any other new hire employee? eg holiday pay, sick pay, NI payments etc. ie the legal minimum requirements for any employee. If this is some new legal loophole, then why can't "ex-contractors" negotiate an employment contract more favourable to themselves? After all, these are the people with in-demand skills and so should have some power over the employer, just as they had as contractors, ie they negotiate the rates for the job.

            (No, I've never contracted or had dealings with contractors so have no idea how it currently works)

            1. Graham Dawson Silver badge

              The point of contracting is that you're not tied to a single employer and can end the contract whenever you like, without losing accrued benefits (because you're employed by your own company, not the client). Permies start on probation and have to accrue holiday and other benefits over the first year of employment. Imagine having to start that over from nothing every six months.

            2. regprentice

              I used to be a permanent member of staff at RBS, now I contract elsewhere. A contractor will earn broadly twice as much as a permanent member of staff. I was taking home £55k when others in the same job as me contracting were being paid £400 a day outside ir35.

              So a contractor doesn't get some emoyment rights, but they do get paid substantially more money than a 'permie' even if they end up Inside ir35. Some people look on it as employment rights being optional, they'd rather have £40-50k in extra cash a year than paid holidays, sick leave or redundancy rights. In fact I worked for 10 years alongside contractors earning £400-500 a day (used to be 500 then they cut rates by 10% twice) and after ten years I walked out with around £30k in redundancy money, when one contracting BA I know on £500 a day probably took home around £500k more than me during that period. Like many, this specific contractor managed more than 10 years continuous contract extensions in the same role at RBS.

              To answer your question these contractors could negotiate onto a permanent contract with holiday pay etc. But they would need to take a 20% pay cut to pay the PAYE rate of tax, another 50% or so to take them down to the same pay level as a normal permanent member of staff in the same job, and then there is a fair chance the Inland revenue would see their move from contractor to permie as an admission they should always have been permanent and go after them for the extra tax on the last 10 years wages (in the example of my contracting colleague above)

              1. Anonymous Coward
                Anonymous Coward

                You didn't mention your pension, your bonus, or your staff benefits there. Your holiday pay, your sick pay, or your training.

                It's weird how many permies think that contractors get 'paid' their day rate and aren't subject to any taxes or expenses.

                1. Anonymous Coward
                  Anonymous Coward

                  I get about £40k a year in my role. My contracting better half was 'paid' around £60k a year. But when you actually took into account my pension, holidays, sick leave and other entitlements I was probably 'paid' a bit more than she was.

                  I'm sure we worked out at one point I'd need to 'earn' about 35-50% more as a contractor to keep pace witmy permie pay.

                2. regprentice

                  Not much in the way of staff benefits at rbs.

                  They dont pay a pension contribution as such. When they give you the job they quote a salary of, say, £55k a year. Then you find out that they really mean a base salary of £42k with an extra 15% to cover your 'value' and another 15% which represents your gross pension contribution. They don't make any employers contribution to your pension whatsoever. You can let them pay the 15% into your pension, or just take it as cash if you want. However when they do something important like calculate your redundancy they use the lower salary figure as that's in their favour.

                  My most recent bonus was the princely sum of £1000. I've had 3 bonuses in 10 years despite exceeding the median grade consistently. Incidentally my salary was frozen for 7 years after 2008 then my recent pay rises were 0.25%, 0.5% and finally 1% last year.

                  I'm not sure what staff training you are referring to. Aside from the determined to lead programme, which is basically an handbook of "management behaviours" they want to enforce, there is a negligible training. Around 7 years ago they stopped paying for external courses and shifted their focus to 'on the job' learning. Which basically means learning from other people In your team by hassling them, that's learning to do your Job, not learning a transferable externally recognised skill you could take somewhere else. They did lay on a cv writing course when I was made redundant.

                  Yes I was paid for holidays. Ironically the thing that attracted me to contracting was being able to take more and longer holidays.

                  There are no staff benefits. No staff mortgages, even the free staff current account was withdrawn around 3 years ago. A benefit worth the princely sum of £9.99 a month.

                  I did say at the top of my comment I now contract elsewhere. And I didn't suggest contractors don't pay tax. Like most people I quote my gross salary if I discuss it, seems fair to me to use the gross day rate as a comparison.

                  1. Anonymous Coward
                    Anonymous Coward

                    Employer pension contributions are a statutory requirement.

                  2. itzumee

                    "Not much in the way of staff benefits at rbs.

                    They dont pay a pension contribution as such. When they give you the job they quote a salary of, say, £55k a year. Then you find out that they really mean a base salary of £42k with an extra 15% to cover your 'value' and another 15% which represents your gross pension contribution. They don't make any employers contribution to your pension whatsoever. You can let them pay the 15% into your pension, or just take it as cash if you want. However when they do something important like calculate your redundancy they use the lower salary figure as that's in their favour."

                    And if you've worked for them for say 25 years, then switch to a four day week after, say, having a child, then are made redundant a year later, the payoff if calculated on the basis of the 4 day week, with no account being taken of working full-time for 25 years.

            3. Jellied Eel Silver badge

              That's the bit I don't get. If they are taken on as new hire employees, why don't they get the same conditions as any other new hire employee? eg holiday pay, sick pay, NI payments etc. ie the legal minimum requirements for any employee. If this is some new legal loophole, then why can't "ex-contractors" negotiate an employment contract more favourable to themselves?

              Large employers may think they can call the shots. Like you say though, if they're direct employees, then they should be entitled to the same employment benefits given to other staff. If they're expected (or forced) to contract via umbrella outfits, then they effectively become employees of the umbrella, and entitled to all the usual employment benefits.. Either after 12 weeks as an agency worker, or immediately.

              That's a bit of a change in relationship between an umbrella-as-a-service doing your payroll & timesheets, and not sure how those agencies will be looking forward to new employees, especially if their clients are also expecting a rates cut.

              Where it's likely to cause the biggest challenges are with contractors with project experience and mobility. IT tends to be project based, with varying durations, so bring in specialists to make that happen, then the clients don't necessarily need those resources on a permanent basis & contractors have been a good fit. Contractors have charged a premium because it's potentially riskier, along with additional expenses and hassles from running your own business. So dealing with corporation tax, employer & employee pay, pensions, holiday costs, medical insurance, DOI & liability policies etc etc.

              Too often though there's a perception that day or hourly rates are all gravy, which is untrue unless you want the rubber glove treatment from HMRC. Sure, there are some advantages. You can create your own pension fund (with some headaches), but you won't get employer pension contributions from anyone but your own client... Given tax changes, that can be less advantageous, but still better than being enrolled in other company's pension plans when you know the employment's likely short-term, especially as fees are front-loaded, and pension companies aren't very generous with policy transfers.

              1. Jellied Eel Silver badge

                ..but you won't get employer pension contributions from anyone but your own client...

                Oops.. That should have been 'from your own company', ie from what your company invoices/revenues. To me, that was one of the biggest benefits of running my own business. My work is project based, and when I was an FTE, ended up only working for a couple of years before changing jobs. Which meant collecting stranded pensions that new employers wouldn't contribute towards. To me, that was a significant benefit, and also a big problem with the pension industry, along with the downside of government policy. So tax/pension rule changes and NHS consultants as an example.

        2. Anonymous Coward
          Anonymous Coward

          Except that RBS aren't taking anyone on as PAYE, you still have to go through a separate PAYS company (such as Lorien) or an Umbrella.

          1. Jellied Eel Silver badge

            Except that RBS aren't taking anyone on as PAYE, you still have to go through a separate PAYS company (such as Lorien) or an Umbrella.

            But any decent ITprofessional knows that working for Umbrella Corp only ends in tears. You may get a nice red & white brolly, but next thing you know, the screaming's started.

            Alternatively, see above :p...

        3. DontFeedTheTrolls Silver badge
          Boffin

          "If the company can take them on as PAYE, doesn't that just prove that they shouldn't have been employing them as contractors in the first place? Sounds like RBS were doing exactly what HMRC created IR35 to stop."

          There are a massive number of projects rolling through all the banks and financial services in general. Each contractor may only be engaged for a few months for a specific project, with a high churn rate, so while the overall number of contractors appears high, the reality is that they are not "Friday to Monday" scenario "disguised employees" that HMRC created IR35 to stop. I've not come across a genuinely disguised employee contractor since about 2004, it simply wasn't worth the risk.

          1. Dabooka Silver badge

            Is this just for the IT sector?

            I only ask as away from IT, I know several 'paid consultant' type functions that should be on the payroll but are continuously paid as a contractor. I assume it should stop those roles continuing too?

            In which case it most definitely goes on.

            1. Jellied Eel Silver badge

              Re: Is this just for the IT sector?

              I only ask as away from IT, I know several 'paid consultant' type functions that should be on the payroll but are continuously paid as a contractor. I assume it should stop those roles continuing too?

              Yep, and they're in HMRC's sights as well, as we've seen with various entertainment cases.. One rule of thumb is the longer you're in/on one job, the higher the risk you'll be found inside IR35, especially if there are FTE's working alongside.

        4. SimonC

          Absolutely not. I've been offered perm at my current gig.

          I'm working on a specific IT project with specific deliverables, with no supervision or guidance as to how I do it. After this project, there is a phase 2, and after that, new work is coming in...

          I declined the perm role. I'll finish my current assignment, and then consider taking the phase 2 assignment, and then probably move on.

          I don't have any HR faff, performance meetings, or people telling me how to do what I do. The only thing I get told is what the project is, and then we have a project manager tracking timelines and who is doing what and if anything is being held up by anyone else.

          I work on all aspects of the project, and I liase myself with 3rd parties directly. I work 3-5 days a week of my choosing and choose my own hours to work which don't line up with anyone else.

        5. MikeDuncombe

          Yes...

          ...for most contractors (and I am one) a PSC and a contracting life are just a way of getting paid more and not having to commit to the dubious pleasure of being a permanent employee. I have always found that the extra pay compensates for the gaps in employment, allowing yourself holidays and putting money away for a pension. There are some expenses you can claim (if the contract allows them), and some extra expenditure (employer's liability insurance and professional indemnity) and you have to have an accountant.

          The main benefit you get from permanent employment that you can't get if you're a contractor with a PSC is permanent health insurance - so if you fall long term ill you have a problem that most permies don't have - but then in that situation you've got big problems anyway.

      3. Imhotep

        Are they actually paying 20% less, or are there additional deductions that decrease the amount they see by 20%?

        A 20% reduction is a life changer. I hope things work out for them.

        1. Ochib Silver badge

          There are deductions made be the umbrella company, or do you think that they work for free.

          1. Imhotep

            I was thinking of additional governmental deductions. For instance, it sounds as if employees are paying in to government programs that contractors aren't?

            But your example brings up another question: Are these contractors being hired through consulting firms? My experience in the US was that I was treated as an employee of that firm. Is that not the case in the UK?

      4. NeilPost Bronze badge

        “The company is not getting rid of them, it's offering them a 20% pay cut with no employment benefits to compensate”

        ‘20% rate cut’ to someone who probably gets paid up to 50% more than the equivalent permie in the next cubicle.

        Exactly why IR35 is on the money.

        1. silus

          I don't think you quite grasp the value of sick pay, holiday pay, training, pension, and all the other bits that make up the permies package . Yes the contractor takes home more, but there isn't that much disparity between the overall value of the package the permie has. Now stop whinging about it.

          1. Anonymous Coward
            Anonymous Coward

            On the other hand if there's training a permie wants that the employer doesn't want to pay for they can pay full whack for it out of their post tax income. As a contractor I can reclaim the VAT on that training course and write it off against my tax bill.

            Being based from home so that every mile you drive to work each day is expensed through the company. PCs, laptops, tablets etc are all easy to pay for with pre-tax income because they're trivial to show business use for.

            It's not just that we get paid more than a permie, it's that we can deduct so much stuff from our tax bill that they can't, you can end up earning more per hour and paying way less tax.

          2. Persona Bronze badge

            Yep all those things even it up. The contractor gets ahead again by avoiding tax using creative measures such as paying themselves a pittance, paying their wife for doing nothing other than being a company director in name only, and both raking in the low tax rate dividends.

      5. Chris Hills
        IT Angle

        They are getting rid of them, then offering them a job on new terms. If they don't like it, go get a contract elsewhere.

      6. Stevie Silver badge

        it's offering them a 20% pay

        The temptation to throw back comments made to me by commentards when I've had the nerve to complain about my job in these pages is overpowering so I won't restrain myself:

        "If you don't like the terms of employment, work somewhere else".

      7. Caffeinated Sponge

        My understanding is that it’s only a 20% pay cut if you viewed paying taxes as optional and something to be avoided.

        I’m having a lot of trouble getting worked up about this one tbph although I agree there are far more grievous avoided tax bills that could do with collecting.

    2. Steve Button

      I didn't actually see that bit in the article giving details of who is suing who, and for what? just that contractors are seriously pissed off.

      And if you accept a permy job, doing the same thing minus a 20% haircut, then you could be in for a HEFTY tax bill for your previous roles at the same place, so you'd be a real fool to take that route.

    3. Anonymous Coward
      Anonymous Coward

      Typical El Reg spin on the situation.

      Nobody is considering legal action at this point. There is a lack of clarity on the future and all parties are discussing and removing ambiguity as more information is released. Legal advice is required to support both sides given HMRCs complete lack of clarity in IR35.

      1. Doctor Syntax Silver badge

        "HMRCs complete lack of clarity in IR35"

        HMRC has always been clear about IR35: whatever the circumstances you're caught. Right up to the point where the tribunal says you aren't.

      2. AMBxx Silver badge

        El Reg really doesn't get tax either. Nobody is taking a 20% pay cut. Yes, you lose money, but it's not that good any more.

        1. Dabooka Silver badge

          I agree

          For example, I'm fairly sure the 0.5% apprenticeship levy deduction isn't correct.

        2. Spike of Bayswater

          Speaking personally, I am currently enduring deductions at 50-60% of my day rate. This includes Employee and employer NICs, pension* deduction (simply a form of tax), umbrella company fee (£75 or a 5% deduction in day rate), and agency fees. The HR has outsourced the hiring to an agency which sources staff through another agency both of which get paid out of my day rate. I have to pay for a completely unecessary DBS check at a fee which includes a 50% "uplift". I now have five of these all current and for different jobs.

          I have worked for these guys for 3 months. They have offered me a permanent job at a rate appropriate for someone who is newly qualified or unqualified and which does not pay my mortgage (which is in its last 8 years so it's fairly modest). Curiously, they can't get anyone to apply who can actually do the job. Sure I'll get some of the tax over-deduction back in about 15 months time but I will never get the pension deduction, agency fees, agency costs or payroll taxes back.

          Pretending I can get a suitable permanent job is cloud cuckoo land. I started contracting because I was made "redundant" and asked to reapply for job but through a limited company. So I sued, got a pay-off and have been contracting ever since.

          I was overseas when Brown was chancellor but it was George Osbourne who chose to change the IR35 rules with the idea that salary payments should be the same for emplyees and contractors with no recognition of the benefits.Hammond then tried to do the same for chippies, sparkies, etc in breach of an election promise and was forced to rescind. So they will be next in line.

          The rule changes are simply a means of hiking the tax rate on people with no political clout and who will continuing to vote Conservative blindly with the sort of arguments seen in this comment string. Not that Labour are likely to be any better. If you wish to permit large corporates to export their profits to Dublin, Luxembourg or the Cayman Islands then you have to bleed someone dry. That would be you and me, mate.

          Rant over. I am now being offered work overseas at 5 times the net. Cheerio Blighty.

          *(new pension for every job with a theoretical right to change which is a complete pain in the arse to achieve and all for a pensin I do not want and do not need and will nver receive any meaningful return particularly compared to my own pension plan which I set up years ago) ) holiday pay

          1. Dabooka Silver badge

            That sounds about right (which is wrong)

            It's the bloody 'extras' you end up having to pay for, I get that. DBS checks are rarely, ever, accepted outside the organisation they were requested from, but to charge an admin / processing fee (via an agency) is a disgrace, as is being employed via a sub-contacted agency. All taking a cut.

            We've recently started going for limited hours / zero hour in some cases to escape the huge top slice the agencies take and it's been a revelation. Now we can afford to pay the going rate!

            RE: The apprenticeship levy, I guess you don't pay that as you're not drawing down £3m/yr?!

    4. eamonn_gaffey

      Contractors won't sue RBS or anyone else over this, because they would lose. All that money on expensive QC's (also contractors) would be wasted.

      Hirers of contractors are free to pay whatever rate they want, so if contractors (who claim to run their own businesses) don't like it, then look elsewhere.

      All this complaining is starting to sound like permanent staff who actually are covered by employment laws - but contractors aren't, because they are not permanent. You can't have it both ways.

      I suspect most of the complaining is coming from "contractors" who are de facto permanent staff, but have arranged recompense to avoid paying their fair share of tax.

  3. Steve Davies 3 Silver badge
    Coat

    Just the start

    of an exodus.

    Several contractor friends of mine (I was one once) are heading for the exit and moving abroad.

    One finishes his current contract at the end of the month. His house has been sold and is off to Canada.

    They won't be the last and there are politicians talking about the skills shortage (sic). Yet the HMRC are being totally intransigent and effectively making it worse for many companies and government departments.

    Take footgun and shoot themselves in the foot...

    1. Locky Silver badge

      Re: Just the start

      Is this the super Canada-plus deal I keep hearing about?

    2. Commswonk Silver badge
      Thumb Up

      Re: Just the start

      His house has been sold and is off to Canada.

      Gives a whole new meaning to the words "house move".

      1. tim 13

        Re: Just the start

        https://i.pinimg.com/originals/6a/bb/a0/6abba053aaf4833fc87bbff6bc46003a.jpg

    3. Doctor Syntax Silver badge

      Re: Just the start

      "Yet the HMRC are being totally intransigent"

      And equally intransigent about pensions causing the NHS all sorts of problems.

      1. Richard Laval

        Re: Just the start

        HMRC aren't being intransigent about the annual pension allowance causing the NHS problems. They are merely enforcing the law with regards to it.

        It's the Treasury and the government minister's who thought it was a terrific wheeze who have been both in denial and intransigent.

    4. Anonymous Coward
      Anonymous Coward

      Re: Just the start

      Several contractor friends of mine (I was one once) are heading for the exit and moving abroad.

      I've worked as a contractor in the past although for a long time I've been a regular salaried employee....I can appreciate the benefits of both.

      Upping sticks and moving to a foreign country seems bit of an extreme move to avoid a change in working regime.

      What's the fear of commitment? What are they really running from?

      1. Anonymous Coward
        Anonymous Coward

        Re: Just the start

        Or just offered a better deal?

        1. Anonymous Coward
          Anonymous Coward

          Re: Just the start

          Or just offered a better deal?

          Personally I'd struggle to conceive a deal which would convince me to travel thousands of miles to take up a job in a new country, leaving all of my friends and family behind in the UK, taking my kids out of school and transplanting them into another education system - possibly in a country where the first language is not their own......versus staying put and working under a different set of practices.

          1. zebm

            Re: Just the start

            I went permanent so that I could work in Australia for a few months last year, back to contracting now

          2. John Brown (no body) Silver badge

            Re: Just the start

            Yes, this sounds like it's been a long term "wish" and it just needed something to be that final nudge. It's not a decision to take lightly nor in haste because there are always hoops to jump in emigrating to another country.

          3. Gordan

            Re: Just the start

            You would be amazed just how much higher the salaries in North America are compared to Europe.

            1. Imhotep

              Re: Just the start

              And the standard of living and the housing.

          4. Imhotep

            Re: Just the start

            I agree, I can't imagine what kind of deal would make me move. And yet, where would the US be without its constant stream of immigrants? They drive this economy to a large extent: un oarticular, they seem to be the ones starting the small businesses.

          5. EveryTime

            Re: Just the start

            > Personally I'd struggle to conceive a deal which would convince me to travel thousands of miles to take up a job...

            Then you don't have the temperament to be a successful consultant.

            A classmate of mine was a very successful (in income terms) consultant. He wouldn't hesitate to leave a gig when there was a better offer. Or a girlfriend, in the middle of a date. One in particular was a weekend New Years Eve party, in different city, where he left an hour before midnight with someone he had just met, and returned for breakfast the next day. I was impressed with his commitment to the pure consultant lifestyle. If you can't do that, and have the original girlfriend take you back, you don't have what it takes.

            1. Mike 137 Bronze badge

              Re: Just the start

              What a thoroughly untrustworthy contractor! Such people should carry a health warning, as they both harm the businesses that engage them and bring the profession into disrepute. The fundamental ethic of real consulting is integrity, as every professional body states in its membership criteria. Pity some folks think they can ignore that.

              1. Imhotep

                Re: Just the start

                I've been in the unfortunate position of being an internal resource on a large project where contractors started jumping ship shortly before the project was completed. It just reinforced my philosophy for the projects I managed: if we were going to have to support it, we were going to build it.

              2. Anonymous Coward
                Anonymous Coward

                Re: Just the start

                What a thoroughly untrustworthy contractor!

                You say "untrustworthy" but I must admit that the first word that sprang to mind for me was "psychopathic"

          6. Kernel Silver badge

            Re: Just the start

            Personally I'd struggle to conceive a deal which would convince me to travel thousands of miles to take up a job in a new country, leaving all of my friends and family behind in the UK, taking my kids out of school and transplanting them into another education system - possibly in a country where the first language is not their own......versus staying put and working under a different set of practices.

            I consider myself fortunate that my grandparents took a more forward-looking view and came to New Zealand - at least I'm not another unemployed Durham coal miner now.

            1. Spike of Bayswater

              Re: Just the start

              If you were in the UK and not NZ then you are exactly the sort of person Boris George, Tony, Gordon and their cronies want here so that they can impose tax hikes significant pay cuts and living standard cuts whilst retaining a work force. It's not that hard to change countries. I have done it many times. But most people (including me) only move if their current situation changes for the worse. Obviously you think we should lie back and think of England.

              1. Anonymous Coward
                Anonymous Coward

                Re: Just the start

                So when Boris lies to you, you just lie back?

          7. hoofie

            Re: Just the start

            Imagine if you moved from London to Newcastle. New job, new house, new schools etc etc.

            Change that from London to Australia and it's the same really, just a question of distance.

            Except that the weather is a damn sight better.

            1. Anonymous Coward
              Anonymous Coward

              Re: Just the start

              Not entirely the same is it. There's a big difference between a 3 hour train ride and a day or so on a plane to come back and visit relatives.

              Maybe I'm unusual on here, but I actually value my family and friends and like to spend time with them - especially aging relatives who are increasingly spending more time in hospitals as they get older.

              To me there is be a big difference between (a) accepting that tax laws change and that it's all part of the contracting/hired gun game that I've chosen to play and adapting to it even if it meant a relatively small change in my circumstances in the overall scheme of things, and (b) telling all of my family and friends that they won't be seeing very much of me from now on because i'm going to f*** off to the other side of the world just because I prefer their taxation practices for freelance workers....and ask my octogenarian parents not to have any more cancer relapses or heart attacks until I return for a visit at Christmas next year, as I won't be around for them until then.

      2. Mike 137 Bronze badge

        Re: Just the start

        The fear is not of commitment, particularly for the specialist subject matter expert. The fear is of finishing up getting less benefits from your contract than a conventional employee but still under instruction from a boss that brought you in as an expert because they didn't understand the subject, or from an agency that understands even less.

        I can't see why this isn't crystal clear to all who discuss the matter. It's the fundamental difference between a contract of service (employment) and a contract for services (B2B consulting), and all IR35 is doing is muddying the waters and killing off the independent consulting option, which is essential for business in many circumstances. Soon, the only consultants left will be employees of the big four who by definition fall outside IR35. So they'll grab the entire market while continuing to mess up repeatedly.

      3. Spike of Bayswater

        Re: Just the start

        They are just getting on their bikes as advised many years ago by that tosspot Norman Tebbit.

        These days one has to go further than London to earn a living wage.

    5. OrientalHero
      Joke

      Re: Just the start

      Take footgun and shoot themselves in the foot...

      Wouldn't this be the purpose of a footgun, so that would be things working as they should....

      1. Anonymous Coward
        Anonymous Coward

        Re: Just the start

        Given that a handgun is a firearm intended to be operated by the hand rather than the hand being a target, then I would infer that a footgun is a firearm with intended to be operated with the foot. Probably quite a neat trick if you can do it, but how you could then use one to shoot yourself in the foot....presumably some sort of curved barrel?

        1. DavCrav Silver badge

          Re: Just the start

          "then I would infer that a footgun is a firearm with intended to be operated with the foot."

          And an elephant gun? Could be interesting.

        2. Anonymous Coward
          Anonymous Coward

          Re: Just the start

          well a shotgun fires shots, and a pellet gun fires pellets, and a BB gun fires BBs and an anti-tank gun fires anti-tanks, (which annihilate tanks when they touch,) then surely a footgun fires feet?

          1. Graham Dawson Silver badge

            Re: Just the start

            no, it fires foots.

            1. Anonymous Coward
              Anonymous Coward

              Re: Just the start

              :D :D

    6. Aussie Doc

      Re: Just the start

      "His house has been sold and is off to Canada."

      His house should like it - they're nice folks there in Canada.

    7. Nancy9

      Exodus

      Yes. Plenty of who I know took contract work in Dubai, Singapore, Luxembourg. As an EU citizen, I am also offered contracts in Brussels, Amsterdam, Paris. I also see a ton of remote work.

  4. Anonymous Coward
    Anonymous Coward

    HMRC is badass, HMRC don't give a sh*t

    Didn't IR35 cause an exodus of contractors from the HMRC meaning that many of its own projects went TITSUP?

    If it doesn't give a shit about the affect on its own business I doubt very much it'll care about the effect on anyone else.

    Also it's still easier than trying to get tax out of Amazon, Google or Starbucks.

    1. Symon Silver badge
      Pint

      Re: HMRC is badass, HMRC don't give a sh*t

      They don't care about their 'customers', that's for sure. Twenty years ago, they sold all their buildings to a company in a tax haven and then leased them back.

      http://news.bbc.co.uk/1/hi/business/2263208.stm

      "Further details of the contract cannot be uncovered from Mapeley Steps' accounts, because the firm is not UK registered and neither files financial reports nor does it pay tax in the UK. The accounts of Mapeley Limited, which manages the estate, show it made a loss in 2001, and therefore also paid no tax."

      Trebles all round!

      1. tip pc Bronze badge

        Re: HMRC is badass, HMRC don't give a sh*t

        20 years ago most businesses where doing the same and being praised for it. Most large retail chains did the same, the stock market and pundits considered it a smart move, leasing is a cost and results in less tax paid.

    2. Dabooka Silver badge
      Joke

      Re: HMRC is badass, HMRC don't give a sh*t

      I believe projects across the government have gone TISUP for many a year, sometimes because of the contractors.

      Not sure there is much call for correlation = causation here.

    3. A.P. Veening Silver badge

      Re: HMRC is badass, HMRC don't give a sh*t

      Didn't IR35 cause an exodus of contractors from the HMRC meaning that many of its own projects went TITSUP?

      An exodus threatened, so HMRC declared all contractors working on contract on HMRC projects exempt from IR35. This in and of itself should already have been reason enough to abolish IR35, but some idiotic, bureaucratic mangler (with excuses for the redundant tautology) decided otherwise.

  5. alain williams Silver badge

    FUD is at play

    The HMRC IR35 CEST tool is well known to give bad answers. I think that this is deliberate as the result is that companies will not use it for fear of being bitten by a court case some time down the line.

    The result is that companies will play exceedingly safe - thus the blanket 'no contractors' positions that many are adopting.

    I am upset that my government is playing silly buggers and trying to pull a fast one - but looking at what their political masters have been up to for the last 3 years I do understand where they get it from.

  6. Anonymous Coward
    Anonymous Coward

    So RBS are effectively employing people without employment rights, and the contractors have to pay all taxes too. That's a great wheeze for the large corporations in cutting their costs - have off-payroll employees, and not have to pay pension, employers NI, etc.

    I bet HMRC didn't see that 'law of unintended consequences'

    1. Anonymous Coward
      Anonymous Coward

      I bet HMRC didn't see that 'law of unintended consequences'

      On the contrary, isn't it exactly what IR35 was intended to stop? Looks like it's working.

      1. Doctor Syntax Silver badge

        It's exactly what it was said to be intended to stop despite having the exact opposite effect.

      2. Anonymous Coward
        Anonymous Coward

        I was thinking more along the lines that why wouldn't large corporate companies force all employees into off-payroll umbrella companies, thereby removing a whole pile of employment rights and taxes. Surely that's going to be a huge loss of revenue...

        1. Anonymous Coward
          Anonymous Coward

          "why wouldn't large corporate companies force all employees into off-payroll umbrella companies, thereby removing a whole pile of employment rights and taxes. "

          The assumption is many contracting roles pay well - take a look at logistics as an example of where large companies (ie supermarkets) outsourced warehouses and logistics to third parties who promptly provided staff with new contract roles (yes I'm glossing over some steps but the outcome remains the same).

          HMRCs policies have targeted a very small percentage of contractors with the initial IR35 rules and made a dog's breakfast of it while trying to demonstrate it wasn't a mistake by repeatedly making it worse.

    2. Dr. Mouse Silver badge

      One of the points they'll need to look at is the "assignment rate".

      Many have said that this is legally questionable due to employment law: the company cannot deduct employers NI from an employee's salary. If the contractor moves onto PAYE and is quoted this assignment rate, the (now) employer is breaking the law.

    3. Warm Braw Silver badge

      RBS are effectively employing people without employment rights

      I don't think they can actually do that. However, you have very few rights in your first two years of employment, so don't expect to be there very long.

  7. Anonymous Coward
    Anonymous Coward

    Life goes on

    This was always going to happen in the private sector.. so contractors just need to man up and pay the same tax as everyone else. Its the contractors' fault that IR35 has been implemented as for years they have been paying themselves the most basic salary possible then dividends; if they paid themselves the day rate in full then their limited company would be required to deduct employer NIC etc..

    still get double what a permie makes !

    1. RancidRodent

      Life goes on.

      "contractors just need to man up and pay the same tax as everyone else."

      Typical green-eyed permie nonsense.

      Contractors typically raise twice as much revenue for HMRC as a permie doing the same role. A £45K PA permie will be paying about £20K tax plus another 5K from his employer.

      A contractor doing the same role will charge about £100K, will raise £20K in VAT, will pay about £20K in corporation tax, will pay (admittedly small amounts of IC and NI) but will pay another £20K+ tax on his dividends - as well as having to pay an accountant (required by law) more money indirectly to HMRC.

      So from the contractor, HMRC will be collecting close to £50K tax - more than the permie earns gross! The hiring company gets a no-strings worker without personnel overheads and future pension liabilities. The contractor gets more take-home pay - EVERYONE WINS - why are the so-called Tories pursuing Labour's spiteful green-eyed IR35 tax? This will destroy what's left of UK IT jobs and put many (usually Tory) contractors on the dole.

      1. Cederic Silver badge

        Re: Life goes on.

        Paying more tax than someone earns isn't terribly admirable when you also take home more cash than the permie earns gross.

        Incidentally if you're paying £50k tax on earnings of £100k then you need a new accountant.

        1. RancidRodent

          Re: Life goes on.

          Who said pay £50K tax? I said "raise" - roughly £30K tax (probably about 35) + £20K VAT on a charge rate of £100K + VAT.

          1. Cederic Silver badge

            Re: Life goes on.

            I'm sorry, I misinterpreted. I counted £20k VAT + £20k Corporation Tax + £20k tax on dividends + tax on accountant + NI + income tax and it came to around the £50k you quoted plus VAT which I thought you'd omitted.

            I'll go and buy a new calculator.

            1. Hans Neeson-Bumpsadese Silver badge

              Re: Life goes on.

              I'll go and buy a new calculator.

              Remember that tax could be deductable on that, so get a receipt.

          2. PerlyKing Silver badge
            Facepalm

            Re: Life goes on.

            I don't think you know how VAT works.

            VAT is a tax on the end user, only raising revenue on retail goods and services. A VAT-registered contractor charges VAT to the client and pays it to HMRC (roughly, there is also the Flat Rate Scheme), from whom it is then reclaimed by the VAT-registered client. So in this case VAT raises no actual revenue for HMRC.

            1. Anonymous Coward
              Anonymous Coward

              Re: Life goes on.

              Except that Financial Services companies (i.e. RBS) don't charge VAT on the majority of their services. That means that they can't claim back all the VAT they spend on contractors services.

              1. Anonymous Coward
                Anonymous Coward

                Re: Life goes on.

                It doesn't matter at all that they don't charge VAT on their services. As long as they are VAT registered (and they will be) then they *can* reclaim VAT on their spends (with some exceptions). If HMRC end up owing them VAT as a result then HMRC will indeed hand over that cash. It also happens if a company manufactures products in the UK (paying VAT on inputs) but sells overseas (so no VAT on those outputs).

                1. johnfbw

                  Re: Life goes on.

                  AC Generally speaking banks and other financial service providers can only claim a small percentage of their VAT back (often 4-5% of the 20% they pay - so less 1%). It is highly dependent on the type of service they provide

                  Also you don't technically need an accountant to sign off small accounts. It is just recommended (by accountants!)

        2. Lost In Clouds of Data
          Thumb Down

          Re: Life goes on.

          IR35 treats contractors as lesser permies.

          PAYE on both employee and employer sides, plus max 3% expenses claimable, irrespective of actual expenses. No sick, no paid vacation. Nothing.

          The tangible loss if benefits and the flexibility of the workforce is why contractors got paid more. They take on more risk.

          Sure and hourly rate over a year might be £100k, but if they only do 6 months then that's instantly cut in half.

          You show me a permie who is capped at 3% expenses and has to pay both sides of the PAYE bucket and we'll talk. And let's not forget, a sick permie in bed with the cold is a paid permie. A permie drinking Sangria on the beach is a paid permie.

          Last I worked in blighty (2001) as a contractor I calculated that my total net payouts from gross came to over 60% if I'd done IR35 again.

      2. Headley_Grange Silver badge

        Re: Life goes on.

        I'm freelance - so if I've got an axe to grind it's against IR35, but....

        There's no VAT benefit to HMRC. Whatever the contractor adds to the invoice will be reclaimed by the client.

        You're also forgetting that (in this simple analysis) the client is £55k better off for not employing a contractor and will therefore pay corporation tax on that amount.

        There's no legal requirement for an accountant unless your accounts have to be audited - which I would find surprising.

        1. Doctor Syntax Silver badge

          Re: Life goes on.

          "There's no VAT benefit to HMRC. Whatever the contractor adds to the invoice will be reclaimed by the client."

          It depends on the client. It can be set against VAT collected on VATtable supplies to the client's customer if the client's product or service is VATtable. If it isn't they can't and end up paying the VAT.

          1. matt 83

            Re: Life goes on.

            Yeah, just for example IIRC Independent Financial Advisers can't be VAT registered so will have to pay the VAT on any invoice a contractor gives them.

        2. Anonymous Coward
          Anonymous Coward

          Re: Life goes on.

          "There's no VAT benefit to HMRC. Whatever the contractor adds to the invoice will be reclaimed by the client."

          That depends on the client - Financial service companies cannot reclaim VAT.

      3. Professor Clifton Shallot

        Re: Life goes on.

        I am sure your valuable skills, geographic flexibility, and preference for working as required at a price the market deems reasonable will ensure you do not spend a great deal of time on the dole - you are much more in tune with the gig economy than all these stick-in-the-mud defined benefits permies.

      4. bigbob

        Re: Life goes on.

        > EVERYONE WINS

        Um, in your example the client pays £60k more for that flexibility. And simply by allowing business expenses the overall tax rate is lower, which is simply unfair to other the 99% on PAYE.

        > put many (usually Tory) contractors on the dole

        All these contractors charging £100k are just going to be out of work are they? I can't take you seriously.

        1. RancidRodent

          Re: Life goes on.

          The client doesn't pay £60K more - they've got to train you to meet this weeks' legislation hot-cake, insure you, run a personnel dept, run a pension scheme or two (BT, GM and Ford are practically bankrupt simply down to pension liabilities) pay maternity leave - as well as put up with crap employees that are difficult to get rid of or perpetual sickie pullers - then end up in court for bogus unfair dismissal cases which they just fold on and pay up - I've had two days off sick in 30 years of contracting. I've often done the work of two or three permies - particularly in coding roles.

          Yes there are a lot of excellent permies - but many are bone-idle - particularly in government and council roles. The overall cost is high and efficiency low - even worse if you go off-shore and get three utterly useless bums on seats for the price of one UK permie. Permies are NOT cheap - the hidden costs are enormous. If you want 5 man days' work you need 12 permies (including support staff) to cover it for all the reasons above. Or you could just hire 5 contractors with the right skills and get the work done - and what if the skills required are varied and changeable? With permies you end up with 10 square pegs in 10 round holes.

          I know several 40-50 year-olds all excellent in their roles who have done all the travelling round the globe for work, got the T-Shirt and just want to earn an honest crust in the UK - what's wrong with that? - IR35 will destroy thousands of UK jobs and steer big companies who don't want the hassle to outsourcing companies. I suspect this very outcome has been lobbied for by the likes of Andersens, PWH and TCS - which is why why a so-called Tory government is implementing such a Labouresque retrograde tax which will hurt the sort of people who are (were) part of their core voting base.

          1. Anonymous Coward
            Anonymous Coward

            Re: "I've often done the work of two or three permies - particularly in coding roles."

            " I've often done the work of two or three permies - particularly in coding roles."

            Same here, except I did it as a permie, and I know many others who could and did do the same; it's unrelated to whether someone is a contractor or permie, it's possibly related to the competence of their management.

            I also have worked alongside contractors whose net effect on project productivity was negative.

            " I suspect this very outcome has been lobbied for by the likes of Andersens, PWH and TCS - which is why why a so-called Tory government is implementing such a Labouresque retrograde tax which will hurt the sort of people who are (were) part of their core voting base."

            Now we're getting somewhere; you're right that the tories were taken over by corporate thieves (and lawyers and accountants) years ago. Why anyone expected anything different, I have no idea.

            That's not specific to contractors vs so-called permies though is it.

            It may well

    2. Dr. Mouse Silver badge

      Re: Life goes on

      "if they paid themselves the day rate in full then their limited company would be required to deduct employer NIC etc.."

      If they paid themselves the day rate in full, their limited company couldn't fulfil its responsibilities (e.g. paying holiday/sick pay), and couldn't even pay its expenses (accountancy fees etc). It is prudent business management to retain some profits for contingencies and other things.

      When it comes to paying dividends, this is how the tax system works for businesses. Do you voluntarily send the tax you would have paid on your pension contributions or ISA interest to HMRC?

      The main problem, IMHO, is the "stealth income tax" in the form of National Insurance. Both employer and employee NI are effectively just additional income tax. If these were correctly incorporated into income tax, there would be no tax advantage to paying dividends over salary. However, this would show the true income tax rate (around 45% basic) and this wouldn't be a vote winner...

    3. Doctor Syntax Silver badge

      Re: Life goes on

      @A/C

      Usual reply to this. If it's like you say why haven't you been freelance yourself? Altruism? Don't have anything good enough to sell? Or is it possibly that you don't like taking risks? If the last you're part way along the road to realising the difference between being employed, in an employee tax regime, and being in business in a business tax regime.

      1. DavCrav Silver badge

        Re: Life goes on

        "If it's like you say why haven't you been freelance yourself? Altruism? Don't have anything good enough to sell?"

        But isn't this a (stupid) answer to all complaints about corruption? If it's so easy to go round nicking stuff, why don't you stop work and go round nicking stuff? Maybe people don't want to burn down society, but stop others from taking the piss instead. Not everyone is a psychopath/libertarian.

        In my case I'm not a tax-avoiding contractor because

        1) it is morally reprehensible to avoid as much tax as humanly possible, and

        2) almost all industries don't really have contractors anyway, just IT, newsreading apparently, and other people on the telly.

        1. Dr. Mouse Silver badge

          Re: Life goes on

          "it is morally reprehensible to avoid as much tax as humanly possible"

          Contractors are not avoiding tax, they are running businesses and paying tax according to the tax code.

          Do you have an ISA? Do you pay into a pension? Do you tick the gift aid box when you donate to charity? If you do any of these, do you then go to HMRC and say "I avoided this tax, here, have it back"?

          1. Professor Clifton Shallot

            Re: Life goes on

            > Contractors are not avoiding tax, they are running

            > businesses and paying tax according to the tax code.

            This whole 'just following the rules' thing would be a lot more believable if my fellow contractors didn't immediately depram the toys at any change to the rules that doesn't benefit us financially.

            Most of us are not really 'running businesses', are we? We're one person companies, two at a push if we're pretending to employ a spouse, providing one client with one worker, and always the same worker.

            If that description doesn't apply then there's a good chance IR35 doesn't either.

            IR35 looks like being a bit of a pain in the bum, but it wouldn't have happened if 'contractors' who were to all intents and purposes permanent employees hadn't been taking the piss for so long.

            In the end there's work to be done so there's money to be earned and if we are all so amazing as we claim we'll still get plenty of it.

            1. Dr. Mouse Silver badge

              Re: Life goes on

              Most of us are not really 'running businesses', are we? We're one person companies

              Is a plumber/joiner/builder/decorator/cleaner running a business when setting out on their own? There is no requirement for a company to consist of more than one person.

              I run a company. I keep accounts up to date, submit relevant data to authorities, maintain insurances, search for clients, market my company.... The list goes on. True, it is on a smaller scale than many, but it is still a legitimate business and I run it as such. In time, I hope to it grow into a fully-fledged consultancy with employees and several, but for now it is just me, contracting.

              The one thing I am not, to my clients, is an employee. I accept more risk and responsibility than an employee and work in a completely different manner.

              Personally, I don't care that much about the tax levels. If they increase the tax rates involved, I'll pay them. Tax is not even on the radar of reasons I am contracting.

              However, what I do object to is being taxed differently to other small business owners and trying to classify me as an employee, especially an employee of my client with no employment rights from them (and can no longer provide them to myself from my own company).

              1. d3vy Silver badge

                Re: Life goes on

                "However, what I do object to is being taxed differently to other small business owners and trying to classify me as an employee, especially an employee of my client with no employment rights from them (and can no longer provide them to myself from my own company)"

                Yes.

                I have a friend who is setting up doing buildings inspections, hes one guy, he has one client at a time and come April he will be taxed differently from me because his clients are not being pressured into deciding between him being an independent supplier or an employee - with threats of them being held liable for his tax if they make the wrong choice.

              2. Professor Clifton Shallot

                Re: Life goes on

                >Is a plumber/joiner/builder/decorator/cleaner

                >running a business when setting out on their own?

                Do they invoice the same single entity once per month?

                1. Dr. Mouse Silver badge

                  Re: Life goes on

                  They could well have the same client for a long period of time (months) if working on a large job. They may well invoice monthly, or weekly, or on completion of key deliverables. None of these are indications of whether they are running a business.

                  I have known consultancies with multiple employees who have only one client which they invoice on a monthly basis. Are they in business, or are all their employees actually employees of the client? What about cleaners contracted through an agency, should they be classed as employees of the client?

                  I will add again: The courts and HMRC themselves have said that number of clients has no bearing on IR35. Indeed, you can have some contracts inside and some outside at the same time.

            2. d3vy Silver badge

              Re: Life goes on

              "Most of us are not really 'running businesses', are we? We're one person companies, two at a push if we're pretending to employ a spouse, providing one client with one worker, and always the same worker.

              If that description doesn't apply then there's a good chance IR35 doesn't either."

              Funny thing is... none of the things that you mention are indicators of being inside IR35...

              1. Professor Clifton Shallot

                Re: Life goes on

                > none of the things that you mention are indicators of being inside IR35

                Right of substitution is absolutely key.

                If we can provide alternative workers to the client as a contractually enforceable right then IR35 is not going to apply - if the company has one worker, and can provide that worker or no one or if the client won't accept a substitution then IR35 bites.

                So the fact that in almost every case the same worker is supplied to the same client day after day with no contractual obligation on the client to accept, and no ability of the company to provide a substitute is precisely an indicator.

          2. d3vy Silver badge

            Re: Life goes on

            "it is morally reprehensible to avoid as much tax as humanly possible"

            So are you paying MORE than you have to? The next logical step to your morality argument is that if you are a good upstanding citizen you should be happy to give over more than you need to.

            Ive argued again and again that morality doesn't come into it.. I assure you what I consider to be perfectly acceptable by morals is very different to yours, and yours are very different to the guy next to you. Where tax is concerned the only thing that matters is the law.

            Am I paying all the tax I *LEGALLY* have to pay? Yes.

            If I told you what % this was would you think it moral? Probably not.

            But then Im fairly sure you could tell someone on minimum wage how much you make an hour compared to them and they would think that immoral too.

        2. Franco Silver badge

          Re: Life goes on

          "it is morally reprehensible to avoid as much tax as humanly possible"

          Well aware I will almost certainly collect a flurry of downvotes for this, but no one pays more tax than they have to. As much as it is very popular to criticise Amazon, Google, Facebook et al for their UK tax bills, not one of those companies is breaking the law (that I am aware of). There is a clear argument that the laws have not evolved accordingly for largely digital businesses, hence why some countries have started looking at taxes specific to them (E.g. France).

          HMRC's argument is that it is "unfair" to have people doing the same jobs paying different rates of tax, but the converse is also true. It is unfair to expose people doing the same jobs to different levels of risk (E.g. lack of job security, holiday pay, sick pay, insurance, pension contributions)

        3. Graham Dawson Silver badge

          Re: Life goes on

          The construction and civil engineering industries run on contractors. Skilled specialists who are mobile between clients and can command top rates as a result. They're about to be fuvkef by ir35, right when the gov is gearing up to throw a bunch of infrastructure projects at the country to try and float the economy.

          1. Anonymous Coward
            Anonymous Coward

            Re: Life goes on

            "The construction and civil engineering industries run on contractors."

            Looking at this as an outsider, the collapse of various UK construction and civil engineering outfits in recent years (medium and large ones in particular) suggests that there may not have been much future for *anyone* working in an engineering/technical role in these outfits in recent years.

            Strange how G4S and Crapita manage to keep their heads above water :(

            I'm not at all sure that IR35 has much to do with this. Or with the mess in which banking IT has found itself at some of the UK's major financial institutions.

            1. Anonymous Coward
              Anonymous Coward

              Re: Life goes on

              I'm talking about things that are going to happen, not things that have happened. Civil engineering contractors tend to be project-based, like IT contractors, but they're also more globally focused in their activities. Asking them to sign up as permies for work that might only last a few months is going to convince a lot of them to either just retire, or to move out of the country.

              Construction contractors are people like brickies and plasterers, electricians and plumbers, joiners and welders, but also subcontract services companies that coordinate for sites and bring in specialised knowledge. They have sub cards, but they're often set up as Ltds to make the relationship with contracting companies easier to manage. IR35 will make their life much more complicated, driving up costs in an industry that already operates on long financial risk.

              Like I said, the gov is going to be throwing around infrastructure investments in short order (not least to get BIPs and related infrastructure up and running at Calais and on the ports across from Ireland), but at the same time they're placing inordinate pressure on many of the people they will need to design and build that infrastructure.

              Capita and G4S won't benefit all that much this time, either. They rely on subcontractors to do all the actual work they contract, a significant number of which are independents like the ones I've outlined above. Their costs are going to rise to cover IR35 changes, either by taking on large numbers of permies that they weren't previously employing, or to cover the increased rates charged by subcontractors willing to stick around and deal with the bureaucracy.

              Meanwhile, we'll get more late government projects that go wildly over budget and any apparent revenue increase HMRC sees will be swallowed up in the increased costs the industry has to suffer because of all of this.

              This is going way beyond just the narrow focus of the register readership. Entire industries are going to be knocked for six by this.

              1. Graham Dawson Silver badge

                Re: Life goes on

                Also I don't know why I hit anon on that...

          2. Professor Clifton Shallot

            Re: Life goes on

            >The construction and civil engineering industries run on contractors.

            >Skilled specialists who are mobile between clients and can command top rates as a result.

            If they are contracted to specific projects and have multiple clients then they have a good chance of being able to successfully demonstrate they are in business of their own account.

            1. Graham Dawson Silver badge

              Re: Life goes on

              Tell that to HMRC.

  8. katrinab Silver badge
    WTF?

    Heads they win, tails ...

    Either they have employment rights, and lose the case because they are being correctly taxed as employees, or they don't have employment rights, in which case there are no rights to enforce. How could legal action possibly work?

    1. jmch Silver badge

      Re: Heads they win, tails ...

      "How could legal action possibly work?"

      Presumably because company A signed a contract with company B for £X and company A is unilaterally wanting to reduce £X by 20%

      1. bigbob

        Re: Heads they win, tails ...

        It's a contract with a negligible notice period, so the client can simply end it and offer a new one with whatever terms they like.

        1. d3vy Silver badge

          Re: Heads they win, tails ...

          "It's a contract with a negligible notice period, so the client can simply end it and offer a new one with whatever terms they like."

          This is one of the risks of contracting, I could be told today that I'm not needed anymore and end up sitting at home watching homes under the hammer tomorrow.

          And while there's nothing illegal about it - its still a pain in the arse for the contractors, If I was there then as a matter of principle I'd be looking for a new role by now.. The only downside to this is that its November and the run up to xmas is never a great time to be looking for new roles (This is compounded by the fact that no one knows whats happening with IR35 so there are even fewer roles about than normal)

  9. Ian Johnston

    So, having deliberately avoided employee status so they could dodge tax and NI, "contractors" now want the protections which employee status gives?

    Bwa-ha-ha-ha-ha-ha-ha-ha-ha. Tough.

    1. Anonymous Coward
      Anonymous Coward

      Even if you paid yourself properly as an employee

      and that includes both employee and employers NI the company I was contracting to decided that they were going to tax me again as per the new rules for IR35.

      I spoke to HMRC and they just told me to pay both sets of tax and sort it out later.

      I walked. The project is suffering.

      Sooner or later, an IR35 case will end up in the Supreme court. But when?

    2. Doctor Syntax Silver badge

      Not really. They want either to be treated like a business (their preference) for all aspects of the engagement or as an employee for all aspects. What they don't want is to be treated as employees for tax and not employees for everything else. If the engager dumps them into IR35 they should expect a trip to the ET over employee rights.

      1. DavCrav Silver badge

        "If the engager dumps them into IR35 they should expect a trip to the ET over employee rights."

        Because you can't go to an ET unless you've been an employee for two years?

        1. DavCrav Silver badge

          (Before anyone says anything, except in cases of discrimination. Which this isn't.)

    3. d3vy Silver badge

      "So, having deliberately avoided employee status so they could dodge tax and NI, "contractors" now want the protections which employee status gives?"

      No they are being told that they are going to be taxed and treated as employees but not given the benefits that employees get.

      I bet you'd be pissed if someone told you that you no longer had paid holiday entitlement, pension contributions, paid bank holidays, sick pay, maternity pay... oh and by the way we are outsourcing our payroll and we need you to pay £100 a month for admin.

  10. Rich 2 Silver badge

    Does this mean we get some proper rules?

    One of the problems with IR35 is that HMRC have always been deliberately vague about the rules that determine whether you ARE or ARE NOT inside it. Hence the string of wasteful court battles that have raged - because nobody has a bloody clue.

    When this latest fuck-up goes live next year, then at least we should get some clear rules (*) otherwise how will any hiring company be able to work with it.

    (*) Yea, right :-)

    1. Doctor Syntax Silver badge

      Re: Does this mean we get some proper rules?

      "HMRC have always been deliberately vague about the rules"

      Not really,they have a single rule: IN.

      1. d3vy Silver badge

        Re: Does this mean we get some proper rules?

        "Not really,they have a single rule: IN."

        :)

        The problem is that the vast majority of court decisions disagree with them.

    2. Anonymous Coward
      Anonymous Coward

      Re: Does this mean we get some proper rules?

      Deliberately vague because the rules have been designed to try to catch independent workers, so that large consultancies (who like to pay their 'consultants' peanuts, and charge a fortune for the work) aren't caught by the rules.

      IIRC, it was those large consultancies who advised HMRC on these rules originally, as they wanted to protect their profits, and independant contractors were getting in the way of that goal.

  11. bigbob

    Hello, big consultancies

    Accenture, KPMG and the rest are rubbing their hands with the prospect of providing contractors to the private sector at far higher rates. It's very convenient to organize it between the execs at the golf club.

    1. Anonymous Coward
      Anonymous Coward

      Re: Hello, big consultancies

      Not my downvote but I will point out that my 'big consultancy' employer recently sent round an email asking all PMs to identify any contractors working on their projects. So we are also similarly affected.

      It's possible that we will see a net benefit in terms of getting work that would otherwise have gone to a one-man band - but it's too early to say yet.

      As an aside, we used to have a 'professional services' division which specialised in selling out individuals, but 'corporate stupidity' regarding which salesmen were allowed to sell what to which client made it all too much hard work, so they gave up and they made us all redundant. Given that salesmen protect their turf ferociously, I can't see 'professional services' being reinstated (not until a new generation of execs without those scars gets into power).

  12. Dave 15

    simple answer

    All contractors at RBS should quit en masse. Not too difficult to arrange. Even if they tried to run off to India they're not going to replace the whole lot

  13. zebm

    Done both contract and perm over the last 12 years

    I went contracting at the start of 2008 as I had moved several hundred miles cross country with work only to be told my job was at risk and then the housing market crashed. The main reason for doing so is that I could take rent out of pre-tax income which then meant to say I could afford my mortgage as well.

    In 2010 I tried to contract in Brussels, the agent effectively said "trust me I'm an international tax lawyer" when I was querying about limited company contracting. It turns out that the fine I was up for would be more than 100% of income. Apparently all his colleagues used umbrella companies based out there. Also, as a British national, I had to fill out a Limosa a.k.a. a work permit application.

    This year I found out that France also does work permits - there is a minimum income which varies with number and age of dependants - as some remoaning sponger wrote to the newspaper saying that they were being kicked out "because of Brexit" as they had applied to be naturalised and the French replied that they shouldn't be in the country in the first place.

    One thing to note is that with a level playing field between public and private sector contracting the exodus that happened in the former will be addressed so you can see why they are doing it.

    I'd be happier paying tax if the sponging royal family didn't have all those tax breaks.

  14. Engineerasaurus

    Add expenses to the mix...

    My main client, which is a large insurance company in Edinburgh has announced that they will terminate all contractors that have not agreed to a PAYE contract by 6th January.

    Now, whilst local contractors (i.e. those taking a short bus ride to work), this will mean a pay cut around 20%, but for those people like myself who work hundreds of miles from home and have large travel/accommodation expenses that we cover ourselves, this will be hurt far more.

    These expenses would still need to be paid, but instead of coming from our limited comapnies pre-tax income (and effectivly transparent to VAT), we would now have to pay that from our personal post-tax income with VAT now added. This makes it more like a 50% pay cut.

    Now take into account that partner draws a salary from the limited company as well and closing that would break our whole income model. Hence, I'll be walking when those contract notices come along. If we have to move to PAYE, then it is only possible if you live locally, so this is the end for contractors working away Monday to Friday (assuming firms don't bother engaging with IR35 at all) and reduces the pool of workers they can choose from.

    1. DavCrav Silver badge

      Re: Add expenses to the mix...

      "Now take into account that partner draws a salary from the limited company as well".

      Uh-huh. Your partner was doing what exactly? *Cough* tax avoidance *cough*.

      I have to commute a long distance as well, and run two houses, but don't get expenses for that as I am an employee. Suck it up. Or quit, which you are apparently going to do.

      1. Graham Dawson Silver badge

        Re: Add expenses to the mix...

        Again, you're conflating evasion and avoidance. Avoidance is not paying taxes that you do not owe.

        The partner in question is certainly doing work for the company and drawing a salary as a result of that.

        My wife did work for my company when I was a full-time contractor. Mostly filing, for which I paid her a wage. She and my company paid NI and tax on that wage appropriate to the wage earned, no more, with an appropriate tax code to avoid paying tax that she didn't owe.

        1. Anonymous Coward
          Anonymous Coward

          Re: Add expenses to the mix...

          filing :D :D :D LOLZ

          1. Graham Dawson Silver badge

            Re: Add expenses to the mix...

            Affairs with the secretary are much easier if you're already married to her.

  15. 5leeper5ervice

    Tiny Violin

    Same job as a perm, you're making a packet and not paying tax. About time the game was up IMO

    1. Rich 2 Silver badge

      Re: Tiny Violin

      Yawn....

    2. Anonymous Coward
      Anonymous Coward

      Re: Tiny Violin

      If HMG decided that NI was to go up by 20% and all leave, sick benefits etc were to be removed plus US style instant dismissal (I think i have just re-invented zero-hour contracts!). I am sure there would be a lot of people on here bitching about it.

      Another jealous Permie with little clue but a lot of opinions. Try contracting yourself if you are that bothered, it's not that hard to set up :)

    3. RancidRodent

      Re: Tiny Violin

      Contractors raise more tax than equivalent permies - are cheaper for the employer (when efficiency and overheads are taken into account) and don't rack up future financial liabilities. What do you think the cost of running a payroll and personnel support is in a large organization? Plus with contractor you can get the right person with the right skills for the role in hand - rather than spending half your time battering and bending someone to do something they're not very good at. Sure - if you go to a big consulting company charging £2K a day for a developer - yes that's expensive - direct contractors are good value.

      1. tim 13

        Re: Tiny Violin

        You do realise that often contractors are hired by the personnel dept. And their payments go through the finance dept? You still need people to do that whenther you have all perm or all contractors.

        1. RancidRodent

          Re: Tiny Violin

          "You do realise that often contractors are hired by the personnel dept. And their payments go through the finance dept? You still need people to do that whenther you have all perm or all contractors."

          Really? I've been a contractor for over 30 years for well over a dozen large organizations in the UK and Europe and not once have I been engaged or paid via the personnel department.

    4. forumusernamealreadytaken

      Re: Tiny Violin

      Maybe .. except contractors are utterly disposable resources who can be laid off with 1 week's notice and can be replaced with another monkey from the tree when you find out that the contractor and the agency colluded in selling you a pig in a poke.

  16. Anonymous Coward
    Anonymous Coward

    IR35's HMRC Business Case

    IR35 has not been the success that it was predicted to be by HMRC. Contractors, agencies and clients changed their contracts to maintain the tax efficiencies they had previously. The amount of money that HMRC invests in an IR35 case compared to the windfall I think has been poor.

    All that is happening is that organisations that use a large number of contractors see targets painted on their backs due an increased risk of HMRC asking them for money.

    I suspect that several things will happen. Organisations that use a large number of contractors will either pay more or invest in mitigating the risk that HMRC have transferred to them. It will take two years for this to be shaken down and during those two years some contractors will walk, some will stay and bite the bullet,

    One benefit of public sector contracts now is that you now know up front whether its in or out of IR35.

    The first two questions I ask now ask are the rate and the IR35 status. The IR35 status has an impact on the distance I am prepared to travel. From a contractor's perspective the business case for taking on a piece of business has become a little more complex.

  17. Anonymous Coward
    Anonymous Coward

    Hmmm, anyone else have a weird sense of deja vu ?

    I can recall - on these very forums - the end of the world being catastrophied over when IR35 was first bought in under nu Lab in 2000.

    I will just note that we are all still here, UK IT did not collapse, and none of the mouthy gits I was working with at the time followed up with their talk of "leaving the UK". Suggesting that emigrating is easier to say and spell than do, and that the grass isn't always greener.

    1. Graham Dawson Silver badge
      Facepalm

      Re: Hmmm, anyone else have a weird sense of deja vu ?

      You missed: it was brought in and then they promptly decided to not enforce it when they realised that it would result in exactly what we're seeing now

  18. Maximum Delfango
    Facepalm

    Luckily we have a mass of talented offshore code shops, stackoverflow.com, as well as our old favourite consulting houses (the ones that haven't yet gone bust anyway) to take up the work the exiting contractors will leave behind. Oh, and Lottie Dexter can surely be wheeled out to manage UK's new IT Drive 'Can I haz teh codez?'

  19. Jeff 11

    The landscape will change for sure - I predict highly skilled contractors will only be engaged to the larger firms via the big consultancies, who'll end up fighting over each other for good people with particular skills. Those who don't go down this route may have to reduce their rates to work with smaller firms who aren't in the scope of IR35, or go perm. I can't imagine many will go abroad - I've noticed remote work roles in northern Europe come up increasingly often, and I expect this will happen more with the surplus of skilled people in the UK. Some clients will look overseas to fill the skills gap, wiping out tax revenue in the UK: that could swing back in a generation when government wakes up to this wilful act of self-destruction.

    Personally, I'd advise making oneself as indispensable as possible to someone with a large budget and tight deadlines in the next few months.

    Still, there are a quite a few contractors I've worked with in the past who are not highly skilled, pleasant to work with or even decently competent. They're the ones who should be worried about April.

  20. Anonymous Coward
    Anonymous Coward

    Been there, done that, never again.

    Spent 6 months working as a contractor at their Kegworth Helldesk many, many moons ago.

    Found out that (company name sounds like Seed) were earning twice my hourly rate and still baulked when I wanted to leave 1 week early.

    1. The Oncoming Scorn Silver badge
      Holmes

      Re: Been there, done that, never again.

      You only just realised that?

      I was still fairly wet behind the ears as a contractor in 2000\2001, obviously the agency skims off the cream or so I thought.

      Then while early into a contract somewhere in Herts, someone somewhere at the client\agency decides for a couple of weeks to send me the sign off authorisation for the agency invoice for my hours. By strange coincidence I discovered that my rate was half of what they were paying me.

      Some years later I discovered that as Team Lead, my barely English speaking underlings from another agency were getting more per hour than myself & by yet another strange coincidence my agency handler......I mean rep took me to lunch the same day.

      Over lunch he mentioned a small rise due to my work performance (Client feedback), I mentioned that the new rate was still lower than the others which he stated:

      "OK I can match that rate for you, but I want you to know I'm not making anything off this!"

      "I have been in this game a long time, I may be fresh off the boat as far as Canada is concerned but I have been contracting for over ten years now, I'm pretty sure that someone somewhere is doing very well off the back of my work"

  21. Anonymous Coward
    Anonymous Coward

    Impacts elsewhere in dot Gov dot UK

    Elsewhere in Gov, as HMRC dictate to their nearby departments how to use CEST and how difficult it should be to assess a contractor as Outside (conveniently leaving out mutuality and years of case law), said contractors are leaving in numbers due to fear of retrospective action, an inability or unwillingness to take a 20% cut in their income (given their role was assessed as outside only 6 months ago by the same departments!) plus a general displeasure at how they are being treated. They are taking their skills, knowledge, experience but also their in-flight projects' abilities to deliver with them.

    All of the above is affecting Brexit projects! Sorry 'EU Exit' as its referred to in Gov. "There will be cost implications in back-filling those roles" to quote an anonymous source and yes Big consultancies are standing by salivating ready to provide on-shore, off-shore, near-shore, far-shore and all the shores in order to shore-up those projects which have Brexit-driven deadlines or BAU commitments. All in the master plan eh HMRC?

    Yes I am a contractor, yes I am in dot Gov and the impact is real,and significant. AC obvs.

  22. ecofeco Silver badge

    "Now, they'll be 'employees' of the client for 6 months, with less rights & benefits than any FTE cow-orkers."

    Wow. That's the American temp hire model right there! A large amount of I.T. people in the U.S. are already working just like this.

    1. Jellied Eel Silver badge

      Wow. That's the American temp hire model right there! A large amount of I.T. people in the U.S. are already working just like this.

      Curious huh? I guess it's one of those Anglo-American partnership benefits.. If/when Brexit happens, expect more 'alignment'. 25 days annual leave? Such extravagence! 5 is extremely generous and the peon's should be pleased with that.

  23. Danny 2 Silver badge

    Filthy Lucre

    My friend's sister's husband has worked there as a temporary contractor since 2001. He earns four times what the regular employees earn doing the same job, or so he boasted. I'm not one to grudge anyone else's income, especially since I like his wife, but he's not as techie as me and during the banking crisis it began to become wearisome that he was still employed and royally over paid while I lost my bank account.

    There is a lot of lingering hatred for the Royal Bank of Scotland in Scotland across the political spectrum, and presumably in the rest of the UK too. Utter shysters, dastards, and one King Cnut, Sir Fred the Shred. It's not just what they did to the tax payers, they had a policy of driving small business owners into bankruptcy for their profit.

    1. Anonymous Coward
      Anonymous Coward

      Re: Filthy Lucre

      RBS spent the better part of a decade trying to screw over my parents for money that, it turns out, wasn't even owed them. I hope they lose all their contractors and implode.

    2. Anonymous Coward
      Anonymous Coward

      Re: Filthy Lucre

      has worked there as a temporary contractor since 2001

      18 years is an interesting interpretation of "temporary"

      1. The Oncoming Scorn Silver badge
        Pirate

        Re: Filthy Lucre

        I'll admit I got creative to stay with one client for longer a little more than I should have, but 18 years is a quantum leap in creativity.

        I'm not sure if I should applaud or damn him for the bare faced cheek.

    3. regprentice

      Re: Filthy Lucre

      The longest serving 'temporary' contractor I found Sr rbs was 24 years. I personally know at least 10 with 10 years +

  24. Ribfeast

    I always thought the contractor thing was odd. I did it once, it paid a shitload of money but you had no sick leave or holiday leave, and could be dismissed at any moment. I was contracted via a recruitment company, they had some sort of payroll company set up, so I technically worked for that.

    I think the contract thing is so they can allocate the bill to various departments, all my work had to be marked as Capital, not business as usual etc.

    1. Anonymous Coward
      Anonymous Coward

      > and could be dismissed at any moment.

      I think you mean: and could be not renewed at the end of the contract.

      1. Ribfeast

        There's that too, which is what happened to me.

      2. Jellied Eel Silver badge

        I think you mean: and could be not renewed at the end of the contract.

        Not always, but depends on the contract. My first contract was to create a new network for a well-known financial institution. The project was overrunning and experiencing difficulties*, so cancelled and around 1,500 contract posts surplus to requirements. That 'job loss' didn't make the news, but that's contract life.

        Depending on the contract, there may be some recourse for breach of contract, ie for terminating before a defined end-date, but contracts can be week by week, or monthly. That's just one of the risks of contracting, especially doing project work. And any recourse would mean paying lawyers, which would come out of your company's funds. On the plus side, I think it's easier to argue that kind of project work and risk of termination means it's arguably outside IR35.

        *One being relying on an X.21 feature not implemented in BT's Kilostream network, the other possibly being relying on OS/2. The permie who specified the X.21 bit wasn't happy when I pointed that problem out, and remained an employee after I'd left. So it goes..

      3. Anonymous Coward
        Anonymous Coward

        No, their original comment is valid.

        A contract is a *maximum* term, not a minimum. If you have a 6 month contract, you can still be let go at *any time for no reason* with only, usually, a weeks notice.

        The risk to a contractor with most contracts is significant.

  25. Charles Smith

    Castillian solution

    The banks should release the UK Contractors and replace them with Spanish Bank IT Experts.

  26. wscull

    In my experience (permanent employee now but 12+ years as a contractor), the contractors normally do the work the permanent employees want to avoid, which is often times the dirty work critical to keeping things working (as opposed to the high-profile, career-building new initiatives and projects).

    Chase off all the contractors, and 6 months later at most companies you'll be begging them to return back to fix everything - even at double the rate.

    Excaberating this is the tendency of contractor to be less than enthusiastic regarding documentation (why document when it just makes you easier to be replaced/not be renewed?) and the low prioritization of documentation in daily operations which makes swapping out highly technical human resources a significant challenge.

    Antagonize your contractors at your own risk! Of course the gov't has no clue about such effects - perhaps they'll notice when their own IT breaks......

    1. Anonymous Coward
      Anonymous Coward

      "

      Excaberating this is the tendency of contractor to be less than enthusiastic regarding documentation (why document when it just makes you easier to be replaced/not be renewed?) and the low prioritization of documentation in daily operations which makes swapping out highly technical human resources a significant challenge.

      "

      If the contractor isn't writing documentation as part of their day to day work, They're not the kind of contractor I want anywhere near business critical systems. That demonstrates a worrying level of professionalism. IMO, It's akin to a sysadmin placing logic bombs in case they get fired. On the other hand if their manager isn't allocating time, that's a needless risk to the business. Either way, it's an HR issue.

      A lesson I learnt long ago is that "Nobody is irreplaceable". Long ago that mindset was prevalent in many developers, thankfully things have improved in the last few years. Most of the development shops these days, run on the "Build it modular enough that if it ain't documented, then it's replaced/reworked by someone else at the first opportunity" principal.

  27. Anonymous South African Coward Silver badge

    Beancounters...

    ...have reportedly already told contractors that they will only employ them as on-payroll workers

    Sneaky Beancountery move, to cut some expenditures.

  28. Anonymous Coward
    Anonymous Coward

    Not all contractors are tax dodgers....

    In my (vast) experience, a lot of them are contracting because they're too sh*t to hold down a job for more than a few months

  29. Anonymous Coward
    Anonymous Coward

    Poor well paid tax-dodgers

    Yes, why should these hardworking employees have to contribute to the NHS just because they earn more than their employed colleagues, don't you know they're better than the underpaid person next to them doing the same job who can still be let go with little notice for the first two years for no reason whatsoever.... They chose not to pay proper tax because they're too good for that - didn't you know.

    1. SimonC

      Re: Poor well paid tax-dodgers

      Ironic you'd mention the NHS, maybe think next time you need a life saving procedure and they don't have a surgeon on hand, that they'll probably use a Locum surgeon, aka a Contractor, commanding a hugely inflated income (up to £20,000/day it was reported a while back for some due to legally requiring certain skills in the hospitals to avoid an even bigger fine).

      Perhaps you can tell them that they're a tax dodger choosing not to pay proper tax cos they got out of bed and showed up to save your life. They'll have time to think about that when they go home and wonder when their next callout will be.

    2. hoofie

      Re: Poor well paid tax-dodgers

      "They choose not to pay proper tax" - you are a moron and I claim my 5 quid.

  30. TolerantViews

    Fair Tax

    This is not a pay cut, this is the contractor having to pay the same taxes as the permie employee sitting next to them. Same job, same taxes. If you like the option to still roam and take up other employment there is nothing stopping you. Perhaps someone will up your rate, from what I see that is not likely to happen. Lots of public sector IT contractors ejected to the private sector, finally fair taxes are catching up with all contractors. Having worked on both sides I think equality of tax is a fair outcome.

    1. Anonymous Coward
      Anonymous Coward

      Re: Fair Tax

      For most contractors its not the same job under the same terms though. Sounds like more permie whinging because they're forced to take home less to receive benefits many of which they don't use.

    2. DontFeedTheTrolls Silver badge
      Boffin

      Re: Fair Tax

      "Same job, same taxes."

      This is a fair statement. 100% same terms and conditions deserve same pay rate and any tax due will be the same.

      Terms and Conditions not identical? Pay rate for the job may vary and subsequently any tax due may vary.

  31. Anonymous Coward
    Anonymous Coward

    on-payroll

    However, RBS is not alone. Major employers, including Barclays and GlaxoSmithKline, have reportedly already told contractors that they will only employ them as on-payroll workers.

    Funny, if you were at IBM they want MORE off-payroll workers, just so they can dump them at a moment's notice (yes, it can actually consist of your contract agency calling just before 5PM and saying it's your last day on the job).

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