Tech contractors begin mass UK.gov exodus in wake of HMRC's IR35 income tax clampdown

Re: Yet again

Next they will claim there is an IT skills shortage, bring in a load of shit but cheap Indian resource. All justified because of their own policy and their inability to see their own stupidness.

The real irony is the fact they will (have to) use the large consultancies that pay little or no corporation tax in britain who use truly dubious tax schemes and will pay a much higher overall cost for the same resource level but actually collect less overall tax than if they had just left well alone.

Re: Yet again

I don't think it is shooting itself in the foot - it's getting what it wants:

- no people working for themselves

- replace all UK technical resource with big boys contracts (and their ON SHORE indian slave labour)

I don't think this was ever about HMRC or tax.

Re: Yet again

This outcome is all far too obvious which makes me think the gov't have an ulterior motive/agenda for shoving the small individuals out which they surely knew would happen.

The first thing that comes to mind is lining their pockets via various kickbacks from large co's like Capita, etc. Maybe it's actually something more subtle which will be played out in a year's time when a fictitious 'skills shortage' is being moaned about. Well. Not fictitious to the Public Sector but no-one will be reminding Joe Public why that shortage is there due their DIY toxic status.

Also the general lack of awareness/action in Public sector and the Agencies is astonishing.

Binning my Public Sector contract before end March, one week's notice plus making sure the last payment falls before April. Fuck 'em. They brought in on themselves.

Re: Yet again

I think you are kidding yourself about O+G esp. the North Sea and Deep Sea.

Re: Yet again

How much do you want to bet, that once HMRC works with government departments to work out how to classify contractors within IR35 or not, they will go after the private sector? IMHO this is a test run with other government departments before UK wide roll out.

Re: this is an old paul daniels trick...

No magic here. It is the same as with crackdown during the Blair government.

Big guns pay bribes the standard British way - over the table and fully legitimate. It is called DONATIONS. Your average freelance IT contractor bod does not.

This is how corruption works in nowdays UK. If you are not familiar with the methodology, I suggest you familiarize yourself.

Re: this is an old paul daniels trick...

I don't think it's 40 - 50% more. Typically contractors earn something in the region of £500 / day. Consultants charge £1,500+ and still pay the actual consultant less than a contractor. You are right about where to money goes though.

Poof! overseas.

"the job of Government is to support the people, not tax the people"

Unluckily, for many depends on which side of the tax pipeline they are. Those who gets money from other people taxes truly believe the job of government is exactly that. And many politicians are promising more of that - it's the best way to look for votes, and have a stranglehold on them. Of course someone has to pay for that...

Re: Darwinian selection in Government IT

"IR35 isn't fixed by creating some hideous online tool to manage its complexities. It's fixed by ending this obfuscation and witch-hunt mentality." If they were serious about this being to "help" and not just being a tax grab, an effective online tool would have been available six months ago and open to everyone, and the same tax & IR35 rules would apply to everyone - including MPs and those who work in their offices. Same expenses rules, same NI and so on - if your MP can claim it, so can you. Never going to happen.

Re: Darwinian selection in Government IT - OH PULEASE STOP YOUR MOANING

Nope, governments' prime responsibility is safety and security of their people, law and order andpublic services - ALL OF WHICH HAVE TO BE PAID FOR, so, you can argue GOV's top responsibility is to collect the tax to pay for the above.

Maybe am missing something, but most contractors work for the same employer in the public sector for a year or year(s). Hardly any PSCs seem to be for people working for multiple different clients and not working in their clients' offices full time. IE they aren't running a proper business .. they are freenlancers or part or full time workers masquerading as not, as often to suit the employer as to suit them.

So, either they should be registered as sole traders / self employed freelancers or they should be employed properly full time or on 6 or 12 months contracts or whatever.

Given how tiny the financial advantage is to contractors of being IR35 or full time employed, maybe the industry should be agitating to BE EMPLOYED PROPERLY ... seems to me the whole thing has been a scam to let well paid IT people avoid tax and to let the public sector get away without paying national insurance, handling paye and paying pension contributions.

Re: Darwinian selection in Government IT

Regarding

"In response to this, HMRC are developing an online tool that will help public sector bodies to determine whether or not the rules apply.”

bool doesRuleApply(object doesntFuckingMatterItWontBeConsidered) {

return true;

}

Re: Darwinian selection in Government IT

"IR35 isn't fixed by creating some hideous online tool to manage its complexities. "

I have no idea why this on-line tool is so late. I could write it in a few minutes.

"Please upload all your financial information. We accept any file format." [Upload]

"Calculating, please wait.."

"Your contract is subject to IR35, please report to your local tax office to pay all the taxes outstanding."

Re: IR35

"Why does every government think that everyone wants to break the law."

People in government who themselves would bend a law - then believe everyone else would do the same unless draconian controls are placed on them.

Re: IR35

Because there to many companies and individuals and accountant who spend far to much time trying to find loopholes in the tax laws that allowed them not pay tax.

Re: IR35

Your tax return is your responsibility, not your accountant's

So they need another £37K p.a. to tread water

"The supposed savings of £440,000,000 are coming out of someone's pocket - the contractor's pocket."

£440 meellion divided by 20,000 contractors is £22,000 per contractor.

A back of a beermat calculation says that at 40% tax, they need to increase their annual turnover by £36,667 to stay at the same take home pay level.

Re: Simple Answer

You need to simplify it even more. Eliminate EE and ER NI, roll it all into income tax. (You can pass a law saying that the full ER NI is passed on to employees at the time of elimination, and fiddle with the bands so this doesn't alter things.) Then you treat earned and unearned income the same, by bringing CGT into income tax.

Then you forbid all companies without a banking licence form lending money to individuals. That closes the unofficial lending loophole. And so on. But merging IT, CGT and NI is obvious.

Re: Simple Answer

@velv - your "simple answer" is based on a fallacy that IR35 only impacts people who are earning significantly more than "lower paid employees". I suggest a fundamental part of the problem is that large numbers of employees don't actually know jus how much it costs a business to employ them.

Re: Simple Answer

Unfortunately a simple solution is not the goal.

Treasury/Chancellor always want many leavers to push and pull so that it is impossible to work out what they've done.

If it was simple then they couldn't hide tax rises.

Re: Simple Answer

Merging NI and income tax seems like a mostly good idea; however...

Increase employer NI to 15% to cover the difference.

Employer NI is effectively a tax on employing people so it might actually lower employment, make offshoring seem more attractive and/or make the UK a less attractive place for multinationals.

Re: Simple Answer

"The reason why this legislation is being brought in is because the vast majority of contractors actually work like their inside IR35 but then arrange their tax affairs exactly like their outside IR35 "

IR35 is about disguised employees. The vast majority of contractors are not disguised employees, but are self employed and work with additional risks and across multiple employers over time. The fact that IR35 isn't very good at catching those who really are disguised employees is another issue, but don't tar all legitimate contractors with the same brush...

"And when the playing field is level for everyone there's no need for "schemes" like IR35."

There are good reasons for self employed contractors to pay less tax so there is unlikely to ever be a level playing field. They have much higher employment risks and fewer benefits. If they got the same money, everyone would want a permanent job instead.

I wouldn't rely on that "firewall" you mention as its got any government common criteria evaluation status and its not like the tax office has a record of retrospectively changing the legislation to suit.

Retrospective audit

Changing your employment status now will not mean that HMRC might not choose to audit you retrospectively. Note that it's retrospective audit, not retrospective taxation as it would be an interpretation of the rules are they were believed to operate at the time. However, there may be hop for those who escape abroad.

Whilst I don't disagree...

What did you expect the outcome to be? This is the same situation as when IR35 was introduced. I remember the terms "terrible" and "unworkable" being bandied around by the same old professional bodies back then; but look where we are 10-15 years later... IR35 has not been repealed, although neither has it really been effective in filling the HMRC coffers with the rediculous figures that Primarolo was quoting at the time.

Unfortunately, neither will this be repealed because HMRC doesn't listen to anyone but itself. The shame is that I can see in a year or so this being in the budget to be rolled out to private sector contractors also.

@ Franco

Would you mind telling me why you're off? I'm not a contractor, never have been, so I don't know the situation at all and my view of it is completely naive.

But, I assume you are a Ltd company, and pay yourself a salary + dividends? And you pay full employer's and individual NI on your salary? So what's changing?

Or are you saying that you break the rules in order to lower your rates as otherwise you'll be undercut by all the other contractors also breaking the rules?

Re: Big outsoucing companies

"the UK Government is broke, I mean really end of the line broke"

What did you think would happen when the previous lot emptied the Treasury and then sold off the gold reserves that could be used to guarantee any loans? I'm no fan of the Tories but surely anyone can understand the difference between being able to say "if we default you can have the gold we keep locked away" and "lend us money even though we don't have anything to give you if it all goes wrong", and why public borrowing costs so much more.

Once again we have to reap the "benefits" of a socialist government who spent money with no thought of what would happen once they had emptied the coffers - other than the knowledge that the Tories would get voted in, somehow managing to turn the situation around again but p*** everyone off enough for the socialists to get back in and spend it all again.

Unfortunately, the Tories cannot pull off their usual chicanery this time so the robber barons of the labour party will find the country in the same state they left it in - up Sh*t Creek without a canoe, let alone a paddle.

Still, what else can you expect from a group that opens the prisons and lets out convicted murderers then turns around and locks up the soldiers doing what Tory Blur sent them off to do in the first place...

Re: the smart contractor...

Undoubtedly rates will rise in natural reaction to there being fewer contractors available, what really shocked me is the idiots are applying this to the NHS as well where similar shifts to the private sector are expected (no doubt part of their evil plan) :

https://www.theguardian.com/society/2017/feb/27/tax-changes-uk-public-sector-workers-salary-exodus-nhs

I agree: two points though?

"Now you might argue that the clients should manage their staffing levels better than to have such short notice requirements." Yes - they should, but they don't. Sometimes it is not their fault as you said - but sometimes it is, such as for example where you have a public sector organisation that has a mandatory headcount reduction and simply hires contractor to fill the gaps left by imposing the cull, rather than saying "this is too stupid to do, Minister"

secondly - the thing about availability, slack, and so on: there is a large public sector body (and it can't be the only one) that wrote to staff in January, telling everyone their contracts were ending in Feb. It then said, err, no, we aren't ready for that, then "err, no, still not decided what we're going to do", and left a lot of contract staff not knowing if they had work the following week. The IR35 discussion never seems to take into account the massive benefit of job security or what contractors are supposed to do during slack periods - or illness, or if they want paid holiday (what's that), or how to handle a client that doesn't know it's SaaS from it's ... (there must be an acronym that fits, surely)

Re: Moar tinfoil please

4). Ever seen Logan's Run?

Re: Cant see any other option but to walk...

"The other problem is the trust eroded between public sector and the contracting world. Hard to commit to a contract when the rules change on a regular basis"

The normal way to address that would be to have a contract clause that says if the rules change, rates can go up. However, in my experience most public sector contracts are a standard form and the client staff you deal with are not allowed to change them or show any common sense.

Re: Online Tool

The README file is empty; and none of the code contains any comments. This doesn't bode well.

Scrolling through the code itself, I can see that the IR35 tests themselves are the usual grab-bag of questions:

- Do you provide your own equipment & materials?

- Are you paid a daily rate or a piece rate?

- Do you still get paid if you deliver substandard work?

- Is there an obligation to fix substandard work in your own time?

- Is there a right of substitution? Has it actually been exercised?

No doubt someone could reverse-engineer the code and turn it into a simple flowchart.

Re: Big off-shore boys will win

"IR35 is and always has been a piece of legislation to appease the larger consultancies. This time however the crapita, wipro et al of the world will be rubbing their hands with glee."

Not really. It's about disguised employees. Real self employed contractors are not usually caught....

"the contractors who are responsible for massive cost overruns"

Are a figment of your imagination.

What causes massive cost over runs? Firstly poor requirements being expressed by the government departments. I haven't seen a well written set of requirements originating from government, ever. It seems that a backgrounds in classics, modern languages, history and politics is not at all conducive to being able to specify technical requirements. Secondly, dithering. Civil servants are great at vacillation, in fact it's about the only thing they do well. They agree to something, work starts, they change their minds or their minds are changed for them from on high. This can, in the worst case, result in complete scrap and rework of the project. Thirdly penny pinching. Most government departments want the proverbial silk purse from a sow's ear but they aren't even willing to pay for the sow's ear. They get delivered what they paid for, don't like and then ask for the project to be reworked to actually do the job it's supposed to. Finally lack of project management talent. Civil servants seem to be unable to grasp that some jobs must be done in a particular sequence, hence it's not unusual to get on site and find that people are sitting around twiddling their thumbs waiting for delivery of the kit that should have been ordered and in place six months ago.

Re: And yet, "Personal Service Companies"

"Are allowed to charge out the Person concerned at an hourly rate, yet claim to be a Company."

Rates can be hourly, daily, weekly, whatever. Just like Crapita, IBM, whatever. You know, the big outsourcing companies who'll take over and charge much larger day rates. The only differences are the scale of the company, the overheads charged to the client and the residence in which the profits are taken and the corporate taxes paid.

As I wrote in another comment, as soon as you make the relevant comparisons all these arguments fail.

Re: Backhanders

"I suppose the real test is if any of those self same contractors who left are hired by these parasites at the same rate they were on before"

No, they may be hired back at a lower rate so the mark-up will be more.

Re: Wait until next year..

"Therefore, expect Her Majesty's Arse to announce that the rules will be expanding to the whole economy, not just the public sector."

As far as I was aware that was always going to be on the cards, hit the public sector this year and the private sector next year.

Funny how the amount they hope to raise (£440M) seems to be about the same as they expected to raise from stopping Umbrella companies allowing contractors to claim expenses. I sense that they'll probably just about make as much from this as they did from the umbrella 'clampdown' so will want to somehow make even more the following year with another hair brained scheme.

Re: Stupid Questions

I humbly suggest rather than venting your ire on the contractor/consultants (there is a difference!), you instead take up your perceived grievance with your hiring management.

A point I would make with your assumption - you seem to forget many of us working in the contract market are away from home, some like me for extended periods, and only by working for ourselves can we make the finances pay with hotels, B&B's, travel etc. Staying with a client and ending up with less than you paid out to work there is not good business sense, is it?

Re: Stupid Questions

"most have a very over rated opinion of themselves and are not worth the money."

But enough about permies...

Seriously though, I question most of your claims. Contractors can only exist if there's some value to a business in using them. Part of the attraction is flexibility. Some skills are only needed briefly for a particular phase of a project and it makes no sense to employ someone who will later have to be laid off. Some skills are so niche that very few people have them - try finding an Arcsight engineer, for example. Also it's easier to get rid of a contractor, most contracts specify a contract cancellation cause.

I've heard the rhetoric you spout before from permies, and the response is "If you think you are that good, and you are envious of the contractor day rate why don't you quit your job and get access to all the Free! Money!! that you imagine exists?"

I'll also point out that you may have the skills internally (I doubt it, most permies are hopelessly out of date) but what you won't have is the resource because the skilled people are employed to do a specific job and can't be released to do something else. If they are skilled and have lots of time on their hands then their employer should either be looking to fully utilise them or dismiss them as a drain on the company.

Re: Stupid Questions

"So all these contractors are dumping their existing contracts early. Is there such a shortage of contractors in the private sector that they are all going to get work?"

There will be such a shortage of contractors in the public sector that they are all going to get work at higher rates, compensating for the tax disadvantages. Said before, contractors don't care about their daily rates, they care about what's left in their pocket. If there are more taxes to be paid, the daily rate must go up.

Re: Stupid Questions

"So all these contractors are dumping their existing contracts early"

That probably depends on if their existing contract has provision for their employer to deduct such tax at source. Otherwise unless I missed some legislation, Limited company invoices created as part of a valid contractual agreement are fully enforceable....

Re: Then do something significant . . .

"Miss May and Oaf Johnson"

Come on, that was a great 2 fingers up to the EU! If they can make someone that we have all never heard of with "the charisma of a damp rag" president, I think we can send them a very intelligent and well educated "Oaf" that says it how it is in return....

Whatever you might not like about Boris, he is clearly not stupid as tends to be implied by "oaf", so I think you need a more appropriate insult....

See http://www.itv.com/news/london/2016-05-23/sadiq-khan-6th-most-intelligent-politician-in-history/

Re: New Tool Available and its a farce!

Here is the output from my filling in the tool questions.

Which of these describes you best?

The worker

Has the worker already started this particular engagement for the end client?

Yes

How does the worker provide their services to the end client?

As a limited company

Is the worker or their business an office holder for the end client?

No

During this engagement has the worker's business arranged for someone else to do the work instead?

No - it's never happened

Would the end client accept the worker's business sending someone else to do this work instead?

Yes

Would the worker's business have to pay the person who did the work instead of them?

Yes

AND THE RESULT BASED ON JUST THESE QUESTIONS?

The intermediaries legislation does not apply to this engagement.

HAHA no one is inside IR35 if they have the right of substitution!!

Re: New Tool Available and its a farce!

"Basically, If you have the right of substitution in your contract and the end client agrees with it, then you are shown by the tool to be outside the legislation!"

To make sure it's not abused (or even used!) the client generally has the right to vet / approve the potential substitute...