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UK.gov gears up for IR35 private sector crackdown – say industry folk

DavidRBoyle

The idea that contractors will have "nowhere to turn" is absurd and sounds like wishful thinking from someone on a salary. What is clearly not going to happen is that freelancers are going to stop working nor are their employers going to stop needing them. The contracting culture developed precisely because both companies and employees alike had nowhere to turn when there was a short term urgent need for skilled workers. The fundamentals driving contracting will not disappear.

If the tax laws change then one place contractors can turn to is using the umbrella company, paying PAYE and then campaigning for all the employment benefits that salaried staff enjoy and that employers prefer to avoid providing where possible. That's also a big *if*. There's a big gap between what HMRC wants and what is politically acceptable.

Assuming as the article suggests there's "nowhere to turn" and salaried staff gleefully witness their contractor colleagues sucking up the changed tax laws en masse, then people who are essentially the most well paid and most in demand IT professionals are going to find their net pay is less. So naturally they will demand and get higher earnings, move out of the industry altogether , retire , or move abroad. What they are not going to do is just suck up a reduction in earnings. The truth is that freelancers are a resourceful bunch who have an eviable ability. That being precisely the ability to find somewhere to turn to when others lack their vision.

Employers who are highly dependent on IT contractors such as the big banks are perfectly capable of lifting up entire operations lock stock and barrel and moving them abroad. So whatever the government says about IR35 there is always somewhere to turn.

Ultimately and inevitably any increased tax burden must fall on the end user of contractor's services which is why there is a huge gulf between claims that everything is going to be much "fairer" and the political reality. What will never happen, whatever the tax regime is, is that those on salaries will find that life will suddenly become fairer to their eyes. The best and most talented people's net pay will never become the same as that of their less talented colleagues. The market always finds a way to swerve around that happening.

Putting my tongue in my cheek a little, the real scandal is that agencies take a third of contractors wages before they are taxed and this is a tax that salaried staff avoid through the ruse they have cooked up of using 'undisguised employment' ?

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