Reply to post: Unsurprising

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

Dr. Mouse Silver badge

Unsurprising

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

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

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

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

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

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

Basic 40%

Higher 49%

Additional 53%

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