Contractors: IR35 & general discussion
Discussion
FFS.
The British government is steaming ahead with plans to extend its controversial off-payroll working rules to the private sector in draft legislation published today.
From April 2020, medium and large companies will be responsible for determining whether the contractors they hire fall within the scope of IR35 legislation and are liable to pay a higher rate of tax.
https://www.theregister.co.uk/AMP/2019/07/11/gov_e...
Assholes.
The British government is steaming ahead with plans to extend its controversial off-payroll working rules to the private sector in draft legislation published today.
From April 2020, medium and large companies will be responsible for determining whether the contractors they hire fall within the scope of IR35 legislation and are liable to pay a higher rate of tax.
https://www.theregister.co.uk/AMP/2019/07/11/gov_e...
Assholes.
ChevronB19 said:
Totally genuine question, asked purely from my own ignorance - what’s the problem with this?
Contractors will have to pay employers NI on top of employees NI (extra 14%) and cannot retain money in the company to cover periods out of work.They will get no employee benefits of being an employee.
I'm a contractor, and have decided to retire when my contract ends in September. I will go from paying high rate tax to being on JSA
Edited by 98elise on Friday 12th July 01:02
Perhaps naive but I'm still hopeful.
Unfortunately clients won't be able to push their national insurance costs onto the contractor (illegal?) so will face potentially huge additional costs to maintain a flexible workforce. Then there's attrition.
My client is already consulting 'experts' to help classify contractors. My gut is that they're looking for a watertight solution that may change how we operate, but in a way that clearly puts us outside. Not that we weren't anyway but you know
If I'm wrong then I'll just ask for an equivalent rate rise to cover my losses and think most will do the same. Fortunately I have more than one client so will still be able to operate my ltd co. (< 50 employee clients) .
Maybe I'm being naive again but clients must be crapping themselves at the moment, faced with higher costs and attrition. It could all be avoided quite easily so will be interesting to see how companies react. My guess is those who have failed to prepare will suffer.
Unfortunately clients won't be able to push their national insurance costs onto the contractor (illegal?) so will face potentially huge additional costs to maintain a flexible workforce. Then there's attrition.
My client is already consulting 'experts' to help classify contractors. My gut is that they're looking for a watertight solution that may change how we operate, but in a way that clearly puts us outside. Not that we weren't anyway but you know
If I'm wrong then I'll just ask for an equivalent rate rise to cover my losses and think most will do the same. Fortunately I have more than one client so will still be able to operate my ltd co. (< 50 employee clients) .
Maybe I'm being naive again but clients must be crapping themselves at the moment, faced with higher costs and attrition. It could all be avoided quite easily so will be interesting to see how companies react. My guess is those who have failed to prepare will suffer.
Edited by SOL111 on Friday 12th July 06:51
Of course the really annoying thing is that contractors have been taken to court by HMRC in the past and lost. Even a contractor for one of my past clients was taken to court and they lost. I don't think HMRC have won many cases except for the odd BBC one.
Why they think it'll suddenly change is ludicrous.
Why they think it'll suddenly change is ludicrous.
SOL111 said:
Perhaps naive but I'm still hopeful.
Unfortunately clients won't be able to push their national insurance costs onto the contractor (illegal?) so will face potentially huge additional costs to maintain a flexible workforce. Then there's attrition.
My client is already consulting 'experts' to help classify contractors. My gut is that they're looking for a watertight solution that may change how we operate, but in a way that clearly puts us outside. Not that we weren't anyway but you know
If I'm wrong then I'll just ask for an equivalent rate rise to cover my losses and think most will do the same. Fortunately I have more than one client so will still be able to operate my ltd co. (< 50 employee clients) .
Maybe I'm being naive again but clients must be crapping themselves at the moment, faced with higher costs and attrition. It could all be avoided quite easily so will be interesting to see how companies react. My guess is those who have failed to prepare will suffer.
I think/hope pretty much this.Unfortunately clients won't be able to push their national insurance costs onto the contractor (illegal?) so will face potentially huge additional costs to maintain a flexible workforce. Then there's attrition.
My client is already consulting 'experts' to help classify contractors. My gut is that they're looking for a watertight solution that may change how we operate, but in a way that clearly puts us outside. Not that we weren't anyway but you know
If I'm wrong then I'll just ask for an equivalent rate rise to cover my losses and think most will do the same. Fortunately I have more than one client so will still be able to operate my ltd co. (< 50 employee clients) .
Maybe I'm being naive again but clients must be crapping themselves at the moment, faced with higher costs and attrition. It could all be avoided quite easily so will be interesting to see how companies react. My guess is those who have failed to prepare will suffer.
Edited by SOL111 on Friday 12th July 06:51
Clients want a flexible workforce and contractors want to be flexible, so I think between us we can make it work.
Since this idea started to be banded around, I always thought that the ultimate end point would be a rise in rates to cover the loss of net income.
My hope is that clients and contractors will just be more careful and more specific with contract conditions to ensure that the contractor is so clearly outside of IR35 that there is no case to answer. If a client said to me that I am not allowed to use their canteen as it is for employees only, I would have no grumble.
I cannot face the despair (or wages) of being staff again so I'll either have to make it work in some manner or go and work overseas.
Keep the faith.
GT03ROB said:
98elise said:
I'm a contractor, and have decided to retire when my contract ends in September. I will go from paying high rate tax to being on JSA
If the only reason is this change, I'd say that's a bit nose spiting face.I would not take a contract under IR35 regardless. The difference between contract and perm isn't that huge in my area, so an additional 14% tax over what I'd pay as a permanent member of staff almost brings parity (when you factor in the benefits)
CzechItOut said:
What's to stop a handful of contractors getting together, forming a "consultancy" and working through that company?
It has nothing to do with the way the company is set up, or how many employees it has.It about how the work is contracted, and how the working relationship works for the particular piece of work. Things like the right of substitution, mutually of obligation, notice period, set hours, control of work, responsibility for f
k ups etc..
The changes will mean the employing company makes the IR35 decision, on behalf of the contractor. It's cheaper and less risky for the employing company to determine that the contractor is inside IR35, so that's what will happen. The market will then determine if rates should rise to compensate.
Of the last 14 IR35 cased HMRC have taken to court, they have lost 12, so even HMRC are wrong in the majority of its cases.
98elise said:
Mr Pointy said:
You could always decide to operate as Sole Traders instead. No IR35 worries then.
None of my contracts would have allowed for being a sole trader. I also would not want to take on the personal risk.Quote from El Reg comments said:
The original IR35 looked like the End of the World As We Know It. But then people who were familiar with this area of tax and employment law pointed out that Inland Revenue (as they were then) had a consistent record of failure when trying to prove employment status. And so it transpired: you can count HMRC's IR35 successes in the intervening 20 years without taking your shoes off.
It's a measure of the value of contractors to UK business that IR35 was absorbed without disruption. The new rules will probably be similarly accommodated. Most companies that hire contractors don't do so because they can save on the tax bill, but because they can avoid long-term commitment or because it's the only way to obtain rare skills. They won't like paying more, but their needs remain the same, so they'll either just increase rates or, more likely, devise a set of arrangements that satisfies the new requirements.
This is how i see it panning out. There will be some initial confusion/knee jerk reaction (as there was in the public sector), but it will all sort itself out, with the likely outcome being contractors and client companies working together to create an IR35 friendly working relationship.It's a measure of the value of contractors to UK business that IR35 was absorbed without disruption. The new rules will probably be similarly accommodated. Most companies that hire contractors don't do so because they can save on the tax bill, but because they can avoid long-term commitment or because it's the only way to obtain rare skills. They won't like paying more, but their needs remain the same, so they'll either just increase rates or, more likely, devise a set of arrangements that satisfies the new requirements.
Contractors worthy of the name should have a war chest to cover eventualities such as this. If you don't I'd start saving now!
zippy3x said:
Quote from El Reg comments said:
The original IR35 looked like the End of the World As We Know It. But then people who were familiar with this area of tax and employment law pointed out that Inland Revenue (as they were then) had a consistent record of failure when trying to prove employment status. And so it transpired: you can count HMRC's IR35 successes in the intervening 20 years without taking your shoes off.
It's a measure of the value of contractors to UK business that IR35 was absorbed without disruption. The new rules will probably be similarly accommodated. Most companies that hire contractors don't do so because they can save on the tax bill, but because they can avoid long-term commitment or because it's the only way to obtain rare skills. They won't like paying more, but their needs remain the same, so they'll either just increase rates or, more likely, devise a set of arrangements that satisfies the new requirements.
This is how i see it panning out. There will be some initial confusion/knee jerk reaction (as there was in the public sector), but it will all sort itself out, with the likely outcome being contractors and client companies working together to create an IR35 friendly working relationship.It's a measure of the value of contractors to UK business that IR35 was absorbed without disruption. The new rules will probably be similarly accommodated. Most companies that hire contractors don't do so because they can save on the tax bill, but because they can avoid long-term commitment or because it's the only way to obtain rare skills. They won't like paying more, but their needs remain the same, so they'll either just increase rates or, more likely, devise a set of arrangements that satisfies the new requirements.
Contractors worthy of the name should have a war chest to cover eventualities such as this. If you don't I'd start saving now!
Mr Pointy said:
zippy3x said:
Quote from El Reg comments said:
The original IR35 looked like the End of the World As We Know It. But then people who were familiar with this area of tax and employment law pointed out that Inland Revenue (as they were then) had a consistent record of failure when trying to prove employment status. And so it transpired: you can count HMRC's IR35 successes in the intervening 20 years without taking your shoes off.
It's a measure of the value of contractors to UK business that IR35 was absorbed without disruption. The new rules will probably be similarly accommodated. Most companies that hire contractors don't do so because they can save on the tax bill, but because they can avoid long-term commitment or because it's the only way to obtain rare skills. They won't like paying more, but their needs remain the same, so they'll either just increase rates or, more likely, devise a set of arrangements that satisfies the new requirements.
This is how i see it panning out. There will be some initial confusion/knee jerk reaction (as there was in the public sector), but it will all sort itself out, with the likely outcome being contractors and client companies working together to create an IR35 friendly working relationship.It's a measure of the value of contractors to UK business that IR35 was absorbed without disruption. The new rules will probably be similarly accommodated. Most companies that hire contractors don't do so because they can save on the tax bill, but because they can avoid long-term commitment or because it's the only way to obtain rare skills. They won't like paying more, but their needs remain the same, so they'll either just increase rates or, more likely, devise a set of arrangements that satisfies the new requirements.
Contractors worthy of the name should have a war chest to cover eventualities such as this. If you don't I'd start saving now!
zippy3x said:
Mr Pointy said:
zippy3x said:
Quote from El Reg comments said:
The original IR35 looked like the End of the World As We Know It. But then people who were familiar with this area of tax and employment law pointed out that Inland Revenue (as they were then) had a consistent record of failure when trying to prove employment status. And so it transpired: you can count HMRC's IR35 successes in the intervening 20 years without taking your shoes off.
It's a measure of the value of contractors to UK business that IR35 was absorbed without disruption. The new rules will probably be similarly accommodated. Most companies that hire contractors don't do so because they can save on the tax bill, but because they can avoid long-term commitment or because it's the only way to obtain rare skills. They won't like paying more, but their needs remain the same, so they'll either just increase rates or, more likely, devise a set of arrangements that satisfies the new requirements.
This is how i see it panning out. There will be some initial confusion/knee jerk reaction (as there was in the public sector), but it will all sort itself out, with the likely outcome being contractors and client companies working together to create an IR35 friendly working relationship.It's a measure of the value of contractors to UK business that IR35 was absorbed without disruption. The new rules will probably be similarly accommodated. Most companies that hire contractors don't do so because they can save on the tax bill, but because they can avoid long-term commitment or because it's the only way to obtain rare skills. They won't like paying more, but their needs remain the same, so they'll either just increase rates or, more likely, devise a set of arrangements that satisfies the new requirements.
Contractors worthy of the name should have a war chest to cover eventualities such as this. If you don't I'd start saving now!
You might find your contracts start including clauses indemnifying your employers against these costs as well.
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