IR35 - does it need binning?

Brexit_Pride

Old-Salt
Given the disaster that the new implementation of IR35 rules has been, having motivated the public sector to blanket find all contractors in many cases inside IR35. The result has been a chronically understaffed public sector

Is rolling it out to the private sector and effectively killing off the concept of a flexible workforce in the UK what we need? given we are about to embark on the brexit adventure and need all the deregulation and agility in a post brexit Britain.

The loan charge is also a cack handed travesty.

Sajid Javid has called for IR35 to be scrapped in the past. Will he live up to his pro business credentials by removing this barrier to entrepreneurialism?
 
Given the disaster that the new implementation of IR35 rules has been, having motivated the public sector to blanket find all contractors in many cases inside IR35. The result has been a chronically understaffed public sector

Is rolling it out to the private sector and effectively killing off the concept of a flexible workforce in the UK what we need? given we are about to embark on the brexit adventure and need all the deregulation and agility in a post brexit Britain.

The loan charge is also a cack handed travesty.

Sajid Javid has called for IR35 to be scrapped in the past. Will he live up to his pro business credentials by removing this barrier to entrepreneurialism?
Why aren't you using your normal account?
 

UORMan

War Hero
Why aren't you using your normal account?
Not sure about your accountant question !
The issue seems, in my humble opinion, that sole contractors are told it is IR35 and places like the MOD will only pay a day rate of £275 to £350 to these guys, whilst at the same time outsourcing work to "Consultancy" firms, who put in people, some who would have originally been sole contractors on £850 to £1000 a day, but because they come from a "pool" of that companies employees they are NOT IR35 liable.
 
I can't comment for MOD / DIO employees, but as someone who runs a small company, IR35 is intended to prevent tax avoidance by companies "employing" people [as distinct from "sub-contracting"]. I.e. companies circumventing employment legislation to use cheaper sole trader type "limited companies" often via agencies in order not to pay pensions, sick leave etc.

It's wrong to blame IR35 for an employment system which is broken. I used to work with a contractor who had worked for the same company on the same job for over 25 years via an agency but officially a "limited company" and therefore avoiding tax and NI, but taking the risks of sickness / pensions payments. This type of contractor was, and still is, common in certain industries.

I'm fortunate in that I don't fall under IR35 as I can pass all of the tests on the list, but I know of many who, if they do get caught, are going to end up with some very big tax bills dating back >10 years, and will be given 28 days to pay.

Check employment status for tax
IR35 Test: Free Online Status Check for Contractors

If IR35 is enforced properly then it will push rates up, but it will also reduce job security for contractors too as companies will be giving fixed short-term contracts. This will have the side effect of screwing with everyone.

If anything, HMRC should go after the companies who push out these contracts as well as the individual contractors who frig the system deliberately.
 
I've heard it said but not necessarily seen any evidence to support it, that IR35 was strongly pushed to the Treasury by the big consultancies who were fed up seeing big chunks of work being awarded to independent, self employed contractors, rather than handed on a plate to the PwC's, E&Y's, Accenture, etc. Who would then offshore all the grunty stuff to India whilst keeping the big fees for themselves.
 

Tired_Tech

On ROPS
On ROPs
Given the disaster that the new implementation of IR35 rules has been, having motivated the public sector to blanket find all contractors in many cases inside IR35. The result has been a chronically understaffed public sector

Is rolling it out to the private sector and effectively killing off the concept of a flexible workforce in the UK what we need? given we are about to embark on the brexit adventure and need all the deregulation and agility in a post brexit Britain.

The loan charge is also a cack handed travesty.

Sajid Javid has called for IR35 to be scrapped in the past. Will he live up to his pro business credentials by removing this barrier to entrepreneurialism?
You need to ask @Bagl0ck. He's banged this drum too.

Beware though. He's f*cking nuts.
 

AlienFTM

MIA
Book Reviewer
I've heard it said but not necessarily seen any evidence to support it, that IR35 was strongly pushed to the Treasury by the big consultancies who were fed up seeing big chunks of work being awarded to independent, self employed contractors, rather than handed on a plate to the PwC's, E&Y's, Accenture, etc. Who would then offshore all the grunty stuff to India whilst keeping the big fees for themselves.
I wasn't long out of consultancy (salaried, after redundancy I took one contract where Sole Trader would have worked, but couldn't be arrsed with the hassle. Then ACL - @Tedsson - took me on, salaried).

The feeling among people I knew (IBM had contractors. Indeed technically I started as a Fixed Term Contractor, four years on permanent terms until a boss found out, I signed a piece of paper and went permanent) was that Brown destroyed many a life with IR35.
 
The sub-contracting system has been abused by both sides for far too long. IR35 is part of the solution but HMRC should also be going after the big companies that deliberately go out to employ contractors as cheap labour in order to avoid NI, sickness benefits and pension contributions.

I'm fortunate in that 90+% of the work I do is fixed price and I have a variety of clients. I also stand not to be paid if the client doesn't cough up. I've had the solicitors involved twice in the past 3 years for customers who haven't paid 6 months afte submission of invoice.
 
Given the disaster that the new implementation of IR35 rules has been, having motivated the public sector to blanket find all contractors in many cases inside IR35. The result has been a chronically understaffed public sector

Is rolling it out to the private sector and effectively killing off the concept of a flexible workforce in the UK what we need? given we are about to embark on the brexit adventure and need all the deregulation and agility in a post brexit Britain.

The loan charge is also a cack handed travesty.

Sajid Javid has called for IR35 to be scrapped in the past. Will he live up to his pro business credentials by removing this barrier to entrepreneurialism?
In what way is IR35 a barrier to entrepreneurism? Those affected by IR35 are sole traders or operate personal service companies. Neither involve any entrepreneurial risk. Foregoing sickness pay, pension contributions and paid holidays in exchange for tax and NI benefits is not entrepreneurial risk.
 
If the company that I contract for want to put me inside IR35, they will have to increase my day rate so I will not be negatively affected.
Hopefully Sajid will can it as it has been poorly implemented and there a a fair few public sector contracts that I won't touch due to it's implementation.

HMRC seems to be on a mission to kill contracting though so I doubt they care about how it all goes, the loan loophole decision is one example of HMRC implementing nasty and dodgy laws just to stitch up some contractors.
Making it illegal is fine, but backdating the law 7 years is dodgy as **** and I am amazed that they have managed to make it stick.
 

Tyk

LE
In what way is IR35 a barrier to entrepreneurism? Those affected by IR35 are sole traders or operate personal service companies. Neither involve any entrepreneurial risk. Foregoing sickness pay, pension contributions and paid holidays in exchange for tax and NI benefits is not entrepreneurial risk.
Actually that's simply not true. I've been a contractor for the better part of 30 years, to illuminate my point regarding risk in that time I have had:-

Several projects canned for a variety of business reasons -- Contract immediately over no matter what other work was turned down or how long is left in the contract term. No point trying to push it as the customer can simply declare there's no work to do and you only get paid for time actively working.
Customers go bust -- Contractors are WAY down the list of debtors to be paid off so work done not paid and contract over immediately.
Agency gone bust -- Seen this twice, resulting in weeks of graft paid for by the customer but not paid to me at all. Again no chance of getting the lost money back.
Multiple occasions of committing to a customer and turning down other work for the start to be delayed, extensively delayed or simply canned, typically this is the customer not having budget signed off properly or being overruled. Had it happen on day 1 on several occasions having paid to get there, paid for hotels etc just to find the customer isn't ready, but didn't bother to tell anyone.
After having to fight hard to get over 100k of materials paid (my suppliers had to be paid) for by a major multinational I gave up supplying equipment direct to customers.
There are other elements, but if the above isn't a measure of business risk, then you've got a damn funny idea of what is,
 
In what way is IR35 a barrier to entrepreneurism? Those affected by IR35 are sole traders or operate personal service companies. Neither involve any entrepreneurial risk. Foregoing sickness pay, pension contributions and paid holidays in exchange for tax and NI benefits is not entrepreneurial risk.
It's not just the sick pay, holiday etc that's the issue.

Pretty much all of my contracts are in the SE. As such I have to stay away in hotels. If I'm outside IR35 I can claim travel and subsistence expenses against the profits of my Ltd company. Inside IR35 I can't. That's a big difference for me. As much as a 33% drop in my income before adding in the difference in Income Tax vs Corporation Tax, and the increased NI.
 

Bluenose2

Old-Salt
Customers go bust -- Contractors are WAY down the list of debtors to be paid off so work done not paid and contract over immediately.
Which is the situation I find myself in today. One client I recently finished with has gone into administration, leaving me chasing them for invoices which total approx 0.7% of the amount I saved them over an 18 month period.

They've owed it to me since February, but managed to hive off the profitable part of their business and sell it for a tidy sum on the day they folded the remainder, leaving suppliers like myself utterly shafted.

But yeah...no financial risk !

Also - my net tax burden (mostly Corp Tax) is way higher than it was as a senior PAYE salaried manager. If I am chased out of contracting by HMRC, then both parties will end up with less in their pockets.
 
I can't comment for MOD / DIO employees, but as someone who runs a small company, IR35 is intended to prevent tax avoidance by companies "employing" people [as distinct from "sub-contracting"]. I.e. companies circumventing employment legislation to use cheaper sole trader type "limited companies" often via agencies in order not to pay pensions, sick leave etc.

It's wrong to blame IR35 for an employment system which is broken. I used to work with a contractor who had worked for the same company on the same job for over 25 years via an agency but officially a "limited company" and therefore avoiding tax and NI, but taking the risks of sickness / pensions payments. This type of contractor was, and still is, common in certain industries.

I'm fortunate in that I don't fall under IR35 as I can pass all of the tests on the list, but I know of many who, if they do get caught, are going to end up with some very big tax bills dating back >10 years, and will be given 28 days to pay.

Check employment status for tax
IR35 Test: Free Online Status Check for Contractors

If IR35 is enforced properly then it will push rates up, but it will also reduce job security for contractors too as companies will be giving fixed short-term contracts. This will have the side effect of screwing with everyone.

If anything, HMRC should go after the companies who push out these contracts as well as the individual contractors who frig the system deliberately.
The whole point of IR35, is not to punish the people avoiding NI, but to punish the workers instead. It benefits the big consultancies, as they are immune to IR35, the idea is to punish the self employed and push them into employment, that although this means less tax for government, it makes people more reliant on the state which is always the end game

If the companies or agencies directly employed the workers they would have to pay employers NI, and be responsible for PAYE and making tax and employees NI deductions, as well as holiday pay and sick pay

Much better to push the risk onto the worker, then if they're declared an employee, the deemed employee is only an employee for tax law purposes, conveniently in employment law they will still be self employed, even though the will have to pay the taxes due as an employee. Quite convenient for both the government and the end employer this 'deeming' really
 
As I said, abuse of the system.
 
Actually that's simply not true. I've been a contractor for the better part of 30 years, to illuminate my point regarding risk in that time I have had:-

Several projects canned for a variety of business reasons -- Contract immediately over no matter what other work was turned down or how long is left in the contract term. No point trying to push it as the customer can simply declare there's no work to do and you only get paid for time actively working.
Customers go bust -- Contractors are WAY down the list of debtors to be paid off so work done not paid and contract over immediately.
Agency gone bust -- Seen this twice, resulting in weeks of graft paid for by the customer but not paid to me at all. Again no chance of getting the lost money back.
Multiple occasions of committing to a customer and turning down other work for the start to be delayed, extensively delayed or simply canned, typically this is the customer not having budget signed off properly or being overruled. Had it happen on day 1 on several occasions having paid to get there, paid for hotels etc just to find the customer isn't ready, but didn't bother to tell anyone.
After having to fight hard to get over 100k of materials paid (my suppliers had to be paid) for by a major multinational I gave up supplying equipment direct to customers.
There are other elements, but if the above isn't a measure of business risk, then you've got a damn funny idea of what is,
If you are supplying materials to a client you are clearly not an employee and you are taking entrepreneurial risk. Any discussion about IR35 is irrelevant as it doesn’t affect you. Although quite why anyone sane would operate as a sole trader and supply £100k+ of materials to a client beats me.

The issue of clients not paying for work is certainly a business risk, but it’s not an entrepreneurial risk. You are being paid for hours worked. In any event, if you are pushing the boundaries of IR35, that risk could readily be mitigated by complying and being employed.

I’d have sympathy with an argument that enforcing IR35 harms entrepreneurism if it was argued from the other side; that businesses can’t grow without access to contract staff and that enforcing IR35 dries up the supply.

But the idea that self-employed contracting to government departments is somehow entrepreneurial is laughable.
 
Applies equally to several / many other large private organisations.

ICI in the 1990s had many "contractors" employed via agencies who had been with the company for >>10 years.
BNFL ditto,
Shell, ditto
Amec, Costain, Etc, etc

One company I worked for told me that I didn't meet their criteria for graduate entry but they would employ me as a contractor. I ended up as a "company specialist" (still on contract) having been there nearly 10 years. Thankfully tis was pre-IR35 as I was employed via an agency and would therefore be caught under IR35 if it was today.

Obviously companies want "cheap" labour without having to do all the associated admin associated with pensions, tax, NI etc. And, of course, no redundancy payments, and can be got rid of at 1 weeks notice.
 

Cyberhacker

Old-Salt
The vast majority of (limited company) "contractors" are nothing more than (as pejoratively described elsewhere) bums on seats... they are well paid agency temps (albeit by inserting a limited company in the chain).

The use of limited companies only really started in 1978, when agency temps were stripped of their self-employed status.

Life would be much less pretentious if the agency temp tax rules were tweaked to also apply for limited company contractors.

The real problem with IR35 (and all the subsequent anti-avoidance guff around managed service companies etc) is that it (probably unintentionally) affects genuine consultancy and support businesses.
 

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