IR35 - does it need binning?

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.
Contractor's work where ever the work is and when ever the work is or isn't. In 12 years I was out of wowrk for at least 1, I had one contract for ~ 2.5 years that was commutable, otherwsie the very best I coudl do was live away Monday to Friday, typically I'd only come home very other weekend. I also spent nearly 3 years working overseas. On one job things went financially pear shaped with the parent company and I was 'let go' with a months notice. If there isn't some incentive to do this compared with salaried staff then some folks will not play.


As UORMan observed above the usual alternative for companies that want some genuine temporary staff for a project is a consultancy company at inevitably a lot higher rate. The other advantage of sole operators is when you find some decent ones you know if you go back to them what you're getting; a consultancy company will just pull a bunch of names out of a hat.


The scam is where the staff are not working on short term projects and stay with the same company for 20 years. It’s not hard to spot and the way to stop it is to take on the company running the scam not the individuals.
 

NSP

LE
IR35 - does it need binning?
It should never have got as far as an idea sketch, let alone got to the stage where it was in a form that could be tossed in a bin.

Red Dawn should have been taken out and shot, with the sole draft of this nonsense pinned to her bird's nest as an aiming marker.
 
Contractor's work where ever the work is and when ever the work is or isn't. In 12 years I was out of wowrk for at least 1, I had one contract for ~ 2.5 years that was commutable, otherwsie the very best I coudl do was live away Monday to Friday, typically I'd only come home very other weekend. I also spent nearly 3 years working overseas. On one job things went financially pear shaped with the parent company and I was 'let go' with a months notice. If there isn't some incentive to do this compared with salaried staff then some folks will not play.


As UORMan observed above the usual alternative for companies that want some genuine temporary staff for a project is a consultancy company at inevitably a lot higher rate. The other advantage of sole operators is when you find some decent ones you know if you go back to them what you're getting; a consultancy company will just pull a bunch of names out of a hat.


The scam is where the staff are not working on short term projects and stay with the same company for 20 years. It’s not hard to spot and the way to stop it is to take on the company running the scam not the individuals.
There are plenty of employees who take jobs away from where they live. I’ve done it myself; rented accomodation at my place of work. And there are many who drive huge distances in their own cars. Contracting is a lifestyle choice that is often subsided by the taxpayer. IMHO the IR35 rules are fair and haven’t been enforced properly.

But that wasn’t why I posted on this thread. It was the OPs assertion that choosing a tax avoiding lifestyle is somehow entrepreneurial that I responded to.
 
Contracting is a lifestyle choice that is often subsided by the taxpayer.

Absolute bollox.
I am a contractor because I am good enough to do my job and I get paid a lot of money to do it. Without having to 'care' about a company that does not give a toss about it's employees, without having to bother with useless performance reports and so called career progression.

For this, I go without all of the perks that a permie gets such as medical, pension, holiday pay and other benefits.
After I have made my VAT/Corporation Tax and Self Assesment tax payments, I end up paying a lot more tax per year than the permies around me that are supposed to be doing the same job.
I average about 18-24 months per contract and I expect to be paid a good amount to do so. There is no longer such thing as a permanent job in business. the government and HMRC are being completely inept in their management of the whole concept.
 
There are plenty of employees who take jobs away from where they live. I’ve done it myself; rented accomodation at my place of work. And there are many who drive huge distances in their own cars. Contracting is a lifestyle choice that is often subsided by the taxpayer. IMHO the IR35 rules are fair and haven’t been enforced properly.

But that wasn’t why I posted on this thread. It was the OPs assertion that choosing a tax avoiding lifestyle is somehow entrepreneurial that I responded to.
What precisely do you think is fair about IR35, you get taxed as an employee, but are also denied the employment rights of an employee and the benefits of an employee, whilst being disallowed from claiming travelling expenses that a genuine employee would be able to claim
 

jrwlynch

LE
Book Reviewer
IMHO the IR35 rules are fair and haven’t been enforced properly.
So, I get hit with IR35, which means that because I'm an "employee" not a "contractor" I pay employee's NI and standard PAYE, rather than corporation tax on company profit.

But since I'm an employee, I get sick pay if I'm ill or injured? No, I don't.
I get paid holiday, like other employees? No, I don't.
But as an employee I get job security and protection from arbitrary dismissal? Nope, when I saved the taxpayer £150 million pounds I was promptly out of work (after I proved the Army didn't need to buy the shiny gizmo they wanted)

Because I'm employing myself, apparently, so I should make provision for all of that from my own post-tax post-NI income. Oh, and as a special bonus, since I'm 'employing myself' I had to pay employer's NI as well as employee NI to finance all these benefits and protections I'm not getting.

And this while I'm taking on other jobs (proving I've not got exclusivity) and as above, getting binned as soon as the work I was hired for ended proves no mutuality of obligation - so I wasn't inside IR35 anyway, but the rule was "that's the status we apply, no appeal" - to which the answer is "fair enough, bye then..."

And now there are problems recruiting contractors, to add to the problems of recruiting permanent staff... who'd have thought?

Not sure where the "fair" part comes in... you could go with the claimed original intent of IR35 and argue that "if you're really just an employee pretending to be a contractor to cut your tax bill, you should be on PAYE and be treated like any other employee", but demanding more tax and NI for no benefit is a urine-extraction business.
 
What precisely do you think is fair about IR35, you get taxed as an employee, but are also denied the employment rights of an employee and the benefits of an employee, whilst being disallowed from claiming travelling expenses that a genuine employee would be able to claim
I don’t think it’s fair. The fact is that big business and, in particular, public sector organisations, abused employment law in order to avoid tax and NI liabilities. Those who genuinely provided contracted business services have lost out. There are winners and losers.

As I said before, the only reason I painted on here was because the OP asserted that self-employed consultancy to the public sector is somehow entrepreneurial. It isn’t.
 

Tired_Tech

On ROPS
On ROPs
I don’t think it’s fair. The fact is that big business and, in particular, public sector organisations, abused employment law in order to avoid tax and NI liabilities. Those who genuinely provided contracted business services have lost out. There are winners and losers.

As I said before, the only reason I painted on here was because the OP asserted that self-employed consultancy to the public sector is somehow entrepreneurial. It isn’t.
The op, @Brexit_Pride aka @Bagl0ck is a little but simple.
 

A.N.Other

Old-Salt
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.
The 2019 Loan Charge is backdated to 1999, not 7 years.

As a result of this there have been 5 suicides to date, divorces, 40% of contractors surveyed have considered self harm/suicide and a number of people made bankrupt.

HMRC are sticking 2 fingers up to MPs from all parties who are calling on them to suspend activities.
 
The scam is where the staff are not working on short term projects and stay with the same company for 20 years. It’s not hard to spot and the way to stop it is to take on the company running the scam not the individuals.
That’s the badger.
Endemic in government, local authorities and the NHS.
De facto permanent employees avoiding tax.
Frequently made redundant junior and middle managers who walk out the door ‘redundant’ on Friday with a big pay off and walk back in the door on Monday as a ‘contractor’.
 
Frequently made redundant junior and middle managers who walk out the door ‘redundant’ on Friday with a big pay off and walk back in the door on Monday as a ‘contractor’.
In my experience that is usually due to the incompetence and stupidity of the company. They have redundancy quota's to fill. They don't care how vital person A is, they have to lose X amount of people from Pot B.

Me: "Yes but without Him or Her, this project will fail as they are a single point of failure and you have refused to hire extra similar specialists or provide training to get other people up to speed on Person A's specialty."

Company: "We don't care, we have quotas to fill".

Me: "Ok, that's the £12 million project on hold then".

Company: "Oh...why is that?"

A week later....

Person A: "Why yes, I would happily do the same job for 2-3 times the monthly pay as a contractor...I would be stupid to say no. Same desk? Why thank you."
 
That’s the badger.
Endemic in government, local authorities and the NHS.
De facto permanent employees avoiding tax.
Frequently made redundant junior and middle managers who walk out the door ‘redundant’ on Friday with a big pay off and walk back in the door on Monday as a ‘contractor’.
I worked with a fellow contractor at a big govt dept who'd been there 12 years. The moaned like hell when the new CFO brought in a rule that no contractor could be employed for more than 24 months, and then had to have a 6 month gap before being reconsidered with the dept.

In my experience that is usually due to the incompetence and stupidity of the company. They have redundancy quota's to fill. They don't care how vital person A is, they have to lose X amount of people from Pot B.

Me: "Yes but without Him or Her, this project will fail as they are a single point of failure and you have refused to hire extra similar specialists or provide training to get other people up to speed on Person A's specialty."

Company: "We don't care, we have quotas to fill".

Me: "Ok, that's the £12 million project on hold then".

Company: "Oh...why is that?"

A week later....

Person A: "Why yes, I would happily do the same job for 2-3 times the monthly pay as a contractor...I would be stupid to say no. Same desk? Why thank you."
Or sometimes there's other juju afoot. A company I worked for years ago laid about 30% of the IT dept off and re-employed half of them back as contractors. In some cases even providing assistance with setiing up as a contractor. Funnily enough they were the ones with the highest company pension liability (it was one of the last final salary schemes). Nine months later they signed an outsourcing deal with a big service provider. Yes, whilst all the pretty much all the permies TUPE'd across, most of the contractors were given their marching orders within a month.

However, every cloud etc. I was one of those first-time contractors. I'd never considered contracting before, and after the initial (good) shock of a hefty redundancy package, and the (bad) shock of being made redundant, it set me up as a contractor for the rest of my working life. I was tough at first but looking back it's probably the best career decision I've made, albeit forced upon me.
 

Blogg

LE
Can be a lot of confusion around "managed service contracts"

When we are on site often referred to as "contractors" by clients. Some have client email addresses and on internal Distribution Lists, e.g.

"DL_Helpmykitisfcuked@megacorp.com"

But the contact itself is with my esteemed employer to provide kit, install software, updates etc. maintenance & user support and bodies to do all that remotely or on site.

How much confusion? Well the HR Departments of a few clients have demanded IR35 assessments for all on site staff.

Which is at first entertaining as all those concerned are full time employees of our own company with totally compliant PAYE & NIC to go with it. But then becomes tedious as they won't let it go.

Best of all is that two of my guys were previously IT Contractors working for HMRC and bailed along with many others when Public Sector got all in a snot about IR35. They were far from alone.
 
In my experience that is usually due to the incompetence and stupidity of the company. They have redundancy quota's to fill. They don't care how vital person A is, they have to lose X amount of people from Pot B.

Me: "Yes but without Him or Her, this project will fail as they are a single point of failure and you have refused to hire extra similar specialists or provide training to get other people up to speed on Person A's specialty."

Company: "We don't care, we have quotas to fill".

Me: "Ok, that's the £12 million project on hold then".

Company: "Oh...why is that?"

A week later....

Person A: "Why yes, I would happily do the same job for 2-3 times the monthly pay as a contractor...I would be stupid to say no. Same desk? Why thank you."

Local councils in particular exploit it as a means of giving managers nearing retirement anyway huge cash windfalls while retaining their services.
 
Local councils in particular exploit it as a means of giving managers nearing retirement anyway huge cash windfalls while retaining their services.
The trouble is that because of these abuses, normal honest Contractors are going to be screwed over by HMRC who are going to use a sledgehammer to crack a nut.


Sod going Permie, I would rather emigrate.
 
The trouble is that because of these abuses, normal honest Contractors are going to be screwed over by HMRC who are going to use a sledgehammer to crack a nut.


Sod going Permie, I would rather emigrate.

True, but it’s a way to end rackets like making a Council Manager aged 55 ‘redundant’, giving him £550,000 in cash as a ‘redundancy’ payment, and then reemploying him on the Monday in exactly the same job as a ‘contractor’ until he retires in 5 years. Win-win for him, taxpayer royally ripped off. It’s become an accepted Spanish practice across local authorities in particular.

I see a lot of people these days who are with a firm so long as their sole ‘contract’, people think they are permanent staff which in reality they really are. Most ‘contractors’ Really aren’t, and a lot of people use IR35 to avoid tax with the connivance of their employer who keeps the seat warm until Monday. NHS has a lot of admin staff playing that racket.
 

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