IR35 - does it need binning?

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ugly

LE
Moderator
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?
No, look at this sensibly, if you want to work short contracts get an agency job with an hourly rate, eventually the client will hoover you up provided there are no headcount issues, A real entrepreneur will not be headcount post filling but will be providing a niche specialist service and really should be bought in on an as needs basis. No sitting there booking the 36 hours and going home but actually taking on a task for a price.
That's the difference.
If it means loads of folk get pushed into going on the books then it will force a level of realism into the industries that have been less than upfront about their costs!
 

ugly

LE
Moderator
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.
These are the small businesses that need to charge to reflect their true costs. The problem is a small firm set up with three or four staff is often vulnerable to being bought out by the competition.
That's more of a risk to entrepeneurs
 
Well, despite all my contracts being watertight outside IR35 arrangements, it's looking like i'm heading out of business. As are 75% of the similarly-incorporated clients my accountant deals with.

Based on what I think i'll be able to earn back in the perm world, my contribution to HMRC will drop from approx £11k p/a (Corporation, Income Tax etc) to closer to £6-£7k p/a (PAYE and NI).

As things stand, I think there will also be a minimum of a 6 month gap where I have earned zero taxable income too.

Big round of applause for HMRC. They've driven tens of thousands of people out of work so they can tax them more fairly.
I got tired of fighting the bureaucracy of IR35, and the stress of looking over your shoulder lest HMRC deem you to be something you're not

So I took a permie job, work from home, and HMRC get a lot less tax off me than they used to

Why bother working hard, and chasing consultancy work if HMRC want to treat you like a leper
 
We have just finished (and won) the Mexican stand-off on one of my projects. Nearly all of us currently outside but deemed to be INSIDE IR35 going forward, collectively demanded an uplift of 40% on our day-rate or we would walk.

Customer offered 20% - we met in the middle at a 30% uplift and some Contractors are staying, once we get that in black and white and it's signed and sealed.
 
These are the small businesses that need to charge to reflect their true costs. The problem is a small firm set up with three or four staff is often vulnerable to being bought out by the competition.
That's more of a risk to entrepeneurs
Why is being bought out by the competition a risk? Surely it’s an exit strategy?

I struggle to understand how small entrepreneurial businesses are really affected by IR35. We tend to buy services or outputs rather than hours of work.
 

ugly

LE
Moderator
Why is being bought out by the competition a risk? Surely it’s an exit strategy?

I struggle to understand how small entrepreneurial businesses are really affected by IR35. We tend to buy services or outputs rather than hours of work.
More of a risk than being closed out by IR35, esp if they price for work as opposed to hourly bill.
 

ClentBoy

War Hero
IR35 for the private sector was the idiotic brainchild of the evil idiotic chancellor Philip Hammond whose first budget attempted to double the national insurance bills for the self employed then on the orders of utterly deranged prime minister of the day The Mad Christian May when that failed he moved onto PSC's a discredited idea from a discredited government that fell in 2019.
 

A.N.Other

Old-Salt
No, look at this sensibly, if you want to work short contracts get an agency job with an hourly rate, eventually the client will hoover you up provided there are no headcount issues, A real entrepreneur will not be headcount post filling but will be providing a niche specialist service and really should be bought in on an as needs basis. No sitting there booking the 36 hours and going home but actually taking on a task for a price.
That's the difference.
If it means loads of folk get pushed into going on the books then it will force a level of realism into the industries that have been less than upfront about their costs!
Problem is a lot of companies and most government agencies have headcount limits. This leaves them short handed, so they fill the gap with contractors who are paid from a different budget line. I work mostly in the Civil Service and they are feeling the pain. It took me over 7 months to recruit a solutions architect because we're inside IR35 and they thought they could offer "typical" contractor rates. In the end the architect is paid £300/day more than me and I'm the project manager!
 
I have an interview on tuesday. Going permie doing my current job for my current client. They've decided to make the role permie, meaning no more contract for me. May as go for it well given that with the typical benefits below I'll have the same disposable income at the end of the day and job security.

https://www.contractorcalculator.co.uk/what_employee_benefits_contractors.aspx
Going perm for where you were just contracting, if you weren't inside IR35, close that company down quick hoping they don't trigger an investigation

It's like putting up a big IR35red flag
 

ugly

LE
Moderator
Problem is a lot of companies and most government agencies have headcount limits. This leaves them short handed, so they fill the gap with contractors who are paid from a different budget line. I work mostly in the Civil Service and they are feeling the pain. It took me over 7 months to recruit a solutions architect because we're inside IR35 and they thought they could offer "typical" contractor rates. In the end the architect is paid £300/day more than me and I'm the project manager!
I know, its the same here in rail and those choosing to stay contractor inside IR35 are fast disappearing, the rest of us are staff with various consultancies.
 
Problem is a lot of companies and most government agencies have headcount limits. This leaves them short handed, so they fill the gap with contractors who are paid from a different budget line. I work mostly in the Civil Service and they are feeling the pain. It took me over 7 months to recruit a solutions architect because we're inside IR35 and they thought they could offer "typical" contractor rates. In the end the architect is paid £300/day more than me and I'm the project manager!
Why don't they change the way use contractors to make them outside IR35, no more hiring bums on seats, but treat them as genuine consultants

Like everything about IR35, every elephant in the room is ignored
 

A.N.Other

Old-Salt
Going perm for where you were just contracting, if you weren't inside IR35, close that company down quick hoping they don't trigger an investigation

It's like putting up a big IR35red flag
I'm already inside IR35. Working in the public sector in a department where they declare all contractors inside, regardless of setup. While another department IN THE SAME BUILDING has decided it's outside IR35. Civil Service madness.
 
IR35 for the private sector was the idiotic brainchild of the evil idiotic chancellor Philip Hammond whose first budget attempted to double the national insurance bills for the self employed then on the orders of utterly deranged prime minister of the day The Mad Christian May when that failed he moved onto PSC's a discredited idea from a discredited government that fell in 2019.
No it wasn’t. IR35 has applied to the private sector since it was introduced in 2000 by Gordon Brown. What changed in 2000 was the onus on deciding IR35 status moved from the employee to the company.

The definition of disguised employment hasn’t changed in 20 years. Nor have the indicative tests. Some industries and businesses got across IR35 the a decade it more ago. Others continued to disguise employment. All that Hammond did was strengthen enforcement.
 
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I got tired of fighting the bureaucracy of IR35, and the stress of looking over your shoulder lest HMRC deem you to be something you're not

So I took a permie job, work from home, and HMRC get a lot less tax off me than they used to

Why bother working hard, and chasing consultancy work if HMRC want to treat you like a leper
Snap. WFH is marvellous, no books to do and get a sleep in. What's not to like?
 

Cyberhacker

Old-Salt
Why don't they change the way use contractors to make them outside IR35, no more hiring bums on seats, but treat them as genuine consultants

Like everything about IR35, every elephant in the room is ignored
This is the point I've been making for the 20 years since IR35 was announced.

The problem is that (in general) employers want a flexible employee to do what they are told... without all the faff and costs of having them as an employee... a genuine consultant is a very different kettle of fish.
 
I'm lucky that the majority of my projects are outside of the UK and to non-UK based companies. I've recently completed a short term UK contract which, just out of interest, I put through HMRC's online IR35 calculator. I found several questions needed a third option as the results came out at 'indeterminable'. I feel sorry for those people caught up in blanket decisions.
 

ClentBoy

War Hero
No it wasn’t. IR35 has applied to the private sector since it was introduced in 2000 by Gordon Brown. What changed in 2000 was the onus on deciding IR35 status moved from the employee to the company.

The definition of disguised employment hasn’t changed in 20 years. Nor have the indicative tests. Some industries and businesses got across IR35 the a decade it more ago. Others continued to disguise employment. All that Hammond did was strengthen enforcement.
IR35 has never applied to PRIVATE sector in the form perscribed in the new legislation other than for IT contractors and subcontractors who work onsite within Companies themselves, HMRC used a tool known as "Are You Self Employed" to ascertain whether you were Self Employed or on PAYE. The rules for IR35 are very different to the standard definition previously applied in the legislation for the Public Sector whereas the responsibility falls to the contractor to verify the legal validity of the scope of IR35 to the subcontractor which now being applied to the Private Sector. This is a fundamental change to the legal status of the self employed via a PSC therefore I stand by my original post and state YOUR perception of the legislation and how it is applied historically to the private sector is WRONG the new legislation was applied to the private sector by Philip Hammond changing completely the dynamics of a sole director in a PSC as a subcontractor.
 
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I'm lucky that the majority of my projects are outside of the UK and to non-UK based companies. I've recently completed a short term UK contract which, just out of interest, I put through HMRC's online IR35 calculator. I found several questions needed a third option as the results came out at 'indeterminable'. I feel sorry for those people caught up in blanket decisions.
Don't rely on their online calculations, if you go by caselaw you could be outside IR35 based on legal cases but inside based on HMRC online calculator

It's been the same for every status checker they've made, they're about as useful as a chocolate teapot protecting you from a lava flow
 
Gen question; is it no longer worth setting up your own limited company these days in the construction industry?
 

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