I am a contractor and need to know what to do about - IR35

BabyBetty

Hi,

Thanks to everyone who has replied

I still have a lot of thinking to do around this.

BB

isplumm

Gavin83 wrote: »

I'm not really sure you have a complaint as you are effectively avoiding paying tax. Legally of course but it appears they're cracking down and closing the loopholes. Seems a fair solution IMO. I'm sure you'll still be earning a decent wage.

I do know a lot of contractors and most are planning on working for someone else but it is hard to have sympathy when they're paying a fraction of the tax they should be.

Hi

What a load of twaddle .... I have been contracting for 12 years - as a contractor I have no rights, no benefits, etc ... yes you get a decent rate, but remember you have to pay corp tax / accountants fee ... etc ... certainly you can earn more as a contractor ... but not mega amounts more.

I would be shocked if most contractors are planning on working for someone else - I suspect that a lot of the public sector contractors will look to move to the private sector.

Mark

motorguy

BabyBetty wrote: »

Hi,

Thanks to everyone who has replied

I still have a lot of thinking to do around this.

BB

Right, get yourself over here, and start reading....

http://forums.contractoruk.com/public-sector-ir35/

You have a REAL problem, and there is no easy solution.

If you're working for a Public Sector Body (PSB) then as of 5th April, the responsibility for deciding if you are inside or outside IR35 falls to the PSB / intermediary (your agency). THEY become liable for the tax if they get it wrong.

Most PSBs are erring on the side of caution and declaring ALL contractors to be within IR35.

SO, most likely - as per what your agency is saying - you are going to fall into IR35.

Now - the BIG PROBLEM is that this will VERY LIKELY put you on an HMRC list for possible investigation - the basis being, you were OUTSIDE of IR35 and are now INSIDE it, therefore they could pursue you on the basis of trying to extract unpaid tax from you. Even IF they arent successful they are intrusive sociopaths who will take your life apart with forensic precision and go back several years into your financial life. This could take several years and you could get a MASSIVE tax bill at end of it. No money to pay - not to worry, they'll force the sale of your car, house, etc, etc to pay for it. Or bankrupt you.

To start with your PSB, the way to LESSEN the risk, but not remove it, is to resign and have all outstanding payments made to your account by 5th April, then take on a wholly new contract after that date.

The way to REMOVE the risk is to resign and have all outstanding payments made to your account by 5th April and go find a private sector contract.

motorguy

Gavin83 wrote: »

I'm not really sure you have a complaint as you are effectively avoiding paying tax. Legally of course but it appears they're cracking down and closing the loopholes. Seems a fair solution IMO. I'm sure you'll still be earning a decent wage.

Its not a fair solution. They are hitting a very important fully mobile, fully flexible temporary workforce with full PAYE taxation without ANY of the benefits.

I dont get :-

• Sick Pay
• Holiday Pay
• Training
• Career Prospects

And on top of that i have to

• Pay for my own training
• Pay for my accountant
• Support myself through significant periods of downtime.
• Be prepared to go where the work is, live in hotels during the week, etc

And NOW :-

• Pay employers national insurance (@12%) ON TOP of full rate tax

Yet, if i'm sick, need a holiday, dont have work i dont get a penny?

Gavin83 wrote: »

I do know a lot of contractors and most are planning on working for someone else but it is hard to have sympathy when they're paying a fraction of the tax they should be.

Being a contractor is a lifestyle choice. It pays well but there are significant risks. Its also a very important part of PSBs as they use us usually to get projects over the line and get stuff done they dont have the resources / abilities to do themselves.

That is about to change -

contractors will avoid PSBs in their droves.
Most PSB projects that are manned by contractors are going to be cancelled in the short term.
Any new PSB contracts are going to have to pay significantly more to entice contractors to take them.
This suggested £400 million of recovered taxes WILL NOT HAPPEN.
And whatever they do "recover", will be offset by extra money coming from PSBs to fund having to pay higher rates.

Its robbing Peter (the PSBs) to pay Paul (HMRC)

motorguy

patman99 wrote: »

As you work through your own limited company I doubt it will have much effect on you as you are classed as an employee of the limited company.

It will

patman99 wrote: »

Speak with your accountant. At a guess, he will tell you that the agency is trying to scare you into switching to it's 'favoured' umbrella company so it can get a little backhander from them.

Your accountant will be relatively clueless

motorguy

agrinnall wrote: »

Pay the tax, that's what I did when I was contracting at the time IR35 was introduced and we all thought it was going to be enforced. As it turns out, it wasn't, but if the assumption that your client is in the public sector then I believe that you will be required to be IR35 compliant, which basically means paying out all of your company profit through PAYE with no dividends. But I don't see why the agency should be making any deductions, that's for your limited company to do.

Paying the tax is a BAD IDEA.

HMRC will have a list of people who suddenly switched, and will chase this low hanging fruit via investigations.

motorguy

unforeseen wrote: »

It is interesting that Tfl have declared ALL contracts, with the exception of a few critical roles, to be inside IR35.

Most companies have contracts with agencies that are the same across the board so how can 'critical' roles with the same contract conditions as others suddenly fall outside?.

TFL are realising how big an exodus there is going to be and trying to back track...

agrinnall

motorguy wrote: »

Paying the tax is a BAD IDEA.

HMRC will have a list of people who suddenly switched, and will chase this low hanging fruit via investigations.

So if the OP takes the job what do yu suggest that he does, evades paying the tax? In fact, it sounds like there will be no choice as he'll ever get the gross amount of the invoice anyway, what he receives will be the after tax/NI amount regardless. So the only way he can not pay the tax is to not take the job, so his income will be zero unless he finds anothe contract. I very much doubt if HMRC will do as you suggest, it didn't happen when IR35 first came in, and they have even less people to do such things now.

[Deleted User]

If you are a genuine contractor, freelancer, interim or consultant there nothing to fear from IR35. If you are working exclusively for the same company for years on end and should really be an employee, you are going to be in big trouble.

I used to work for a big government department and I have little sympathy for those "contractors" who were and are being paid VASTLY higher amounts than a standard civil servant yet enjoy the benefits of guaranteed work for years on end. Yes, you don't get sick pay etc but come on, £500 - £1000 A DAY means you aren't exactly on the breadline.

I am aware of dozens of "contractors" who have worked in the same role for over 7 years! After 2 years, agency workers should be make permanent employees.

HMRC can and will go back 6 years if they feel a contractor has abused the tax system. I say good. Those who are genuine contractors who work on short term, fixed contracts with various companies will have nothing to worry about at all.

motorguy

agrinnall wrote: »

So if the OP takes the job what do yu suggest that he does, evades paying the tax? In fact, it sounds like there will be no choice as he'll ever get the gross amount of the invoice anyway, what he receives will be the after tax/NI amount regardless. So the only way he can not pay the tax is to not take the job, so his income will be zero unless he finds anothe contract. I very much doubt if HMRC will do as you suggest, it didn't happen when IR35 first came in, and they have even less people to do such things now.

If hes already in the role, and is running over 5th April and being changed to IR35, then yes, he would be safest to resign in advance of it and have all his invoices paid by 5th April and run as fast as he can.

The next safest option would be to do the above and then have a new contract with the client, different job title, starting maybe mid April.

If he hasnt taken the contract at all yet, i personally wouldnt, and i'd look for a private sector gig.

They dont need a lot of people to investigate this BTW, they will have all the info at hand.

There is a load of people better placed than you or i who believe HMRC WILL pick off the long hanging fruit with this - IPSE & QDOS to name just a couple

http://www.contractoruk.com/news/0012890ir35_inspectors_probe_public_pscs_retrospectively.html

(that link might need to be cut and pasted to make it work..)

Allowing yourself to be flipped over to inside IR35 from an outside IR35 stance previously in the same contract is absolute madness. You will just be a sitting duck.