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

motorguy

camelot1971 wrote: »

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.

Correct. However two things about this NEW legislation :-

1. HMRCs view of who should be in or out is NOT based on case law - its based on their skewed view. Their new tool is skewed 95% in favour of being IN.
2. PSBs are opting for a no risk approach and putting ALL contractors into IR35 stances - for example like TFL have done. So a contractor could quite correctly deem themselves outside of IR35 and then be TOLD - because of a risk averse PSB, they are incorrectly IN

camelot1971 wrote: »

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.

Correct. However what about the thousands of contractors who are brought in to staff short term projects and other activities to fill short term employment / knowledge gaps who are now going to be hit by this?

Not only that, but they could investigate you retrospectively, so its not just going forward they can go back 6 years and bill you for ££,£££s based on their SKEWED view of IR35 legislation.

camelot1971 wrote: »

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.

Correct. However thats poor management by the PSB. If someone is there for 7 years they're covering a substantive role.

camelot1971 wrote: »

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.

Lets not forget the following :-

• An HMRC investigation can take several years and they will go in to your life in forensic detail.
• HMRC believe 90% of contractors should be inside IR35. Case law has shown it to be around 30%.
• If HMRC bill you, you're left taking on HMRC in court which would take an awful lot of money to fight and take up more time and stress to prove you are right.
• Personally, giving HMRC the opportunity to investigate my life and having me jumping through hoops for years is not my idea of fun. And that is a LOT to worry about.

isplumm

motorguy wrote: »

HMRCs view of who should be in or out is NOT based on case law - its based on their skewed view. Their new tool is skewed 95% in favour of being IN.

As far as I am concerned HMRC are convinced that ALL contractors are a bunch of tax dodgers - we have all been tarnished with the same brush of those public sector workers who worked through a LTD company, but in reality were employees in but name - earning £1k+ a day!

They are desperately trying to destroy the contract market as we know it - we are easy targets.

Mark

motorguy

isplumm wrote: »

As far as I am concerned HMRC are convinced that ALL contractors are a bunch of tax dodgers - we have all been tarnished with the same brush of those public sector workers who worked through a LTD company, but in reality were employees in but name - earning £1k+ a day!

They are desperately trying to destroy the contract market as we know it - we are easy targets.

Mark

Yup. Private sector will be next.

The laughable part is - what HMRC will "recover" by doing this will be grossly offset by the extra cost to the PSBs who will have to either pay larger rates (+30 to 40%) to entice contractor in to an IR35 contract OR the PSBs will engage with managed services companies like IBM and Capita, who'll charge them DOUBLE what they were paying contractors anyway.

danandgeorgie

I have read this thread with interest. The arguments presented are the same that I am hearing in pso's across the country. I have been working as a contractor for 4 years since being made redundant from my voluntary sector role. I started by setting up a Ltd company. I have never been anywhere more than 6 months and for most of the time I have had at least two income streams to the company. The business risk is entirely mine and I pay all my own insurances etc.... I can claim nothing if sick, I want a day off or I am left between contracts for months at a time. Camelot 1971 may well know contractors to PSOs on £!K per week for years on end with the same PSO but I can assure you that for the vast majority of us the truth is a fraction of that sum and little more than the full benefits package available to the PSOs own employees except that the PSOs are not advertising pay role posts.
The reality of this policy is to try to drive contractors into permanent roles with PSOs as PAYE Employees. Not sure where this fits within the Human Rights Act (whilst we still have it). Does anyone know anything about that? Have there been any challenges? It's all well and good saying move to the private sector but there is no private sector to speak of in my area of expertise.
Anyway after a long lay off I started a new contract in May. it was only for a month and today I agreed another one with a different PSO for 3 months. Both contracts are arranged via different recruitment agencies. Both PSOs err on the side of protectionism and claim the tasks are inside of IR35. One can argue if one wishes but then most PSOs are withdrawing short term contracts from those that do. Recruitment company one gave me a list of Umbrella Companies and because there is now no benefit whatsoever in running my own company I signed up with what seemed the best one. I don't understand the payslips! The second recruitment agency has said it will not work with the current umbrella company as it considers them non compliant. Why? Who knows? The current Umbrella Company are basically giving a take home of approximately 62% of gross. One umbrella company I was put in touch with said they would pay me 82% of gross but they wouldn't put t&cs in writing and claimed it involved lending me my own money - I ran a mile!
Right finally to the point - How do you know which umbrella companies are ok and which are dodgy? Does anyone have a way of comparing these companies easily in terms of legality, integrity and pay rate?

Any advice would be gratefully received.

paddyrg

I know this is an old thread, but changes in circumstance come and go. I see complaints referring to corporation tax and income tax, but they're mutually exclusive, you don't suffer both. I see no mention of dividend tax that levels the playing field aside from NI, so if someone is £500/month worse off, that's only the NI component of earning ~£5k/month - a problem many people would like to have.

It's unfortunate, but contractors spoiled this for themselves by taking the Mickey, so there is a correction. I speak as a long term limited company owner and contractor, with many clients and short projects, not sitting for 7 years in what was clearly a permanent position.

Many people may have gone into company ownership and contracting for short-term gain without understanding the implications, people who'd have been better off as permies wanting a regular wage and stability. Honest contracting was never about those things. The lifestyle is and requires a lot of flexibility to fall outside IR35. You need multiple real contracts per year. And to realise a company owes you nothing, no loyalty, nothing being what is in your contract. Threatening to leave en masse isn't as big a scare as it sounds - things will get held up but roles will get filled.

Ironically the high taxes people are upset about are high because of public sector spending. The elected government rightly or wrongly is about cutting taxes, but that also means cutting the things they attend taxes on, like contractors who want the security of a permie role with the money of contract.

motorguy

paddyrg wrote: »

It's unfortunate, but SOME contractors spoiled this for themselves by taking the Mickey, so there is a correction. I speak as a long term limited company owner and contractor, with many clients and short projects, not sitting for 7 years in what was clearly a permanent position.

Key word added there for you.

The problem now is a lot of people are being unfairly punished. Lots of companies are taking the "inside IR35" blanket approach because they are too spineless / too risk averse to do otherwise.

motorguy

paddyrg wrote: »

Ironically the high taxes people are upset about are high because of public sector spending. The elected government rightly or wrongly is about cutting taxes, but that also means cutting the things they attend taxes on, like contractors who want the security of a permie role with the money of contract.

Its in a contractors interests to make sure a contract is extended as long as possible. Thats not wanting the security of a permie role, thats business sense.

The problem for the government is that the contracting workforce have always been a very flexible, agile body that fill resourcing gaps as and when and are compensated for that - which must then cover their downtime, travel expenses, training, sick, accountancy fees, pension, etc.

Forcing people into IR35 does NOT take in to account any of that, so they're making it relatively unpalatable to people to stay as contractors.

Also, i'm in an IR35 contract now in a public body. It would previously have been deemed outside of IR35 but they have applied a blanket approach.

They seemed somewhat surprised that once it had been deemed inside IR35 i upped my rate by 20% - to cover THEIR obligations to pay employers NI and apprenticeship levy and also to cover my annual leave entitlement that they are now obliged to pay.

All that this new legislation has done is to rob Peter to pay Paul - HMRC will get some extra revenue (but nowhere near the figure of £400M they bandied about) but pubic bodies have had to increase the rates they're paying to pay for that (OR accept a lower standard of contractor)

motorguy

danandgeorgie wrote: »

Right finally to the point - How do you know which umbrella companies are ok and which are dodgy? Does anyone have a way of comparing these companies easily in terms of legality, integrity and pay rate?

Any advice would be gratefully received.

Get yourself over to the UK Contractor forum

All the advice you'll need and they have a list of approved umbrella companies...

http://forums.contractoruk.com/

danandgeorgie

Unfortunately that is the very sort of assumption that is causing contractors like me all the upset. We are wanting perm contracts. We provide a vital short term service at short notice and we take all the business risks of any other self employed person yet we are not allowed to benefit from running our own business. With PSOs claiming everyone falls inside of IR35 they feel the right to order contractors around as if they are employees. We are not their employees.

IR35 has been around for years. Previously it was the contractors responsibility to ensure that they were operating within the law and of course they have always been in trouble if proven not to be. Now that responsibility to operate within the confines of the law is removed from us. What other area of society does this apply to? People wonder why we feel unfairly treated and as several others have pointed out the net cost in financial and social terms is crazy economics.