[Closed] IR35..Brexit...Corona.. Construction Industry

In the IT contracting world there is a lot of noise and flouncing on LinkedIn around the IR35 situation.
I’m a contractor who views it as a proper 1st world problem - life will go on even if we have to pay a bit more tax 🤷‍♂️

^^ This.

I've stopped taking on Contractors via LTD companies. We decided as a organisation we didn't want to be seen to circumvent the IR35 rules, so it's either FTC's or nothing. And we've planned for loosing some folks, but it's for them to decide.. they've had long enough warning about it.

What does annoy me (and others in the IT world) is that the MoJ and other Government bodies are still pushing out contracts outside of IR35.

Which is frankly typical Tory double standards.

I'm with oldtennisshoes on this too - I really have no problem working roles inside IR35 if that's the determination - I certainly have done in the past. However, I'm curious about bikebouys response - it seems a bit heavy handed..

However, I’m curious about bikebouys response – it seems a bit heavy handed..

I'm the contingent worker policy manager for a very large company and we are doing something similar. No more contractors through ltd co, although we do still take them on through umbrella and paye routes.

Many of the large employers of non perm staff are doing similar, not worth the risk or hassle of letting folks go via ltd.

The problem in my industry is that a lot of employing companies want contractors to be employed in a PAYE role but are unwilling to offer these employer benefits of pensions, sick pay etc. It's basically turning into zero hours contracts for a considerable amount of people currently. We have a lot of people who move from company to company in a very fluid working environment.

Was talking to some IT contractors about this the other day. It seems that HMRC have published some new clarification on blanket bans on ltd company contractors that some companies are imposing and it apprears that in doing so, it may have opened them up to the financial penalties that they thought they were avoiding. All the contractors at the firm (many hundreds) have been told they have to go via an umbrella company of the firms own choosing. The managers dont know it yet but at least 50% of them are not turning up next month, which may be interesting.

https://www.itcontractor.com/ir35-contractor-blanket-ban-companies-stuffed-hmrc-now-say/
https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm10014

"EXAMPLE OF A CLIENT NOT TAKING REASONABLE CARE
A medium, non-public sector, company engages an agency to supply workers. The workers supplied by the agency operate through their own PSCs. The client decides not to take any steps to prepare for the introduction of the off-payroll working rules. They elect to simply determine that all workers who provide their services through a PSC will be caught by the new rules, because they undertake similar roles and are engaged under similar terms and conditions. They do this, believing that this will protect them from any liability to pay tax and NICs on payments to those workers. The client passes the same SDS to every worker and the agency."

Risk aversion, simple.

We are only issuing FTC’s from now on. Our main client has issued similar policy and that’s how we will manage it from now on.

I have heard Umbrella is an option for other organisations, but that’s their choice.

I myself contracted for a little while years ago, I went through an umbrella company the agent had and I paid the same tax as everyone else. Then that role turned perm and I stayed there for years after that, recently ex colleagues of mine have been knocking on the door about roles and opportunities but I’ve said the same as I’ve said here to them.

They've not been happy with the message, but we don’t live in the world we used to so you have to either suck it up and pay tax at source via PAYE or .... well..... don’t take the job.

Agree to some extent that FTC’s offer no material benefits (holiday entitlement accru) but when contracts were typically 6/12mths maybe an extension contractors were forced to take 4weeks close out anyway (meaning no pay)

But, I didn’t make the rules. You have your glorious leaders for these changes so blame them.

It's interesting how the whole thing has come full circle.

Years ago, contractors would have been genuinely self employed. Then the government decided that they weren't paying enough tax so made the engagers liable for the shortfall.

Cue everybody becoming Ltd Co.

Then, the government decides that contractors aren't paying enough tax so they make the engagers liable for the shortfall.

Ever get the impression the government don't like contractors?

Those that I know are calling it a day and retiring or going abroad. Already made their money I suppose.

Honesty I think “good on em’ “

It was once lucrative to contract, LTD perks and all that. But as an employer we only budgeted/spent the same on contractors as per employee as an FTE.

2 close friends of mine have been contracting for at least 20yrs, have great reputations and are in demand.. they’ve enjoyed every perk known to man and I applaud them for their resilience through out the ever changing marketplace.

It remains to be seen how this affects them, as one has been offered an FTE role he currently undertakes... and he’s naturally reluctant because the pay gap is quite substantial.

But Jimdub makes the point far better than I have.

At the risk (certainty) of being machine gunned to death...

For about the last 20 years of contracting:

The experience I saw of IT contractors "running" a LTD company led me to firmly believe that every single one was a just tax dodge engine - none met the "retrospective" IR35 rules of being itinerant- they were long term employees. The IR35 stuff raised its head years ago.

Those that thought/think their contract rate = salary are morons and largely deserve the cold shower they are now getting. Your "real, when the party ends" figure you should live to is 1/3 your contract rate. It was and is that f-ing simple.

When I contracted, I went via the PAYE route (paying employees and employers NI).

I'm not a bull541ting, "plastic socialist", like so many contractors I worked with. When I throw the first rock from my moral high ground, I want it to go far and carry much force.

Runs for cover of the Guardian web site....

IR35 (IT) is a top 5%, 1st world problem.

Thing is there are people who are genuinely business who are getting effected by this. They have genuine costs, supply equipment etc etc. They are not disguised employees, it will be impossible for them to continue with this legislation. Even though they would be deemed out side IR35 if every big company deems them in, then its game over.

Probably putting a target on my back but what the hell!
I'm in this position. Currently contracting in IT and have been for years and never stayed anywhere for more than 2 years. I've taken that risk of not working sometimes and also taken very few days off. I do like to think I'm fairly good at the job and will turn my hand to most stuff.

Now I'm currently with a client, contract is being chopped at the end of March because of IR35 and that leaves me fishing around for something else. Surprise surprise while there seem to be jobs around I imagine there's a lot more people going for every role and it's proving tough to get anywhere.

Current client has offered me a perm role and I'd like to take it BUT they've taken my rate ex.VAT, chopped off PAYE & NI, chopped off another bit and then costed out of the remainder
Holidays
Pension
Medical
Misc other benefits & costs
Now, I'd like those benefits (especially paid holiday) but they're not really a benefit and it's not really paid holiday when it's costed out of your gross. Ultimately I'd be paying for every one of those "benefits" and it would give me a Net take home leaving me in the red every month, living off savings and ultimately contributing less tax to HMRC than I am as a contractor once everything is taken into account.

Thanks a lot Conservatives, the party of small business!

That's kind of the issue though isn't it? Most Ltd. co. contractors aren't really small businesses in the real sense of the word. Previously you cost the company you worked for £X/yr. presumably based on some sort of value you created for the business. When you go permanent you will create no more value than you do now, arguably less because the company will have to do more for you and carry more risk for your output and performance. How can it be a surprise that the business will not increase £X? It's totally irrelevant to them what you end up with, just that the total cost does not increase.

I have been though the online tool and thought you could argue a lot of self-employed solicitors and accountants could be caught by this in just the same way.

Contracting is inherently risky and involves costs that PAYE don't. You could apply IR35 to just about any one man band that is employed by a business rather than a domestic customer.

In IT there's little option if you're contracting it has to be through a Limited Company, agencies won't represent you and clients won't hire unless it's a Limited Company.

How do you ultimately determine what a small business really is?
Use your own equipment? Most clients don't like that because of security risks, IT is a bit different to being a chippy or a plumber in this respect.
Produce something? I do, my output/contribution/expertise is my product.
Work for different clients? I do, albeit usually not for days/hours usually for months, IT projects tend to take a bit longer than putting in a boiler.
Investment? I invest in myself, training keeping up-to-date (or vainly trying to) etc.
Taking Risks? Every contract end is a risk. This time more so than any other.

The clients don't like the legislation, they want to have the flexibility to hire and fire quickly with roles from 1 week up to 2 years without the overhead of permanent employees. I've worked in places with difficult permanent employees who would have been shown the door pretty sharpish if they were contractors but everyone just had to put up with them.

I also like the flexibility of contracting, the ability to move on if something doesn't suit, the lack of office politics, having to meet new challenges or learn new skills.

Unfortunately at least in the short term it looks like the IR35 legislation is going to upset the market and cause issues for everyone.

It’s affecting another mate of mine who is a sound engineer, does mostly TV stuff, run through an agency but via his own LTD company.
Single supply chain/client, tasked out for length of production, has travel/overnight to payout for and vehicle/equipment.

Now you’d think he’s a self employed “genuine” self employed sound engineer. Yet IR35 is knocking on his door too.

I foresee plenty of legal challenges in the near future.

Ever get the impression the government everyone don’t like contractors?

FTFY

Fact is that for the vast majority of folks I have come across who contract (i have 20 odd years working in recruitment type roles mainly in It, finance type industries etc) they are basically being paid a shed load more than their perm equivilent to do the same role. They don't have any more flexibility than the perm staff, they don't use their own equipment, they aren't allowed to bring in a mate to replace them when they are off sick.

Up until now they have generally been paid more and managed to avoid tax. Now they are being asked to pay their fair share they aren't happy..limited sympathy if I'm honest. They should be keeping their fingers crossed that HMRC doesn't come after them for backdated tax. I just read an article about some chap who got stung for 70ks worth !!

Permie gloaters beware....it's not long before companies work out that inside IR35 workers are just like employees, except they have zero entitlement to holiday, sick pay and other benefits. It's like a zero hours contract for skilled professionals. You might as well move everyone, permies and contractors alike onto them.

See https://norightsemployee.uk/ for your future.

and the change isn't quite as described...

before (aka outside IR35): Pay less tax, get no holiday / sick / benefits
after (aka inside IR35): Pay same tax, get no holiday / sick / benefits

neither option puts contractors on the same footing as permies

before (aka outside IR35): Pay less tax, get no holiday / sick / benefits
after (aka inside IR35): Pay same tax, get no holiday / sick / benefits

The engagement between a ltd co and and employer was a business to business relationship. The employer pay the ltd co, the ltd co then pay the worker a salary plus benefits.

Moving forward, the agency worker regulations ensure paye/umbrella contractors get holiday pay, bonuses, financial benefits in line with permies. Ltd co's won't however.

You Also forget to mention that contractors by and large are paid far more than perm equivilent, so whilst they may have lost the tax perks they are in main still earning more than permies

gency worker regulations ensure paye/umbrella contractors get holiday pay, bonuses, financial benefits in line with permies

I'd like to see some evidence for this please...

You Also forget to mention that contractors by and large are paid far more than perm equivilent,

Good old british tall poppy syndrome at its finest.

I’d like to see some evidence for this please…

If you want evidence look it up. Or you can take the word of the man that is responsible for making sure one of the uk's largest companies pays many thousands of contingent workers in line with the regulations. It's my job, I've been doing it for many years, and trust me we don't pay contractors bonuses out the goodness of our hearts. Our legal team stipulate we must inline with UK legislation.

Good old british tall poppy syndrome at its finest.

Eh..maybe im misunderstanding the expression but I'm pretty sure it refers to resentment of people of 'higher status' does it not?? How does that apply here.i have simply pointed out a fact.

Thing is there are people who are genuinely business who are getting effected by this

Yup. I was a PSC providing chemistry and operations support to the oil & gas industry. Worked a few weeks at one site for one company doing one particular job, then moved to a completely different site for a completely different company doing sometimes the same, sometimes different job. They all appear to have thrown the IR35 blanket over all contractors, and at that point there is little incentive to stay in that line of work - forcing you to work as an employee but with no employee benefits? No thanks.
Half by luck, half by having a very good representative on my behalf and half by me being pretty good at what I do (which isn't maths), I've landed a contract overseas, I'm classed as a resident overseas and I'm paying tax overseas, but the company I'm contracting for is still trying to IR35 me. There doesn't appear to be any attempt to perform individual contractor assessments, so I can fully understand why contractors are pissed off.

forcing you to work as an employee but with no employee benefits?

Would you get paid a similar pro rated salary if you were perm? If so then I agree you are getting bad deal.

Can't speak for all disciplines, and there can be fairly large differences between what different companies pay their staff, but for what I did it was very much a bad deal: I reckon I'd have been around £100/month better off than an actual employee but no sick pay, no pension, no staff benefits, no travel allowance and accountancy fees to pay on top.

Typed a response earlier but lost it. Anyway it amounted to -
To all those who have an issue with contractors and I've met a few through the years if you think contracting has always been such an easy way to get paid loads more money for doing the same job then why do only a few go contracting and most stay as permanent staff?
Could it be because it suits some people and others are too scared of the risks involved. Often those same people who are scared of the risks are the first to point the finger and throw the "Tax Dodger" accusation around, which I'm frankly tired of and it really ****ing annoys me now.
What annoys me even more is that the shyster politicians behind this will all be cruising cushy PSC roles as public speakers or be directors of large IT service providers or Banks in a few years time.

There's always been a few sitting in their contract roles for 5-10 years+ they are a tiny minority. Most of us are out there getting paid a decent amount for doing something we're actually good at. Moving from client to client, site to site, town to town doing the work that is required. This seems to be frowned on for some reason.

trust me we don’t pay contractors bonuses out the goodness of our hearts. Our legal team stipulate we must inline with UK legislation.

This is interesting @tpbiker
I get that the Agency Worker Reg's say that agency staff have to be treated the same as perm staff, didn't know it extended to bonuses though. Have you got a reference to which bit of the Reg's says that?

Bonuses etc are counted as corporate benefits and don’t fall under the AWR.

I'm having to go perm. Apparently the overall cost is the same to the company whether we're contractor or perm. Currently I'd rather be contractor and take home more cash but with holiday and benefits it seems overall not much different. I pay tax overseas so no dividend tax benefits like in the UK anyway.

Bonuses etc are counted as corporate benefits and don’t fall under the AWR

Ignore this, it's not true.

Have you got a reference to which bit of the Reg’s says that?

It falls under basic terms and conditions after 12 weeks, equal right to pay etc etc. I think it's section 4 of the awr guidance section entitled 'pay'. It specifically calls out bonus linked to individual performance.

Apparently the overall cost is the same to the company whether we’re contractor or perm.

No “apparently” about it. It costs the organisation the same amount whether you are perm or contractor. We just account for it in a different way.

Granted some benefits like Life Insurance/Perks for lunch/bonus/pensions etc. Aren’t the same, and nor should they be. That’s for the contractor to pay themselves those perks.

We aren’t far away from the deadline, I’m keen to see people’s views once this has come into force.

We aren’t far away from the deadline, I’m keen to see people’s views once this has come into force.

It kind of has already, the legislation covers all invoices paid in April, so if you are on 30 day payment terms, work you do in March is under the new regime.

I'm a CTO in the tech start up space (London) and about 1/3 my team are contractors and the rest are perm. We are above the size that means we have to do the IR35 assessment, and its not too much of a ballache as our contractors have limited project scopes. It's also a heck of a competitive advantage as many large companies (banks, consultancies, pharma) are blanket including all their contractors, in effect offering them a 30% take home pay cut and getting none of the benefits. This is allowing me to scoop up all their best contractor talent for very hard to recruit roles, especially in the devops and security areas.

For people who have been in the same contract for years, they are going to be better off going perm - you get the benefits that come with the taxation at least. Going into an umbrella arrangement is a unwise move IMHO. If you are outside IR35 after April then you probably were before April too - it's putting a big backtaxes target on your face.

I expect that the gravy train for median ability contractors is over. For people who are very highly skilled in areas that in high demand, the work will still be there, but it will be an elite activity. For the last 3 years, the only real requirements to land a £450+ a day software engineering contract were a passport and a pulse.

That all said, combined with the rest of the macroeconomic mood music I think a lot of normal people are going to get hurt pretty badly from this in the short and medium term.

It kind of has already, the legislation covers all invoices paid in April, so if you are on 30 day payment terms, work you do in March is under the new regime.

I think they changed that, only work undertaken in the new tax year :-
https://www.accountingweb.co.uk/tax/hmrc-policy/ir35-scope-of-off-payroll-rules-changed-from-april-2020

I think it’s just the IT industry’s turn for a crackdown. They did it with construction and the film/TV industry.
The film one was a bit odd where heads of department would be paid normally so directors would essentially be freelance as would the gaffer but anyone with assistant in their title was taxed at source. I know a few people who were put on the call sheet as ‘driver’ when they were a runner or assistant brought in for a few days. Or if you supplied your own equipment like a director of photography you were self employed (or limited co) it all sounded like a bit of a fudge TBH.

I don’t do much work in TV world but a few years back most ad agencies would not employ a photographer on schedule D. I never understood this insistence on being LTD when the contract would only be for a few days and never repeated or perhaps a few jobs a year. It’s the main reason I went LTD.

Not sure which industry is next? One with lots of freelancers directly employed by companies and higher earners.

It costs the organisation the same amount whether you are perm or contractor.

yes that's what I said