[BerislavLopac]

The problem with the recent -- currently postponed -- changes is not with the IR35 itself; it has been a thing for quite some time now. The changes are about redefining who is responsible for determining the IR35 status: in the old (still valid) regulation, the responsibility is in the hands of the contractor's company, while with the new changes it falls down to the end client.

The reason this change is not welcome by the contractors is that many end clients -- primarily large banks and similar corporations -- do not want to bother checking each individual contract; instead they tend to make blanket decisions and declare all external contracts as inside IR35. And being inside IR35 is the worst of both worlds: you get taxed as if you're a full employee, but you're still not entitled to full employee's benefits like paid sick days or holidays.

[bambataa]

I must admit I’ve never really understood this argument against IR35. Contractors don’t get tax breaks to compensate for the lack of employee benefits. They get higher day rates to compensate for that. How the tax is handled isn’t part of the deal. If my last contract had been inside IR35 it would have still been better than perm pay for that reason.

Too many contractors seem to view lower taxes as one of the perks of being a contractor and in that sense I think the reforms are well-intended though I wont’t say the implementation has been perfect.

[chuck3201]

> How the tax is handled isn’t part of the deal.

It kind of is though? There is a reason why company directors are able to withdraw money as salary or as dividends - their income is less stable, they take more risk, so they are allowed to take more profit in good times but they feel the pain more in bad times too.

Also, as limited company contractors, we haven't received any meaningful support from the government over Corona. Most contractors pay themselves a minimum salary of around £719 / month. The only government support available to such people now is to furlough themselves which gives you £575 / month, which is only a tad above universal credit.

I'm not complaining about that though, its fair enough because we are NOT employees, but thats also why HMRC should stop treating us like employees too.

[bambataa]

The day rate being higher accounts for the uncertainty. There is also nothing preventing a director paying themselves a monthly salary (e.g £2k) to flatten out the highs and lows. I very much doubt the directors of larger businesses are paying themselves a tiny salary and taking dividends. It seems to be only IT contractors who see it like that. Maybe it’s more widespread than I thought.

If you deliberately structure your income to minimise tax you can’t really complain that it also minimises the support available.

Edit since you said you’re not complaining. I understand in-IR35 contracts aren’t eligible for furlough? That’s definitely an example of poor implementation imo.

[chuck3201]

> The day rate being higher accounts for the uncertainty.

Thats partially true, but if you look at outside IR-35 contracts, they might go for £400 / day. While the same kind of work but inside IR35 goes for £600 / day. So HMRC are effectively pushing the burden of a flexible work force entirely on the shoulders of contractors and the clients they work for. This is a huge disruption to both businesses and contractors alike, its also questionable if it will even raise enough revenue for HMRC to make the disruption worth it.

> I very much doubt the directors of larger businesses are paying themselves a tiny salary and taking dividends. It seems to be only IT contractors who see it like that.

You're right, directors of big businesses are paying themselves salaries in the 6 figures and taking out even larger dividends. But for myself, I am usually only in work about 6-9 months a year, I've never worked a contract for more than 6 months, when I'm not in work I spend that time learning and up-skilling to invest back into my career and business. I cannot realistically put myself on a salary of £2k / month when its perfectly feasable that I might be out of work for 6 months or more at any one time. The bottom line is that my working conditions and the benefits I receive (or lack thereof) are much closer that of somebody running a "real" business than it is to a permanent employee, so I should not be taxed as an employee.

> I understand in-IR35 contracts aren’t eligible for furlough?

Honestly I have no idea! I've only ever work outside IR35. I would have thought that inside IR-35 would be comparable to gig-economy workers and sole-traders so they should get 80% of their average earnings over the last three years. But again I am not certain of that.

EDIT: If you're talking about people who work the same contract job for 2+ years and are effectively employed by their client despite working through a limited company, then yes I would agree they are cheating the system. But instead of going after those people, HMRC are making the majority of contractors like myself who are genuinely self-employed, pay for the sins of a minority of contractors who are actually in disguised employment.

[BerislavLopac]

I'm not exactly sure what you mean by "this argument against IR35". My comment was trying to explain what the changes are about, not whether IR35 should exist of not.