I am far from being an expert, but on the other side now it might be easier for Britain to set up more favourable conditions for startups and tech companies since now they don't have to comply with EU laws.
Startup scene was already good before Brexit. So, some additional startup boom will not happen because one other issue, parallel with Brexit and pandemic UK government decided to kill (predominantly) IT contacting by creating some changes to IR35 law (basically increasing taxes significantly to that specific group).
All those combine will have strong impact on UK, I live in London, and finance is probably 80% of how UK makes money. Most of the goods are imported, we do not produce anything (I am exaggerating but not far from truth).
Just to remind, people voted pro Brexit because of a red bus with a large text saying that each week £350 million goes to EU (which was wrong but hey...) that is £18.2 bn a year. Meaning Morgan Stanley is shifting permanently, with one swift move, 6.5 years ... and heaven know about how many jobs... All that also have combined effect as each person working there feeds many others (builders, bakers, creditors...)
"Remain" side was warning about all this, but unfortunately, people have not listened.
Correct. It’s UK’s own income tax legislations designed to tackle tax avoidance of mostly IT contractors being paid via dividends in single person companies.
It is not tax avoidance if you have limited company. Why should single person companies be different than large corporations?
Rules should be the same for all, single person or multi person company ... so Amazon, Google, Microsoft and everyone else should instead paying dividends pay full PAYE... meaning each share holder should pay 60% and more taxes.
One more reason why is harder to succeed with startup... heavy taxes are for those that are at the begining.
It is exactly tax avoidance. It is a method of structuring employment such that single-person contractors who are employees in all-but-name get to pay less tax.
Single-person companies are still free to exist, like other companies. What's no longer permitted is employees pretending to be single-person companies.
By the pattern of your answer I can conclude that you have never been contractor, so you do not know enough about IR35. But fair enough you have huge karma so you can downvote my answer.
IR35 has existed for very long time and has relied on determination of who is in or out, liability before was on Limited companies to determine status. Now, government shifted that liability to employers as for the past 10 years they have not got more than handful of cases in the court against those single-person companies.
So, employers in fear of heavy fines, are using blanket approach and placing everyone Inside IR35 regardless of their real practices.
Those really big are exempted of taxes, you just need to have enough money and good leverage.
Now, why was contracting good in UK?
Because short rotation of contact was helping to increase "salaries" (rates). Permanent employees do not negotiate salaries on regular bases, and what I have experienced that they sitting on the same level for years.
Natural tendency in capitalism is to maximize profit for shareholders and minimize all expenses in process. Salaries of permanent employees are expense column.
Why is this bad news for all companies, regardless of higher rates, it is easier to discharge contractors. Having very strong unions in UK, that will not go easy with permanent employees. Meaning startups will have issue to find people on short term bases.
And many more things to cut the long story short... Nothing to do with fairness but as Jean-Baptiste famously declared “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
That new IR35 changes are bad proof is decision to delay it for one year because of pandemic...
Are directors taxed differently from employees? I've not been a director of a single person company but from what I recall (it's been a while) I didn't pay anything other than normal PAYE for being an employee/director. Of course as a shareholder you may be subject to other taxes but you can be a shareholder without being a director and vice versa.
I know having a limited company is not tax avoidance.
I'm talking about IR35. The sole reason it was created is to fight "a tax avoidance loophole" (not my words) where without the intermediary (limited company) the single person would be an employee instead.
The single person is avoiding tax in the same way and to the same extent as any shareholder in a limited company. If they wanted to fix the "loophole" they should tax dividend income the same as employment income for everyone in the UK. Singling out individual contractors is arbitrary and complicates the tax system for everyone.
if 'startups and tech companies' is a euphamism, for shysters, con-artists, charlatans and crooks, then yes, i do believe that Britain is about to get EVEN more attractive
Funny, because by that logic London wouldn't have been attractive to companies in all this time it spent in the EU
Oh and now they're losing facilitated access to the whole of EU developers. But I guess that doesn't matter (even though the flood of openings I see on Linkedin, etc)
I worked at a startup during the brexit vote and our recruitment plummeted immediately afterwards. We would only get about 10-20% of the EU candidates applying as before. No change in UK candidates.
Anecdata: the start up I work for now has to spent significant time and money serving our customers in the EU, reducing our margins. Brexit has no benefits to us, we were doing perfectly well working with customers in Europe as well as in other countries.
If you were starting a tech company why would you choose to start a company in a country which appears to be decidedly against the idea of economic cooperation and free trade. A country that is deluded enough to remove itself from one trading block because, apparently, its much stronger on its own.
If your comment refers to some sort of utopia where trade and business is deregulated and capitalists can happily roam in the wild I'm afraid you might be disappointed. The average Brexit voter has significantly more to gain from the welfare state and big government than the current crop of politicians. Regulation isn't going anywhere and is probably going to increase as the government seeks to prop up its finances without the aid of the EU.
I find Brexit an emotive topic, if only because "Project Fear" is and was always going to be "Project Reality".
IF they truly believe they have more to gain from the welfare state and big government they are mistaken. Maybe someone who need immediate help will benefit from the welfare state but the best long term plan is always self reliance and hard work, the goal should be to create a robust and free economy such that the individual is free from reliance on the government. This is the root of the conflict in the US now, democrats want to foster a system that increases reliance on the government and republicans want to reduce this reliance.
Less reliance on government in the public health sector has been a great strategy in the fight on COVId, hasn’t it?
Also, you say that republicans have fought to reduce reliance on government but in the last 4 years there’s been a big increase in the federal budget to spend more on military. Aren’t they doing the opposite of what you said? And how is that a free economy when tons of new tariffs have been introduced?
I feel sometimes that people don’t realize that the government has been doing the exact opposite of traditional republicans orthodoxy.
Re Covid, I'm not sure what the government can do, the news of the virus was plastered all over the news. I don't need to government to tell me that if a novel virus is circulating that I need to avoid contact, the people who continued to live normally decided to roll the dice at their own or elderly family members expense, those people made personal decisions and the poor souls they cam in contact with are paying the price, it's not appropriate to blame the government for those actions of private citizens. There is simply no legal precedent to order people to stay home, would you have declared martial law and arrested anyone seen outside their home?
I'm speaking about republican citizens, not "republican in name only" politicians, don't conflate the two. Politicians of all parties are guilty of saying and doing different things.
People absolutely realize the government has been doing the exact opposite of what orthodox republicans want, that is what made Trump seem worthy of a dice roll, he campaigned on a bunch of goals that claimed to try and reverse those decisions.Those goals were either thrown out once he realized how difficult it would be to actually accomplish them or thrown out because he never cared to give it a real go. Given the long time government employees that either quit or were fired and the resistance from establishment politicians both D and R I lean towards the first reason.
Indeed the military budget has been increased, that is driven by our need to fight two full-blown wars on two fronts, our military strategy is based on a worst case scenario. That is the goal that is not talked about publicly but is true. We can expect the military budget to continue to increase.
Re tariffs, they are the right strategy. The primary job class that has been reduced is manufacturing. A large chunk of those jobs were lost to China, the only way to bring those jobs back is to make those Chinese government subsidized imports less attractive to buyers. The tariff strategy can work but it looks like we need to tax imported goods that could feasibly be made in the US by 100-300%, only then will you go to Wal-Mart and find that the US Made goods are in the same price range as the Chinese goods. This is the same strategy that Euro zone and Asian countries use to keep their citizens buying local. Our politicians sold us out circa ~1979. The implementation of these tariffs was a half-measure, it takes years to plan/design/build/ a factory and bring those products to market, Trump should have focused on a 20 year plan that both parties agreed to continue after he left office.
So poor and disenfranchised people want a more equal redistribution of all the economic output and the rich class prefers the status quo, you just have blown out my brain.
Poor people mostly want opportunity. For 2 hundred years that opportunity came in the form of middle pay manufacturing jobs, those job mostly don't exist. Ask a non-disabled non-drug addicted person next time you have the chance, they would rather work and earn their way than get a government check. This has been proven many times going back the Milton Friedman/ Thomas Sowell debates. But you are correct, the rich class prefers to stay rich, that much is bloody obvious. If they could stay rich and have the goods the sell manufactured in the US, they would do that. But the politicians sold us out.
NB Only thing I could think of as being relevant would the working time directive but everyone just opts out of that?
Edit: I did co-found a VC-funded startup in the UK, but not recently, wondering what might have changed!