[TamDenholm]

About damn time, luckily i've not been a contractor for some years now and have missed the IR35 shitshow of recent years. Having a client offering a contract having to determine if my company is an actual business or i'm just a disguised employee is a ridiculous way of doing it. Sorry but when i was contracting i was also taking on other freelance work, had long standing retainers for maintance for past clients and having junior developers working in my company doing the grunt work, thats a business, i'm not a disguised employee.

The responsiblity should be on the person to argue with HMRC that they are a business and for those legitimately operating as such, then its not at all difficult.

[mutatio]

It is difficult, for HMRC - it doesn't scale.

I am actually in favour of the IR35 legislation as it removed entire swathes of "permietractors" from the market and allowed people like myself (and you judging off the working practices you described) to operate in a true business fashion.

It is no doubt to me that 95% of "contractors" previously working "outside IR35" at large FTSE companies were indeed employees in disguise. Tenure even matched permanent staff, quite frankly it was a joke.

[TamDenholm]

I wholeheartedly agree with you, those dodging tax by just operating like a permanent employee but through a Ltd company are on the wrong side of the law. The problem i had is it punishes those operating legitimately.

Lots of laws are like this, for instance the piracy warnings that they used to put at the start of DVD's that only punished lawful users cuz if your pirated it, the warnings would be cut out. Theres many more examples like this.

[pydry]

The only real fix is to tax business owner income at the same (or, ideally, higher) rate as employees.

If the government enforced a higher tax on people who didn't speak with received pronunciation I wouldn't begrudge those who faked it.

I don't doubt that there would an outcry from some corners - both non-earnest and earnest - about the "illegitimate tax dodgers seeking an unfair advantage" who did though.

[Silhouette]

The only real fix is to tax business owner income at the same (or, ideally, higher) rate as employees.

That seems like the perfect way to kill entrepreneurialism and flexible labour. Right now it costs almost nothing to go through the legal formalities of forming a limited company in the UK. However in terms of personal risk and investing your own savings to get the business started and the opportunity costs it can be a huge gamble for anyone who could otherwise be a well-paid professional employee.

We need some people to take those risks and make those investments. Some of those businesses will succeed and then they'll create new jobs and wealth and pay more tax. Of course that also includes employing people in the vast majority who don't want to take those risks and prefer the stability of regular employment.

If there's no reward for taking those risks and making those investments or (as with IR35 umbrella arrangements today) if you're actively penalised for working in a way that's economically useful then obviously it's going to deter most people from doing it. In the long term that doesn't help any of us.

[111615bd]

> I wholeheartedly agree with you, those dodging tax by just operating like a permanent employee but through a Ltd company are on the wrong side of the law.

I'm a permanent employee of a one-man startup that I own. Most of the income at the moment comes form consulting. I pay the exact same tax that I would for any other employee, or that an employer would pay if they employed me. Would you elaborate on how that is dodging tax?

[TamDenholm]

I said that those operating like a permanent employee but paying themselves through a ltd company are dodging tax, based on the limited information you’ve given, it sounds like you’re running a business, not acting as a disguised employee.

You say you’re a startup, that would assume you’re trying to create and offer a product or service from your company for the market, that’s a business. You say your income is currently from consulting, I would assume that means you’re offering a service to one or more clients, I don’t know the details but if you’re offering that consulting service like a business then you’re not a disguised employee.

If however you are working for a company, using their equipment, in their workplace, on their timetable, taking holidays when they say so, where you cannot substitute yourself with someone else and you don’t have any other clients and it’s essentially a permanent arrangement, then yeah, it’s possible you are falling foul of the IR35 law and you should speak to an expert on the subject.

[haspok]

I respectfully disagree, when you say contractors = employees.

Yes, they tenure may be just as long, but there are many other factors to take into consideration (just off the top of my head):

1. Contractors don't have a "career path" inside the organization, not even the ones that think they do.

2. They can be let go within weeks notice and no severance package.

3. They don't (really) participate in company politics.

4. They are also much easier to convince to jump ship and go next door, where the grass is greener.

5. They are responsible for managing themselves, ie. education, marketing, sales...

And there are others, like no paid holidays, etc., but everyone knows about those.

I would argue that contractors are somewhere halfway between employees and business owners. Maybe it would be the fairest to tax them so, by creating a special tax bracket for them.

It's like regulating e-rollers and e-bikes. What are they? Not bicycles really, but also not motorbikes or cars. Somewhere in between really.

[jnsaff2]

Meh. I think the ratio didn't change at all, it is just that contractors jacked up their rates to cover the added NIC. To me it seemed like someone in HMRC/govt got a "win" but all the govt agencies just had to pay more for their contractors. Almost zero-sum but actually net negative because of added bullshit.

I left UK when it only covered govt agencies so not sure what the mitigations were for private sector but I'm sure many found a way around.

[bambataa]

I agree that many contractors were more or less perm. That in turn seemed to be a consequence of the pay differential, rather than an actual desire to be a contractor.

[varispeed]

It's worth noting that length of the contract or number of clients is irrelevant from the IR35 point of view. It's a common myth.

As an employee you can just as well have many short employments and work for multiple employers.

[Lio]

From what I understand about IR35 it's also applied on a contract by contract basis.

So you could run one contract Inside IR35 at the same time as another is Outside IR35.

HMRC refuse to fully disclose exactly how they deem a contract to be Inside or Outside but I always go with how much control I get and if I'm billed solely on time or deliverables. Even then there's no certainty, you just have to submit the accounts and hope for the best.

[logisticpeach]

It's not so much that they refuse to disclose the methodology, it's that there is no methodology. The rules are (I suspect intentionally) vague and the degree to which any given factor (duration of contract, working practices etc.) applies, seems to vary from case to case.

This creates an environment of great uncertainty for freelancers, but also one where HMRC can never be sure themselves, if they're properly pursuing those accused of being in breach.

They seem to regularly lose many of these cases on appeal when a (presumably) fair minded judge is asked to look at the facts.

[eeffoc67]

Regarding maintenance retainers: I have been in a loop where customers realize they haven't "used" their monthly retainer and dump requests on me in the last week of each month. Did you experience this? Would love to come up with a tactful solution to this.

[davzie]

This is happening because you pitched to them x amount of time for x amount of money. Instead re-frame it as included in the price is: server maintenance, backup scheduling, bug fixes and monitoring, minor tweaks etc.

When you frame the monthly cost like this, the customer feels almost like it's an insurance policy rather than paying for your time they aren't using.

[brtkdotse]

Havre different customers on different schedules? Customer A is on retainer 1st to 1st, customer B 10th to 10th and so on.