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Currently UK has a massive tax on specialised workforce - you can easily pay more than 50% tax. They changed IR35 so that risk averse companies only hire in sco

Currently UK has a massive tax on specialised workforce - you can easily pay more than 50% tax. They changed IR35 so that risk averse companies only hire in scope of rules to avoid potential costly investigation. Current UK market is very hostile.

LatteLazy 5y ago
Very true. I am caught by IR35 myself.
- Silhouette 5y ago
  I'm really not sure what Sunak was thinking pushing that through in the current climate. A degree of flexible labour in the workforce is helpful anyway and never more so than with the recovery from multiple economic shocks in the past five years. So let's change the rules so lots of the former freelancers and contractors go permanent and lots of the former clients of those freelancers and contractors have to commit to hiring permanent staff, with all the baggage for both sides that comes with under the UK's employment rules, because the new IR35 rules make even less sense than the old ones and everyone from lorry drivers to software developers is questioning whether it makes sense to work under them at all. Full disclosure: I sometimes work in that sort of environment, so I may be personally affected by the changes at some point, but economically I don't see how it makes any sense at all anyway.
  - dogma1138 5y ago
    That it would be a massive boon to Infosys and TCS…
  - Lio 5y ago
    What was Rishi Sunak thinking? Well his father-in-law is N. R. Narayana Murthy so he was probably thinking the IR35 rule changes were pretty good for Unisys. <cough> conflictofinterests <cough> I mean he’d probably deny he was in favour of moving British jobs off shore but that is what his in-law’s family business is all about so…
    - intricatedetail 5y ago
      It's worse than you think. His father in law is more involved with Jeff Bezos. Rishi wife is a major shareholder of Infosys actually - over £600 million worth of shares currently.
  - LatteLazy 5y ago
    The conspiracy theorist in me assumes our rulers were worried some workers were actually getting ahead just by working hard and taking some risks and investing for the future. Best get them back in the same race-to-the-bottom employment model before they upperty... /Rant
  - youngtaff 5y ago
    If someone's really freelance i.e. running their own business, then IR35 doesn't affect them. IR35 is meant to target disguised employment i.e. someone turning up to do the same job as people sitting at the next desk who are salaried. The latest IR35 changes moved responsibility for policing IR35 onto the client (for large companies) engaging the contractor's company so these large companies started taking notice as they had a new risk Even then it's still possible to be outside IR35 - provide your own hardware, fix issues you create at your own cost etc. The big thing that originally brought in IR35 (20 odd years ago) is contractors spending 5yrs at companies essentially doing the same job as permit staff, which avoiding paying employers NI etc.
    - Silhouette 5y ago
      What you are describing is the theory. What the rest of us are talking about is the reality. Since the recent changes, large numbers of freelance or contract positions are being deemed inside IR35, often without a proper assessment and in some cases even forced into an umbrella arrangement. Whether or not they were actually disguised employment does not matter to many clients affected by the changes. The result is that even genuine independents are ending up with all the tax implications of employment and yet none of the benefits, while still carrying all the risks and overheads of operating as an independent business, the worst of both worlds. Obviously that is not an attractive arrangement and that is why many people have gone permanent and many clients have had to become employers, losing the useful flexibility on both sides. A consequence of this is that the overall market for independent flexible labour has also shrunk, which makes it less efficient for clients still wanting to use it properly and increases risk and puts downward pressure on rates for the freelancers and contractors. No doubt there was always some abuse of the system for disguised employment purposes, but the evidence has always been sketchy about how much that really happened, and the changes in recent years have also hit the legitimate part of the independent workforce hard even if it was not the intended target.
      - youngtaff 5y ago
        I'm aware of the reality as I'm a freelancer who has by and large remained outside IR35 (via good legal / financial advice, and careful selection of clients) When I was employee I worked at places were there were many contractors who were essentially disguised employees and being paid for their time, rather than on a project basis with anything at risk Who knows how we ever got to the position of nurses, and lorry drivers being employed on a limited company basis - probably because the 'employers' wanted to avoid the NI bill
- cutthegrass2 5y ago
  I managed to avoid it by (begrudgingly) accepting a permanent position. However, I pay less tax to HMRC overall now than when I was a contractor, around £13k annually. It's completely bonkers. I'm struggling to find any logical reason for extending the off payroll rules to IT contractors/Lorry drivers etc. I can only assume Rishi pushed it through to benefit his FIL.
  - youngtaff 5y ago
    You may pay less tax but your employer will be paying employers NI contributions
- VBprogrammer 5y ago
  Caught by IR35 implies having to pay the same tax as everyone else? How unfortunate.
  - LatteLazy 5y ago
    Actually you have to pay a much higher rate. I don't get how people with even minimal maths skills get caught by the lie that contractors don't pay their tax. We do, I paid more as a percentage and way more in cash terms than as a permie.
    - youngtaff 5y ago
      It's not really that different when you consider the impact of employers NI How different is your gross as a permit + employers NI, versus what your company turned over as a contractor?
      - Silhouette 5y ago
        If you're going to consider employer's NI, are you also going to factor in pension contributions, paid time off, and other employment benefits that independents generally don't receive? If you go back a few years, the financial advantage of paying via salary + dividends in terms of reduced NI payments roughly cancelled out the direct costs of having no employment perks, particularly paid time off. The difference varied slightly depending on the level of salary/turnover as the relevant thresholds were all different, but there wouldn't have been much in it for most people. Now that independents also get hit with either dividend taxes or IR35 arrangements, while employees receive additional benefits notably including significant employer pension contributions, the balance is heavily tilted towards an employment relationship in purely financial terms if you're comparing direct employee salary with freelance/contract business revenue. In theory, market forces should have pushed freelance and contract rates up to compensate for those changes, but in practice the opposite has happened. Because the IR35 changes have driven an industry-wide shift towards blanket inside-IR35 or umbrella policies at many larger clients all at the same time, they have been able to push their rates down to help offset their own extra costs (or, in some cases, simply stopped taking on independent labour altogether), and in one recent survey the average independent had actually reduced their rate this year. If we're looking at the overall financial situation for employees vs. (genuine) independents and not limiting the discussion to tax/NI specifically, you also have to look at flexibility, particularly issues like business expenses and the ability to spread your personal income over time if your business revenues are irregular. These are important aspects of flexible work that have also been damaged by the recent IR35 changes and will often end up costing a legitimate freelancer or contractor more now.
saiya-jin 5y ago
That's so wrong, what is the motivation of this? Did the folks in power make some bet on how fast they can damage UK economy long term by any means available?
- drcongo 5y ago
  Almost literally yes, the entire Tory party is made up of disaster capitalists capitalising on the disasters they create.
- lotsofpulp 5y ago
  The guy responsible for pushing it through is married to the daughter of one of the biggest outsourcing companies.
youngtaff 5y ago
> you can easily pay more than 50% tax This is only if your caught but IR35 isn't it though And the answer to that is to pay yourself a larger salary rather than by dividends (or course that means you've got to pay employers NI)
- intricatedetail 5y ago
  It's not how it works. It's irrelevant for IR35 how much you pay yourself. Clients decide whether contract is in scope or not and when they declare it in scope, they are in the clear.

LatteLazy 5y ago

Very true. I am caught by IR35 myself.

Silhouette 5y ago
I'm really not sure what Sunak was thinking pushing that through in the current climate. A degree of flexible labour in the workforce is helpful anyway and never more so than with the recovery from multiple economic shocks in the past five years. So let's change the rules so lots of the former freelancers and contractors go permanent and lots of the former clients of those freelancers and contractors have to commit to hiring permanent staff, with all the baggage for both sides that comes with under the UK's employment rules, because the new IR35 rules make even less sense than the old ones and everyone from lorry drivers to software developers is questioning whether it makes sense to work under them at all. Full disclosure: I sometimes work in that sort of environment, so I may be personally affected by the changes at some point, but economically I don't see how it makes any sense at all anyway.
- dogma1138 5y ago
  That it would be a massive boon to Infosys and TCS…
- Lio 5y ago
  What was Rishi Sunak thinking? Well his father-in-law is N. R. Narayana Murthy so he was probably thinking the IR35 rule changes were pretty good for Unisys. <cough> conflictofinterests <cough> I mean he’d probably deny he was in favour of moving British jobs off shore but that is what his in-law’s family business is all about so…
  - intricatedetail 5y ago
    It's worse than you think. His father in law is more involved with Jeff Bezos. Rishi wife is a major shareholder of Infosys actually - over £600 million worth of shares currently.
- LatteLazy 5y ago
  The conspiracy theorist in me assumes our rulers were worried some workers were actually getting ahead just by working hard and taking some risks and investing for the future. Best get them back in the same race-to-the-bottom employment model before they upperty... /Rant
- youngtaff 5y ago
  If someone's really freelance i.e. running their own business, then IR35 doesn't affect them. IR35 is meant to target disguised employment i.e. someone turning up to do the same job as people sitting at the next desk who are salaried. The latest IR35 changes moved responsibility for policing IR35 onto the client (for large companies) engaging the contractor's company so these large companies started taking notice as they had a new risk Even then it's still possible to be outside IR35 - provide your own hardware, fix issues you create at your own cost etc. The big thing that originally brought in IR35 (20 odd years ago) is contractors spending 5yrs at companies essentially doing the same job as permit staff, which avoiding paying employers NI etc.
  - Silhouette 5y ago
    What you are describing is the theory. What the rest of us are talking about is the reality. Since the recent changes, large numbers of freelance or contract positions are being deemed inside IR35, often without a proper assessment and in some cases even forced into an umbrella arrangement. Whether or not they were actually disguised employment does not matter to many clients affected by the changes. The result is that even genuine independents are ending up with all the tax implications of employment and yet none of the benefits, while still carrying all the risks and overheads of operating as an independent business, the worst of both worlds. Obviously that is not an attractive arrangement and that is why many people have gone permanent and many clients have had to become employers, losing the useful flexibility on both sides. A consequence of this is that the overall market for independent flexible labour has also shrunk, which makes it less efficient for clients still wanting to use it properly and increases risk and puts downward pressure on rates for the freelancers and contractors. No doubt there was always some abuse of the system for disguised employment purposes, but the evidence has always been sketchy about how much that really happened, and the changes in recent years have also hit the legitimate part of the independent workforce hard even if it was not the intended target.
    - youngtaff 5y ago
      I'm aware of the reality as I'm a freelancer who has by and large remained outside IR35 (via good legal / financial advice, and careful selection of clients) When I was employee I worked at places were there were many contractors who were essentially disguised employees and being paid for their time, rather than on a project basis with anything at risk Who knows how we ever got to the position of nurses, and lorry drivers being employed on a limited company basis - probably because the 'employers' wanted to avoid the NI bill
cutthegrass2 5y ago
I managed to avoid it by (begrudgingly) accepting a permanent position. However, I pay less tax to HMRC overall now than when I was a contractor, around £13k annually. It's completely bonkers. I'm struggling to find any logical reason for extending the off payroll rules to IT contractors/Lorry drivers etc. I can only assume Rishi pushed it through to benefit his FIL.
- youngtaff 5y ago
  You may pay less tax but your employer will be paying employers NI contributions
VBprogrammer 5y ago
Caught by IR35 implies having to pay the same tax as everyone else? How unfortunate.
- LatteLazy 5y ago
  Actually you have to pay a much higher rate. I don't get how people with even minimal maths skills get caught by the lie that contractors don't pay their tax. We do, I paid more as a percentage and way more in cash terms than as a permie.
  - youngtaff 5y ago
    It's not really that different when you consider the impact of employers NI How different is your gross as a permit + employers NI, versus what your company turned over as a contractor?
    - Silhouette 5y ago
      If you're going to consider employer's NI, are you also going to factor in pension contributions, paid time off, and other employment benefits that independents generally don't receive? If you go back a few years, the financial advantage of paying via salary + dividends in terms of reduced NI payments roughly cancelled out the direct costs of having no employment perks, particularly paid time off. The difference varied slightly depending on the level of salary/turnover as the relevant thresholds were all different, but there wouldn't have been much in it for most people. Now that independents also get hit with either dividend taxes or IR35 arrangements, while employees receive additional benefits notably including significant employer pension contributions, the balance is heavily tilted towards an employment relationship in purely financial terms if you're comparing direct employee salary with freelance/contract business revenue. In theory, market forces should have pushed freelance and contract rates up to compensate for those changes, but in practice the opposite has happened. Because the IR35 changes have driven an industry-wide shift towards blanket inside-IR35 or umbrella policies at many larger clients all at the same time, they have been able to push their rates down to help offset their own extra costs (or, in some cases, simply stopped taking on independent labour altogether), and in one recent survey the average independent had actually reduced their rate this year. If we're looking at the overall financial situation for employees vs. (genuine) independents and not limiting the discussion to tax/NI specifically, you also have to look at flexibility, particularly issues like business expenses and the ability to spread your personal income over time if your business revenues are irregular. These are important aspects of flexible work that have also been damaged by the recent IR35 changes and will often end up costing a legitimate freelancer or contractor more now.

saiya-jin 5y ago

That's so wrong, what is the motivation of this? Did the folks in power make some bet on how fast they can damage UK economy long term by any means available?

drcongo 5y ago
Almost literally yes, the entire Tory party is made up of disaster capitalists capitalising on the disasters they create.
lotsofpulp 5y ago
The guy responsible for pushing it through is married to the daughter of one of the biggest outsourcing companies.

youngtaff 5y ago

> you can easily pay more than 50% tax This is only if your caught but IR35 isn't it though And the answer to that is to pay yourself a larger salary rather than by dividends (or course that means you've got to pay employers NI)

intricatedetail 5y ago
It's not how it works. It's irrelevant for IR35 how much you pay yourself. Clients decide whether contract is in scope or not and when they declare it in scope, they are in the clear.