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UK contractors take home less now than they did 5 years ago due to taxation changes (IR35). It's a bit more complicated than that. The tax rules themselves hav

UK contractors take home less now than they did 5 years ago due to taxation changes (IR35). It's a bit more complicated than that. The tax rules themselves haven't actually changed. What did change was who was responsible for deciding whether an engagement was caught by IR35 or not and was also liable to pay for the big tax shortfall if they were later found to have made the wrong decision. It used to be the contractor themselves who determined the status. Now it depends on the situation but in many cases it will be the client. That has swung the needle from determinations often being too optimistic (some contractors claimed to be outside when they really weren't and hoped to get away with paying less tax than they should) to too pessimistic (risk-averse big clients aren't always assessing engagements properly and instead set blanket policies that put everyone inside even when they shouldn't be). Neither situation is good for the contracting market and neither is what the tax rules say should happen. Both are the fault of successive governments for using such ambiguous rules about such an important tax question and making such poor provision for honest participants who want to get on with the job to know they're safe and doing the right thing as far as their tax obligations are concerned. For genuine contractors who are working with decent clients and obviously aren't disguised employees the rules haven't changed and neither have the tax obligations. But yes there are some clients who just throw everything inside IR35 as policy and also want to keep the same headline rates as before. Contractors working with those clients will have taken quite a hit. The solution is not to work with bad clients who try to dump their obligations on you!

varispeed 4y ago
> For genuine contractors who are working with decent clients and obviously aren't disguised employees the rules haven't changed and neither have the tax obligations. The problem is that whether someone is genuine or not is no longer relevant, because you may be genuine, but risk averse client says you are not and there is nothing you can do about it. Every single genuine contractor I know now works in-scope of IR35. They pay their business costs out of their deemed salary, which is insane. > The solution is not to work with bad clients who try to dump their obligations on you! That's not a solution if the pool of "good" clients is getting smaller and smaller. If you now have much longer downtime because it is much more difficult to find a "good" client - say when it used to take a couple of weeks or even days, now it takes months - it makes the business no longer viable.
- Silhouette 4y ago
  Every single genuine contractor I know now works in-scope of IR35. They pay their business costs out of their deemed salary, which is insane. That is a silly situation I agree. But it's a situation that perpetuates in part because too many contractors tolerate it. If you read the stats published by some of the more open agencies the majority of contractors are still strongly preferring outside IR35 contracts and the clients who still have blanket umbrella policies are finding it harder to hire. Some of the big names who pay high enough rates will get away with it because of those rates of course but further down the list things aren't looking so great apparently. If that pressure keeps up then eventually the ones who determine status properly (and increase rates accordingly for inside IR35 work via umbrellas) will be the ones that attract the good people.
  - sdnas211 4y ago
    > That is a silly situation I agree. But it's a situation that perpetuates in part because too many contractors tolerate it. A sizeable proportion of contractors I used to work with simply removed themselves from the market when the changes were introduced. Many of them retired early, and one retrained as a plasterer. I only tolerate it because I have a mortgage to pay. I'm not willing to take a 50% pay cut to go perm, or a ~20% pay cut for the few contracts outside IR35 that I'm offered. The rates on those used to be significantly higher than before the changes. Speaking to a lot of recruiters over the last few years, we have noticed wage compression in the market. The bottom end has been brought up quite substantially, the top end has dropped.
throwkaway 4y ago
If you are a UK contractor doing remote work, you can avoid the IR35 issue by working for a clients outside of the UK. Also, if you can get US client you'll probably get paid more for doing the same thing as a UK client too.

varispeed 4y ago

> For genuine contractors who are working with decent clients and obviously aren't disguised employees the rules haven't changed and neither have the tax obligations. The problem is that whether someone is genuine or not is no longer relevant, because you may be genuine, but risk averse client says you are not and there is nothing you can do about it. Every single genuine contractor I know now works in-scope of IR35. They pay their business costs out of their deemed salary, which is insane. > The solution is not to work with bad clients who try to dump their obligations on you! That's not a solution if the pool of "good" clients is getting smaller and smaller. If you now have much longer downtime because it is much more difficult to find a "good" client - say when it used to take a couple of weeks or even days, now it takes months - it makes the business no longer viable.

Silhouette 4y ago
Every single genuine contractor I know now works in-scope of IR35. They pay their business costs out of their deemed salary, which is insane. That is a silly situation I agree. But it's a situation that perpetuates in part because too many contractors tolerate it. If you read the stats published by some of the more open agencies the majority of contractors are still strongly preferring outside IR35 contracts and the clients who still have blanket umbrella policies are finding it harder to hire. Some of the big names who pay high enough rates will get away with it because of those rates of course but further down the list things aren't looking so great apparently. If that pressure keeps up then eventually the ones who determine status properly (and increase rates accordingly for inside IR35 work via umbrellas) will be the ones that attract the good people.
- sdnas211 4y ago
  > That is a silly situation I agree. But it's a situation that perpetuates in part because too many contractors tolerate it. A sizeable proportion of contractors I used to work with simply removed themselves from the market when the changes were introduced. Many of them retired early, and one retrained as a plasterer. I only tolerate it because I have a mortgage to pay. I'm not willing to take a 50% pay cut to go perm, or a ~20% pay cut for the few contracts outside IR35 that I'm offered. The rates on those used to be significantly higher than before the changes. Speaking to a lot of recruiters over the last few years, we have noticed wage compression in the market. The bottom end has been brought up quite substantially, the top end has dropped.

throwkaway 4y ago

If you are a UK contractor doing remote work, you can avoid the IR35 issue by working for a clients outside of the UK. Also, if you can get US client you'll probably get paid more for doing the same thing as a UK client too.