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The point of the law is to stop people taking on contracts that should essentially be permanent employee roles. Its more tax efficient to be paid via your own L

The point of the law is to stop people taking on contracts that should essentially be permanent employee roles. Its more tax efficient to be paid via your own Ltd company instead of as a PAYE employee, especially when you get into the highest tax bracket, and so the government loses tax revenue. The IR35 law was supposed to stop them losing tax revenue, and to be honest i even agree with the overall law, they just executed it incorrectly. They put the responsiblity on the company offering the contract, when it should be on the person applying for the contract that has the responsibility to show they're a business and not a disguised employee. The better way to do it in my opinion is to empower HMRC with more resources to question contractors and show that they are actual businesses and not tax dodging employees.

gpderetta 4y ago
AFAIU, the IR35 rules have existed for a long time. The recent change was to shift the responsibility to determine in/out to the employer. This change shifts it back to the employee.
- Lio 4y ago
  "Employee" is a bad term to use here, I assume you mean contractor. If you're acting as a contractor then you are specifically not an employee and you shouldn't let anyone at your client refer to you as such or try to control how you work except via the terms of your contract. That means for example, you ask to take leave. You tell them that you are not available on certain days. It a subtle but very important difference.
73958473024 4y ago
The better way to do it in my opinion is to cut taxes for employees to be equivalent to that of contractors, so it doesn't matter if you are inside or outside IR35.
varispeed 4y ago
> Its more tax efficient to be paid via your own Ltd company instead of as a PAYE employee, especially when you get into the highest tax bracket, and so the government loses tax revenue. That's not true. If you pay yourself from your company whether it is dividends or salary, you pay tax as everyone else. Sure if you decide to retain some money in your company, you only pay corporation tax, but as soon as you decide to pay the remainder yourself you will pay personal tax anyway. That's how any business works! It's completely pointless to do anything about this. Big consulting corporations do exactly the same thing, but are not being hounded by HMR.
- Nextgrid 4y ago
  > you pay tax as everyone else > whether it is dividends or salary Dividends won't incur NI thus significantly reducing the tax impact.
  - Lio 4y ago
    That might be true but they still attract capital gains tax and corporation tax. Then there's all the other expenses of running a business such as accountancy fees, public liability and on going indemnity insurance premiums and business banking fees that an employee won't have to pay on their salary.
  - youngtaff 4y ago
    Dividends incur dividend tax which means between corporation tax, and income tax the contractor will pay roughly the same as someone on PAYE + NI What dividends escape is Employers NI and that's where contractors make a gain Coupled with the ability to have a spouse as a director or shareholder and so income split with them

gpderetta 4y ago

AFAIU, the IR35 rules have existed for a long time. The recent change was to shift the responsibility to determine in/out to the employer. This change shifts it back to the employee.

Lio 4y ago
"Employee" is a bad term to use here, I assume you mean contractor. If you're acting as a contractor then you are specifically not an employee and you shouldn't let anyone at your client refer to you as such or try to control how you work except via the terms of your contract. That means for example, you ask to take leave. You tell them that you are not available on certain days. It a subtle but very important difference.

73958473024 4y ago

The better way to do it in my opinion is to cut taxes for employees to be equivalent to that of contractors, so it doesn't matter if you are inside or outside IR35.

varispeed 4y ago

> Its more tax efficient to be paid via your own Ltd company instead of as a PAYE employee, especially when you get into the highest tax bracket, and so the government loses tax revenue. That's not true. If you pay yourself from your company whether it is dividends or salary, you pay tax as everyone else. Sure if you decide to retain some money in your company, you only pay corporation tax, but as soon as you decide to pay the remainder yourself you will pay personal tax anyway. That's how any business works! It's completely pointless to do anything about this. Big consulting corporations do exactly the same thing, but are not being hounded by HMR.

Nextgrid 4y ago
> you pay tax as everyone else > whether it is dividends or salary Dividends won't incur NI thus significantly reducing the tax impact.
- Lio 4y ago
  That might be true but they still attract capital gains tax and corporation tax. Then there's all the other expenses of running a business such as accountancy fees, public liability and on going indemnity insurance premiums and business banking fees that an employee won't have to pay on their salary.
- youngtaff 4y ago
  Dividends incur dividend tax which means between corporation tax, and income tax the contractor will pay roughly the same as someone on PAYE + NI What dividends escape is Employers NI and that's where contractors make a gain Coupled with the ability to have a spouse as a director or shareholder and so income split with them