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IR35 was full of good intentions. Businesses were abusing the system by forcing low paid workers into self employment and contracting. This allowed them avoid p

IR35 was full of good intentions. Businesses were abusing the system by forcing low paid workers into self employment and contracting. This allowed them avoid paying national insurance or any normal employment benefits. Unfortunately highly paid consultants have been swept up into very badly implemented legislation.

Nursie 3y ago
Yeah I don't disagree entirely with the intent - stop tax dodging by dodgy companies and by dodgy contractors. But the implementation, my god, it's a mess, and it seems to put the liability all in the wrong place, on the weakest party in the relationship. And as I said elsewhere, the root cause of the difference in taxation for the contractor is that investment income is taxed less than earned income, something I find pretty hard to accept in principle.
pydry 3y ago
The intention was to sweep up the consultants. They even bragged about getting an extra £1 billion out of these people. It was mostly about enforcing a clearer class distinction between dirty workers and good clean capitalists (who are handed a lower tax bill). The list of rules actually has an interesting historical parallel - the Soviet Union would deport peasants ruled "outside ir35" to siberia and confiscate their assets in a process known as dekulakization.
- varispeed 3y ago
  It's a classic corrupt regulatory capture. Big consultancies are not bound by IR35 despite operating the same business model. Guess what kind of business our PM's wife is involved in...
  - Lio 3y ago
    You mean the PM's wife who, until it became politically embarrassing for her husband, was dodging millions in tax as a non-domiciled foreign national? No idea but wasn't he the Chancellor of the Exchequer last time the IR35 rules were changed too? Strange the coincidences in life. ;)
    - intelVISA 3y ago
      As an AI language model you aren't supposed to notice those things.
varispeed 3y ago
You are assuming there were good intentions. The real reason for this legislation was the fact that big consultancies were losing talent. Why should someone work through a big consultancy if they could work with the client directly. Like, why earn £50k at consultancy if you can make £500 a day without them. It's a no brainer. So these big firms lobbied Treasury and government and they used tax avoidance as a vehicle for the "reform". It's funny though how the fact that big consultancies are actually avoiding paying tax is never brought in. Like tax yield from a big consultancy employee on £50k is substantially lower than from a contractor on £500 a day, even if they pay themselves the mythical low salary + dividend (which is a result of PAYE being not fit for purpose, but I digress). Currently IR35 actually _enables_ abuse of low paid workers, because they can get hired on inside IR35 and can't get any employment protections.
- disgruntledphd2 3y ago
  So in Ireland, you basically pay exactly the same tax as a contractor as you would as an FTE. If you want to try the dividend trick, well then enjoy a special 5% tax on the gross value of the dividend, plus your personal income rates. As a result, contracting is essentially (from a tax perspective) equivalent to full time, which means no IR35. Mind you, the only difference between Ireland and Greece (apart from the weather) is our tax collection agencies, so maybe I shouldn't be surprised.

Nursie 3y ago

Yeah I don't disagree entirely with the intent - stop tax dodging by dodgy companies and by dodgy contractors. But the implementation, my god, it's a mess, and it seems to put the liability all in the wrong place, on the weakest party in the relationship. And as I said elsewhere, the root cause of the difference in taxation for the contractor is that investment income is taxed less than earned income, something I find pretty hard to accept in principle.

pydry 3y ago

The intention was to sweep up the consultants. They even bragged about getting an extra £1 billion out of these people. It was mostly about enforcing a clearer class distinction between dirty workers and good clean capitalists (who are handed a lower tax bill). The list of rules actually has an interesting historical parallel - the Soviet Union would deport peasants ruled "outside ir35" to siberia and confiscate their assets in a process known as dekulakization.

varispeed 3y ago
It's a classic corrupt regulatory capture. Big consultancies are not bound by IR35 despite operating the same business model. Guess what kind of business our PM's wife is involved in...
- Lio 3y ago
  You mean the PM's wife who, until it became politically embarrassing for her husband, was dodging millions in tax as a non-domiciled foreign national? No idea but wasn't he the Chancellor of the Exchequer last time the IR35 rules were changed too? Strange the coincidences in life. ;)
  - intelVISA 3y ago
    As an AI language model you aren't supposed to notice those things.

varispeed 3y ago

You are assuming there were good intentions. The real reason for this legislation was the fact that big consultancies were losing talent. Why should someone work through a big consultancy if they could work with the client directly. Like, why earn £50k at consultancy if you can make £500 a day without them. It's a no brainer. So these big firms lobbied Treasury and government and they used tax avoidance as a vehicle for the "reform". It's funny though how the fact that big consultancies are actually avoiding paying tax is never brought in. Like tax yield from a big consultancy employee on £50k is substantially lower than from a contractor on £500 a day, even if they pay themselves the mythical low salary + dividend (which is a result of PAYE being not fit for purpose, but I digress). Currently IR35 actually _enables_ abuse of low paid workers, because they can get hired on inside IR35 and can't get any employment protections.

disgruntledphd2 3y ago
So in Ireland, you basically pay exactly the same tax as a contractor as you would as an FTE. If you want to try the dividend trick, well then enjoy a special 5% tax on the gross value of the dividend, plus your personal income rates. As a result, contracting is essentially (from a tax perspective) equivalent to full time, which means no IR35. Mind you, the only difference between Ireland and Greece (apart from the weather) is our tax collection agencies, so maybe I shouldn't be surprised.