3 ms·

> IR35, crafted to shield big consultancies from competition, not the taxpayer I think this is a crank belief, and my guess is that you are an aggrieved ex-con

by twic 1y ago

> IR35, crafted to shield big consultancies from competition, not the taxpayer I think this is a crank belief, and my guess is that you are an aggrieved ex-contractor. But i would definitely be interested to hear more about this theory.

varispeed 1y ago
IR35 only applies if the worker owns the business delivering the work. Big consultancies are completely exempt — even when their staff do the same job, in the same client seat, for years. The legislation funnels work away from independents toward large firms - it’s a structural outcome of how the rules are written, all under the false banner of tax fairness. At its core, IR35 was about consolidating control over skilled labour, locking clients into corporate pipelines, and eliminating independent operators who could undercut on price and offer better quality.
- MattPalmer1086 1y ago
  I also hate IR35, mostly because it has always been so completely unclear on whether anyone is compliant with it. HMRCs own online assessment was shown to be utterly unreliable. My single biggest insurance expense was always for IR35. And you had the constant worry that one day you would be investigated, and have back taxes applied going back years, regardless of how compliant you thought you were. It's a huge horrible mess of a law. Big consultancies are exempt because all their staff are paid at market rates and taxed as normal employees. Let's be honest - most contractors were paying a much lower rate of tax than anyone else holding a similar position. I believe this gap has now narrowed considerably though - been out of contracting for a few years now.
  - varispeed 1y ago
    You're right that IR35 has always been a mess - but that last point seriously misses the mark. Big consultancies aren't exempt because they "pay market rates" - they're exempt because the worker doesn't own the delivery company, so the client carries no IR35 risk. Meanwhile, the consultancy bills the client often 2-3x the day rate and books the margin as corporate profit - profit that’s often structured to minimise UK tax exposure (through internal charges, offshore entities, etc.). It's tempting - and convenient - to reduce a small, one-person business to "just an employee in disguise," but that's classism in its purest form. Contractors didn't have tax advantages over big consultancies or employees - in fact, they often paid much more. They had none of the multinational tax structuring, none of the offshore routing, none of the internal "cost shifting" that lets large firms declare minimal UK profit and no top accountants on tap. Employees typically see a small fraction of what the consultancy actually bills for their work. So the idea that big consultancies "do it right" while small independents were somehow gaming the system is a myth - one that government and corporate lobbyists have carefully exploited to shut down independent economic actors and funnel the contracts back to large firms.
    - MattPalmer1086 1y ago
      The goal of IR35 is to ensure that someone doing a job pays about the same tax as an employee in a similar position [1]. While you are strictly correct that the legislation doesn't apply unless you are the owner of the small business providing the services - I guarantee you that if the consultancies did not in fact pay their employees at market rates, and instead paid low and then distributed dividends (or some other tax avoiding scheme), then there would be similar legislation that applied to them. The tax man just doesn't like large numbers of workers paying less tax than they think they should. [1] https://www.gov.uk/guidance/understanding-off-payroll-working-ir35 https://www.gov.uk/guidance/understanding-off-payroll-workin...
      - varispeed 1y ago
        Big consultancy employees doing the same work are paid far less than independent contractors once were, meaning they pay less tax individually, while the consultancy charges the client 2-10x more and funnels the profit through corporate structures to minimise tax further. You say, "if big firms did X, they'd face similar rules" - but they already do worse, on a much larger scale, and they're rewarded with government contracts, tax privileges, and regulatory cover. IR35 wasn't about fairness. It was about shutting down small, skilled independents so big firms could lock in the profit stream. > The tax man just doesn't like large numbers of workers paying less tax than they think they should. This is pure classism - the assumption that a working-class person cannot possibly run a legitimate business competing with a big consultancy on price and quality. No: they're just a tax-dodging worker who must be stopped.
        MattPalmer1086 1y ago
        I never said IR35 was about fairness. It was because they really didn't like contractors using tax avoidance schemes to pay a much lower rate of tax than other people in the same position. Pay low, pay no income tax, national insurance or employers national insurance, and take the rest in dividends. The fact that large multi-nationals do a lot worse tax wise in other areas of business is irrelevant to IR35. They are much harder to get under control than individuals. Although I still maintain that if they paid their workers the same way most contractors did, HMRC would clamp down on that very quickly. Because they can easily go after people's personal tax affairs; big corporations with expensive lawyers not so much. It's really not classism either. It has nothing to do with being working class.

by twic 1y ago

varispeed 1y ago

IR35 only applies if the worker owns the business delivering the work. Big consultancies are completely exempt — even when their staff do the same job, in the same client seat, for years. The legislation funnels work away from independents toward large firms - it’s a structural outcome of how the rules are written, all under the false banner of tax fairness. At its core, IR35 was about consolidating control over skilled labour, locking clients into corporate pipelines, and eliminating independent operators who could undercut on price and offer better quality.

MattPalmer1086 1y ago
I also hate IR35, mostly because it has always been so completely unclear on whether anyone is compliant with it. HMRCs own online assessment was shown to be utterly unreliable. My single biggest insurance expense was always for IR35. And you had the constant worry that one day you would be investigated, and have back taxes applied going back years, regardless of how compliant you thought you were. It's a huge horrible mess of a law. Big consultancies are exempt because all their staff are paid at market rates and taxed as normal employees. Let's be honest - most contractors were paying a much lower rate of tax than anyone else holding a similar position. I believe this gap has now narrowed considerably though - been out of contracting for a few years now.
- varispeed 1y ago
  You're right that IR35 has always been a mess - but that last point seriously misses the mark. Big consultancies aren't exempt because they "pay market rates" - they're exempt because the worker doesn't own the delivery company, so the client carries no IR35 risk. Meanwhile, the consultancy bills the client often 2-3x the day rate and books the margin as corporate profit - profit that’s often structured to minimise UK tax exposure (through internal charges, offshore entities, etc.). It's tempting - and convenient - to reduce a small, one-person business to "just an employee in disguise," but that's classism in its purest form. Contractors didn't have tax advantages over big consultancies or employees - in fact, they often paid much more. They had none of the multinational tax structuring, none of the offshore routing, none of the internal "cost shifting" that lets large firms declare minimal UK profit and no top accountants on tap. Employees typically see a small fraction of what the consultancy actually bills for their work. So the idea that big consultancies "do it right" while small independents were somehow gaming the system is a myth - one that government and corporate lobbyists have carefully exploited to shut down independent economic actors and funnel the contracts back to large firms.
  - MattPalmer1086 1y ago
    The goal of IR35 is to ensure that someone doing a job pays about the same tax as an employee in a similar position [1]. While you are strictly correct that the legislation doesn't apply unless you are the owner of the small business providing the services - I guarantee you that if the consultancies did not in fact pay their employees at market rates, and instead paid low and then distributed dividends (or some other tax avoiding scheme), then there would be similar legislation that applied to them. The tax man just doesn't like large numbers of workers paying less tax than they think they should. [1] https://www.gov.uk/guidance/understanding-off-payroll-working-ir35 https://www.gov.uk/guidance/understanding-off-payroll-workin...
    - varispeed 1y ago
      Big consultancy employees doing the same work are paid far less than independent contractors once were, meaning they pay less tax individually, while the consultancy charges the client 2-10x more and funnels the profit through corporate structures to minimise tax further. You say, "if big firms did X, they'd face similar rules" - but they already do worse, on a much larger scale, and they're rewarded with government contracts, tax privileges, and regulatory cover. IR35 wasn't about fairness. It was about shutting down small, skilled independents so big firms could lock in the profit stream. > The tax man just doesn't like large numbers of workers paying less tax than they think they should. This is pure classism - the assumption that a working-class person cannot possibly run a legitimate business competing with a big consultancy on price and quality. No: they're just a tax-dodging worker who must be stopped.
      - MattPalmer1086 1y ago
        I never said IR35 was about fairness. It was because they really didn't like contractors using tax avoidance schemes to pay a much lower rate of tax than other people in the same position. Pay low, pay no income tax, national insurance or employers national insurance, and take the rest in dividends. The fact that large multi-nationals do a lot worse tax wise in other areas of business is irrelevant to IR35. They are much harder to get under control than individuals. Although I still maintain that if they paid their workers the same way most contractors did, HMRC would clamp down on that very quickly. Because they can easily go after people's personal tax affairs; big corporations with expensive lawyers not so much. It's really not classism either. It has nothing to do with being working class.