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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 u

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.
      - varispeed 1y ago
        You're making two contradictory claims. First, you say big consultancies would face similar crackdowns if they paid their workers like contractors. But that ignores the fact that big consultancies already do far worse - they pay those workers far less, charge the client multiple times more, and funnel profits through complex corporate tax minimisation schemes. And somehow, that's fine? > Pay low, pay no income tax, national insurance or employers national insurance, and take the rest in dividends. That's a misleading argument. Taxes aren't hypothecated - it doesn't matter if it's labelled income tax, NICs, or dividends. What matters is overall tax contribution relative to the full value of the work delivered. A contractor's small business typically generated more total taxable value - as both personal and business tax - compared to the portion of client fees that actually passed through to consultancy employees and stayed in UK tax channels, once the consultancy layered on profit extraction, internal costs, and offshore routing. Secondly, this "tax avoidance" narrative was easy to sell because most people don't understand how the tax system works - and because the independent contractor is visible, familiar, and easy to resent. They look just like the person judging them - maybe even sit at the next desk - but they're earning more and keeping the rewards of their own work. It's far easier to stir anger at that visible success than to explain how large firms quietly charge clients £1,000 a day for the same job, pay the employee £45k, and funnel the surplus offshore. The real extraction happens invisibly - while the system trains people to aim their anger sideways, not upwards. > Large companies are just harder to control. That's no excuse. They could have been included under IR35 - they weren't, because the system is designed to shield institutional profit chains, not treat all labour pipelines equally. And no, it's absolutely about class - because IR35 rests on the assumption that a skilled, independent worker cannot possibly run a legitimate business, only a disguised employee gaming the system. That's structural classism - whether you acknowledge it or not.

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.
    - varispeed 1y ago
      You're making two contradictory claims. First, you say big consultancies would face similar crackdowns if they paid their workers like contractors. But that ignores the fact that big consultancies already do far worse - they pay those workers far less, charge the client multiple times more, and funnel profits through complex corporate tax minimisation schemes. And somehow, that's fine? > Pay low, pay no income tax, national insurance or employers national insurance, and take the rest in dividends. That's a misleading argument. Taxes aren't hypothecated - it doesn't matter if it's labelled income tax, NICs, or dividends. What matters is overall tax contribution relative to the full value of the work delivered. A contractor's small business typically generated more total taxable value - as both personal and business tax - compared to the portion of client fees that actually passed through to consultancy employees and stayed in UK tax channels, once the consultancy layered on profit extraction, internal costs, and offshore routing. Secondly, this "tax avoidance" narrative was easy to sell because most people don't understand how the tax system works - and because the independent contractor is visible, familiar, and easy to resent. They look just like the person judging them - maybe even sit at the next desk - but they're earning more and keeping the rewards of their own work. It's far easier to stir anger at that visible success than to explain how large firms quietly charge clients £1,000 a day for the same job, pay the employee £45k, and funnel the surplus offshore. The real extraction happens invisibly - while the system trains people to aim their anger sideways, not upwards. > Large companies are just harder to control. That's no excuse. They could have been included under IR35 - they weren't, because the system is designed to shield institutional profit chains, not treat all labour pipelines equally. And no, it's absolutely about class - because IR35 rests on the assumption that a skilled, independent worker cannot possibly run a legitimate business, only a disguised employee gaming the system. That's structural classism - whether you acknowledge it or not.