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Big consultancy employees doing the same work are paid far less than independent contractors once were, meaning they pay less tax individually, while the consul

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.
  - MattPalmer1086 1y ago
    I think we will have to agree to disagree! I fundamentally don't think IR35 is a class-based attack on the working class. It was introduced by a Labour government. The consultancies don't pay their workers far less than they could get in a similar position as an employee of the client - or they would leave! They do charge the client a lot more of course - that's their profit, deserved or not. While I totally acknowledge that large multinationals play fast and loose with tax, it's a totally different problem than going after small fry. I would welcome efforts to crack down on that, it's just very, very hard to pull off. So my view is simply that IR35 was the taxman trying to bring in more revenue by targeting a common tax avoidance scheme used by people they thought would be easy to target. And then executed it incredibly poorly.
    - varispeed 1y ago
      The class dynamic isn't negated just because a Labour government introduced IR35 - Labour has historically protected institutional labour structures, not independent working people. The origin doesn't matter, the outcome does: IR35 crushed the ability of skilled individuals to operate as businesses, while shielding corporate profit flows. > The consultancies don't pay their workers far less than they could get as employees of the client — or they would leave! They do charge more, of course — that's their profit. Yes - and when those workers realised they were undervalued, they left to set up their own businesses. That was precisely one of the points IR35 was lobbied for: to stop that exodus and lock talent back into captive corporate pipelines. This was never about tax - it was about control over the market. > I would welcome efforts to crack down on that, it's just very, very hard to pull off. No - they could have simply included large corporates under IR35. That was a deliberate exclusion, not a technical challenge. > My view is IR35 was the taxman trying to bring in more revenue by targeting a common tax avoidance scheme used by people they thought were easy to target. Running a legitimate business isn't a "tax avoidance scheme." Contractors paid personal and corporate taxes - and proportionally, they paid far more onshore than the consultancies replacing them. IR35 is a market capture - one of the most efficient, targeted consolidations of skilled labour the UK has seen. And it works.
munksbeer 1y ago
>IR35 wasn't about fairness. It was about shutting down small, skilled independents so big firms could lock in the profit stream That is way too sophisticated. The simpler explanation, governments look for ways to squeeze more tax out of people. IR35 was an easy win for them, since it typically impacted only people who were effectively already employees by using tax loop holes to pay less. I know, I was one of them.
- varispeed 1y ago
  That's not a simpler explanation - that's just swallowing the official propaganda. IR35 was never about raising tax. If it were, big consultancies would have been a primary hit, as this is where actual tax avoidance is. You may have accepted the "I was one of them, using loopholes" framing, but running a small business isn't a loophole - and repeating that myth only props up the system that shut you out.
  - munksbeer 1y ago
    > but running a small business isn't a loophole If you run a genuine small business, then you're not in IR35 because you'll be doing jobs for multiple clients. Come on, let's not pretend here.
    - varispeed 1y ago
      IR35 only applies if the worker owns the business and it's irrelevant how many clients they have. A big consultancy can have just one client for years and IR35 won't apply.
    - MattPalmer1086 1y ago
      I think it is entirely possible to run a genuine small business and only work for a single client at a time - given that what is being sold is the time and skills of the owner. Certainly true that working for multiple clients simultaneously pretty much insulates you from being inside IR35 though.
      - 1y ago

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.
- MattPalmer1086 1y ago
  I think we will have to agree to disagree! I fundamentally don't think IR35 is a class-based attack on the working class. It was introduced by a Labour government. The consultancies don't pay their workers far less than they could get in a similar position as an employee of the client - or they would leave! They do charge the client a lot more of course - that's their profit, deserved or not. While I totally acknowledge that large multinationals play fast and loose with tax, it's a totally different problem than going after small fry. I would welcome efforts to crack down on that, it's just very, very hard to pull off. So my view is simply that IR35 was the taxman trying to bring in more revenue by targeting a common tax avoidance scheme used by people they thought would be easy to target. And then executed it incredibly poorly.
  - varispeed 1y ago
    The class dynamic isn't negated just because a Labour government introduced IR35 - Labour has historically protected institutional labour structures, not independent working people. The origin doesn't matter, the outcome does: IR35 crushed the ability of skilled individuals to operate as businesses, while shielding corporate profit flows. > The consultancies don't pay their workers far less than they could get as employees of the client — or they would leave! They do charge more, of course — that's their profit. Yes - and when those workers realised they were undervalued, they left to set up their own businesses. That was precisely one of the points IR35 was lobbied for: to stop that exodus and lock talent back into captive corporate pipelines. This was never about tax - it was about control over the market. > I would welcome efforts to crack down on that, it's just very, very hard to pull off. No - they could have simply included large corporates under IR35. That was a deliberate exclusion, not a technical challenge. > My view is IR35 was the taxman trying to bring in more revenue by targeting a common tax avoidance scheme used by people they thought were easy to target. Running a legitimate business isn't a "tax avoidance scheme." Contractors paid personal and corporate taxes - and proportionally, they paid far more onshore than the consultancies replacing them. IR35 is a market capture - one of the most efficient, targeted consolidations of skilled labour the UK has seen. And it works.

munksbeer 1y ago

>IR35 wasn't about fairness. It was about shutting down small, skilled independents so big firms could lock in the profit stream That is way too sophisticated. The simpler explanation, governments look for ways to squeeze more tax out of people. IR35 was an easy win for them, since it typically impacted only people who were effectively already employees by using tax loop holes to pay less. I know, I was one of them.

varispeed 1y ago
That's not a simpler explanation - that's just swallowing the official propaganda. IR35 was never about raising tax. If it were, big consultancies would have been a primary hit, as this is where actual tax avoidance is. You may have accepted the "I was one of them, using loopholes" framing, but running a small business isn't a loophole - and repeating that myth only props up the system that shut you out.
- munksbeer 1y ago
  > but running a small business isn't a loophole If you run a genuine small business, then you're not in IR35 because you'll be doing jobs for multiple clients. Come on, let's not pretend here.
  - varispeed 1y ago
    IR35 only applies if the worker owns the business and it's irrelevant how many clients they have. A big consultancy can have just one client for years and IR35 won't apply.
  - MattPalmer1086 1y ago
    I think it is entirely possible to run a genuine small business and only work for a single client at a time - given that what is being sold is the time and skills of the owner. Certainly true that working for multiple clients simultaneously pretty much insulates you from being inside IR35 though.
    - 1y ago