it is around 40 billion or so... where would you find the money to replace that?
so you'd be hitting entrepreneurs, investors, pensioners etc.. too
more crackdowns on contractors expected
- Thread starter dowie
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it is around 40 billion or so... where would you find the money to replace that?
so you'd be hitting entrepreneurs, investors, pensioners etc.. too
Soldato
You can't overlook the VAT raised by a typical limited co. on the flat rate scheme.
Soldato
People that are inside IR35 currently have to pay themselves a salary (not allowed to pay themselves via dividends), so pay income tax and NI on that salary i.e. like an employee. It can be like that outside a term which is deemed no longer a temporary worker, my suggestion was a year.
In fact that would work under the current rules. Just say if you can prove that you are outside IR35 then fine for a say a year maximum and after that you will be inside IR35 whatever and have to pay yourself under those rules.
We contractors have always been perceived as an easy target as there are a lot of misconceptions of what tax we (don't) pay.
Lets put it in context shall we :
For a £100k a year contract, working 48 weeks a year (a modest £400'ish per day or so), I can expect to pay between £25k-30k in taxes operating through my own limited company.
(http://www.sjdaccountancy.com/contractor_calculator/index.html)
If I were a permanent employee earning £100k a year, I would pay £34k in taxes
(http://www.thesalarycalculator.co.uk/salary.php)
So lets factor in pensions, training, sick pay, holiday and other benefits that permanent staff enjoy that we must pay for, and you begin to see that the initial difference in take home pay starts reducing to a level that is pretty much comparable to a permanent wage.
What I do is a choice, I've been doing it for a while now. The only reason I am engaged by companies is to provide services and skills that their current workforce cannot provide , bringing experience that permanent members of staff cannot attain. It would be amusing to see what happens to the public sector IT departments should they meddle too much, seeing as the public sector are usually the biggest users of contract staff, especially HMRC. I can't really see many offers of permanent employment being taken up by contractors, nor could I see many employers happy with the idea of having to payroll temporary staff (with the benefits that they would then be entitled to).
We provide a service that is mutually beneficial to both parties. There is no black art to what we do, anyone can organise their affairs in the same way. Yes we enjoy more freedom and a choice of who we work for but at a cost of security and lifestyle.
Just my tuppence worth..... (IT contractor / Technical Solutions Architect, for over twenty years now...)
Lets put it in context shall we :
For a £100k a year contract, working 48 weeks a year (a modest £400'ish per day or so), I can expect to pay between £25k-30k in taxes operating through my own limited company.
(http://www.sjdaccountancy.com/contractor_calculator/index.html)
If I were a permanent employee earning £100k a year, I would pay £34k in taxes
(http://www.thesalarycalculator.co.uk/salary.php)
So lets factor in pensions, training, sick pay, holiday and other benefits that permanent staff enjoy that we must pay for, and you begin to see that the initial difference in take home pay starts reducing to a level that is pretty much comparable to a permanent wage.
What I do is a choice, I've been doing it for a while now. The only reason I am engaged by companies is to provide services and skills that their current workforce cannot provide , bringing experience that permanent members of staff cannot attain. It would be amusing to see what happens to the public sector IT departments should they meddle too much, seeing as the public sector are usually the biggest users of contract staff, especially HMRC. I can't really see many offers of permanent employment being taken up by contractors, nor could I see many employers happy with the idea of having to payroll temporary staff (with the benefits that they would then be entitled to).
We provide a service that is mutually beneficial to both parties. There is no black art to what we do, anyone can organise their affairs in the same way. Yes we enjoy more freedom and a choice of who we work for but at a cost of security and lifestyle.
Just my tuppence worth..... (IT contractor / Technical Solutions Architect, for over twenty years now...)
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Soldato
There are many contractors who are on <£30k contracts which it'll effect too. People seem to make an automatic assumption that "contractors rake it in" etc which, while true for a minority, isn't right for the vast majority.
The amount of tax I'll "save" this year being a contractor is <£200 which is almost all from mileage claims, so it's not what I'd consider a tax dodge either.
The amount of tax I'll "save" this year being a contractor is <£200 which is almost all from mileage claims, so it's not what I'd consider a tax dodge either.
As in addition free money to the contractor? My gf made an extra 5k a year out of the flat rate scheme when she was a consultant. Reduced her net tax burden even more.
so surely you'd benefit from becoming an employee with a pension + sick pay + holiday pay
Soldato
That's a big number. Big take home or a low rate 'industry' however I was talking about the VAT generated for Uk treasury. My corp tax per week and VAT created by the invoice are pretty similar numbers each week.
Treasurer looses out. The vat on your sales invoice all gets claimed back by the company you work for but everything you buy which an employee wouldn't get to claim any money back from or the generous flat rate schemes is lost vat to the treasury.
She was lucky for her industry. I think she was 9% on the flat but barely had any vat input expenses so it was free money to her
There is a grey area for lowER paid contractors, similar to the zero hours contract scandal, slightly higher hourly rate than a permie with no benefits.
Soldato
Benefits the employer hence they probably wouldn't want to offer the position as permanent
Soldato
Bingo!
Soldato
possibly but not by much
Soldato
I know what you are saying, but as a for instance, in my example I live in Bucks and work in Scotland. Who in their right mind would work like that on a fixed term contract on permie wages for your minimum of 6 months?
But the issue is that if adjusting for pensions and holidays that the contractor doesnt get any more net pay than the permie then it would be the same.
What you are clearly saying is that with the extra wages and the generous tax situation you end up getting paid much more than a permie. But why should you?
Basically I can see rates of pay for temporary staff on the books will have to increase. Contractors will still lose out though as they will lose all their tax breaks.
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Permabanned
How can they differentiate between a contractor and an entrepreneur? If I open a business and work as a consultant I might work for a few companies per year or many more or only one. Either way it's no different. These changes discourage entrepreneurship and help the big IT companies who will have less competition to deal with when taking on contractor work because they will of course be exempt from the changes because they pay employees payee then get contractor work and charge the employee out at 4x the rate.
Personally I had contracting mostly lined up as my next career move, it's simply the only way to make decent money in the UK. Fact is there's a huge gulf in permie/contract wages before you even get to the tax advantages. I don't know why this really exists, UK employment laws/regulations etc. too punitive and onerous? It's certainly not the case in the states where Permie/Contract rates are mostly the same, and ofcourse considerably better than here 
.
I'm hoping for now that contract rates will simply go up to reflect the taxation changes?
.I'm hoping for now that contract rates will simply go up to reflect the taxation changes?
Personally I had contracting mostly lined up as my next career move, it's simply the only way to make decent money in the UK. Fact is there's a huge gulf in permie/contract wages before you even get to the tax advantages. I don't know why this really exists, UK employment laws/regulations etc. too punitive and onerous? It's certainly not the case in the states where Permie/Contract rates are mostly the same, and ofcourse considerably better than here
I'm hoping for now that contract rates will simply go up to reflect the taxation changes?
I still cant under why there is such a difference. I'm convinced a lot of contractors employed is mainly down to headcount restrictions (it was certainly the case for my gf for 3/4 years and she wanted to be permanent but the company had a hold on headcounts while a merger went through with their largest rival - which fell through in the end due to the monopolies and mergers commission anyway) or its accounted for out of a different budget on the project. But this resulted her is getting paid £95k per annum as a contractor for a permanent position which carried a salary of £45k per annum.
Throw in the £5-£6k VAT she got got from the flat rate scheme and the generous taxation on expenses etc compared to an employee, when she finally became permanent it was a massive drop in net income.
Apart from the headcount freeze issue, her employer choosing to employ her as a contractor ultimately cost them substantially more per annum then employing her as an employee.
Personally if it goes through that people will need to be employees after a certain time albeit temporary ones, then clearly employers will have to increase the rates they pay their temporary employees as otherwise they won't get them to come and work for them.
However, I doubt employers will then overcompensate and pay them excessively more to make up for the tighter tax regime. Eg no sane employer would pay the £5k gained from the VAT flat rate scheme to my gf if they had her as a temp on their books.