more crackdowns on contractors expected

Soldato
Joined
11 May 2007
Posts
8,905
Location
Surrey
Currently you can claim expenses for two years before its deemed a permanent place of work, so that could be a logical starting point. Even a year would be pretty reasonable as it wouldn't effect people working as maternity cover.

Personally I would be happy with Joksters suggestion. So long as you are contracted to a project that has and end date for your set of deliverables be it a bit part of a project or the whole thing and your employment is to be terminated upon completion that would be temporary.

In the real world I think a year is the best compromise.

I think that already happens. 4 month contract. Get to the end. Extended another 4 months, 3 years later you're still at the same company!
 
Don
Joined
7 Aug 2003
Posts
44,275
Location
Aberdeenshire
Currently you can claim expenses for two years before its deemed a permanent place of work, so that could be a logical starting point. Even a year would be pretty reasonable as it wouldn't effect people working as maternity cover.

Personally I would be happy with Joksters suggestion. So long as you are contracted to a project that has and end date for your set of deliverables be it a bit part of a project or the whole thing and your employment is to be terminated upon completion that would be temporary.

In the real world I think a year is the best compromise.
It's one of the IR35 tests already that there is a defineable end date to a contract, not just between the contractor and client, but in terms of the work that's being carried out, eg project work is being carried out and not "business as usual" type stuff which has no determinable end date to it and would continue for the life of the business.
 
Caporegime
OP
Joined
29 Jan 2008
Posts
58,898
Individuals set up companies for a variety of reasons. The main one that I've come across is because an employer who wants their services won't take them on if they don't go Ltd or go through a payroll company.

My point being that no everyone sets up a Ltd company just to avoid tax, some people have little/no choice!

whether they go through their own ltd company or payroll company shouldn't matter to the company employing contracting them

the point was more why simply raising corporation tax isn't an option as it affects more than just individual contractors
 
Soldato
Joined
24 Oct 2002
Posts
14,162
Location
Bucks and Edinburgh
erm yes there is - the proposed legislation aka the topic of the thread and what I was referring to in that post if you read it in the context of the post it was quoting

And in the context of my post I am saying it is an idiots method for getting people to pay more tax and there is no reason to make a temporary worker into a permanent one, just make them pay more tax.

I think that already happens. 4 month contract. Get to the end. Extended another 4 months, 3 years later you're still at the same company!

Which was why I said, in the real world, a year would be a good compromise.
 
Caporegime
OP
Joined
29 Jan 2008
Posts
58,898
And in the context of my post I am saying it is an idiots method for getting people to pay more tax and there is no reason to make a temporary worker into a permanent one, just make them pay more tax.

how are you proposing to do that though?
 
Soldato
Joined
11 May 2007
Posts
8,905
Location
Surrey
whether they go through their own ltd company or payroll company shouldn't matter to the company employing contracting them

the point was more why simply raising corporation tax isn't an option as it affects more than just individual contractors

Of course.

But my point was that people don't only set up Ltd co. to dodge tax.

Cracking down on Ltd companies as mentioned is harsh. Employers should harbour some of the responsibility too. For example, perhaps they should be made to offer a full time, PAYE position after a year of contracting.
 
Soldato
Joined
24 Oct 2002
Posts
14,162
Location
Bucks and Edinburgh
how are you proposing to do that though?

Just like the expenses time limit that says you can't claim expenses after two years as it is no longer a temporary place of work, then at that time it would be logical to say that you should cease paying yourself a temporary worker and pay tax as a normal employee does.

That way, HMRC gets the tax they want, the contractor doesn't get forced into permanent employment against their will, employers don't lose the flexibility of being able to hire temporary staff without any commitment and the accountants can sort it out as that's what they are paid to do.

If two years is too long then shorten it to a year so it doesn't penalise maternity cover.

Of course.

But my point was that people don't only set up Ltd co. to dodge tax.

I only went into contracting because it was the only job available to me at the time after being made redundant. If you go into contracting, you will only be taken on if under an umbrella or ltd co. both of which are being attacked under these proposals.
 
Associate
Joined
8 Apr 2008
Posts
1,471
Location
Berks+Powys
I agree with ^^ -- as I said before, I contract /by choice/ and not to dodge taxes, just because I don't want to be employed and prefer to be a mercenary sort of person than a desk drone.

On the other hand, it's nice to have a 'retainer' with a company or two -- some DO want to have me available at the drop of a hat -- just not all the time -- so I have a contract with them, with generally very few hours (unless the **** hit the fan). So I *can* and *want* to be able to have these retainers, it's great business for me.

And all of that is NOT to dodge taxes -- I take risks, I live by the sword too -- one of my project was cancelled last week (zero notice) and that affects my bottom line immediately. I take risks, there has to be an incentive too.
 
Caporegime
OP
Joined
29 Jan 2008
Posts
58,898
Just like the expenses time limit that says you can't claim expenses after two years as it is no longer a temporary place of work, then at that time it would be logical to say that you should cease paying yourself a temporary worker and pay tax as a normal employee does.

That way, HMRC gets the tax they want, the contractor doesn't get forced into permanent employment against their will, employers don't lose the flexibility of being able to hire temporary staff without any commitment and the accountants can sort it out as that's what they are paid to do.

If two years is too long then shorten it to a year so it doesn't penalise maternity cover.

that doesn't change the tax situation

Do away with NI and just have one tax rate regardless of how you make your money.

how though? are you proposing increasing corporation tax for example? - that would hit genuine companies not just off the books employees with personal service companies.
 
Caporegime
OP
Joined
29 Jan 2008
Posts
58,898
Yes it does, it would then five people that contract on jobs lasting longer than say a year to pay tax as an employee would which is the whole point.

so you're not proposing any different to the speculated changes other than extending the time period from a month to a year?
 
Soldato
Joined
24 Oct 2002
Posts
14,162
Location
Bucks and Edinburgh
I'm a bit confused by all the people thinking that this removes all flexibility from employers.
You can have a fixed term contract of a "proper" PAYE employee.

Proper PAYE employees will normally be paid under the company's wage structure for a fixed term. A contractor gets paid a premium so they are able to move about the country for a short term job and a contractor can be got rid of usually with a weeks notice.

I'm not sure anyone would really want to move for a job that lasts say for a year with all the costs it entails for what a permie gets paid.

I'm sure you will then say, why don't the PAYE fixed term worker get paid the enhanced rate the contractor would, but that's been covered already. People getting permanent workers pay get paid differently to contractors. Contractors are normally attached to a project and are part of the costs of delivering that project and that project only, so normally comes out of CapEx.

so you're not proposing any different to the speculated changes other than extending the time period from a month to a year?

Yes I am, the onus of the payment of tax is on the contractor once the suggested term of temporary worker is past. This deals with the payment of tax by the contractor which is the whole point. What this isn't is for the client to take the contractor on their books as a permanent employee.
 

alx

alx

Soldato
Joined
10 Aug 2003
Posts
6,066
Location
Dubai, UAE
Proper PAYE employees will normally be paid under the company's wage structure for a fixed term. A contractor gets paid a premium so they are able to move about the country for a short term job and a contractor can be got rid of usually with a weeks notice.

I'm not sure anyone would really want to move for a job that lasts say for a year with all the costs it entails for what a permie gets paid.

I'm sure you will then say, why don't the PAYE fixed term worker get paid the enhanced rate the contractor would, but that's been covered already. People getting permanent workers pay get paid differently to contractors. Contractors are normally attached to a project and are part of the costs of delivering that project and that project only, so normally comes out of CapEx.

As you've alluded to, employers don't want to pay a premium for fixed term permanent staff because it often doesn't fit into their wage structure - hence why they choose contractors. Whether this would change, who knows, but there is a reason wjy employers choose to recruit contractors and it's not because they have no other choice!
 
Caporegime
OP
Joined
29 Jan 2008
Posts
58,898
Yes I am, the onus of the payment of tax is on the contractor once the suggested term of temporary worker is past. This deals with the payment of tax by the contractor which is the whole point. What this isn't is for the client to take the contractor on their books as a permanent employee.

what do you mean by that though - re: payment of tax - how are you suggesting that is implemented?
 
Soldato
Joined
13 Dec 2002
Posts
7,646
Location
Manchester City Centre
Proper PAYE employees will normally be paid under the company's wage structure for a fixed term. A contractor gets paid a premium so they are able to move about the country for a short term job and a contractor can be got rid of usually with a weeks notice.

I'm not sure anyone would really want to move for a job that lasts say for a year with all the costs it entails for what a permie gets paid.

I'm sure you will then say, why don't the PAYE fixed term worker get paid the enhanced rate the contractor would, but that's been covered already. People getting permanent workers pay get paid differently to contractors. Contractors are normally attached to a project and are part of the costs of delivering that project and that project only, so normally comes out of CapEx.
I don't disagree with anything you've said, and none of it is news to me, but plenty of the examples given in this thread of "this is never going to be possible now" refer to things that fixed term contracts would cover.
If you're taking on a team to develop a new project with an uncertain future beyond fixed funding then so long as the time scale is long enough (minimum 6 months) to attract people after a fixed contract then that would be the best path.

I'm not saying there aren't scenarios where contractors are more appropriate, but there aren't many examples in this thread.
 
Don
Joined
7 Aug 2003
Posts
44,275
Location
Aberdeenshire
how though? are you proposing increasing corporation tax for example? - that would hit genuine companies not just off the books employees with personal service companies.
I would do away with corporation tax to be honest, it would level the playing field between small UK businesses and the likes of Amazon, Starbucks and the like that export their profits to low corporation tax nations which gives them a competitive advantage.
 
Caporegime
OP
Joined
29 Jan 2008
Posts
58,898
I would do away with corporation tax to be honest, it would level the playing field between small UK businesses and the likes of Amazon, Starbucks and the like that export their profits to low corporation tax nations which gives them a competitive advantage.

that would create a huge hole in the budget...

and you've still not explained how you'd increase the tax contractors pay
 
Back
Top Bottom