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80% of UK Government IT Projects Suffer Delays Due To Tax Clampdown (theregister.co.uk)
An anonymous reader shares a report: The vast majority of UK government IT projects are suffering delays due to freelancers quitting over the IR35 tax clampdown, according to a survey of contractors. Of 405 IT freelancers surveyed by Contractor Calculator, 79 per cent said the projects they have been working on were delayed as a result of contractors leaving. In April, the government shifted responsibility for compliance with the IR35 legislation from the individual contractor to the public body or recruitment agency. The Treasury says it hopes to raise $240m for 2017/18 by bringing public sector contractors within the scope of the legislation. However, the overall number of freelancers leaving as a result of the changes is lower than previously thought, with 48 per cent jumping ship. In previous surveys more than 80 per cent had threatened to walk once the changes came into force. Half of the contractors who decided to stay managed to find a way of working outside the IR35 changes, with a further 13 per cent working within the scope of IR35 but negotiating a rate increase. The rest seemingly took the changes on the chin.
misclassified contractors should not be on the hook for taxes no the recruitment agency should be paying and doing the paper work.
It's easy to spend other people's money. There's no consequences or responsibility. It's why the UK has descended from the world's premier Superpower to American lapdog.
This isn/t really "misclassified" contractors. This is a case of IT contractors using a tax loophole, the government closing that tax loophole many years ago, then IT contractors trying to weasel out of it illegally. The change happened years ago, and the government has been explicitly telling people for at least seven years not to pull the "IR35-proof contract" bullshit that doesn't work, but plenty still try.
Basically, the issue is this: organisations employ contractors who act like employees, but want to pay tax like corporations. So they set up a one-person business and write contracts that on paper attempt to swerve around the IR35 legislation. But the government has basically said that it doesn't matter what the contract states if neither party actually adhere to it because you're basically just disguising an employee and evading tax.
On the face of it, it sounds like you guys had a bunch of freelancers who weren't declaring at least some of their income.
#DeleteChrome
programmers decent wages, this isn't unexpected. My two roommates have worked for a payroll company in the US for over thirty years. but were offered over 30% less to go to the UK to work, it's understandable why they turned them down.
misclassified contractors should not be on the hook for taxes no the recruitment agency should be paying and doing the paper work.
I do freelance/contract/consulting work. However, I never work through an agency. I always form an agreement directly with my client. In my case I am responsible for all my own taxes along with everything else, which is how I prefer it to be. Is this approach not common? Is it more common for IT/tech/software dev consultants/freelancers/contractors to use an agency? If so, what is the benefit?
From my perspective I have always steered clear of those agencies because I don't care for recruiters in the first place, and because I would rather not have some filtering the exchange between me and the client.
Yes, apparently you deal with sociopaths by electing them as the head of said government.
Let's see how that works out for your "group society" in the long run.
How about taxes for government services but a lot less for giveaways to non-workers?
Wow, you're even stupider than I realized.
What's stupid is assuming my facial structure, it's disgusting how insensitive people are to the chin-impaired.
"IR35-proof contract" bullshit that doesn't work
The government's problem is that the "IR35-proof contract" mostly did work.
IR35 initially caused a great deal of aggravation in the industry, not least because it was like a Sword of Damocles over the head of every legitimate contractor or freelancer who really was conducting their affairs as an independent business would and not just claiming to be a contractor as a tax loophole while still acting as an employee for all other practical purposes.
After an initial period of confusion, a few test cases settled various criteria as clearly distinguishing people who would not be caught by IR35, and almost everyone started structuring their contracts in this way. From that point on, HMRC has won almost no cases, not that it's even bothered to bring that many in recent years, and most accountants working with small businesses are IME not particularly concerned about the risks of IR35 today.
That poor track record of successful enforcement actions continued even after various attempts to introduce new official guidance on what should or shouldn't be covered. Some of the guidance was hilariously ill-judged; for example, IIRC one set of questions would have put one of my companies under IR35 even though it has nothing to do with contract or freelance work of any kind and no-one who could possibly be in the "employer" role.
The trouble, of course, is that all of the above also applied to the cheats who really are disguised employees and really should be caught by IR35. And so the irony of the whole government contractor mess coming up now is that the government already basically gave up on IR35 and just directly shafted all the legitimate contractor-based businesses as well by slapping a huge tax rise on dividends a couple of years ago, and then tightening the noose even further last year. At this point, you'd be mad to operate as a limited company and pay out through dividends just to try to save a small percentage on your taxes anyway; the overheads in admin and professional fees to run a limited company would surely cost you more that any small tax saving would be worth.
And yet since the government don't want to hit main income tax, National Insurance or VAT rates, the small businesses and independent professionals keep getting hit anyway. (Just imagine the reaction if, out of the blue, they increased the basic rate of income tax by 7.5% at the next budget, in addition to pushing up a variety of other tax rates here and there so the overall increase in what you were paying was more like 10%.) Sooner or later, they were bound to find that smart, well-advised professionals of the kind who could actually run successful small businesses in the first place were going to walk away from the kind of bad deal the government apparently thinks everyone should take, and in this case, it appears that the government itself is the one losing out as a result. As someone who's always run businesses according to both the letter and the spirit of the rules and yet been repeatedly screwed over by the government anyway, I don't have an iota of sympathy for them.
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.
thats why you should have balls on them.
I've got news for you pal - judges all over the world routinely invalidate contracts. It's nothing unique to the UK, it happens everywhere. It's funny you should accuse the UK of being a "slave state" for this in particular. One of the classic examples of a judge invalidating a contract is when the contract conflicts with a person's statutory rights. For instance, if you sign a contract that commits yourself to slavery, the state can and will disregard it on human rights grounds.
I do freelance/contract/consulting work. However, I never work through an agency. I always form an agreement directly with my client. In my case I am responsible for all my own taxes along with everything else, which is how I prefer it to be. Is this approach not common? Is it more common for IT/tech/software dev consultants/freelancers/contractors to use an agency? If so, what is the benefit?
You don't need a network, you don't need to be a salesman, you don't have to know all the paperwork and you got a guaranteed base salary. At least that was roughly my experience starting out as a consultant, "all" I had to do was show up at clients and deliver well. As an consulting company they come across many opportunities big and small with different requirements, they were quite good at keeping billable hours high at good rates. It was employee-ish but with more variable pay, more varying projects, technologies and people. If you had downtime you could take classes and certifications. Overall a pretty good fast track to build a good CV.
If you mean agencies that take a cut just to match up the work with the people then I think people try to avoid them. Before you needed them to find the resources but with online database it's much easier to find what you're looking for. There's still those who do all that "other" work for a cut though, basically it's more like you buy a support service but if you don't find your own billable work you're not making any money. Often it's worth it to spend time billing and not dealing with everything else. You can waste a lot of time fiddling with paperwork and when you start to put a price on those hours it might make sense. Unless you're the jack-of-all-trades kind that can both sell and deliver and support yourself and be good at all three.
Live today, because you never know what tomorrow brings
programmers willing to work for less for less than they're a;ready getting paid. I know my company pays them well into six figures so they'll never leave us since they're so hard to replace.
Also, 79% of contractors surveyed, not projects.
Stupid is everywhere.
And yet, the vast majority of the not so stupid, went with the age old "if slavery is a choice, i choose not to be a slave". Get out of the UK while you still can, they are insolvent from mother to son, and will do anything to keep the gold plated boat floating when charles assumes command next year.
If there was a gun involved, there wouldn't have been so many walking away. That's the thing with the UK, at least for now, bahaving like slave owners but with all the fences to keep the slaves on the farm torn down.
Maybe the UK will give itself another brain drain; many of the good doctors left for the US in the 60's and 70's. The IT snowflakes can jump ship to the EU before brexit shuts to door.
I'd much rather stay in the UK than live on planet Loon with you.
I do freelance/contract/consulting work. However, I never work through an agency. I always form an agreement directly with my client.
Do you do work for the government? To supply services to my government you have to be on a list of pre-approved government suppliers (this process is vetted to try and prevent fat govt contracts going to friends and family of ministers/secretaries etc). To get on the supplier list is an effort, so your average freelancer doesn't have the time or patience to endure this, but recruitment agencies do, so they act as a middleman. Gov uses agencies to recruit contingent labour, freelancers apply via agency.
If you are big enough you would apply to be a direct supplier, but most contractors simply go through an agency.
We've seen this Reaganomics voodoo before, and it doesn't work because it was never intended to "work", it was intended to enrich the owner class further so they could extend their grasp over a duly uneducated captive electorate that doesn't care to study macroeconomics and prefers bullshit six word slogans instead.
Trickle down economics works reasonably well in a non-globalised economy. In the old days, most money stayed in the country so the wealthy used it to grow their local business which in turn trickled down to employees and their families.
But when modern transport and comms networks opened up borders, the money no longer trickled down, it trickled away overseas to cheaper labour and tax havens.
The idea is sound, but like most conservative policy it was just 20 years too late.
And yet even with this change IR35 is still horribly woolly, with HMRC's own assessment tool often returning incorrect results, and in all likelihood it'll continue to be largely unenforced because they know they'll lose most of the cases they bring to court and doing so costs more than they can possibly hope to recover in "lost" taxes.
Right now if you're a contractor working in the public sector through a PSC you have the worst of both worlds; you don't get holiday or sick pay, pension, or other benefits but you *do* have to pay income tax and NI at permie rates.
It's ironic that HMRC themselves lost all of the developers of their online assessment tool, because they were all PSC contractors affected by the stupid changes, which is part of the reason it doesn't work properly and they aren't fixing it.
The way they were operating is quite common in other countries and seems quite reasonable to me so I see no need for this change.
The thing I find strange about the UK is the pay rates for developers appears to be pretty low. Maybe the crowd emailing me job offers there are the cheap labor suppliers, and real market rates are higher, but based on the offerings I am seeing the typical rates are £35 - £45 P/H or £25k - £65. The highest I have seen offered was £75k. Given that the UK is an expensive place to live this is hardly that attractive.
Be careful what you wish for. We have a similar situation in the Netherlands. The situation was that in principle, the client or the agency was responsible for taxes if the contracter was deemed a "virtual employee" by the IRS. However a contractor could submit a form, detailing his situation, income, nr of clients and other info, upon which the IRS would issue a release (called VAR) that effectively shifted the liability for taxes to the contractor. The upshot of course was that no agency or firm would hire a contractor without that release, since the liability for those extra taxes could be substantial.
Things have changed a little since. The government was concerned about employees (chiefly in construction, health care and delivery) being fired and hired back as contractors with shit rates. They'd earn enough to have around the same net pay, but not enough to get decent insurance or pay into a pension plan, meaning massive savings for the company. The government instituted a new law to fight this, shifting even more responsibility to the hiring party and replacing with the VAR release with a complicated system around so called model contracts. As an IT contractor, I felt this. Early last year I had clients lining up; then the law went into effect and requests fropped to zero. Agencies told me that the only contracts available were with government, or through payroll companies that "employ" you and take a massive bite out of your fee rate.
After many complaints, the law was suspended (though not repealed). And immediately I started getting requests again. So that is what you get if you create uncertainty around the classification of contractors and shift the responsibility to the hiring party: they will find ways to avoid that responsibility, and it's the freelancer who will suffer.
By the way, in our case the new laws were made to prevent corporations from abusing the system at the expense of the contractors / employees. The tax loophole was closed years ago: in a one man company or small firm, the IRS will set a minimum salary that you will have to pay yourself, taxed as regular wages.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
That’s not a fair characterisation of the situation at all. Remember that some ten years ago the government said that in order to supply them you had to register as a limited company. It was the government that not just advised, but compelled, us to form a limited company if we wanted to continue working. And many of the contractors were originally civil servants who were pushed out because of the deskilling of the civil service and then brought back as contractors almost immediately. Again, they didn’t necessarily want to do this but had to in order to keep their jobs.
I’m one of the ones who negoatiated a rate increase (circa 25%) to account for the difference of being under IR35. There’s a significant difference between the rate I charge and the rate I receive because now there’s one, potentially two, additional middle men taking their cut (agency and umbrella company). And the amount of tax I’m paying? Broadly the same. The government themselves only estimate the impact to be about £400 per contractor per year and I’m certain that the additional costs of overruning projects have eclipsed the negligible increase in tax income.
Trickle down economics works reasonably well in a non-globalised economy.
And that's why it has always been horse shit. Nobody was talking about it until the economy was already globalized.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
It doesn't matter the economic results. What matters is that it grows the government and keeps all those bureaucratic assholes employed. Government, by nature, is parasitic via its monopoly over the populous. It's up to the voters to call them out on their bullshit. Sadly, people don't really give a shit so they Gov gets away with these shenanigans.
Wow, you're even stupider than I realized.
You've exposed the chink in his armour.
Wanna buy a shirt?
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Get out of the UK while you still can, they are insolvent from mother to son, and will do anything to keep the gold plated boat floating when charles assumes command next year.
To where? The ship may be sinking but the sea is on fire.
Wanna buy a shirt?
https://www.redbubble.com/people/stealthfinger/shop?asc=u
The prime contractor is usually one of those companies on the "approved list", but you can sub to them as you like, and don't have to be on an approved list.
Yes, of course they get a bit of you bill rate, but that's how the game is played.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
The main problem is the population see a business that makes money, and wants the government to take as much money from them as possible to give to them. So instead of talking to the businesses trying to figure out what is acceptable to them, like how much is too much, and how law does the tax need to be for them to grow, they just raise taxes and figure just by raising taxes it means more tax is gathered.
Got people in government who don't know anything about macro economics who simply raising taxes as A + B = C. If taxes are too high, people will do something else. When taxes are to high, the government is telling the people that they don't want them running businesses.
>Right now if you're a contractor working in the public sector through a PSC you have the worst of both worlds; you don't get holiday or sick pay, pension, or other benefits but you *do* have to pay income tax and NI at permie rates.
If you're self employed who do you expect to pay you while you're on holiday or sick etc and why should you pay less tax? Those things aren't paid for out of tax and why should your NI be lower? Are you less likely to need the NHS somehow?
Wanna buy a shirt?
https://www.redbubble.com/people/stealthfinger/shop?asc=u
Personally I think of it as golden shower economics, where we are all supposed to be grateful that some of the splashes fall on us.
The money doesn't trickle down. End of.
Rich People cannot spend any more than they already are. Give them more money, it goes into long term savings and investments. It doesn't get trickled down at all.
Put that money at the bottom of the earnings pile, and those people will spend every extra penny out of necessity. This truly boosts an economy. But it doesn't make rich people even richer.
No, the problem is the government can't take money from huge businesses which provide donations to get them elected so they have to screw over small businesses which are where growth and innovation actually happens. The current gov (conservative) is supposedly business friendly, but this only refers to big business and monopolies. Labour actually offers a better deal to small businesses which is ridiculous.
I did this myself for a while so I might be biased.
I also went legit for one contract by working under an umbrella corporation. During that contractor had the privilege of paying the extra tax/NI while still not getting holiday pay, sick pay, pension contributions and for 6 weeks, never getting paid at all because the contract said they would only pay me once they were paid and the end client decided not to pay. If I'd been working directly, I could have sued them, but since I was under the umbrella, it was the umbrella that would need to sue them - and they couldn't be bothered as it would only be worth a ~hundred quid to them.
So yeah, I didn't go the umbrella route again.
I smell a Hector! You seem to have completely avoided addressing the most common argument contractors put forwards. They dont get sick or holiday pay, they dont get company pensions or benefits or any other employee benefit. So to tax them as if they are employees puts them at a distinct financial disadvantage to someone on PAYE. I dont see why HMRC and the govt continually meddle with this, they are slitting their own throats in terms of delivery capability across the o so needy public sector. Administration, red tape, out moded operating models could save a lot through technology projects, but they require expertise to deliver. disincentivise the flexible workforce and by all means pay a lot more for one of the consultancies you mention. Sensible use of limited resources......
Fucking pay your fucking taxes, problem solved!
"79 per cent said the projects they have been working on were delayed as a result of contractors leaving"
The other 31% will tell their employers they're going and leaving the project inthe lurch unless the organsiation picks up the bill. Emploer, especially publci secotr" rolls over and takes it up the doodah.
This sounds like shout99.com. By hector you mean a tax man in disguise?
#clover
"Right now if you're a contractor working in the public sector through a PSC you have the worst of both worlds; you don't get holiday or sick pay, pension, or other benefits but you *do* have to pay income tax and NI at permie rates."
Well, you see, your Personal Service Company is your employer, it's up to them to provide benefits as part of the remuneration package you agree with them.
If you arrange a legal fiction to get around paying self employed tax and NI you should at least be competent at it
Fucking pay your fucking taxes, problem solved!
I'd feel better slitting your fucking throat then following your command. It wouldn't be a complete solution but certainly a step in the right direction.