Member Since: 9th Apr 2002
Dave Chaplin is founder and CEO of ContractorCalculator and author of The Contractors Handbook and Beat IR35: The ultimate guide to IR35 for contractors, agencies and clients.
Started in 1999, ContractorCalculator.co.uk is the leading independent website for the UK contracting industry – most of whom are highly skilled knowledge workers.
Dave has lived and breathed contracting since he first took the plunge and became ‘one of the chosen’ in 1997. He spent seven years working as an IT contractor in the City of London on critical, cutting-edge IT infrastructure and development projects for global players like HSBC, Merrill Lynch, Cable and Wireless, and many others.
31st Aug 2019
Looks like the guidance is wrong if it is saying that the employment taxes (employers NI and App Levy) can be deducted from the earnings that are to be treated as employment income.
SSCBA Schedule 1, 3(2) is very specific about the fact that secondary class 1 NICs (employers NI) cannot be deducted from the earnings.
For inside IR35 contracts, agencies are going to need to be very careful that the rate they have agreed with the contractor is the rate they get are going to get paid as employment income, and not try and deduct employers NI and App Levy from it. It's an easy court case to win - trust me, I've seen this happen very recently.
If they are using umbrella companies then they will need to pass the contractors fees + the employment taxes + the umbrella fee to the umbrella company, and ensure that the umbrella treats all the contractors fees as employment income. Maybe proof of payslips, etc, would do it.
The other nuance with this is that contractors who have contracts spanning April 6th, and are told they are inside IR35, the agency will need to cough up the employers NI. So either they need to chase the client for this, or terminate the contractor. They have no lawful basis upon which to deduct it from the current contract rate.
This is all a consequence of a dogs diner piece of draft legislation.
29th May 2019
Clearly no abuse of powers going on here, or any need for independent oversight of HMRC. Sigh....
19th Apr 2019
My cynicism based on what I've seen lately tells me that they are hoping firms will get existing contractors to agree to go on payroll, irrespective of actual status, so any tax risk is avoided. And then HMRC will pounce and say "See, you were inside IR35, so pay up."
Then any appeal will start on the back foot. Is the client going to be a useful witness at this point? I doubt it.
Contractors who are thinking of switching to inside should speak to their advisors to protect themselves against frivolous historic claims by HMRC.
Of course, if the contractor doesn't have much money in the company, then the HMRC claim is somewhat pointless. But for those who keep reserve funds they should take advice on how best to ring fence that against unjust attempts to steal it.
24th Mar 2019
Slam dunk win for Kelly. Reading the judgment, I sense the judges were not impressed that this even ended up in court. In para 177 they said "we do not consider this a borderline case". It's rare for them to use such words.
She was paid pro-rata to do a specific thing to which she heavily controlled. Which is what self-employed people do really. HMRC are told this time and time again, but they still pursue weak cases that have little merit.
18th Mar 2019
The whole chain idea seems overly complex, and for what reason?
Surely if the client makes the determination it would be easier if they made the tax payments, and just passed the net figure down the chain, with some sort of note that taxes had been deducted.
Not only would that considerably reduce the administrative burden, but it would also close the door on the tax avoidance schemes queuing up and licking their lips ready for April 2020.
Failing to deduct the tax at source is asking for trouble, and another Loan Charge fiasco in 10 years times. HMRC have already demonstrated that they cannot close down schemes quick enough because they lost £3.2bn due to IR35 and loan schemes. I'd expect it to be 10 times worse when these new changes come in.
6th Mar 2019
Semi-scapegoating contractors again. The vast majority of the perceived tax loss is due to the hiring firm not paying Employers National Insurance when they hire a contractor.
The actual amount of tax a contractor pays, via corporation and dividend taxes, is similar to the taxes paid by an employee.
The Government, in all of it's pamphlets, is playing this down, and it's worrying, because firms need to be aware of the potential tax bomb they face if they do not assess their entire workforce before April 2020.
I hate to scaremonger, but the consequence of getting is wrong for companies is enormous. Crippling in fact.
25th Feb 2019
Tax legislation over the past 20 years has been designed to be more vague, and more subjective to (a) widen the net for enquiries, and (b) prevent hard lines that open the door for creative tax planning. Introducing subjectivity is juxtaposed to the necessary objectivity required when moving to automation.
18th Feb 2019
Spot on Graham. Only those ignorant of the facts and suckers for Government propaganda adopt the "surely they should have known" and "they deserve it" lines. They should try doing more research and coming to a more considered opinion.
27th Sep 2018
The arguments about bricklayers was explored on Castle Construction. They were found not to be employees, and in fact self-employed.
Amusingly, HMRCs CEST tool gets the wrong answer for this case, which they freely admit to.
Another (I'm doing my Peter Cook El Wisty voice) interesting fact about the Castle Construction case was the judge commenting on the fact that if the bricklayers had been employed then they would not have earned as much money, and therefore less tax would be due than HMRC are trying to collect.
Apparently (sarcasm mode now), and HMRC aren't yet able to grasp this fanciful notion, people who freelance charge more than their permanent counterparts.
When an HMRC inspector's boiler breaks and a plumber turns up to fix it for the day, they should try paying by looking up the average annual salary for a full time plumber and offering him 1/365th for his work. Doh.
27th Sep 2018
incompetence is expensive!