Contractors versus Consultancies
Having worked as employee, contractor and consultant, it seems to me that the contractors provide the same services as the consultant, but at a far cheaper rate (comparatively).
Thus for the top end of the city wide boys delivering Risk Management, Trading Financials or Regulatory Finance a contractor might cost £700 a day and a consultant would cost £1,600 a day ++
Since the consultant is typically an employee of the consultancy (whilst perhaps earning £100,000 per year including bonuses they are still paid PAYE)
If the contractor can no longer operate via a one-man Limited company route then the only options are to become an employee of the bank on £50-£60,000 or become a consultant and earn £100,000 per year.
Can't see the banks liking either option as the people who stick around on the middle tier salaries tend not to be the ones they want. The contractors are at least self-motivated, have no "Company" to protect as the consultant does and tend to do the same job a lot more effectively and a lot cheaper.
I can easily see the emergence of consultancies which are really just "contractor conglomerates" to get around whatever employee numbers or shareholding limitations that they put in place.
If there was no demand for contractors they wouldn't command the rates that they do, but very few people thrive on the very dynamic nature required for contractors, who are neither employees nor consultants.
Why can't we just dump the Agency Rules stuff and go back to them being self-employed, which is what Limited Company Contractors actually are. This façade of pretending to be an enterprise is helping no-one, but again the root cause of this is legislation wanting to turn everybody into PAYE paying employees, whereas some people, by their very nature, just aren't.
justsotax wrote:so....i am guessing the bigger risk for anyone contracting is the cessation of the contract....that makes paying the mortgage v difficult....
True, but that's a personal risk unrelated to the company.
It's like Mo Farah's left leg, neither right nor fair...
Vaughan Blake1 wrote:The other 'loophole' as HMRC see it is income splitting. Husbands using their wife's personal allowance & basic rate band. As a previous poster pointed out 'why is this a problem'. DC is forever promoting the family unit and marriage. What better way to assist that unit financially than surrenderable allowances and basic rate bands?
But going back to your previous argument about fairness and equity in taxation, as income-splitting is not possible between a PAYE schlep and his non-working wife, why should it be between a Limited Company Contractor and his non-working wife?
Certainly, if the fiction of Employers National Insurance is too
Colin Lothian wrote:If National Insurance and income tax are merged as was proposed some time ago, the need for Status Inspectors and all the paraphernalia of IR35 would disappear at a stroke.
The problem here is that the economic incidence of the Employers NI is actually carried by the employee, from the employers perspective all aspects of PAYE are the cost of employing the employee.
The problem with loading this onto income tax would be that people earning relatively modest incomes would suddenly realise the state is taking a vast amount off them in tax, probably upwards of 50% of their total salaries.
Although such a move would in reality be tax neutral, it would look like a massive hike and the opposition would portray it as such regardless of the reality.
As per usual, ignore compliance costs
As per usual with these matters, it completely ignores the compliance cost or the amount of hours lost to IR35 compliance / hoop jumping that could have been spent by agents and clients on actual revenue generating business.
IR35 is attempting to plug a hole that only exists because of the difference in taxation between highly paid, highly skilled employees and those operating through limited companies using low salary + high dividends.
The main problem here is not just IR35, but charging Employers NI for one-man-band limited companies, which only really exist because of various regulations introduced by previous governments to prevent contractors working for companies on a self-employed basis where there was genuine self-employment (agency regs, msc regulations, etc.)
Given the judgement against HMRC this is unsurprising...
Given the judgement against HMRC this is unsurprising, certainly if I was in the position of these trusts, I'd be weighing up the value of coughing up in full or delaying until HMRC come up with better settlement terms.
I hasten to add that I'm not sympathetic to their plight. Simply pointing out their position.
This was pointed out when RTI was proposed
CJMaslen wrote:The true hidden cost of RTI must be astronomical and yet we are told that it is more efficient and saves administrative time. I look forward to hearing what other correspondents have to say.
The impact assessments for RTI took no consideration of the time and effort of accountants getting clients up to speed on RTI or resolving problems with RTI.
As far as HMRC are concerned, they don't pay for it therefore it is free.
The costs to UK businesses are massive and rising, for little ACTUAL benefit to accountants or clients.
Look at it from a project management perspective...
In respect of the core criteria of for any project (time , money and functionality/quality), HMRC can be said to have met only one. They delivered RTI within the POLITICAL timeframe required, which is aligned to meeting timescales for the DWP's Universal Credit commitments.
This helps HMRC slightly and agents/taxpayers not at all.
Ashlea wrote:...instead ask the Accountants, ask the STAFF, ask the people who know what is required of HMRC and how they think HMRC can deliver this. Get back to basics.
Without simplification of the tax code, there is no solution to HMRC's dilemma.
The combination of poor training, poor management and low morale is a vicious circle which only results in only those who can't leave remaining. Anyone with any skills, training, gumption will get out as fast as possible as many did back in 2005 when the writing was on the wall.
If the Office of Tax Simplification did what it said on the tin then we wouldn't have a Tolley's tax guide (2012/13) which is 16,220 pages long, having doubled in size between 1997 and 2011.
I'll believe tax simplification is working when the page count starts to drop dramatically.
That's quite funny...
jelpiero wrote:I'll be honest, it scares me that AAT practices are even legal.
AAT provides a good grounding for accounting professionals for personal taxation, self-employed and small businesses, so probably > 90% of all taxation needs of the UK high street. For these folks an AAT qualified professional is perfectly adequate.
Not sufficient for doing the accounts at BP, but it isn't aimed at that market sector.
My two juniors have AAT and they are very good at what they do, both of them are intent on becoming fully chartered at some point, but recognise that the most essential preparation is day-to-day experience.
It's accountancy, not the priesthood.