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Er...so, "UKHO denied that it has pre-emptively adopted the IR35 changes" but "contractors were told they could side-step the assurances issue by agreeing to be taxed in the same way as a regular employee or cease working there from 1 September 2016." Sheer hypocrisy on the part of the HO. Sounds very much like they gave a "my way or the highway" ultimatum to all contractors. To which contractors responsed by voting with their feet...as had been foreseen for months by the contractor community at large.
We wish that this will make the Government pause for thought, but somehow doubt it.
Some food for thought re IR35, from another forum:
"There are many reasons IR35 was a shockingly bad piece of legislation. From a personal perspective here is my take on it.
Being inside IR35 basically says that you are really an employee of your end client and trying to disguise the fact. This would be much worse than being an employee for the following reasons:
VAT liability, I asked Her Majesty’s Custom’s and Excise if I was inside IR35 could I deregister for VAT. Their reply was that I would still have to charge VAT and that were my company not to do so they would ultimately come after me as a director for criminal fraud. As most of my clients were Financial Institutions who could not claim back VAT the full amount charged was paid 100% to the treasury. NO EMPLOYEE WOULS BE EXPECTED TO CHARGE OR COLLECT VAT. Nor would they be crimally liable if it were not charged.
During my work for clients my company had to carry Professional Indemnity Insurance. This was almost always written into the clients contact. If I was working on financial trading systems often the premiums for this would be excessive. My company had to also provide Public Liability Insurance. NO EMPLOYEE WOULD BE ASKED TO PROVIDE PROFESSIONAL INSURANCES TO INDEMNIFY THEIR EMPLOYER.
My responsibilities as a company director meant I was responsible for filing Company Accounts and Returns. The clients I worked with would not hire me unless I traded through a Limited Company. NO IT EMPLOYEE WOULD BE ASKED TO FILE COMPANY RETURNS LET ALONE PAY FOR THEM OR BE RESPONSIBLE FOR THEM.
The ultimate injustice was that if I truly was an employee as the Inland Revenue were asserting they would ask me to pay the Employer National Insurance. NO EMPLOYEE PAYS EMPLOYERS NATIONAL INSURANCE. I would also be responsible for the payment of PAYE income tax and Employees National Insurance. NO EMPLOYEE IS RESPONSIBLE FOR PAYING PAYE INCOME TAX AND EMPLOYEES NATIONAL INSURANCE as this is normally deducted by the employer.
Along with this I would have no employment rights, paid holiday or paid sick leave. AN EMPLOYEE HAS ALL THESE LEGAL RIGHTS."
Everyone could be saved a massive amount of uncertainty and expense if HMRC just ditched IR35 and increased the Dividend Tax a bit, although I would rather see Er's NI absorbed into taxes on profit instead of being a tax on employment but that will never happen.
In a post Brexit world the UK is going to have to have a flexible and cost effective workforce and imposing IR35 "rules" in a hard handed way is just going to make UK plc even less effective and efficient.
Dividend taxes have already been increased to cover this... so does it need to increase further?
I must admit that increasing Dividend tax rates will just mean that people will not take their money out of the company and it sits around gathering dust...
Don't forget that they are also talking about "look through" company structures for small companies which deems the company income as personal income for tax purposes... (OTS 2016)
I think the post from another forum sums up what an utter load of twaddle IR35 is, and always has been.
Personally I think corporation tax worldwide is totally busted. So let's scrap it completely and just put in place a dividend tax to balance up the hole in the deficit. We can also scrap IR35 because the dividend tax would sort out the perceived tax gap for contractors.
If the Office of Tax Simplification were worth its salt this is the sort of stuff it would have come up with.