IPSE Government Collaboration
It looks like the latest IPSE Government collaboration will end up in more, maybe most, contractors inside IR35.
The Government are getting Matthew Taylor to compile a report on self employment and what to do about it.
We saw an early example in the budget when Prime Minister May and Chancellor Hammond tried to increase the national insurance that contractors pay from 11% to 13%.
After a backbench revolt they withdrew this with great political pain to themselves.
This was because there was a specific manifesto promise not to raise national insurance.
Matthew Taylor said that he regretted that they dropped this measure that he recommended as an early measure from his report.
Matthew Taylor Report – IPSE Government Collaboration
I see, in the press, that Matthew Taylor’s report will recommend a far stricter definition of employment. They say that if employers control contractors in any way, then the contractor is not a proper contractor.
Also, if the job used to be done by a permanent person then a contractor now doing it is not a proper contractor.
I think they are proper contractors.
However, IPSE appear to think that they aren’t and should, presumably, pay IR35 tax.
Self Employed Should Pay Same Tax as Employees
The basic premises for the Chancellor and Prime Minister, fuelled by Taylor, is that the self employed should pay the same amount of tax as employees.
They also agree that some people are incorporating just for tax purposes.
The Chancellor asked this question in his budget. “Why should a self employed person on £100,000 a year pay les tax and NI than an employee on £100,000?”
Well, I can think of quite a few reasons why they should pay less. This is only the cash part of what either gets. It doesn’t take into account the perks employees get or expenses contractors have to pay.
However, we can see from the Prime Minister May and Chancellor Hammond’s statements which way they are facing.
IPSE Government Collaboration and IR35
So, the last thing we need is more IPSE Government collaboration to put more contractors inside IR35.
When we already know that the main reason that the Matthew Taylor report, backed by the Government, is going to redefine self employment to make it stricter, in order to get more contractors to pay IR35 tax, it doesn’t make any sense that IPSE demand that the Government make “a statutory definition of self-employment to end confusion about who is and isn’t self-employed”.
IPSE in Government Trap
This is just walking into the Government’s trap.
We know, through the press, that the Government intend to do this.
They are going to do this to make more contractors, and IPSE members, pay IR35 tax than do now.
Why collaborate with them to help them do this?
HMRC IPSE IR35 Test
It reminds me of the last IPSE Government collaboration with HMRC to have a new definition of IR35. It would decide who is inside it and who is outside it.
It ended up that almost all contractors were inside of IR35 according to the test created by HMRC and IPSE.
Of course, this had no basis in law and they had to scrap it in the end.
Of course, IPSE complained that, although there was IPSE Government collaboration on it, HMRC decided on the points system by themselves.
However, they should have been aware that they might do with this before collaborating with them to create this nonsensical test.
IPSE Demands on Government Over Self Employment
IPSE are demanding that the Government, via the Matthew Taylor report’s definition of self employment should be based around the following:-
- Having autonomy in their work. For freelancers this means the ability to send substitutes and for there to be no requirement to do work outside what is agreed
- Having control over working arrangements. Self-employed people are able to decide how to complete their tasks and the hours and location they choose to work in
- Taking on business risk. Self-employed take responsibility for their finance and tax responsibilities and can be paid on a per task basis
- Level of independence from clients. This would include things such as having to wear a uniform or using your own tools and equipment to complete your work.
IPSE’s Deluded Idea of What a Contractor Is
IPSE have always had a fond, but false, idea of the self-employed almost like John Major’s vision of Britain “Fifty years on from now, Britain will still be the country of long shadows on county grounds, warm beer, invincible green suburbs, dog lovers and pools fillers and, as George Orwell said, ‘Old maids bicycling to holy communion through the morning mist’ “.
IPSE’s fond idea of the average contractor is one who has control over the work they do, the way they do it and when it gets done.
This ‘average contractor’ can decide on whose premises they will do the work, and what equipment they will use. They will decide how much time a task will take. They will tell the project manager this and not the other way around.
If they are going to be busy doing something else for a few days they can send in a substitute to do their work for them.
Companies do not hire them for three months or six months but for a particular task and when that task is complete they will depart.
IPSE’s Contractor Britain
This is just as delusional as John Major’s idea of Britain, which people widely mocked as not even true of fifty years ago never mind now or in 50 years time.
It was, basically, a fantasy – just like IPSE’s idea of the average contractor.
I worked for many years as an IT contractor in many, many sites and locations and met many contractors.
I remember seeing a few years back that 48% of IPSE’s members at the time were IT contractors.
The Average Contractor
Let me tell IPSE, as they don’t appear to know this, what an average IT Contractor is.
They start IT contracting after a few years experience usually as a developer but often as a Business Analyst or Data Analyst too.
There is a company who are just starting a major project to replace the previous system.
They will need 40 people to work on the project.
However, when the project is finished they won’t need 40 permanent employees just to maintain the system.
So, they decide that they will need 15 permanent staff to work on the project and maintain it when it is over.
They currently have 10, so they hire 5 new permanent employees.
Hiring Contractors to Make up Numbers
As they need 40 people altogether, they will take on 25 contractors – including our new contractor.
This is the flexibility they need. There is no way they are going to need 40 permanent staff to maintain the system when it goes live.
So, they go out and hire the contractors.
The project is expected to take a year. However, for flexibility, they give the contractors contracts of three months at a time.
If the contractors are not up to what they expect they can drop the not so good ones afer three months and replace them with other contractors.
It would be totally inflexible for them to hire the contractors for the duration of the project – however long it took.
How Project Contractors Work
The contractors will get their specifications of what needs to be done from the business or systems analysts. They will be told how much time the task should take. The Project Manager will come round once a week to monitor progress against the time allocated.
This, IPSE, is much closer to the average contractor than your view of them.
To me, these are proper contractors. They are not permanent members of staff and they are not disguised employees.
Companies who use contractors understand the difference between contractors and permanent staff.
They know that the people described above are not disguised employees.
This model works very well for companies. It has for years – till the Government and IPSE stepped in.
Government and IPSE v Companies and IT Contractors
Although companies and contractors agree that these are genuine contractors, the Government doesn’t.
It thinks they are disguised employees.
What’s more, from their statement, IPSE appear to side with the Government.
Indeed, they used to refer to them derogatorily as ‘bums on seats contractors’.
That’s despite the fact that this is the way the vast majority of IT contractors (and their members) operate.
Change Governments View of Employment
IPSE should be seeking to change the Government’s view of what a contractor, or a self employed person is – not reinforce it.
Instead they appear to have pretty much the same opinion that the Government does of who is, and who isn’t, a contractor.
IT Contractors’ IR35 Status
Let’s take another example of an IT Contractor and their IR35 status.
An employee leaves the company during an important project.
The company wants to hire another permanent employee to replace him.
However, the hiring process for hiring a permanent person takes much longer than that for a contractor. For instance the person they take eventually might have to give a month, or even three months’ notice.
Take a Contractor Temporarily
So they take a contractor on temporarily while they are looking for a permanent member of staff.
The Matthew Taylor report will recommend that this contractor, who has been contracting for years, is really a disguised employee.
The report will say that if a contractor fulfils any role that was previously done by a permanent employee then that role is inside IR35.
That is ridiculous. Companies don’t think so and nor do the contractors.
However, the Government believe that is so, and so, it appears, from their suggested definition of employment, do IPSE.
Maternity / Paternity for Contractors
They state “IPSE believes the Taylor review should also consider how to encourage pension uptake and savings for the self-employed as well as developing fairer maternity, paternity and childcare support. Government also has a role in incentivising training and skills development so people can progress in their careers, regardless of how they work.”
I think that contractors just want to be called what they are, contractors, and left alone by the Government.
They also don’t want their representatives, IPSE, collaborating with the Government and Matthew Taylor to make the average IT contractor inside IR35. This is what is going to happen.
IPSE need to get their act together quickly. They need to act for all their members, and contractors in general, who are not in IPSE’s John Major-like visions of what a contractor is.
Otherwise contractors will think of them as just glorified Insurance Salesmen.
This new IPSE Government Collaboration is not going to end well.