When IR35 PAYE Email Comes Through Contractor Poised to Resign

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IR35 PAYE email contractors are getting
IR35 PAYE email contractors are getting

IR35 PAYE Email

One contractor, we know of, is going to quit as soon as the expected blanket ban IR35 PAYE email hits his Inbox. What’s more he is going to quit the UK for good. He has had enough of the constant attacks on contractors by successive Governments for over 20 years now.

Said our contact “like your contractor my adjacent desk fellow contractor is primed and ready to give notice once the PAYE contract lands. He’s leaving the UK for good”.

Contractor Questions on IR35 PAYE Email

  1. Why are contractors getting the blanket ban IR35 PAYE Email?
  2. Why are the Government so biased against contractors?
  3. What promises did the Government make and break to contractors on IR35?
  4. What is the Government’s attitude to contractors?
  5. What are contractors doing to fight back when they get the IR35 PAYE email?
  6. Why are so many companies blanket banning PSC contractors?
  7. So, why are contractors in open revolt over IR35 PAYE email?
  8. Why are so many contractors deciding to quit after getting their IR35 PAYE email?
  9. What promise on IR35 have HMRC made?
  10. What do contractors think about HMRC promises?
  11. Why do I believe that this IR35 battle is winnable by contractors?
  12. What will big companies do when they see the effect on them of the IR35 changes?
  13. How will the final battle between contractors and the Treasury take shape?

Why are contractors getting the blanket ban IR35 PAYE Email

So what’s brought this on?

Contractors have been kicked and pushed by successive Governments for more than 20 years. Each time it is for more and more tax.

Every time contractors, in general, have pretty much meekly accepted their fate. There have been Press Releases from IPSE condemning each fresh attack on contractors but it hasn’t made much difference.

So successive Prime Ministers and Chancellors have felt unconstrained in coming back for a fresh helping of tax from contractors.

Why are the Government so biased against contractors

Prime Minister Theresa May and Chancellor Philip Hammond both said “It is an unfair anomaly that a self employed person earning £100,000 pays less in tax than a permanent employee earning £100,000 a year.

We all know that this is not comparing like with like as a permanent employee gets lots more benefits and has more secure employment than a self employed person.

One assumes that this idea has been implanted in them by the many consultants they hire.

What promises did the Government make and break to contractors on IR35

Prior to the 2010 election the Conservatives made a verbal promise to IPSE and contractors that they would abolish IR35. However, in their manifesto it just said that they would ‘look at’ IR35 again.

They did look at it and decided not only to keep it but to strengthen it. And the party of business has been strengthening it ever since.

Just prior to to the last election, after Labour, the Lib Dems and SNP promised IR35 reviews, Chancellor Sajid Javid promised one too.

However, after the election the Government said that the remit of the review was only to find out how the changes could be implemented most easily. This from a Chancellor who once called on the Government to ‘repeal the silly IR35 tax’.

What is the Government’s attitude to contractors

This is to be the final countdown. Treasury Minister Jesse Norman has gone native down at HMRC. He told Parliament in answer to an IR35 question that there is ‘only 10% compliance in this area’.

That means that both he and HMRC believe that 10 times as many contractors should be paying IR35 PAYE tax as currently are doing so.

Yet the test results from HMRC’s IR35 tool Check Employment Status for Tax (CEST) don’t show this.

It shows that 54% of contractors test outside IR35 while only 31% test inside IR35 with 15% indeterminable.

What are contractors doing to fight back when they get the IR35 PAYE email

It feels very different this time. Many contractors are not taking this lying down like so many did so many times in the past.

Many contractors are deciding to quit rather than taking the PAYE route.

Not all of them are going for instant resignations. Most of them are considering their options before they act. However, it looks like most contractors who can afford it are deciding that the IR35 PAYE email offer is an offer that they can refuse.

Why are so many companies blanket banning PSC contractors

Many companies, instead of testing their contractors like they should do are simply putting a blanket ban on contractors using personal services companies.

This is because the Government and HMRC are threatening to force them to pay all their contractors’ back taxes, interest and penalties if they get it wrong.

Some companies have over 5,000 contractors. That would be a huge hit to their profits if that came to pass. So, most of the UK’s biggest companies have decided not to roll the dice. They are deciding to just ban the use of personal services company contractors completely.

This would mean that their contractors would have to take new contracts which showed them to be inside IR35.

This is even though many of those contractors would test outside IR35. Indeed many have done.

So, why are contractors in open revolt over IR35 PAYE email

This is not fair at all – and many contractors are up in arms about it.

Companies are not allowed to do blanket assessments of contractors. They must do them individually.

However, they can do blanket bans on using PSC contractors. This comes to the same thing and was never intended. So, it should be stopped. Companies should be told that they must test their contractors individually.

Those inside IR35 should then have to pay PAYE. Those outside should continue to be able to operate via personal services companies. The Government is acting unfairly here.

Why are so many contractors deciding to quit after getting their IR35 PAYE email

So, many contractors, when they get the IR35 PAYE email are deciding to quit rather than take the enforced PAYE contracts they are being offered. They believe that contractors who take these ‘inside IR35 contracts’ after getting the IR35 PAYE email are leaving themselves open to future HMRC IR35 investigations.

After all, if they are now working with an inside IR35 contract doesn’t that beg the question “were you not really inside IR35 before when you were claiming you were outside IR35. Do you not owe us a lot of back tax, interest and penalties then. Perhaps you were really inside IR35 at other companies where you were claiming to be outside IR35”.

What promise on IR35 have HMRC made

HMRC said that they have taken the decision to focus on getting new taxes rather than going after contractors for previous tax. However, they have a proviso of ‘as long as the contractor was not doing anything criminal or illegal. Would they consider tax evasion illegal?

However, it looks like this time is different. Large numbers of contractors across the land, when the IR35 PAYE email hits their screens or desks, are deciding that this is an offer they can refuse.

What do contractors think about HMRC promises

Older contractors are taking early retirement believing they have seen the best days of contracting. Others are deciding to go abroad to look for contracts. Many of them will take their skills, experience and business and systems knowledge of UK companies with them to offer to foreign rivals.

Other contractors still will wait it out to see if companies change their behaviour when they see how hard it is both to keep their current contractors and to hire ‘inside IR35’ contractors in the marketplace.

Why do I believe that this IR35 battle is winnable by contractors

I’ve never felt that previous contractor campaigns against the Government were winnable. The ideas firmly implanted in Prime Ministers by consultancies were too firmly implanted.

But I believe this one is winnable.

Why do I believe this is winnable?

Because if contractors keep their nerves and quit in the numbers they say they will, which according to various polls is in he 40% to 50% range, this will cause havoc at every single large company up and down the land.

What will big companies do when they see the effect on them of the IR35 changes

From what I hear, up and down the land, companies are assessing the effect that contractor walkouts will have on their projects. It will be catastrophic for many companies. That’s especially the financial ones who have to get regulatory systems in place by a certain time.

From what I hear the size of the problem is just starting to get escalated to board room level by those involved at the company for keeping and hiring contractors.

Almost all IT project work is being done by contractors up and down the country. If companies lose their capacity to get their projects done on time then boards up and down the land will escalate this to Government. One feels that this is the next step.

How will the final battle between contractors and the Treasury take shape

We are rapidly approaching the final countdown here. The more contractors who don’t put up with this when the IR35 PAYE email hits their Inbox the better the chances are that the UK’s biggest companies escalate this to Government.

We’ve already seen that Government and HMRC will back down in the face of large company concerns. They said that after concerns raised to them by companies they will make it so that contractors can continue to operate through PSCs up till April 6th even if their payment for their services is after April 6th.

The Treasury and HMRC can expect an even bigger ‘concern’ from our biggest companies very shortly.

With many contractors going to revolt after receiving the IR35 PAYE email, our biggest companies, and UK plc, are going to have a very big problem indeed.

Something has to give!

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