Contractors Outside IR35
Many of our biggest companies are getting rid of their contractors outside IR35. They are only keeping those contractors who agree to take an inside IR35 contract. That’s even if the contractors’ contracts and working practices take them outside IR35. The companies are too afraid of fines from HMRC which could cripple their businesses.
Questions on Contractors Outside IR35
- What has surprised companies about contractors outside IR35?
- Why are UK companies turning to workers from offshore?
- What are companies telling their contractors outside IR35?
- Why was it predictable that offshore workers would replace contractors?
- How much tax will the Government get from workers from offshore?
- Have companies really discovered a much better way of using contractors?
- Are companies really dumping PSC contractors out of fear?
- Are the Government forcing companies to abandon UK contractors for offshore worker?
- How much tax will the Government get from those replacing contractors outside IR35?
What has surprised companies about contractors outside IR35
Companies have been surprised by the numbers of contractors who have refused to buckle under and take the inside IR35 contracts.
Some of those companies are trying to replace those contractors in the marketplace. However, most of those in he marketplace have rejected inside IR35 contracts from their previous companies. They are not going to take inside IR35 contracts elsewhere.
Why are UK companies turning to workers from offshore
So, we hear that those companies are turning to workers from offshore companies. Indeed some are not bothering even to try and recruit replacement UK contractors. They are going straight to offshore labour.
Some of these are being brought onshore. However, some are via projects sent offshore because of the lack of available contractors onshore who will operate inside IR35.
One company announced recently that they were sending a major project offshore. Two days later they announced that they were getting rid of the contractors on the project. They will all be gone by April 6th.
What are companies telling their contractors outside IR35
Another company told their contractors who wouldn’t contract inside IR35 that they would be replaced by workers from a well know Indian offshore company (who are now onshore).
Not only that, they were told that they would have to train them up in their jobs. That went down like a lead balloon.
One contractor has seen a vast load of visa applications to bring IT workers here to replace contractors. All of those applications are for dates prior to April 6th when the contractors are due to go.
Why was it predictable that offshore workers would replace contractors
In a way, it was entirely predictable that this would happen. A vast army of IT workers lies offshore ready to come to the UK when work is available.
And with companies turfing out their contractors who want to continue using their personal services companies there are now a whole load of vacancies.
The Government and HMRC brought in this legislation so they could snag a lot more tax from contractors. This is a carcass that they pull out and feed from on a regular basis.
How much tax will the Government get from workers from offshore
However, what we are seeing in the real world marketplace is that many of those contractors are being replaced by people who don’t pay tax here at all.
As they were using UK based contractors before I’m sure that many firms would prefer to use those contractors into the future. However, the Government has now rigged the market against them.
Have companies really discovered a much better way of using contractors
In their most recent IR35 review, the Government stated that many companies, after a review, are now going to a new business model which suits them better.
They stated “The Government is aware that some organisations are considering whether PSCs are the best way to engage contractors who are working like employees. Businesses reported that where individuals had been moved onto payroll, this was a result of a review of the structure of their workforce”.
You have to be kidding!
They are doing it whether contractors are inside IR35 or not.
Are companies really dumping PSC contractors out of fear
They are doing it because they are afraid of massive Government fines which could cripple their businesses. They haven’t just found a fantastic new business model that suits them better. Companies are adopting it out of fear.
They all preferred the current business model. A new business model is being forced on them by the Government and HMRC. It’s just a protection racket. They are saying “you take money off your contractors and give it to us and we won’t take money from you.”
“We don’t care if those contractors are real, proper contractors or not. Just take it off them or we will take your money”.
Are the Government forcing companies to abandon UK contractors for offshore workers
However, what this is doing is throwing all of our top companies into the hands of those who can provide offshore labour.
Of course, the Government will deny that this is happening. However, contractors out there working for companies who have now supposedly, all at the same time, found a super-duper new business model will know that this is correct. They are being asked to hand over their work to non-UK taxpayers. Some of them are even being asked to train them.
How much tax will the Government get from those replacing contractors outside IR35
One hopes that the Government, when they are calculating what they have made from the IR35 changes, will subtract the tax money they will no longer get from UK contractors as the money has now gone offshore.
However, one knows that they won’t. As in the public sector it will be declared a roaring success.
That’s even though many of the UK’s top companies have had to dump, out of fear, a business model that worked perfectly for them for one that is a lesser solution. They will less competitive against their foreign rivals and so make less profit and so pay less tax.
Let’s hope the Government take this into account in their calculations.
But we know they won’t!
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