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workingpoor

Osborne To Torpedo Psc's On Wednesday

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It doesn't really say what the loop hole is, aren't these people just contractors? Obviously some are well dodgy, like for example a long running BBC presenter who is shown as a BBC employee, but is actually a contractor. But others are probably only needed for a couple of months, so going via a contractor makes sense.

Edited by reddog

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Someone working as a PSC is basically a Contractor and will have to demonstrate to HMRC that they are not an employee using a psc to lower the amount of tax paid.

There are millions to be recouped here.

The other part is all taxpayer funded sectors ie BBC NHS Public sector Ordanance survey etc etc will have to show they are checking that income tax is not being avoided by anyone they employ using a PSC.

Edited by workingpoor

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George Osborne believes up to 20,000 public sector workers using PSCs are avoiding an average of £3,500 every year when they should be paying the same tax as a staff member doing a similar job.

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Isn't there a regulation (IR35 or somesuch) already in place to stop long term employees masquerading as contractors?

Or is this an assault on contracting and consulting one man bands?

I suspect there's a bit of political showmanship behind this grab for the sum of, ooh, £70m. It's popularly assumed (because of high profile chaps like Paxton) that this is a sweet deal only available to the "elite".

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Isn't there a regulation (IR35 or somesuch) already in place to stop long term employees masquerading as contractors?

Story looks to me like extending IR35 to places that have hitherto been (whether de facto or de jure) exempt.

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Isn't there a regulation (IR35 or somesuch) already in place to stop long term employees masquerading as contractors?

Or is this an assault on contracting and consulting one man bands?

I suspect there's a bit of political showmanship behind this grab for the sum of, ooh, £70m. It's popularly assumed (because of high profile chaps like Paxton) that this is a sweet deal only available to the "elite".

Yes there is, I suspect they will mandate that IR35 is applied to public sector contractors. Its unlikely that there will be a net saving for the treasury as they will find it much harder to staff some projects and end up with more outsourcing to large consultancies. In recent the years some gov depts such as HMRC have massively improved their efficiency in delivering IT projects in particular by switching from outsourcing to the like of EDS Accenture and Cap Gemini to managing projects in house and staffing them with smaller consultancies and contractors. Even a small reversal in this trend will cost massively more than the £70 million they are looking to save.

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Yes there is, I suspect they will mandate that IR35 is applied to public sector contractors. Its unlikely that there will be a net saving for the treasury as they will find it much harder to staff some projects and end up with more outsourcing to large consultancies. In recent the years some gov depts such as HMRC have massively improved their efficiency in delivering IT projects in particular by switching from outsourcing to the like of EDS Accenture and Cap Gemini to managing projects in house and staffing them with smaller consultancies and contractors. Even a small reversal in this trend will cost massively more than the £70 million they are looking to save.

You really, really should not believe what you read in government department press statements.

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I am an one man outfit doing contracting. Most of my work is with local authorities.

If I have to pay more tax (on top of the changes to dividend tax which has already wiped out the marginal tax gains I get for no paid holidays or sick leave) then my prices go up. So same cost to the tax payer either way.

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With respect to what specifically ?.

So hard to no where to begin.

For a start the main IT suppliers such as Capgemini, Fujitsu, Accenture are still running huge chunks of government IT. Moreover some of the 'Contractors' working on projects are derived from the very same outsourcing companies at elevated charge out rates. My former contacts in the Revenue tell me the world and his wife within the department have rushed to join the CDIO which is essentially the digital arm of the Revenue but precious few have any real experience of delivering IT projects.

Government departments have insourced some of the formerly outsourced staff but retention rates are poor as civil service pay rates are not competitive particularly in London. Many projects are flagged red and a significant number are going to overrun on time and budget if they work at all with Universal Credit being the most notorious example. The main savings so far have been on the hardware side with increased use of virtualization but even these may have long term cost implications as government are notoriously poor at predicting future capacity requirements and some of the Cloud contracts have hefty uplifts when systems start to go over their designated resource allocations.

The main advantage to government departments in breaking up the larger contracts is that it will make measuring their costs even more opaque as very few people will bother to plough through all the details. Thus while overall cost overruns may still rise to billions they won't have the inconvenience of a single bill from one contractor for the lot. That means less problems from NAO and PAC since diffusion will aid obfuscation. Moreover when projects blow up they can sack the odd contractor as a sop to public opinion in the future without risking the whole shooting match. In the end it is all about massaging the poor state of public sector IT so it is less of a political problem for the minister's who are the civil services masters than actually saving money.

Edited by stormymonday_2011

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I am an one man outfit doing contracting. Most of my work is with local authorities.

If I have to pay more tax (on top of the changes to dividend tax which has already wiped out the marginal tax gains I get for no paid holidays or sick leave) then my prices go up. So same cost to the tax payer either way.

Isn't that a bit of the "I'll cover Clause 24 tax bill by raising the rents" fallacy?

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Isn't that a bit of the "I'll cover Clause 24 tax bill by raising the rents" fallacy?

That's exactly what I was going to post. Seems unlikely, or wishful thinking.

I'm losing my main contract in the new financial year. Been my main source of income for the past 5 years but all good things come to an end.

Times like this I'm glad I don't have a large mortgage or any debt.

I've been a contractor for about 8 years.

Started off as a Sole Trader then had to switch the Ltd company status as some clients wouldn't work with sole traders.

Last year I invoiced £50k.

My expenses came to about £5k (travel, the occasional overnight stay, insurance and accountancy costs)

I took a salary of circa £11k and dividends of about £25k

I paid about £7.5k in corporation tax and perhaps £1k in employees AND employers NI.

As an employee on a salary of £50k I'd have taken home £36k.

As a contractor I'll take home about £39k but I won't get any paid holidays, sick pay etc

I'm sure there are various things I could do to reduce my tax take massively (e.g pay it all into a pension or employ another member of my family) but according to my accountants most contractors do what I do.

Thankfully contracting allows me to work 2-3 days a week which is why I do it rather than a full time job.

Precisely. I work in consultancy and my public sector work is drying up at the moment.

People keep asking me if I am worried, and yes I am a bit, but I've got 3 years of tax free salary saved up in the business which covers 100% of the living costs for my family of 4.

If I had a £2k a month and a £400 a month car loan then I'd be screwed.

People voted Tory because millions are now utterly dependent on them directly for money. £100Bn a year deficit year after year or TRUE austerity? Osborne's too populist to do anything responsible.

Correct me if I'm wrong but I thought an economy can only grow in 4 ways:

Government spending

Personal spending

Business spending

Positive balance of trade

If government borrowing were to fall by £100b than we'd either have to increase business, personal or trade earnings by £100b to compensate.

That doesn't seem feasible to me.

So the result of the government cuts would be a massive reduction in the living standards for millions, in fact for everyone due to the multiplier effect/velocity of the spending.

We are a sovereign nation so servicing debt isn't a problem, the only risk to this high spending is high inflation or a currency collapse but neither looks likely.

I can never understand why people worry so much about the deficit and want millions impoverished to fix the non-issue.

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I am an one man outfit doing contracting. Most of my work is with local authorities.

If I have to pay more tax (on top of the changes to dividend tax which has already wiped out the marginal tax gains I get for no paid holidays or sick leave) then my prices go up. So same cost to the tax payer either way.

Struggling to understand why if a higher price is available you're not already charging it? After all you're not a charity...

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Struggling to understand why if a higher price is available you're not already charging it? After all you're not a charity...

I tend to charge one fee for short term work and a much lower fee for longer term work. The place I'm leaving pay the same for me as they did in 2010. I don't ask for more because they let me work from home 70% of the time. With the financial climate in local government I don't want to agitate.

However if tax changes meant I ended up taking home less than I would as an employee, and they still insisted on me working as a contractor, then I'd happily ask them to cover the differences.

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Why didn't all the employees become higher paid contractors?

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Why didn't all the employees become higher paid contractors?

Not confident enough, not good enough to win their work, enjoying the false sense of security that being an employee brings, inertia, not part of the 'old boy network' etc

Edited by LiveinHope

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Point I was angling at was perhaps some contractors will soon have to accept lower rates than the employees get net.

The local authority/company doesn't have to pay higher rates, even when asked nicely, to top up contractors' positions due to tax changes.

Although of course, yes, many employees might not have job security.

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Point I was angling at was perhaps some contractors will soon have to accept lower rates than the employees get net.

The local authority/company doesn't have to pay higher rates, even when asked nicely, to top up contractors' positions due to tax changes.

Although of course, yes, many employees might not have job security.

Agree, the high pay could prove to have been a passing fad and everything may level, and employees may have to become reluctant contractors.

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A Government source said: You have situations where someone working in a public body pays thousands of pounds less in tax than someone doing exactly the same job alongside them whos taxed as an employee.

'That cant be fair either on the taxpayer or their fellow workers. We are going to put a stop to it.

http://www.dailymail.co.uk/news/article-3489705/Osborne-kill-Paxman-tax-ploy-costs-400m-Budget-tackle-books-dodge-used-civil-servants-media-stars.html

Edited by workingpoor

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This is the usual stuff proffered a week or so before a budget on many fronts to make what they intend to do more acceptable, this could be to make the additional 7.5% tax on dividends (up from 20-27.5% if I remember correctly) palatable without too much fuss.

Taking the numbers Timak put forward previously where he was quoting a dividend of 25K the proposed additional 7.5% tax on that divident would effectively neutralise the percieved tax loss to the exchequer the cumbersome IR35 legislation was designed to combat. The result is that IR35 will be irrelevant, the government won't have to waste man hours on it and the additional 7.5% acceptable.

The contracting world will carry on supporting all those employment agencies and accountants who feed off it and keep hundreds of thousands tax legislation related non-jobs not to mention the trickle down businesses that provide services to those businesses.

Look behind the smoke and mirrors.

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