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Thousands of workers hit with massive tax avoidance bills

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4 hours ago, untakenname said:

I think it's unfair to penalise low paid workers who had no choice but accept the agencies terms 

They did have a choice.

 

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9 hours ago, Pop321 said:

True. 

As an employee paying higher rate, a LL (yep, apologies) and someone who has sold several properties I am no stranger to tax. 

No tax scams from me.  CGT paid on sales, income split 50/50 despite my wife having no other income etc. The only mitigate I used was the ability to offset interest. Which is why my cash pile was high and so was my debt. S24 should close that issue....pleased it has. 

However there is a problem. 40% tax with NI, P11D benefits and negative K codes means working 5 days a week and feeling 2.5 days are paid away.

So as your contractor friends did for 5 years I put 50/60% of my earnings into my pension....and lived off savings if need be. With other things (and that flipping k code) I still was a higher rate tax payer but overall in total I saved maybe £40k/£50k in tax. (Although will pay tax taking it out of the pension over the years to come...so a net gain of say £25k). 

Two points

1) despite being the very liberal in my views and leaning left wing in my politics....I have always struggled with proportionately higher taxes. If you charge someone 40% they will look at ways to legally avoid it. Particular into a pension

2) Yep, no idea about these ‘loans’ from offshore companies to avoid tax. Anyone sold into that scheme and able to avoid £300k tax knows it’s too good to be true. To save £300k is massive, the earnings must have been enormous. 

So overall, whilst I empathise slightly with the motive I cannot agree with the method. Earning such large amounts and paying little or no tax is wrong. If you can shave £5k off a £20k tax bill by paying into a pension...fair enough. But if you owe £40k tax and pay nothing...that can’t be right  

Tax should be simple, unavoidable and fair. 

I very much agree. At one time I would have jumped at the chance to cheat but later grew up enough to realise where this would lead the nation if everyone were at it.

The problem for me with the socialists has been that they give off signals that they think anyone (except themselves and hangers on) who earns a lot of money must somehow be undeserving and should give back at least half of it.

I'd be much more impressed if they and (some hope) the Tories would put more thought and energy into taxing more effectively those people who make fortunes out of exploiting others. Instead we have been going as hard as we can in exactly the opposite direction.

I accept of course that exploitation is subjective and hard to define. That's no excuse for not trying to confront it.

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6 minutes ago, Bluestone59 said:

I accept of course that exploitation is subjective and hard to define. That's no excuse for not trying to confront it.

+1. This argument drives me up the wall. Just because we don't know how to do something perfectly doesn't mean we shouldn't make improvements to what we have now. For example, idiots blathering on about "there is no better way to value something than by a free market but that's OK because the free market gets things mostly right except for x, y and z" don't appear aware that implicitly they have valued x, y and z differently to the free market and believe their valuation is more correct. 

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So, as someone who has paid a ton of PAYE tax (think 1.5 million+ over last 20 years) I'm happy this is being caught up. But a bit of that is envy too.

And then I think the £3bn, is only a 1/3rd of our foreign aid budget, and it makes me feel sick.

And then I think the £3bn is less than 5% of HS2 and I feel worse.

I'm glad this is being stamped out; but I also wish our politicians, would stop spending our money. 

SORRY, this is not a humblebrag, it's just me trying to be honest.

 

 

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21 hours ago, mrtickle said:

I've worked with contractors who have sat next to me for 4 years doing the same job. The UK automotive industry is full of them. PLEASE tell me how I can shop them, because they are certainly not being classed as employees at the moment.

Me too. Finance is exactly the same. Working on projects 85% of the people I work with are contractors. It's going to be very interesting to see how the rollout of ir35 to the public sector ends up happening. I would say that if these people with 4 years in one role then that roles is suddenly assessed as being within ir35 under the new rules then that would be applied retrospectively. 

I've been offered two jobs on a day rate of more than double my salary by department managers who thought I was a contractor. My employer doesn't allow staff to come back as contractors for 2 years after leaving. 

Ignoring the tax issues, the disparity in wages between 'permie' and 'contractor' doesn't make sense. As the ir35 changes are rolled out across the private sector all the contractors I know Tell me wages will have to increase to cancel out the difference or the contractors will walk. But I also read about contractors, or perhaps more generally the self employed or 'gig economy pseudo self employed' having  their employment rights strengthened... Holidays , notice , training etc. 

As an example - My dad was a self employed, commission only, double glazing salesman. Never paid wages for a holiday. Recently someone in an identical position won a claim for 20 years back holiday pay. Sadly for my dad all his previous players have gone bust.  http://www.redwing-solutions.co.uk/new-holiday-pay-case-mean-employers-self-employed-workers/

Something's got to give, I don't see how the self employed contractors can become more like permanent staff yet continue to demand even higher wages relative to permanent staff. Surely their day rates would have to fall In back into line with the permanent staffs wages? Certainly when i was a temp back in 2000 I didn't expect to be paid as much a permanent staff, or to be paid as a ltd. co, or through a tax dodge. I'm not sure how so much changed in 10-15 years. 

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14 minutes ago, regprentice said:

Me too. Finance is exactly the same. Working on projects 85% of the people I work with are contractors. It's going to be very interesting to see how the rollout of ir35 to the public sector ends up happening. I would say that if these people with 4 years in one role then that roles is suddenly assessed as being within ir35 under the new rules then that would be applied retrospectively. 

I've been offered two jobs on a day rate of more than double my salary by department managers who thought I was a contractor. My employer doesn't allow staff to come back as contractors for 2 years after leaving. 

Ignoring the tax issues, the disparity in wages between 'permie' and 'contractor' doesn't make sense. As the ir35 changes are rolled out across the private sector all the contractors I know Tell me wages will have to increase to cancel out the difference or the contractors will walk. But I also read about contractors, or perhaps more generally the self employed or 'gig economy pseudo self employed' having  their employment rights strengthened... Holidays , notice , training etc. 

As an example - My dad was a self employed, commission only, double glazing salesman. Never paid wages for a holiday. Recently someone in an identical position won a claim for 20 years back holiday pay. Sadly for my dad all his previous players have gone bust.  http://www.redwing-solutions.co.uk/new-holiday-pay-case-mean-employers-self-employed-workers/

Something's got to give, I don't see how the self employed contractors can become more like permanent staff yet continue to demand even higher wages relative to permanent staff. Surely their day rates would have to fall In back into line with the permanent staffs wages? Certainly when i was a temp back in 2000 I didn't expect to be paid as much a permanent staff, or to be paid as a ltd. co, or through a tax dodge. I'm not sure how so much changed in 10-15 years. 

Why should they ? Employers pay a premium to have that flexibility to get rid at the end of a project and also not to have to pay holiday pay, sick pay and pension 

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Absolutely zero sympathy.  Heard the same thing being discussed on LBC, with presenter Iain Dale outraged on behalf of the 'victims'. 

I was shocked at how flagrantly people admitted to paying such low levels of tax, while sobbing about the HMRC coming after them, and asking for help / sympathy.

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1 hour ago, regprentice said:

Ignoring the tax issues, the disparity in wages between 'permie' and 'contractor' doesn't make sense.

Then you've never looked at operation personnel costings for a medium/large company. The total cost of an employee is usually calculated at 2.2 - 2.4 times gross salary in order to allow for holiday sickness training pension potential redundancy various insurances liquidity (ability to fit bodies to work, a big problem as you cant easily contract your workforce) and other statutory obligations.Having employees is very expensive and risky, its honestly a wonder that anyone bothers at all.

Quote

As the ir35 changes are rolled out across the private sector all the contractors I know Tell me wages will have to increase to cancel out the difference or the contractors will walk.

The vast majority of companies will declare all contractors outside IR35. Thats hows its worked out in the public sector, so far anyway, and I cant see companies being being more cautious than public sector.

Edited by goldbug9999

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3 hours ago, Bluestone59 said:

I very much agree. At one time I would have jumped at the chance to cheat but later grew up enough to realise where this would lead the nation if everyone were at it.

The problem for me with the socialists has been that they give off signals that they think anyone (except themselves and hangers on) who earns a lot of money must somehow be undeserving and should give back at least half of it.

I'd be much more impressed if they and (some hope) the Tories would put more thought and energy into taxing more effectively those people who make fortunes out of exploiting others. Instead we have been going as hard as we can in exactly the opposite direction.

I accept of course that exploitation is subjective and hard to define. That's no excuse for not trying to confront it.

You are touching on a much wider debate about what the government should actually do. 

Grass roots rethink. Fighting talk...I like it 👍🏻

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10 hours ago, goldbug9999 said:

Then you've never looked at operation personnel costings for a medium/large company. The total cost of an employee is usually calculated at 2.2 - 2.4 times gross salary in order to allow for holiday sickness training pension potential redundancy various insurances liquidity (ability to fit bodies to work, a big problem as you cant easily contract your workforce) and other statutory obligations.Having employees is very expensive and risky, its honestly a wonder that anyone bothers at all.

The vast majority of companies will declare all contractors outside IR35. Thats hows its worked out in the public sector, so far anyway, and I cant see companies being being more cautious than public sector.

******.

This is stupid orgs where the OnM bit suck up larger and larger cash, blaming the expense of the actual person doing the work rather  then a the bloated management structure.

It depends on what the person is doing but the rule of thumb I use for my type of work isthat employee n costs add about 30% to the employers salary.

Then theres the cost of putting a bum in a seat/year - that should be no more than 20k.

Then theres stuff like special kit and what not. Thats not an employee cost.

A figure of 2-3 employee pay is nuts. Pure contractor wet dream.

The rise of contractor income reflect more o nthe incompetence of the Hr/OnM not beign able to  manage costs/rulesnlaws.

IR35 is becoming clearer - if a contractor is travelling to the pretty much the same place, day in day out ,chaging a per day charge rather than a fix priced contract, and working for the same company for a tax year then they are not contractor.

I say this til Im blue in the face.

If you are doing contracting where theres little in the way of non labour costs i.e. IT/service stuff, then you MUST make sure that you have more than one billable client during a tax year.

Take a few months out, work for someone at cheap rate, write a book, do some traininging, whatever. Anything but turn up day in day out to the same place for over 6 months.

Once you go over ~10 employees, having employees is no more expensive orr difficult than running a bunch of contractors. In facts its easier. There's nothing magical about contractors.

Runing payroll etc is pretty much automated.

Pensions and redundo, they are easily accounted for over time.

You have loads of one man band contractor. What happens if one gets run over by the bus? You are screwed - theres no replacement, no company to sue. In which case, contractors should only be used for dumb, evertyday stuff (unless you have a short term, high skilled requirment, which is more consultantcy - even then Id want a backup plan).

 

 

 

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12 hours ago, hurlerontheditch said:

Why should they ? Employers pay a premium to have that flexibility to get rid at the end of a project and also not to have to pay holiday pay, sick pay and pension 

 

11 hours ago, goldbug9999 said:

Then you've never looked at operation personnel costings for a medium/large company. The total cost of an employee is usually calculated at 2.2 - 2.4 times gross salary in order to allow for holiday sickness training pension potential redundancy various insurances liquidity (ability to fit bodies to work, a big problem as you cant easily contract your workforce) and other statutory obligations.

Not sure about either of those observations. I work for a large UK bank designing and Installing databases. 

I have a defined contribution pension, my employer tells me that 15% of my wages are for my pension. Taking my pension out of the comparison reduces my wage by 15%.

I get paid holidays, taking those out of the equation 30 days reduces my wage by £6.7k

Now the contractor is earning three times my salary. 

I've taken 10 years to earn a potential redundancy pot of £30k I'm likely to never draw. A contractor clears £50k a year more than I do, dwarfing my redundancy.

Training is mandatory for all staff, contract or or not. 

I don't think those differences go anyway to addressing the difference in income.

I'm aware form previous posts I've made that some contracting organisations structure themselves to keep permies and contractors separate, eg engaging Deloitte to take on a programme and doing that from deloittes premises visiting the office only occasionally.

At my employer there is no difference between permanent and contracting staff. That's how I've managed to be offered two contracting roles . A programme might have 3 permanent PMs and 7 contracting PMs. There might be 6 permanent BAs and 14 contracting BAs. They move role, permanent replacing contractor and vice versa over time. Contrators have to come In to the office, they have no right of substitution, and anything flexible they can do such as work from home, I can also do. 

While retained on rolling 6 month contracts, the majority of contractors I work with have 2-5 years continuous service, I know a handful of contractors with more then 10 years continuous unbroken service with a single employer as a contractor.

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44 minutes ago, spyguy said:

******.

This is stupid orgs where the OnM bit suck up larger and larger cash, blaming the expense of the actual person doing the work rather  then a the bloated management structure.

It depends on what the person is doing but the rule of thumb I use for my type of work isthat employee n costs add about 30% to the employers salary.

Then theres the cost of putting a bum in a seat/year - that should be no more than 20k.

Then theres stuff like special kit and what not. Thats not an employee cost.

A figure of 2-3 employee pay is nuts. Pure contractor wet dream.

The rise of contractor income reflect more o nthe incompetence of the Hr/OnM not beign able to  manage costs/rulesnlaws.

IR35 is becoming clearer - if a contractor is travelling to the pretty much the same place, day in day out ,chaging a per day charge rather than a fix priced contract, and working for the same company for a tax year then they are not contractor.

I say this til Im blue in the face.

If you are doing contracting where theres little in the way of non labour costs i.e. IT/service stuff, then you MUST make sure that you have more than one billable client during a tax year.

Take a few months out, work for someone at cheap rate, write a book, do some traininging, whatever. Anything but turn up day in day out to the same place for over 6 months.

Once you go over ~10 employees, having employees is no more expensive orr difficult than running a bunch of contractors. In facts its easier. There's nothing magical about contractors.

Runing payroll etc is pretty much automated.

Pensions and redundo, they are easily accounted for over time.

You have loads of one man band contractor. What happens if one gets run over by the bus? You are screwed - theres no replacement, no company to sue. In which case, contractors should only be used for dumb, evertyday stuff (unless you have a short term, high skilled requirment, which is more consultantcy - even then Id want a backup plan).

 

 

 

I have to disagree. Major projects last more than a year. I have been part of projects that last longer and as soon as your scope is finished you are out ther door

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13 minutes ago, regprentice said:

 

Not sure about either of those observations. I work for a large UK bank designing and Installing databases. 

I have a defined contribution pension, my employer tells me that 15% of my wages are for my pension. Taking my pension out of the comparison reduces my wage by 15%.

I get paid holidays, taking those out of the equation 30 days reduces my wage by £6.7k

Now the contractor is earning three times my salary. 

I've taken 10 years to earn a potential redundancy pot of £30k I'm likely to never draw. A contractor clears £50k a year more than I do, dwarfing my redundancy.

Training is mandatory for all staff, contract or or not. 

I don't think those differences go anyway to addressing the difference in income.

I'm aware form previous posts I've made that some contracting organisations structure themselves to keep permies and contractors separate, eg engaging Deloitte to take on a programme and doing that from deloittes premises visiting the office only occasionally.

At my employer there is no difference between permanent and contracting staff. That's how I've managed to be offered two contracting roles . A programme might have 3 permanent PMs and 7 contracting PMs. There might be 6 permanent BAs and 14 contracting BAs. They move role, permanent replacing contractor and vice versa over time. Contrators have to come In to the office, they have no right of substitution, and anything flexible they can do such as work from home, I can also do. 

While retained on rolling 6 month contracts, the majority of contractors I work with have 2-5 years continuous service, I know a handful of contractors with more then 10 years continuous unbroken service with a single employer as a contractor.

10 years is rediculous !! I do know of someone the same. Who was also on the Isle of Man scam. Makes a mockery of it all. I have had numerous clients over that period and have had periods of no work due to a downturn  

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1 hour ago, hurlerontheditch said:

I have to disagree. Major projects last more than a year. I have been part of projects that last longer and as soon as your scope is finished you are out ther door

Yes, project do last more than a year.

But unless you are very careful i.e. ensuring that you are more than a one man band and you are ble to offer replacibility, you will fall foul of the IR35 'Are you an employee?' test.

The only expcetion I can see working is where the project is in a seperate,. temprary place and there's a end date or stage.

For example:

Claiming self emloyment, and turning up toe mega Corp Slough HQ for >12 months - fails.

Claiming self employment and working on MegaCorp Oil project site in Shetland for 24 months - passes.

 

 

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1 hour ago, regprentice said:

 

Not sure about either of those observations. I work for a large UK bank designing and Installing databases. 

I have a defined contribution pension, my employer tells me that 15% of my wages are for my pension. Taking my pension out of the comparison reduces my wage by 15%.

I get paid holidays, taking those out of the equation 30 days reduces my wage by £6.7k

Now the contractor is earning three times my salary. 

I've taken 10 years to earn a potential redundancy pot of £30k I'm likely to never draw. A contractor clears £50k a year more than I do, dwarfing my redundancy.

Training is mandatory for all staff, contract or or not. 

I don't think those differences go anyway to addressing the difference in income.

I'm aware form previous posts I've made that some contracting organisations structure themselves to keep permies and contractors separate, eg engaging Deloitte to take on a programme and doing that from deloittes premises visiting the office only occasionally.

At my employer there is no difference between permanent and contracting staff. That's how I've managed to be offered two contracting roles . A programme might have 3 permanent PMs and 7 contracting PMs. There might be 6 permanent BAs and 14 contracting BAs. They move role, permanent replacing contractor and vice versa over time. Contrators have to come In to the office, they have no right of substitution, and anything flexible they can do such as work from home, I can also do. 

While retained on rolling 6 month contracts, the majority of contractors I work with have 2-5 years continuous service, I know a handful of contractors with more then 10 years continuous unbroken service with a single employer as a contractor.

This is what will kill them.

At the moment, UKGOV is only threatening the contractor with violations of employment/self-employment.

It doesnt take a genius to grasp there's the potential for both contractor and company could be pursued -both are gaming their employment to reduce tax.take.

Again, >1 contact in a tax year, working at different sites projects. Or bid for a lump of work at a fix price. Or set up with a couple of other people and swap placing around.

 

 

 

 

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28 minutes ago, spyguy said:

Yes, project do last more than a year.

But unless you are very careful i.e. ensuring that you are more than a one man band and you are ble to offer replacibility, you will fall foul of the IR35 'Are you an employee?' test.

The only expcetion I can see working is where the project is in a seperate,. temprary place and there's a end date or stage.

For example:

Claiming self emloyment, and turning up toe mega Corp Slough HQ for >12 months - fails.

Claiming self employment and working on MegaCorp Oil project site in Shetland for 24 months - passes.

 

 

Yes exactly. One thing is to have an end date and a specific project stated in the contract. I have seen over the years contractors doing employee appraisals !

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Whilst I have no sympathy for those that signed up to these loan schemes to avoid paying tax, self-employment and contracting are not tax avoidance schemes. Employment, self-employment, temporary, contract all have benefits to individuals and employers. What is needed is for income tax to be the same for everyone regardless of how their money is earned. Then HMRC can stop wasting our tax money trying to herd cats.

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14 hours ago, Ballyk said:

Absolutely zero sympathy.  Heard the same thing being discussed on LBC, with presenter Iain Dale outraged on behalf of the 'victims'. 

I was shocked at how flagrantly people admitted to paying such low levels of tax, while sobbing about the HMRC coming after them, and asking for help / sympathy.

Yup.

There are at least 3 kinds of IT contractors:

a) Use a Ltd to smooth out income and mitigate tax (pay about 20-25% in the end) and listen to their experienced accountants
b) Are gullible and contract on whatever basis their wide boy/girl agent reckons is 'OK' (and entirely co-incidentally makes them money) and rented porsches that they "never thought they'd 'own'" <facepalm>
c) Wide boys using non-dom, loan schemes etc. living off money taken out of cash machines from offshore accounts (I am not joking)

I, and my mates were in 'a' and soon tired of futile arguments with 'b's (who should never have gone contracting) and listening to the bragging of greedy 'c's (who were often pretty hot technically BTW), knowing they'd get in trouble eventually, or have to leave the UK.

Sadly IT contracting does attract a lot of chancers, but the 'a's tend to stick around longer and outnumber both 'b's and 'c's in my experience of multiple gigs.

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On 16/02/2019 at 16:52, mrtickle said:

Predictable response which is repeated every single time any tax loophole is closed. It's £3.2 BILLION of lost tax money not "small beer".

This is a one off reclamation, will probably cost hundreds of millions to administer and represents 36 hours' worth of UK government spending.

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I was contracting when IR35 came in and these types of schemes were being heavily advertised.  At the same time HMRC made it quite clear that all new tax avoidance schemes would be investigated.  Most contractors I spoke to knew these schemes were too good to be true.  However, some decided to hide behind the advise of accountants and recruitment agencies and take them up (pure greed).  I have no sympathy for anyone who thought they could reduce their taxes to almost zero and now complain when the back taxes are due.

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1 hour ago, Captain Kirk said:

Whilst I have no sympathy for those that signed up to these loan schemes to avoid paying tax, self-employment and contracting are not tax avoidance schemes. Employment, self-employment, temporary, contract all have benefits to individuals and employers. What is needed is for income tax to be the same for everyone regardless of how their money is earned. Then HMRC can stop wasting our tax money trying to herd cats.

Good points.

Sadly, the HMRC get to grow their empire by making tax complicated, including job creation for some (!) of those around - there are really good useful accountants out there, I am sure - but a lot of what they do is about legal-hopping such details.

Also, if taxes were simpler then it would mean dropping one of the (many) props to the "money is real" campaign.

 

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6 minutes ago, Aidan Ap Word said:

Good points.

Sadly, the HMRC get to grow their empire by making tax complicated, including job creation for some (!) of those around - there are really good useful accountants out there, I am sure - but a lot of what they do is about legal-hopping such details.

Also, if taxes were simpler then it would mean dropping one of the (many) props to the "money is real" campaign.

 

Nope.

Pols set the the tax system.

HMRC just try to operate it.

 

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9 minutes ago, spyguy said:

Nope.

Pols set the the tax system.

HMRC just try to operate it.

 

The politicians view tax as a means of social direction (or engineering, even) - so they have a vested interest (or at least tunnel vision) regarding it's usefulness that drives them to further complication - including using it as an engine for validating that money "exists".

The HMRC is a large employer "with around 60,000 people working across the UK". I don't see any of those leadership having a problem with taxes being more and more complicated and thus making their employment empire bigger and bigger?

 

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Was the programme neutral, supporting the taxpayer, or supporting the cheaters? I often find it is excessively sympathetic to gullible idiots and sensible people who definitely knew what they are doing. Paul Lewis is a massive leftie (see his twitter).

 

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