Lords launches IR35 inquiry as freelancer confidence ‘plummets’

Michael Forsyth, Baron Forsyth of Drumlean, chair of the committee, speaking in the House of Lords last year.
Photo: House of Lords/PA Archive/PA Images

A House of Lords select committee is to scrutinise the extension of IR35 rules to the private sector, just two months before the new rules are set to become law.

It comes as an index of freelancer confidence fell to a six-year low despite the improving economic certainty surrounding Brexit.

The House of Lords Finance Bill Sub-Committee invites contributions to its inquiry before 25 February. It focuses on the government’s proposal to extend the off-payroll working rules – which were introduced for the public sector in 2017 – to large and medium-sized organisations in the private sector from April 2020.

It’s vital that the Lords Select Committee looks at the facts around IR35 changes. Has public sector reform worked? No, not when you consider that thousands of contractors were unfairly forced inside IR35” – Seb Maley, Qdos

The rule changes mean that businesses – not individuals – will be responsible for deciding whether contractors they hire are liable to pay income tax and national insurance contributions, and if so, for paying those sums to HM Revenue and Customs.

The inquiry comes a month after the Treasury announced a review – which runs until mid-February – to ensure the implementation of these changes in April runs as smooth as possible.

Major businesses, including many large banks, have said they will no longer engage contractors in fear of falling foul of the new legislation.

Former Conservative cabinet minister, Lord Forsyth of Drumlean, chair of the Lords Finance Bill Sub-Committee, said: “We are interested in how this change will work in practice, and how it relates to wider changes in working arrangements.

“To inform our work we want to hear from as broad a range of people and organisations as possible. If you have a view on off-payroll working rules, please let us know what you think.”

This inquiry will cover the impact of the rules in the public sector, whether the impact of the extension to the private sector have been adequately assessed, the effect the new measures will have on a chain of contractors and sub-contractors, and what HMRC should do to help businesses understand the new rules.

It will also examine HMRC’s widely-criticised “Check Employment Status for Tax” (CEST) tool and how it might be improved, and whether the draft Finance Bill will achieve the government’s objectives.

Seb Maley, chief executive of contractor consultancy Qdos, said: “While we welcome this inquiry into IR35 reform, we can’t help but wonder why it wasn’t held months ago. Nonetheless, it’s an opportunity for contractors, agencies, businesses and experts to have their voices heard.

“It’s vital that the Lords Select Committee looks at the facts around IR35 changes. Has public sector reform worked? No, not when you consider that thousands of contractors were unfairly forced inside IR35.

“Is HMRC’s IR35 tool capable? In its current state, it simply isn’t fit for purpose. What effect might further IR35 reform have on contractors? If mismanaged, there is a risk the private sector will repeat the mistakes made in the public sector.”

It seems that whilst freelancers are more confident about the wider economy, their confidence in their own industry has fallen off a cliff, thanks to the IR35 changes coming into play in April” – Xenios Thrasyvoulou, PeoplePerHour

He added that recruiters and end-clients must continue preparing for the reforms, which will be introduced on 6 April.

The inquiry comes as freelancer confidence has reached a six-year low, according to research by the Association of Independent Professionals and the Self-Employed (IPSE) and freelance platform PeoplePerHour.

Freelancers’ confidence in their own businesses has dropped sharply despite the fact that their confidence in the wider economy is now recovering.

Inna Yordanova, senior researcher at IPSE, said: “Freelancers’ confidence in their business performance has reached record lows and this seems to be because of fears about the changes to IR35 due in the private sector in April.

“The IR35 changes appear to be behind the confidence dive because confidence has fallen sharply in the two groups that will be affected most by them… In fact, if you focus on these groups, which include managers, directors, senior officials and professional occupations, their confidence has truly plummeted this quarter.”

Xenios Thrasyvoulou, founder and CEO of PeoplePerHour, said: “I am disappointed, but not surprised, to see another fall in freelancer confidence this quarter, to the lowest in six years. It seems that whilst freelancers are more confident about the wider economy, their confidence in their own industry has fallen off a cliff, thanks to the IR35 changes coming into play in April.

“There is still a chance for government to address these issues and listen to the concerns of this important industry, before more damage is done.”

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69 Responses to Lords launches IR35 inquiry as freelancer confidence ‘plummets’

  1. Avatar
    Cristi Neagu 6 Feb 2020 at 1:56 pm #

    IR35 is supposedly meant to stop employers from taking tax shortcuts by using contractors instead of employees by forcing employers to pay the same amount of tax as they would for employees. In reality all this does of punish contractors even further. They still won’t get any of the benefits employees have (paid leave, maternal and paternal leave, health and pension plans, etc) but now employers will take the extra tax they have to pay straight out of the contractor’s rate. This does nothing to prevent employers from taking advantage of contractors, and everything to punish contractors. This legislation is absolutely destructive.

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      Jon Parry 7 Feb 2020 at 8:55 am #

      Tough luck contractors earn huge premiums compared to employees which compensates for not receiving employee benefits. I’ve been both a contractor (inside IR35) and an employee for the university I am now employed by. Pay your fair share if you are a genuine contractor for services you should have multiple contracts or be very specialised and therefore outside the legislation and unaffected. Time to stop dodging tax. Additionally this should (in theory) encourage firms to take on employees rather than contractors and if that saves them money they will report more profits and therefore pay more corporation tax. Win win. Unless your a freelancer who already gets paid too much

      • Avatar
        David Smith 7 Feb 2020 at 10:18 am #

        You are so wrong about so many things.

      • Avatar
        IQTEDAR AHMAD 7 Feb 2020 at 6:44 pm #

        You got it totally wrong. You have experience in education sector only. Contractors are required for capital jobs as and when a company gets a job. How can I company afford to have employees just with the hope of winning a contract for some work.

      • Avatar
        Jamie 7 Feb 2020 at 10:21 pm #

        Well done Jon… You have proved that you are an un-educated chip on the shoulder!… I have 4 contracts I work for… However each is tested separate under new rules.. I can Work for 4 clients yet get stuck with not only employee but also employers national Insurance contributions, PAYE, & the apprenticeship levvy… I will have no sick pay, holiday pay, pension, or the ability to claim for the 160 miles I travel every day… Or the BnB I stay in to save travel…. Keeping me from my family…. Do the math!!!

      • Avatar
        paul jacob 10 Feb 2020 at 10:31 am #

        Jon you sound very bitter with life you could equally be a contractor right now as you say you have previously, although you were actually an interim employee and rightly defined inside IR35. So you have no real contract experience.There is not huge reward for working as a contractor. The day rates have not changed since 2007. In fact they have reduced. The majority of contractors provide specific skills. Required for a short term to build or transition a service. As a subject matter expert I travel outside a daily commute, other 3-5 hours from home each way. That means staying away. I deliver against defined deliverable s. The issue is that employers have taken a risk averse approach that now hits those that are genuine contractors. That also means no pay between contracts, no notice period (1 week is the norm), no redundancy, no paid holiday or sick pay or pension. So it is about risk / reward not as you churlishly say ‘you get paid too much’ .

      • Avatar
        Rich 11 Feb 2020 at 7:52 am #

        Leaving aside that you couldn’t have got that post more wrong if you tried, “huge premiums” mean high revenues from VAT, corporation tax and dividend income taxes – far in excess of a comparable PAYE role.

        A typical IT contractor will pay around 16.5pc of their fees as VAT.

        They pay 19% on everything over their costs in corporation tax.

        They then pay dividend taxes on top of that.

        The personal tax efficiencies largely lie in company expenditure, which effectively comes from gross – but then things like pensions often go through salary sacrifice anyway.

        HMRC seem to think that a contractor and a permanent employee earn the same, and as a result a permie earning £50k will pay more tax than a contractor earning £50k. But you couldn’t get a contractor to do that role for that money, as you rightly acknowledge, because of the risk involved with not working, whether that’s gaps between employment or getting flu off a permie. Plus of course try getting a permie out to remote locations when the cities pay so much more for their skills – yet the travel and accommodation costs come from the contractor’s pocket, not the client’s. “Huge premiums” – gem up before making dumb comments.

        The main difference in tax revenues between permies and contractors actually lies in the employer contribution. So how do employers respond to the new rules? Surely they would rush to pay their bit, right? No, they’re trying to force contractors to pay it for them – they get cheap temporary labour with no obligations to protect them and at no additional cost, HMRC get less tax than they were as a result, and the contractor finds themselves with a substantially lower income. Who wins exactly?

      • Avatar
        Adam Parker 26 Feb 2020 at 2:45 pm #

        Its already screwed the NHS!
        Now the Private sector!

    • Avatar
      Tony Court 7 Feb 2020 at 2:22 pm #

      No, you’re wrong, that isn’t and never has been the purpose of IR35. Originally, and still largely the case, IR35 is about avoidance of employment taxes. The real target is not the contractors but those who use them to avoid NI contributions. However, a side effect of IR35 is that many businesses etc. are taking the easy route and going wholly or partly out of the contractor market. So, to an extent you’re right in saying that it’s hurting contractors.

      • Avatar
        What ever 7 Feb 2020 at 7:29 pm #

        Every contractor I’ve come across on any project is there because the permanent members don’t have the experience to do the job !

    • Avatar
      Marie 18 Mar 2020 at 7:41 pm #

      i wondered how the government came up with cruel idea!

      • Avatar
        Richard 2 Jul 2020 at 10:23 am #

        The Australians tried it first in the late 1990s, but after two years they scrapped the legislation as an unworkable, unfair disaster.

  2. Avatar
    cameron 6 Feb 2020 at 2:04 pm #

    There is too many people working through self own Ltd companies when they should not, IR35 is to tackle this, the system has been abused for too long. If your a self employed one man band Plumber/Doctor/ consultant/Nurse etc you earn through a LTD company enough so pay your fair share

    Stop avoiding paying TAX. Simple!

    • Avatar
      Rob 6 Feb 2020 at 2:17 pm #

      I do pay tax and I pay exactly what is required by law, I also pay lots of it but this will stop in April when I’m forced in to a dodgy umbrella scheme with no workers rights. Sounds like your a permanent employee? watch out as they are coming for you next!

    • Avatar
      Paul 6 Feb 2020 at 2:25 pm #

      Very simplistic viewpoint Cameron I am afraid.

    • Avatar
      James 6 Feb 2020 at 2:37 pm #

      Pay your fair share… But without any employee benefits, sick pay, holiday pay etc.

      • Avatar
        Brian 6 Feb 2020 at 4:51 pm #

        Contractor’s earn a significantly higher rate than a permanent employee which compensates them for the benefits they don’t get as a permanent employee, so pay your Fair amount of tax. If don’t like it take up a permanent position!

        • Avatar
          Matthew 6 Feb 2020 at 6:02 pm #

          Yes, Brian, we do get paid a higher rate. This is because of the risks associated with it being temporary work (and we can be dismissed at no notice), and/or the fact that we are hired in the first place because we have a skill set that you don’t have. Of course we’re going to cost more. I’d ask you to think about how much your job security is worth to you…

        • Avatar
          John 6 Feb 2020 at 7:17 pm #

          I assume you are a permanent employee and if so you don’t pay Corporation Tax, Indemnity Insurance, Public Liability Insurance, Employer’s NI, Account’s fees and VAT. I also assume you enjoy Death in Service benefit, Sick Pay, Holiday Pay and pension contributions from your employer. I also assume you don’t pay for your own equipment. All of these overheads and lack of employment benefits add up and minimise any benefit of reduced taxation and income differences.

          • Avatar
            Steve 7 Feb 2020 at 7:36 am #

            also not paid bank holidays. worst of all when company communication meetings or anything related to company, “managers simply say loud and clearly “no contractors need to attend and carry on working…we suffer humiliation daily.

        • Avatar
          Jonny 6 Feb 2020 at 8:39 pm #

          Who would want to take up a permanent position with a company, the majority of managers in the UK are clueless idiots. Anyone with half a brain cell knows that working for yourself us the best way to go.

        • Avatar
          Chris 6 Feb 2020 at 11:33 pm #

          We do pay the fair share Brian, we also offer skills perm staff do not have an when they gain them we leave, if we don’t meet requirements we are let go, if we are sick we are not paid, if we take leave we are not paid. We take on risks of long term unemployment and operating as we do allows you to provide for time on the bench. If your firm has contractors in perm roles it says more about the quality of the perm staff not the contractor

    • Avatar
      Matthew 6 Feb 2020 at 2:44 pm #

      A very uninformed argument I’m afraid Cameron. Do you understand that the self-employed do not get sick pay, holiday pay, pension, paternity leave or expenses, and can be fired on a weeks’ notice with no reason given? And in addition, we have to pay for professional indemnity and public liability insurance, accountants and our own tools/equipment? You sound like a typical permanent employee who has discovered the contract rates of his co-workers and developed a chip on their shoulder, without pausing to factor in any of the risks we take. Favourable tax arrangements resulting in increased take-home pay is appropriate compensation for all the things we don’t get and have to provide for ourselves.

      • Avatar
        Cathy 6 Feb 2020 at 4:51 pm #

        Well articulated Matthew. Twice the programme I’ve been working on at big FS corporates has been pulled due to business circumstances and you’re out of a job through no fault of your own. It’s a nature of the beast and we need to balance our business accounts to allow for suddenly being out of work. I’m waiting to hear what my current company is going to offer to go perm, they’ve warned it’ll be nowhere near as all the costs to them when you go perm. They don’t want IR35 either and I don’t want their pension I’ve got my own which I’ll now struggle to pay into.

    • Avatar
      Jonny OJ 6 Feb 2020 at 4:07 pm #

      Oh dear Cameron you’re not the smartest cookie in the jar are you…? Seems like you might want to do your homework before posting any more uneducated, naive comments.

    • Avatar
      TK 6 Feb 2020 at 4:19 pm #

      what about the risks that contractors take?

      Quarterly renewals at the last possible day, no sick pay if youre off short or long term ill. no benefits. Being let go in 1 weeks notice.
      No leg to stand on if you report issues.
      Being let go on Christmas eve because the manager had to make cost cuts for the next quarter and your project was successfully delivered over Christmas – The stress of which led me to A&E with no pay

      I have a contractor mate out of work for 6+ months with 3 kids after having deliver 3 successful projects at his last place.

      Yes there are tax benefits but we pay Corporation taxes, VAT, Income tax and NI – probably more than you contribute to the state under PAYE – I sleep easy knowing that I am doing more than my fair share for our state in a competitive market where I carry all of the risk

    • Avatar
      ph 6 Feb 2020 at 4:58 pm #

      unfortunately your opinion is very uneducated. Tell me why a contractor travelling from one end of the country to the other should pay tax on the accommodation they stay in. The ability to work local may of been taken away with the specialist skills they have and the company benefits from being able to use those skills to progress a project.

      Road projects/large engineering projects etc all rely on the movement of people. this eliminates that option and with Brexit rolling up. Getting projects off the ground are extremely important to the future of industry.

      The government seem to be tagging this budget coming as one for the hardworking people. But if this IR35 is established at this form it will destroy the hardworking man.

    • Avatar
      Steve Jones 6 Feb 2020 at 5:57 pm #

      I guess YOU’RE a disgruntled employee like the many that object.

    • Avatar
      Pete 6 Feb 2020 at 7:44 pm #

      Don’t worry Cameron, you will soon be doing the work the contractors were doing for no extra money as they will be gone and your company will force it upon the remaining permies.

      Dividend tax changes were already narrowing any gaps, the only difference in reality was the employer was saving on NI which now will lead to less profit in your company so it may affect your bonus as well.

      Large projects may not be possible to resource at the same cost as before IR35 as your company will need to hire via an expansive outsource firm who will charge 100k per head and pay their staff 30k so again you will be left to pick up the work load that the new guys are incapable of as they are probably 24 year old graduates who don’t have a clue.

    • Avatar
      Jim 6 Feb 2020 at 10:11 pm #

      Sure, as long as they get the benefits that a permanent member of staff gets.

      You sound very upset with your working life.

    • Avatar
      Mike 6 Feb 2020 at 11:30 pm #

      Wow what a completely moronic and ignorant response! Its complete idiots like you who give power to those who will steel kore from hard working people. I can guarantee I pay more taxes than you ever will through my ltd company. I pay coporation tax, VAT not to mention the plethora of other business that supply services to me such as insurances running to the 000s accountancy fees etc. So kindly go stick your misinformed comment where the sun dont shine

    • Avatar
      Bob 7 Feb 2020 at 7:56 am #

      We pay tax, we don’t avoid tax.
      Get your facts straight.
      Pull your head out your red top and try and understand the tax system in this country is broken.
      Paying NI at 0%? Who came up with that? Fix, simplify and make fair a broken system. Do not bolt on an ill judged punitive measure taregetting a select group.

    • Avatar
      Unhappy flip flop driver 7 Feb 2020 at 11:45 am #

      I’m self employed driver. If I will have to go full time that mean I have to close bank account that’s money gone. Stop paying an account that’s less money to government and accountants will have to reduce their workforce.

      Because I’m working for lots different agency’s covering all aspects of work they giving me i won’t be able to.
      From now on I will have to stick to one because other wise I will pay humongous amount in taxes.

      Imagin there is Hgv driver shortage how that will affect people who wants to came in to industry where you have to spend money again to get the licence.

      Future looks that to earn 12ph you will have to spend £3000 and uncertainty if you still will be able to get a job because you’ll be unexperience driver.

      Story goes on
      No parking spaces
      Dirty toilets
      Theft on even parkings drivers paid for.

      I wants to see government taking all these money showing of with and other businesses like agency’s and accountants shutting down.

      Best of luck Boris

    • Avatar
      T North 7 Feb 2020 at 3:50 pm #

      Does it seem fair ? Thats 45% income tax, 45% on the first 12500 since the allowance is tapered to zero and most companies applying blanket bans or umbrellas are illegally trying to charge the 13.8% employers NI out of the deemed employee gross as well – so that is 58.8% tax. For that you get no holiday pay, no sick pay, no paternity/maternity paid leave, no pension contributions, no employee benefits.

      In addition, if the contract means travelling away, you also cannot claim travel expenses because you are deemed an employee. And the umbrellas still havent taken their payroll fee from that.

      No country in Europe charges any resident over 70% tax except the UK now.

    • Avatar
      Mark 8 Feb 2020 at 1:19 pm #

      I pay tax and ni every year without fail. I have done for 37 yrs. As a lorry driver , mechanic , and welder. So why should I lose everything I have worked for ?

    • Avatar
      ed 12 Feb 2020 at 4:26 pm #

      We are not avoiding paying tax. we pay much *much* more tax than permanent employees

    • Avatar
      Multiroom 22 Mar 2020 at 2:02 pm #

      It won’t be a fair share the contractor will pay 40% after everything is take out. The employer contribution then gets used by the umbrella company which is out of the rate along with everything else.

      They then use it to offset against there corporation tax . So desguised employment yes but not the way people think. Contractors no matter what skills they have are being ripped off simple .And as for paying your fair share please stop the BS .I personally in percentage terms pay more in corporation tax than amazon and Google .As for working through a LTD that’s the world we live in if you dont operate one then larger companies won’t deal with you .

  3. Avatar
    Mr Aitken 6 Feb 2020 at 2:18 pm #


    Well done HMRC. You’ve created a no rights employee, which businesses will be exploiting. Why employ perm full time staff when you can get someone with zero commitments and are cheaper.

  4. Avatar
    Jack Roberts 6 Feb 2020 at 2:25 pm #

    How will it be technically possible to start a managed service company to compete with the big players in the industry after IR35. As a small limited company with one employee that is trying to develop a brand a company, now we are being forced to do business through a third party and my limited company may not be used. How can I grow my business with more employees if I can’t even invoice through my company? This IR35 is anti-competiive and is destroying sma consultanty businesses.

    • Avatar
      LN Boya 6 Feb 2020 at 9:29 pm #

      I completely agree with Jack. Well. Said 👏👏👏👏👍

  5. Avatar
    James 6 Feb 2020 at 2:39 pm #

    Even worse are these companies that are deducting pay, to cover their employer national insurance contributions.

    Bank of new york mellon in the UK are reducing the rates of their contractors, in order to cover employer NI. It’s illegal to take employer NI from a workers pay, so they are cutting rates to cover that cost.

    So we are getting more tax and less actual rate

  6. Avatar
    Paul Sharpe 6 Feb 2020 at 2:41 pm #

    The whole contracting industry is being destroyed because of a HMRC vendetta against entrepreneurs running service companies. I have 25 years experience and take on contracts which permanent employees do not have the skills to deliver. Thanks to this legislation, my company is no longer viable and my industry has applied a blanket ban on hiring contractors. Now rather than pay circa 50K in tax and VAT per year, I am generating nothing and claiming benefits while I look for a contract. If I do manage to find something in a recruitment landscape akin to the Sahara desert, It would be via an umbrella company and I would have have to pay tax and NI as an employee, but also employers NI!out of my own pocket! So actually be more heavily taxed than an employee, with no bonus, sick pay, workers rights, holidays, pension or job security. Never mind, Judge Rinder is now on and I get my benefits paid weekly, but will probably lose my house. Thank you Mr Johnson.

  7. Avatar
    J 6 Feb 2020 at 2:53 pm #

    Employment agencies are parasitical in nature and will now be brought into line – It’s disguised employment fair and simple.
    Boohoo to the above who will have to go PAYE and be treated just like the rest of us. You will be entitled to holiday pay by the way so saying you wont is inaccurate.

    • Avatar
      M 6 Feb 2020 at 5:06 pm #

      No we won’t, it all comes out of our pocket just like the employers NI. Plus we can be sacked on the spot for no reason. We’re being punished for working hard & taking risks, not what I expect from a Tory government!

    • Avatar
      Pauline Gascoyne 6 Feb 2020 at 6:35 pm #

      Actually J there is no obligation on employers who classify their contractors as within IR 35 to do anything other than subject them to standard PAYE. So the post is correct – no holiday, sick, or parental leave, no pension,or parking space oh and by the way your hourly rate is being reduced to cover your “employer’s” national insurance contributions.

    • Avatar
      Mike 6 Feb 2020 at 11:35 pm #

      Another moronic comment! You wont be entitled to anything all that will happen is less tax will be collected it will plumit as rates plumit contractors will take the business abroad. I have already lined yo several contracts with companies outside of the uk and europe. I get hounded day in day out to fill urgent roles contracting but are inside of ir35 I just say no. And so it seems does almost all the other contractors. You have no idea how contracting works or the amount of money that is paid out in corporate tax or VAT more than you earn I can promise you that!!

    • Avatar
      Ed 12 Feb 2020 at 4:31 pm #

      It is in no way “Employment” or “the same job”

      If your employer comes to you and says we are taking away your pension contributions, your holiday entitlement, your sick pay. We are moving your job 300 miles away and you must cover the travel and accomodation costs from your own pocket. We are also removing any employment protection rights and leaving you with effectively a zero notice period. Oh and you have to pay employers NI from your own pocket as well.

      In what way is this “the same job” or “Employment”

  8. Avatar
    Jake 6 Feb 2020 at 3:12 pm #

    If is simple. Many contractors will leave.
    I certainly will.
    If they screw you hard, why just take it?

  9. Avatar
    K 6 Feb 2020 at 3:27 pm #


    Companies need contractors for just the reason you have shown. I.e. Perm staff (I assume you are one and at the lower end of the spectrum) do not gather knowledge, do any analysis, or have any skills, and take their view from some trash newspaper. Unless of course you can point me to the legislative changes that are occurring to give these wonderful entitlements like holiday pay (without just skimming off the contractors pay in the first place). Oh and agencies are not being targeted (though are parasites), the Limited companies they place in contracts are being targeted…

    Oh why do I bother.

  10. Avatar
    Neil 6 Feb 2020 at 4:25 pm #

    The proliferation of small “bought-in” services companies gives “UK plc” a significant competitive advantage overs its highly regulated overseas (EU) competitors in project management and delivery. In the IT and financial sectors (which rely heavily on bought-in services, there is a really large risk that the work will be off-shored to India, Malaysia, Brazil etc. The result is a double whammy loss to the UK economy. Surely its in the best interests of the Government to retain the flexible and highly responsive work force – which is good for the hirers and good for the contractors (in the sense their is generally a marginal benefit of running your own company, the loss of employment rights is partially offset by a slight perceived tax advantage).

  11. Avatar
    X 6 Feb 2020 at 4:32 pm #

    Previously a limited company contractor had additional take home pay versus a permanent employee because of the risk they were taking with potential short notice termination, no holiday pay, sick pay, life cover, pension, bonus etc that permanent employees were entitled to. This allowed contractors to pay for these missing benefits out of their own pocket, plus as mentioned above the non-standard costs such as own equipment and insurance. Under this arrangement, permanent and contractor pay was actually in balance.

    Now under IR35, we have an imbalance. A limited company contractor who is now being forced under PAYE/Umbrella is getting the following:

    – Increased tax bill including Employers Taxes (13.8% NI and 0.5% Apprenticeship Levy). For a permanent employee, these are paid by the company you work for, not out of their own pocket. Not many contractors are questioning the need to pay full PAYE taxes, but to pay the Employers bit too is not appropriate.

    – No real holiday pay – Under PAYE you are entitled to paid holiday, however the contractor rate is being reduced to account for this, so there is no benefit to the contractor at all. This is not legal for an employer to do this if you are an existing employee, however they are using the ploy that this is a “new” engagement and so the rate on offer is lower.

    – No real sick pay – Most contractors do earn a day rate more than the national minimum wage. PAYE/Umbrella companies are stating in the new contracts that the contractors base salary is now equal to the national minimum wage, with their contract income being treated as a bonus. This means that when contractors are sick, they will not get paid their normal income, but a severely reduced one. This is a questionable practice to say the least, and definitely out of balance with a permanent employee.

    – No real pension contributions – Again, PAYE/Umbrella companies are obliged to provide a pension for the new contractors under the new Employer pension rules, with the standard sort of setup being the contractor pays in 5% and then there is an Employer Contribution of 3%. Sounds like a benefit, but sadly not. The 3% employer contributor comes out of the contractors day rate. Again, a questionable practice to get round the new pension rules, and out of balance with a permanent employee.

    – Other various benefits such as company cars, health insurance, life cover, training etc are still not being offered to PAYE/Umbrella contractors, even if the equivalent permanent employee position might have been entitled to those. Again, another imbalance.

    I suspect in the future, organisations undertaking such a forced change in engagement arrangements will find themselves in court, being accused of circumventing the law. This is the reason the Lords should look at it.

    The government should be considering the impact on the economy of no longer having a flexible workforce. This naturally slows down growth as businesses permanent staff levels will need to rise, even where there is only a temporary need for certain skill sets. This will lead to businesses undertaking less projects outside of their core knowledge and generally stagnating. Any additional tax associated with this move (which is already been stated by a leading think tank to be limited), will be insignificant in comparison to the loss of GDP.

    Finally, when HMRC’s tools and guidance don’t give the same result as is being found in case law, it is extremely unlikely that the new regulation will be implemented in any lawful way.

    • Avatar
      Mike 6 Feb 2020 at 11:42 pm #

      A totally you are wrong on all accounts… there is NO holiday pay at all! There is NO sick pay at all, there is NO pension at all, there is nothing. What’s more you have no stability. Also I tell the company when I’m working. When im mot working when I am working on something else with another client under this new tulingnand companies blanket banning I now have that option taken away from me as I will now be taxed as if I ahve 10 jobs what happens then also the expenses of all my software computer gear. Etc. I dont use companies gear as near enough most of the time its Dell or IBM crap that’s slow. … I really dont know what’s going to happen I have multiple out of uk contracts set up now so will run those may leave the uk and not pay any more tax in to this system as it seems to want to rib me and give it to those that want to stab and rob us…

  12. Avatar
    Mark 6 Feb 2020 at 4:55 pm #

    Hi folks, the reality is if you want quality you need to pay for it. Permanent staff are lazy and disillusioned. As a consultant we take the risks associated. Funding the same level of individual from a consulting house will cost double +. It’s a no brainier for companies wanting results.

    Sadly the majority of permies are not good enough to stand on their own two feet or they would have the balls to work for the benefits.

    Bring it on. IR35 will filter the market but only until normality prevails.

  13. Avatar
    Andrew 6 Feb 2020 at 4:56 pm #

    Contractors attract higher rates due to short term requirement of a specific skill set. contractors have to travel the length & breadth of uk for short term gigs. for this they require a registered company, business bank account, accountant, VAT registered, business insurance, medical insurance. All of which attract costs to a business.
    A such these are offset against profits, just like any other multi national company.
    We pay C/T tax on profit at 19%
    We pay tax personal drawings at the relevant tax rates.
    Which part of this suggest we are avoiding any tax???

    There is currently a 2 year rule that could be managed better that would suffice!

    Other wise leave us alone, go after multi national oil companies that make in excess of £5B profit but manage to get a tax refund?? Oh I forgot they were offsetting their business expenses pre tax just like we are all trying to do!

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    Andrew 6 Feb 2020 at 5:02 pm #

    Didn’t Amazon start in his garage???

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    Robert walsh 6 Feb 2020 at 5:07 pm #

    I’ve been a contractor for 10 years after being made redundant 4 times from permanent employment. I believe no job is for life these days and wanted to take control of my own future. I love contracting for its flexibility not just the cash benefits! Yeah we get good rates in my sector Engineering and i believe the government hasn’t thought about all the national projects out there being worked on by many many contractors without which will never get completed i.e rail, defence etc. If this county wants to be an independent island then by bringing in these new rules will destroy this country in one easy blow!!

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    Vik 6 Feb 2020 at 6:51 pm #

    Such complete, total and utter nonsense.

    For all the perms out there, I pay more tax as a contractor than I do as a 6 figure salary earner although the tax is labelled differently.

    I get no company benefits at all, ie I don’t get the extra paid 10 days of sick leave that a permy gets, I can’t sit at my desk on ebay throwing all my work at the contractor sitting next to me – and yes this deffinately happens, I’ve had it in every contract role that I’ve done!

    The rates for contractors have plummeted recently and in addition gone inside meaning that you’d be earning similar to or less than a permanent member of staff with no benefits at all.

    ‘J’ also commented that a contractor will be entitled to holiday pay – what you’re talking about is a fixed term contractor (ftc) and not someone who is inside ir35 – these are 2 completely different setups. So as a contractor inside ir35, you get no holiday pay, no sick pay, no benefits at all, 0, nothing!

    Working under an umbrella is a scam in itself in a number of cases…. If they calculate your tax wrong, you’re liable and not them.

    I’m seriously considering moving elsewhere for work.

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    Brian Ragunathan 6 Feb 2020 at 6:57 pm #

    I have worked with contractor’s some good some bad, all on a significantly higher rate than permanent employees. The risks , no benefits are more than componsated by this increased rate of pay.

    I have worked in IT for 25+ years, I have periodically added up the benefits of a permanent position against the risks of a contractor on a rate of 800 + a day which my experience would command, but in my case permanent benefits far outweigh the risks of being a contractor. I always base my figures only being employed 10 months in a year to take into account being out of contract, sickness, holiday, etc. You can also mitigate sickness via insurance.

    As mentioned before contractor’s should pay a Fair rate of tax, it’s their choice if you don’t like it go permanent!


    • Avatar
      JJ 6 Feb 2020 at 9:58 pm #

      Brian, you are referring to consultant companies providing their contractors at £800 per day.
      I am an independent contractor and only get half of that! Get your facts and numbers right.

    • Avatar
      Mike 6 Feb 2020 at 11:47 pm #

      Firstly ther eisnt enough prmerm jobs out there. Companies simply cannot operate they would go bust over night.. but say we all decide to go perm guess what we are much better at the job then all perm staff are and easily would displace most of the perm work force… guess that would teach those with your pathetic attitude wouldn’t it… loose you house end up on the street I just walk past you and laugh…

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    Anon 6 Feb 2020 at 10:50 pm #

    It’s not “fears”…. it’s reality. Big orgs have blanket assessed …. killing their contract workforce. That’s a fact. And why? Because it’s to even up tax?? Complete rubbish.

    Impact is contractor workforce is paying less tax to HMRC due to either moving perm or inside…. LTD companies revenue to HMRC has and will drop. This will not be offset by moves inside or perm. Work moving offshore with likes of Wipro, TCS, HCL etc…. other consultancies trying to fill void but rehiring under umbrellas. It’s a joke and only winners are offshore companies, umbrellas and not UK economy in any way.

    There should only be 3 types of employment…. perm contract, FTC and outside IR35. Everything else in between is just a fudge. Doesn’t benefit the service provider or the revenues of government. It creates confusion, risk, administrative burden and an unnecessary additional market for umbrella companies or consultancies to offshore work.

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    Decapod 6 Feb 2020 at 11:56 pm #

    The reality is that no-one benefits from IR35 in the long run.

    Simply short sighted meddling in an ecosystem that was regulated by market forces – you got regularly hired if you were any good, not if you were average or less.

    Now HMRC will raise less tax, UK companies will have a smaller choice if experts, loose out to cheaper overseas foreign outsourcing companies, smaller support businesses such as accountants will go to the wall, contractors will have less disposable income to spend in their local community, the list goes on.

    Well done whoever is responsible for IR35! (Gordon Brown as I recall)

    • Avatar
      Anonymous 7 Feb 2020 at 2:50 pm #

      On a lighter note(although not practical) all the Contractors should walk out and start claiming Job seekers allowance , Rent etc 😉

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    Bob 7 Feb 2020 at 7:00 pm #

    I am a contractor. Inside ir35 forget about me working away from home again! Why bother just get a local less paid job direct locally for less money.
    Staff benefits

    Call in sick for a week
    Injury yourself or have mental health issues take a another 6-12 months off.
    Don’t waist your time travelling 2 hrs a day or staying in hotels or bed sits.
    Don’t spending time away from your family.
    Don’t work bank holidays or weekends or longer hours . When you are at work talk all day and do not alot what can your boss do…nothing.
    Project deadlines ha they will get done when they get done

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    Mark 7 Feb 2020 at 8:08 pm #

    A permanent employee is like a married man. He’s loyal, doesn’t want to cause a storm and will do as he’s told by the boss. What they don’t realise is when they don’t perform his boss needs to get real men in to do the job.

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    steve 12 Feb 2020 at 5:43 pm #

    What you dont realise , yes we do get paid good money and do not pay as much tax on our earnings, I get paid a day rate , a day is 10 hours not 8 or 35 hours a week I average 60 hours per week , no sick pay no holiday pay no benefits at all, no pension contribution from my employer , I am on 1 weeks notice , if become ill or dont perform within 1 week im gone, I cant play the stress card or my wife’s ill , I have worked in both situations and I have never worked so hard as now , I honestly look around me at the permanent staff and can safely say would wouldn’t miss half of them if that never turned up , what is even more concerning is why thay dont go for the real big tax dodgers , I have just come out of a IR35 meeting and our company have just announced thay will not be taking the risk , this is no small company do not under estimate what is about to happen in April all your major projects including HS2 are about to collapse and it will cost billions of pounds to put right, I earned 90k last year I paid in total 12k corp tax 3k PAYE and 2k NI my expenses for working away where 25k and i worked 49 weeks at 50 hours a week , I have been offered a permanent position on 75k with 35 hours per week 6 weeks holiday all expenses paid and a company car you do the maths on an hourly rate i wound be better off with all those benefits , so what does this mean , i work in the water industry , so the this means if all 186 people go for this in my company , no jobs will get finished , the cost to the client for the work will double and this time next year all yiour utility bills will be double
    Well done to the muppets !!!!

    • Avatar
      Brian Hunt 13 Feb 2020 at 4:20 pm #

      I’ve just retired after twenty years as a freelance working on business process projects. Most permanent employees are either too scared of company politics, getting a bad appraisal or not willing to go outside their comfort zone. Many of them have worked in the same role for many years and cannot understand better ways of working. Basically, too many of them lack the competence and courage to be self employed, where they only get paid on the basis of how good they are.

      Successful contractors and consultants hit the ground running, using their experience to quickly understand problems, solutions and implementations. They know that the next contract depends on their reputation, not brown nosing the boss.

      So big consultancies will take over this work, typically charging 2-3 times the contractor rate. But these consultancies tend to get new graduates in once the contract has been won. They then learn on the job. Companies then pay a lot more for a lot less.

      Economic lunacy!

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    Isobel S 17 Feb 2020 at 7:59 pm #

    This is going to be a massive problem for the creative industry where people are contracted depending on skills and projects. It’s also a very fickle industry as clients come and go and redundancies are common. The option to freelance was something we could fall back on. It’s either that or Universal credit. I don’t see how this is going to be beneficial to anyone. Some of us can barely keep our heads above the water as it is. If as freelancers we don’t get the same benefits of permanent employment why should we be paying the same amount of tax? No one is paying my sick days, holidays, parental leave or pension. Yet again the government is targeting the small guys instead of the big tax dodgers.

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    kiran 3 Mar 2020 at 4:05 pm #

    “Most members of the Lords do not receive a salary for their parliamentary duties but are eligible to receive allowances and, within certain limits, the travel expenses they incur in fulfilling their parliamentary duties.” Does anybody know why/how the members of the house of lords are not recognised as ‘disguised permanent employees’?

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