Our columnist Colin Beveridge - one of the UK's top interim IT
directors - touched a rich vein of passion running through the IT
industry with his piece on the government's IR35 tax-catch
regulations.
Read Colin Beveridge's article on IR35 >>
Here are some of the many opinions of IT professionals on IR35. All
our respondents found IR35 to be unjust and unrewarding for both
the contractor and the Inland Revenue - which the rules were
designed to benefit.
Taxman loses when skills take flight
Many
contractors have already taken their skills out of the UK and are
in no hurry to return. For Keith Leggett, the clean air of the
German hills is an added bonus to higher pay and less tax.
"Who wants to work in car-infested, traffic-jammed, stressed-out,
rule-based bureaucratic Great Britain Limited where food, petrol,
living expenses all cost more?" he asks.
"Tomorrow I'm off to the hills - clean air, few people and lots of
wildlife."
He adds that all the British politicians are doing is reducing
competitiveness, increasing the skills shortage and brain drain -
and losing revenue into the bargain.
That the Inland Revenue is losing out is a point also made by
recruitment specialist John Cowell. "When the Conservatives said
that they would repeal IR35, Labour said that this would cost £1bn
a year. How much extra tax has the Revenue got? I suspect it is a
mere fraction of the £1bn. How then do Gordon Brown's income/spend
plans hold water?"
A brake on new enterprise
Aitken Scott
wonders why he's stayed in the UK where he believes Inland Revenue
 | | "I can't understand why the
government has come after us. We are the highly skilled who have
taken responsibility for ourselves and helped drive the extremely
high standards we have here in the UK." | | | | | |
| | Rob Maynard | | |
|
|
rules make it hard for small companies to get established
He writes: "I've been a contractor since 1984 and from the start
made a point of salting away money to finance moving my
'convenience company' into mainstream software development.
"Quite successfully too, I might add. We ended up with four staff
and wrote a pretty significant chunk of software for the European
Airbus A320, A330 and A340. All were funded by taking a subsistence
salary and retaining earnings from earlier 'tax-dodging' contracts.
This simply would not be possible now due to IR35.
"We are now unfortunately in a similar situation, which will result
in us either having to do deals with the devils in the venture
market or fold the company. We have identified a potentially, very
lucrative niche market but need to do a six-figure amount of work
before we can get it to market. We need to fund it somehow, not to
mention put food in the babes' mouths in the interim. Answer, take
a couple of short term, high earner project management contracts,
pay my two staff out of the take and burn a few (if only) midnight
hours to handle the in-house project. Sounds like the stuff of
entrepreneurial legend? Er, no - enter the dreaded IR35...
"I question my sanity for:
a) staying in this country
b) staying in this industry."
A case of double standards
The perceived
anomalies in the IR35 rules are a source of anger for many
contractors, with "double" National Insurance contributions being a
major irritant.
Philip McMahon writes: "I can't see how the government can have it
both ways. If I am deemed to effectively be an employee and as such
should be subject to paying NI contributions on what I earn, then
why am I still paying employer's NI?"
Rob Maynard agrees: "If IR35 is not removed in the next 12 months
or so then I will have to go permanent. It's just not worth it. I
will be paying a high rate of income tax and dual NI with no
benefits whatsoever. I can't understand why the government has come
after us. We are the highly skilled who have taken responsibility
for ourselves and helped drive the extremely high standards we have
here in the UK."
Another instance of double jeopardy is highlighted by Paul Dack.
"If I am classed as 'disguised employee' and the IR removes my
disguise what does that make me?" he asks. "A new type of employee
who pays equivalent NI and tax but has no employee rights? You
cannot be classed as one when being taxed but another when
exercising individual rights."
Overseas workers are the winners
Several of
our readers pointed out that the issue of double standards extended
to the issue of work permits and tax benefits for contractors from
abroad.
As Peter Colclough puts it: "Government organisations are readily
giving work permits to people from overseas if they have IT skills,
due to the 'shortage of skilled IT workers'. I maintain that there
is no shortage at all, just a shortage of people with two children
and a mortgage in excess of £500 per month who are willing to hand
over 10-15 years experience for £25k per year."
What about share dividends?
There was also
strong support for Colin Beveridge's suggestion that revenues
should be raised by making share dividend payments to employees
subject to National Insurance contributions.
"Simple, fair, but also potentially a bigger tax grab," argues
Peter Lappo, who says that contractors should be able to "operate
exactly like other companies - claiming expenses, retaining profit
for expansion, and employing people without paying out wages from
directors' taxed incomes".
The tip of the iceberg
The above comments are
just a representative sample of the many responses CW360.com has
received following Colin Beveridge's column on IR35.
Some correspondents preferred not to be identified for fear of
persecution by the Inland Revenue for making their views
public.
The broad feeling was not simply one of self-interest but a sense
of injustice that contractors should receive all the disadvantages
of being an employee without receiving all the benefits. Clearly
there is now a breakdown of trust between the government and a
significant section of the IT fraternity.
Thank you to all who responded - our apologies if your views
were not quoted directly.
All reader feedback on CW360.com is published only with the
specific authorisation of the correspondent.
Read Colin Beveridge's article on IR35 >>