Contracting and IR35

What is the Government doing?

The UK Government thinks that contractors have unfair advantages over employees and are tightening the IR35 regulations so that most onsite contractors are treated more like employees without any of the benefits of employment: sick days and holiday pay, share options, long-term predictability.

If you are paying a mortgage and/or have a family, then the likelihood is that the benefits of employment would be a priority.  Contractors move from company to company and accumulate a different set of skills and experience that have an immediate benefit on a project.  Of course, some contractors are simply employees and may be on a short-term arrangement so that they can then take up permanent employment, thus reducing risk to employers.

Project completion, not time spent

Remote Development does not offer employment or contracts to developers.  We seek whole projects which are developed for clients strictly off-site and without supervision.  Our teams are coordinated using Agile Methodology, but it is up to each developer to deliver.  If during a Sprint, a developer has no contribution then there is no fee.  Of course, their contribution may dominate a subsequent sprint.  This means a contract with a client for a planned number of sprints.  We deliver project completion by the Sprint and charge for planned results, rather than a wage for a day worked.

Does this mean our work is subject to IR35?  The law may change but as it stands, we only deliver on a basis of projects, not replacing any staff or employee function.  Outsourcing is a business-to-business corporate arrangement.

How we pay our taxes

Individual contractors are also businesses and are not employed by Remote Development.  Of course, their own businesses have to pay tax and individuals they employ are on salaries which are subject to PAYE.  Shareholder-employees can also be paid dividends (a share of profits), which are now also taxed in the UK.

What is not taxed?

Investment back into the business.  Remote development has a side product – teamwork.  As we build teams, they are able to create businesses by investing their time and mutual skills.  Business investment is spending revenue to create future revenue growth.  The best defense against taxation is investment back into the business.  It is also a path to paying more tax while retaining a much larger slice of the profit pie.

What is good about tax?

We should not be in business to avoid paying tax. The zero-sum game of avoidance is to simply make nothing – of course, that is self-defeating.  Taxes support the government of the land.  Education, defense, health – all need to be paid for.  Deficits are the selling of the future but rampant tax avoidance are a primary cause of Government borrowing against tomorrow.  A better way is to cause business growth and to run a fair tax regime.

What is bad about tax?

Governments make political choices, not business choices.  Taxation takes money away from future risk takers, sometimes for the benefit of society, sometimes due to crippling levels of Government debt.  Businesses borrow money to build a future.  Governments borrow for the same reason, but the debt levels these days mean they are selling the future to pay for the past.  Hard decisions could reduce these levels, but who would vote for tax increases?  Why do we vote for austerity?  A business that adopted policies that reduced sales would not survive.  Supporting a government that is dishonest with their mandate seems counter-intuitive.

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