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As an older consultant I've done pretty badly out of the tax regime pre-IR35. My mortgage is not yet paid, my pension scheme misappropriated by the fat cat directors and not enough money to stuff into tax free savings.
Thank goodness for New Labour. Finally a Government we can influence. Having donated money to them and got promoted onto one of their myriad task forces our company has finally got their fingers on the levers of power.
Here is how it used to work. We would hire in staff straight from University and then pay them a really low salary. We would then rent them out to other companies for an absolute fortune. The difference would be eaten up by our fat cat overheads, and much of it was squirreled away overseas. Any left over was paid out in dividends to our shareholders. Which unlike our wage slaves did not attract National Insurance.
Overall some consultancies would only be paying about 15% in tax on the gross income. We were also able to claim back all our overheads, like expensive lunches for politicians as well as the salaries of those executives we put on the task forces.
Our big risk was that these young graduates would realise the enormous profits they could be making and go off to set up in competition. This risk became increasingly commonplace. They could charge a third of our rates, still make good profits as well as pay the taxman a higher percentage of their gross turnover. Everybody was benefiting except us. Worse they actually did a better job than us.
So our friends in high places set about levelling the playing field. What if our competitors had to pay out all their costs as salary and how about making the rules so complex that those who had not yet taken the plunge would be so uncertain they would stay put as wage slave to our consultancies.
I have to say we exceeded expectations. We were pushing at an open door with the civil servants who loved the idea of pushing more people into PAYE rather than the messy business of corporation tax. But the icing on the cake was a Paymaster General prepared to look no further than a couple of cut and paste quotes before making her mind up on an issue that has taken the Institute of Fiscal studies several years to report on.
To further help us the Revenue are writing to the companies that use our competitors and are asking them for all kinds of information. Apart from all the extra work, it is giving the impression they are dealing with criminals. Many of them are turning to us, fed up with the hassle. We just cannot believe our luck. Not only are our competitors being taxed out of existence, we appear to have our own police force to put the fear of God into clients ever using them again.
If this was not enough we have even managed to persuade the Government that rather than increasing our training budgets we could import cheap labour in from overseas. Some of us have been given blank cheques to carry out a fast track process and others are offering bounties to their staff to root out and replace any of the local small businesses with the cheaper resources from overseas.
The only problem is I find it hard to look at myself in the mirror in the morning.
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Andy White
Inspired by the Revenue Joe Contractor article in Computing
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