IR35 is not being repealed, only the 2017 amendments (which required Public Sector buyers to make an assessment) and the 2019 amendments (which required Private Sector buyers to make an assessment). Prior to 2017, the onus was fully on the Seller and presumably we revert back to that status. This is in line with the Truss/Kwarteng "cutting red tape" and "personal responsibility" philosophy.
All along, IR35's problem has been the difficulty of codifying what is politically determined as a "real" business. Attributes like company size, number of clients/customers, ability to choose your own place of work, the degree to which you're under supervision or direction, the length you've been with a sole customer, your contracted right to walk away or to replace yourselv, and so forth are all indicators toward what may politically seen as "not real", but they are not concrete or absolute. All that is happening is that the onus is shifting back to the Seller and the Buyer's may not longer be on the hook quite so much. But some of it will be baked in now - the changes public sector made might live on despite the repeal, since they continue to work toward the political incentive that brought them in.
It's not a difference in rate between employment and self-employment, though, and that's really the core of the issue. If you're self-employed your tax rates are (virtually) identical to those who are employed. If you set up a company and pay yourself a salary from that company, those tax rates are also virtually identical (although now you're having to pay employer NI contributions).
What's different is the tax rate on dividends from shares, and the tax on employment, and that's the tax loophole that IR35 seeks to close.
As an employee earning £50k a year I would pay £12224 tax and NI, as a self employed person I would pay £11303 tax and NI. If I'm working for my own ltd I will pay £10871 as a combination of personal tax and corporation tax. The difference is not enormous. I think the IR35 stuff was to stop employers avoiding their NI contributions which is an extra £6155 tax on the £50k salary.
But when IR35 was introduced the dividends weren't really taxed at all. In fact there were even some tax credits related to dividends for a while. Today the situation is completely different and the tax rates on dividends are not far off NI levels at lower income levels and much worse higher up (because employee NI drops to a very low rate once you're a higher rate tax payer but dividend taxes are uncapped).
Once you factor in things like the contractor's Ltd paying for its own running costs, time off for things like holidays or sickness, and pension contributions it makes very little sense for someone to go the Ltd route instead of being an employee just for tax/financial reasons now. The real advantages are in flexibility and having a real business-to-business relationship with clients, which can break various glass ceilings you might otherwise hit as an employee.
Low dividend taxes were supposed to ensure that richer, business owners who provided political donations were taxed less than the people who worked for them. The "loophole" is that workers figured out a way to get that white glove capitalist treatment.
In the process of trying to "close the loophole" and codify the distinction between "good upstanding capitalist" versus a "dirty little employee" they kind of underscored the fact that economically identical activity is being taxed differently according to your position in the British class hierarchy.
It reminds me a bit of dekulakization - the idiotic Soviet reforms that took the opposite tack and attempted to crack down on "dirty little capitalists" by deporting farmers to siberia because e.g. they owned a sewing machine and two pigs.
The irony is that it mostly doesn't any more. There are several different types of employment status and business relationship recognised in legal and tax rules but one way or another the person actually doing the work ends up paying a very similar rate of tax in all of them now.
Since the government started taxing dividends at significant rates on top of the corporation tax already paid any small owner-run businesses that pay out via salary+dividend arrangements are close to the same total tax level as an employee pays in income tax and NI. You're actually quite a bit worse off financially now if you equate gross revenue for the business with salary for an employee because the business has to cover all its own costs in terms of paid time off, pension contributions and so on. And of course you have none of the job security and other protections that employees have under our system.
The only ones who really win big under the current system seem to be the employers of disguised employees because they can dodge employer NI contributions if they pay via a Ltd company outside IR35. But they solved the problem of getting hit with employer NI under IR35 by forcing contractors to work through umbrella companies and then pay all of the costs for both employee and employer themselves. And since that has widely been done inappropriately through blanket policies and lazy status determinations since the rules that are now to be repealed were introduced the one really big tax anomaly in the whole system is the legitimate contractors (and other independents like freelancers) who have been hit with a far higher tax bill than anyone else.
I was surprised when I moved to Sweden that it didn't seem to have an IR35 equivalent, but then I noticed that taxation is exactly the same for employment and self-employment.
Note that the liability is shifting back to contractors.
I don’t consider this a win for the contractor. The end client should be the one to determine status and shoulder the responsibility if it turns out to be incorrect.
> The end client should be the one to determine status and shoulder the responsibility if it turns out to be incorrect.
I'd say the opposite, the incentives / risk structure are otherwise completely misaligned. If the end client says you're outside IR35 and you should be in, they get whacked for income tax + 2x national insurance (employer and employee contributions). If they say you're inside and you should be outside they only have to pay the employer NI contributions.
That's a recipe for blanket "inside IR35" decisions, which is exactly what happened to the detriment of many genuinely independent contractors.
It would have made sense that if 'employee for tax purpose' also meant 'employee for employment law purpose', so that the declaring someone inside IR35 would have significant consequences for the employer as well.
If you are contractor then you are a business owner, and you should bear responsibility for your own taxes.
The upside of this liability shift is that your customers will be more willing to negotiate with you. Right now some of them are assuming very defensive positions, like treating all contractors as being inside IRS35, because claiming that you're outside is a risk for them.
This shouldn't be a win for genuine contractors but it very obviously is. Since the reforms that are being wound back were introduced there has been a huge chilling effect on the flexible labour market here because a huge proportion of larger clients are highly risk-averse and push all contractors into IR35/umbrella arrangements as a blanket policy.
Of course they aren't supposed to do that and they are supposed to assess each contract individually and there are supposed to be appeals processes if the IR35 status is then determined incorrectly. However we live in the real world and what is "supposed to" happen means very little.
The market for contractors today is a fraction of the size it used to be before the new rules came in. Typical rates in many parts of the market actually fell since the changes when logically several factors should have been pushing them up if the market was functioning properly. No doubt some part of that was getting rid of disguised employees because those people do exist. However the effect has been far too widespread and affected far too many genuinely independent workers and their clients as well.
> Of course they aren't supposed to do that and they are supposed to assess each contract individually and there are supposed to be appeals processes if the IR35 status is then determined incorrectly.
That part was completely botched. The HMRC themselves admitted that role based assessments are permitted. Also they have deceived the public what assessment actually means. If the client writes the contract in a way that puts service provider in-scope (to minimise the risk), then there is not much that can be done. The appeal is basically requesting the client to change the contract, which for obvious reasons they won't do, because that would put them at risk. So the client can always walk away when you appeal.
From the IR35 perspective, the individual situation of the contractor does not matter.
I wonder whether the net tax revenue even from "disguised employees" (both the taxes they pay directly such as Corp & Dividend tax, as well as indirect taxes such as those they pay when they actually spend their gains) was still more in volume thanks to a healthy, flexible contracting & IT market rather than the sad & deserted wasteland we have now.
Tax avoidance is a problem but maybe it's better to skim off a little bit from many people than take a lot from a very few people while scaring the rest away?
There is a whole host of unintended consequences with that, that negatively affect the market.
It gives the larger entity in b2b relationship an effective say how the smaller partner is being taxed. This gives them literally an instrument to wipe their competition. For instance, a big haulage company can't find drivers to do a certain route, but there is a small company in the area happy to subcontract.
Big company can now say, alright guys, I can only give you the contract in-scope of IR35. If every big company in the area does that (and they do), then suddenly that small business can no longer operate. Company folds and its workers can either seek employment in the big company or do something else.
Liability ultimately was always with contractors, just now when HMRC claims the assessment was wrong and the client gets fined, they pay, but they can claw the money back from the contractor. Usually it is in the contract terms. The PAYE that becomes due is contractor's personal tax and the client could likely use unjust enrichment - the contractor was paid in error if it wasn't defined in the contract.
These IR35 changes were really poorly written with only the happy path in mind.
At least one IR35 insurance policy I've reviewed essentially gave the insurer a way out from litigating the case "if they didn't believe they'd prevail".
If the same party that stands to lose money if they get involved is the one deciding whether to get involved or not, surely that's a conflict of interest and makes the policy pointless?
Sure, I guess you could litigate against the insurer (and still litigate against HMRC), but the whole point of this insurance is to protect against legal costs - if you're going to spend money anyway, what's the point of insurance?
That was ever the case in the past though, and previously dealt with by means of a well written contract and appropriate working arrangements. The alternative (status determination by client/'employer') meant an instant ~15% pay cut for anyone unable to negotiate a rate increase to cover the additonal tax burden.
There is no risk if you're genuinely running a small business.
If you're a permalancer, coining a freelance rate whilst paying very little tax (no PAYE), then you _should_ be caught out. You _should_ have the liability.
The problem is that the rules are ambiguous and in some industries (such as software development) it is not possible to effectively separate employees from contractors which means that even legitimate contracting activity can look like disguised employment.
If you operate a business that provides software development services and want to help a client with their existing software project (who already has full-time employees working on it) you will often need to become embedded within their team which includes participating in regular meetings (including daily standups) and do "employee-ish" things that look risky from an IR35 point of view. Just speccing out a clear scope of work in advance is very difficult as sometimes the scope will vary over time as edge-cases are discovered during development, so the SOW will end up very broad and may look employee-ish. Your best bet is to have mitigating factors such as working for multiple clients, using your own equipment, etc and possibly contract length (I am not sure if it counts, IMO it definitely should) but none of those are bulletproof either.
Contributing to an existing codebase in parallel with a client's in-house development team is risky from an IR35 point of view even if you are doing so in good faith and want to operate a business rather than just be a "permalancer". That's also why with the new rules (that are now being repealed), a lot of companies did a blanket determination of putting everyone "Inside" IR35 because the rules are not only unclear to begin with, but even more difficult to correctly interpret and apply in certain industries.
You're still liable for corporation & dividend tax. Though the rates are favourable towards the independent contractor, there isn't a huge amount of difference between a perm. employee these days; when you factor in the additional risk taken on by the independent contractor, it's difficult to say either way which one has the better deal.
Note to mods: The current headline ("IR35 will be repealed from April") is wildly misleading and potentially dangerous.
The underlying IR35 rules don't appear to be changing. The announcement today is about winding back some relatively recent reforms about who is responsible for determining whether those rules apply to any given contract.
About damn time, luckily i've not been a contractor for some years now and have missed the IR35 shitshow of recent years. Having a client offering a contract having to determine if my company is an actual business or i'm just a disguised employee is a ridiculous way of doing it. Sorry but when i was contracting i was also taking on other freelance work, had long standing retainers for maintance for past clients and having junior developers working in my company doing the grunt work, thats a business, i'm not a disguised employee.
The responsiblity should be on the person to argue with HMRC that they are a business and for those legitimately operating as such, then its not at all difficult.
I am actually in favour of the IR35 legislation as it removed entire swathes of "permietractors" from the market and allowed people like myself (and you judging off the working practices you described) to operate in a true business fashion.
It is no doubt to me that 95% of "contractors" previously working "outside IR35" at large FTSE companies were indeed employees in disguise. Tenure even matched permanent staff, quite frankly it was a joke.
I wholeheartedly agree with you, those dodging tax by just operating like a permanent employee but through a Ltd company are on the wrong side of the law. The problem i had is it punishes those operating legitimately.
Lots of laws are like this, for instance the piracy warnings that they used to put at the start of DVD's that only punished lawful users cuz if your pirated it, the warnings would be cut out. Theres many more examples like this.
I respectfully disagree, when you say contractors = employees.
Yes, they tenure may be just as long, but there are many other factors to take into consideration (just off the top of my head):
1. Contractors don't have a "career path" inside the organization, not even the ones that think they do.
2. They can be let go within weeks notice and no severance package.
3. They don't (really) participate in company politics.
4. They are also much easier to convince to jump ship and go next door, where the grass is greener.
5. They are responsible for managing themselves, ie. education, marketing, sales...
And there are others, like no paid holidays, etc., but everyone knows about those.
I would argue that contractors are somewhere halfway between employees and business owners. Maybe it would be the fairest to tax them so, by creating a special tax bracket for them.
It's like regulating e-rollers and e-bikes. What are they? Not bicycles really, but also not motorbikes or cars. Somewhere in between really.
Meh. I think the ratio didn't change at all, it is just that contractors jacked up their rates to cover the added NIC. To me it seemed like someone in HMRC/govt got a "win" but all the govt agencies just had to pay more for their contractors. Almost zero-sum but actually net negative because of added bullshit.
I left UK when it only covered govt agencies so not sure what the mitigations were for private sector but I'm sure many found a way around.
I agree that many contractors were more or less perm. That in turn seemed to be a consequence of the pay differential, rather than an actual desire to be a contractor.
Regarding maintenance retainers: I have been in a loop where customers realize they haven't "used" their monthly retainer and dump requests on me in the last week of each month. Did you experience this? Would love to come up with a tactful solution to this.
This is happening because you pitched to them x amount of time for x amount of money. Instead re-frame it as included in the price is: server maintenance, backup scheduling, bug fixes and monitoring, minor tweaks etc.
When you frame the monthly cost like this, the customer feels almost like it's an insurance policy rather than paying for your time they aren't using.
For those commenting that it doesn't make much sense anymore from the tax perspective, forget the difference between employee and contractor rates. If I would switch to contracting, my earnings would almost double...
For instance:
£500/day contracting? Easy. As an employee? Not a chance.
You need to account for corporation tax, dividend tax, expenses of running a company, sick pay & holidays, etc. Once you account for all that, it's not as much.
It's really advantageous if you work on a startup or side-project that requires capital; in this case your company accumulates the money and can spend it without incurring any tax (not to mention claiming back VAT), where as buying that same equipment as an employee means not only did you already pay tax on that money, but you can't even claim back VAT.
If you're just looking for an equivalent to a long-term permanent job but as a contractor (even with a legitimately Outside IR35 contract with no tax-avoidance shenanigans), it's not worth it. A conservative calculation on a 500/day rate assuming 44 weeks worked in a year, 11k/year salary (with the rest as dividends), 6k/year pension contributions and 2k/year expenses suggests that it's equivalent to ~110k permanent salary. In practice, you might actually get a bit less due to downtime in between contracts.
But the original statement still stands. Which one do you think is easier: A. Finding a contract 500 per day, or B. finding a job 110k per annum? The latter is a challenge even in London (for a techie), let alone anywhere else, while 500 is achievable anywhere, in London / the City it would actually be comically low even.
I have been outside the UK for more than 8 years but I still get approached by UK recruiters offering contracting gigs. 7 out of 10 of them always write "Outside IR35" and I never really grasped what it meant exactly, can any UK contractors ELI5?
The point of the law is to stop people taking on contracts that should essentially be permanent employee roles. Its more tax efficient to be paid via your own Ltd company instead of as a PAYE employee, especially when you get into the highest tax bracket, and so the government loses tax revenue.
The IR35 law was supposed to stop them losing tax revenue, and to be honest i even agree with the overall law, they just executed it incorrectly. They put the responsiblity on the company offering the contract, when it should be on the person applying for the contract that has the responsibility to show they're a business and not a disguised employee.
The better way to do it in my opinion is to empower HMRC with more resources to question contractors and show that they are actual businesses and not tax dodging employees.
> Its more tax efficient to be paid via your own Ltd company instead of as a PAYE employee, especially when you get into the highest tax bracket, and so the government loses tax revenue.
That's not true. If you pay yourself from your company whether it is dividends or salary, you pay tax as everyone else. Sure if you decide to retain some money in your company, you only pay corporation tax, but as soon as you decide to pay the remainder yourself you will pay personal tax anyway.
That's how any business works!
It's completely pointless to do anything about this. Big consulting corporations do exactly the same thing, but are not being hounded by HMR.
AFAIU, the IR35 rules have existed for a long time. The recent change was to shift the responsibility to determine in/out to the employer. This change shifts it back to the employee.
The better way to do it in my opinion is to cut taxes for employees to be equivalent to that of contractors, so it doesn't matter if you are inside or outside IR35.
"Inside IR35" would mean you're controlled like an employee, and taxed so.
"Outside" could mean one of two things, the company you're contracting for doesn't qualify to determine your status (and the tax burden if investigated is on you, if you deem yourself "outside") or they have provided a statement outlining why the role is truly considered outside IR35 (https://www.gov.uk/guidance/check-employment-status-for-tax). For the latter, any incorrect determination is on them.
Since the changes of IR35 this statement "Inside IR35" would mean you're controlled like an employee, and taxed so." is not really true.
Only thing that matters from the IR35 perspective is whether the service needs to be performed by a specific person in the business. All the rest is irrelevant. If the work is personal, then it is in scope.
Risk averse companies can declare contract in scope by simply fettering substitution clauses or not having them at all.
It doesn't matter if business providing service is legitimate or not.
Question for other UK contractors here - it is just me or do you also find that a significant portion of developer roles advertised "outside IR35" don't actually feel "outside" at all and could be risky if you didn't have mitigating factors on your own side (such as working for multiple clients, hiring subcontractors/employees, offering services, etc)?
Readit News
All along, IR35's problem has been the difficulty of codifying what is politically determined as a "real" business. Attributes like company size, number of clients/customers, ability to choose your own place of work, the degree to which you're under supervision or direction, the length you've been with a sole customer, your contracted right to walk away or to replace yourselv, and so forth are all indicators toward what may politically seen as "not real", but they are not concrete or absolute. All that is happening is that the onus is shifting back to the Seller and the Buyer's may not longer be on the hook quite so much. But some of it will be baked in now - the changes public sector made might live on despite the repeal, since they continue to work toward the political incentive that brought them in.
What's different is the tax rate on dividends from shares, and the tax on employment, and that's the tax loophole that IR35 seeks to close.
Once you factor in things like the contractor's Ltd paying for its own running costs, time off for things like holidays or sickness, and pension contributions it makes very little sense for someone to go the Ltd route instead of being an employee just for tax/financial reasons now. The real advantages are in flexibility and having a real business-to-business relationship with clients, which can break various glass ceilings you might otherwise hit as an employee.
In the process of trying to "close the loophole" and codify the distinction between "good upstanding capitalist" versus a "dirty little employee" they kind of underscored the fact that economically identical activity is being taxed differently according to your position in the British class hierarchy.
It reminds me a bit of dekulakization - the idiotic Soviet reforms that took the opposite tack and attempted to crack down on "dirty little capitalists" by deporting farmers to siberia because e.g. they owned a sewing machine and two pigs.
Employer NI is 14% on top, it’s a big increase tax wise. It brings the effective tax rate for FAANG/similar salaries to over 58%.
For those unfamiliar, listentothetaxman [1] is a great resource.
1. https://listentotaxman.com/
The dividend tax makes up for this
What's different is the dividends escape employers National Insurance contributions
Since the government started taxing dividends at significant rates on top of the corporation tax already paid any small owner-run businesses that pay out via salary+dividend arrangements are close to the same total tax level as an employee pays in income tax and NI. You're actually quite a bit worse off financially now if you equate gross revenue for the business with salary for an employee because the business has to cover all its own costs in terms of paid time off, pension contributions and so on. And of course you have none of the job security and other protections that employees have under our system.
The only ones who really win big under the current system seem to be the employers of disguised employees because they can dodge employer NI contributions if they pay via a Ltd company outside IR35. But they solved the problem of getting hit with employer NI under IR35 by forcing contractors to work through umbrella companies and then pay all of the costs for both employee and employer themselves. And since that has widely been done inappropriately through blanket policies and lazy status determinations since the rules that are now to be repealed were introduced the one really big tax anomaly in the whole system is the legitimate contractors (and other independents like freelancers) who have been hit with a far higher tax bill than anyone else.
I don’t consider this a win for the contractor. The end client should be the one to determine status and shoulder the responsibility if it turns out to be incorrect.
I'd say the opposite, the incentives / risk structure are otherwise completely misaligned. If the end client says you're outside IR35 and you should be in, they get whacked for income tax + 2x national insurance (employer and employee contributions). If they say you're inside and you should be outside they only have to pay the employer NI contributions.
That's a recipe for blanket "inside IR35" decisions, which is exactly what happened to the detriment of many genuinely independent contractors.
The upside of this liability shift is that your customers will be more willing to negotiate with you. Right now some of them are assuming very defensive positions, like treating all contractors as being inside IRS35, because claiming that you're outside is a risk for them.
Of course they aren't supposed to do that and they are supposed to assess each contract individually and there are supposed to be appeals processes if the IR35 status is then determined incorrectly. However we live in the real world and what is "supposed to" happen means very little.
The market for contractors today is a fraction of the size it used to be before the new rules came in. Typical rates in many parts of the market actually fell since the changes when logically several factors should have been pushing them up if the market was functioning properly. No doubt some part of that was getting rid of disguised employees because those people do exist. However the effect has been far too widespread and affected far too many genuinely independent workers and their clients as well.
That part was completely botched. The HMRC themselves admitted that role based assessments are permitted. Also they have deceived the public what assessment actually means. If the client writes the contract in a way that puts service provider in-scope (to minimise the risk), then there is not much that can be done. The appeal is basically requesting the client to change the contract, which for obvious reasons they won't do, because that would put them at risk. So the client can always walk away when you appeal. From the IR35 perspective, the individual situation of the contractor does not matter.
Tax avoidance is a problem but maybe it's better to skim off a little bit from many people than take a lot from a very few people while scaring the rest away?
It gives the larger entity in b2b relationship an effective say how the smaller partner is being taxed. This gives them literally an instrument to wipe their competition. For instance, a big haulage company can't find drivers to do a certain route, but there is a small company in the area happy to subcontract. Big company can now say, alright guys, I can only give you the contract in-scope of IR35. If every big company in the area does that (and they do), then suddenly that small business can no longer operate. Company folds and its workers can either seek employment in the big company or do something else.
These IR35 changes were really poorly written with only the happy path in mind.
If the same party that stands to lose money if they get involved is the one deciding whether to get involved or not, surely that's a conflict of interest and makes the policy pointless?
Sure, I guess you could litigate against the insurer (and still litigate against HMRC), but the whole point of this insurance is to protect against legal costs - if you're going to spend money anyway, what's the point of insurance?
If you're a permalancer, coining a freelance rate whilst paying very little tax (no PAYE), then you _should_ be caught out. You _should_ have the liability.
If you operate a business that provides software development services and want to help a client with their existing software project (who already has full-time employees working on it) you will often need to become embedded within their team which includes participating in regular meetings (including daily standups) and do "employee-ish" things that look risky from an IR35 point of view. Just speccing out a clear scope of work in advance is very difficult as sometimes the scope will vary over time as edge-cases are discovered during development, so the SOW will end up very broad and may look employee-ish. Your best bet is to have mitigating factors such as working for multiple clients, using your own equipment, etc and possibly contract length (I am not sure if it counts, IMO it definitely should) but none of those are bulletproof either.
Contributing to an existing codebase in parallel with a client's in-house development team is risky from an IR35 point of view even if you are doing so in good faith and want to operate a business rather than just be a "permalancer". That's also why with the new rules (that are now being repealed), a lot of companies did a blanket determination of putting everyone "Inside" IR35 because the rules are not only unclear to begin with, but even more difficult to correctly interpret and apply in certain industries.
Honestly, I don’t get this mindset.
When you see someone doing better than you, why is your first thought “I must put him down” instead of “I want to learn this too”.
This is absolutely a win for the contractor.
The underlying IR35 rules don't appear to be changing. The announcement today is about winding back some relatively recent reforms about who is responsible for determining whether those rules apply to any given contract.
The responsiblity should be on the person to argue with HMRC that they are a business and for those legitimately operating as such, then its not at all difficult.
I am actually in favour of the IR35 legislation as it removed entire swathes of "permietractors" from the market and allowed people like myself (and you judging off the working practices you described) to operate in a true business fashion.
It is no doubt to me that 95% of "contractors" previously working "outside IR35" at large FTSE companies were indeed employees in disguise. Tenure even matched permanent staff, quite frankly it was a joke.
Lots of laws are like this, for instance the piracy warnings that they used to put at the start of DVD's that only punished lawful users cuz if your pirated it, the warnings would be cut out. Theres many more examples like this.
Yes, they tenure may be just as long, but there are many other factors to take into consideration (just off the top of my head):
1. Contractors don't have a "career path" inside the organization, not even the ones that think they do.
2. They can be let go within weeks notice and no severance package.
3. They don't (really) participate in company politics.
4. They are also much easier to convince to jump ship and go next door, where the grass is greener.
5. They are responsible for managing themselves, ie. education, marketing, sales...
And there are others, like no paid holidays, etc., but everyone knows about those.
I would argue that contractors are somewhere halfway between employees and business owners. Maybe it would be the fairest to tax them so, by creating a special tax bracket for them.
It's like regulating e-rollers and e-bikes. What are they? Not bicycles really, but also not motorbikes or cars. Somewhere in between really.
I left UK when it only covered govt agencies so not sure what the mitigations were for private sector but I'm sure many found a way around.
As an employee you can just as well have many short employments and work for multiple employers.
When you frame the monthly cost like this, the customer feels almost like it's an insurance policy rather than paying for your time they aren't using.
Assuming there is still an economy in the UK in 2023 :)
£500/day contracting? Easy. As an employee? Not a chance.
It's really advantageous if you work on a startup or side-project that requires capital; in this case your company accumulates the money and can spend it without incurring any tax (not to mention claiming back VAT), where as buying that same equipment as an employee means not only did you already pay tax on that money, but you can't even claim back VAT.
If you're just looking for an equivalent to a long-term permanent job but as a contractor (even with a legitimately Outside IR35 contract with no tax-avoidance shenanigans), it's not worth it. A conservative calculation on a 500/day rate assuming 44 weeks worked in a year, 11k/year salary (with the rest as dividends), 6k/year pension contributions and 2k/year expenses suggests that it's equivalent to ~110k permanent salary. In practice, you might actually get a bit less due to downtime in between contracts.
The IR35 law was supposed to stop them losing tax revenue, and to be honest i even agree with the overall law, they just executed it incorrectly. They put the responsiblity on the company offering the contract, when it should be on the person applying for the contract that has the responsibility to show they're a business and not a disguised employee.
The better way to do it in my opinion is to empower HMRC with more resources to question contractors and show that they are actual businesses and not tax dodging employees.
That's not true. If you pay yourself from your company whether it is dividends or salary, you pay tax as everyone else. Sure if you decide to retain some money in your company, you only pay corporation tax, but as soon as you decide to pay the remainder yourself you will pay personal tax anyway. That's how any business works!
It's completely pointless to do anything about this. Big consulting corporations do exactly the same thing, but are not being hounded by HMR.
"Outside" could mean one of two things, the company you're contracting for doesn't qualify to determine your status (and the tax burden if investigated is on you, if you deem yourself "outside") or they have provided a statement outlining why the role is truly considered outside IR35 (https://www.gov.uk/guidance/check-employment-status-for-tax). For the latter, any incorrect determination is on them.
Only thing that matters from the IR35 perspective is whether the service needs to be performed by a specific person in the business. All the rest is irrelevant. If the work is personal, then it is in scope.
Risk averse companies can declare contract in scope by simply fettering substitution clauses or not having them at all.
It doesn't matter if business providing service is legitimate or not.