[scott_w]

> You wrote, in your second reply: "First off, IR35 does not apply to self-employed workers, it only applies to a worker contracting via a limited company."

Apologies, I misread and thought you said I claimed IR35 does apply, which is why I answered the opposite. In which case, let me state my position clearly:

IR35 is not applicable to a self-employed individual because they are not a limited company. There is no field on the Self Assessment Tax Return to declare yourself in-scope of IR35, which I can confirm having filled out SA forms since 2018. I have no idea why you think it can be applied. It just can't.

> The plumber's company is in scope of IR35 precisely because the plumber owns it.

That is not what "In Scope of IR35" means at all. In Scope is, as we have both said above, based on the contract and work arrangements, which would either be "In Scope" because the arrangement mirrors an employment, or "Out of Scope" because the plumber is functionally self-employed, just contracting from within a limited company.

Also, this is part of why I say you're speaking out of both sides of your mouth. You say it's nothing to do with ownership structure and everything to do with ownership structure at the same time!

> The ownership structure is what brings the regime into existence.

This is what would trigger the test but it does not mean a company or arrangement is in or out of scope. That has to be applied based on the contract and working arrangements.

> why does this regime target worker-owned companies specifically, rather than applying a universal status test to all companies supplying labour in identical conditions?

You're basically asking "why does IR35 exist?" and the answer can be found by literally Googling it: it targets contracted workers who would pay less tax than an employee in exactly the same working arrangements. That is the top and bottom of it and has always been the case.

Why doesn't it target consulting companies? Because their employees are already employed! They already pay the full Income Tax and National Insurance!

I question your reading comprehension because I already fucking answered this question above:

> In an IR35 in-scope arrangement, the one-person limited company would otherwise pay themselves up to the income tax exemption threshold. They would then take a dividend for the rest of the payment, which isn't subject to NI payments, reducing revenue intake to the government.

[varispeed]

You have finally stated your position plainly: IR35 exists because a worker running their own company would pay less tax than an employee in the same working arrangement. Thank you. Now let me explain why that reasoning is exactly the class assumption I have been describing.

The worker is not an employee. They are a business owner. Every limited company in the country pays its directors a combination of salary and dividends, and pays corporation tax on profits. That is not a loophole. That is how companies work. The only reason it is treated as a problem is that the person who owns this particular company also does the work, and the assumption is that a person who does work cannot legitimately own a business - they are merely disguising employment.

That assumption flips every principle of good business on its head. For any normal business, having repeat customers is a sign of quality and reliability. For a worker-owned business, it is evidence of disguised employment. For any normal business, long-term client relationships are commercially valuable. For a worker-owned business, they are suspicious. The entire framework starts from the premise that the business is not real and works backwards from there.

You say the consultancy's employees "already pay full Income Tax and National Insurance" as though that settles it. The small business owner earning more than both the employee and the consultancy worker will pay more tax, because they earn more and do not have the instruments available to larger companies exempt from this regime to reduce their tax burden - transfer pricing, offshore margin routing, intercompany structures. The framing asks you to compare only the worker's personal tax position to an employee's, while ignoring that the entity capturing the surplus in the consultancy model contributes far less to the Treasury. That is designed to make employees resent the business owner while the consultancy extracting more value and contributing less tax is never part of the conversation. You have just demonstrated this perfectly.

You say I am speaking out of both sides of my mouth. I am not. The ownership structure triggers the regime. The contract and working arrangements determine the outcome of the assessment within that regime. These are two separate stages. The first stage - who gets subjected to this test at all - is determined by ownership. A large plumbing company sending an employee to the same job under the same conditions is never tested. That is the asymmetry. You keep describing the second stage as though it answers my question about the first.

[scott_w]

> The worker is not an employee.

Yes they are. That’s the point of IR35 and why it’s not a class issue. If the person wants to be a business owner, then operate as a self-employed contractor and not an employee.

It’s nothing to do with class.

> For any normal business, having repeat customers is a sign of quality

They’re not a “repeat customer,” they’re the only “customer.” I gave examples of real business, this includes many IT contractors that I’ve worked with. I pointed out many other trades do not typically fall into IR35 because they operate as self-employed business owners.

> The small business owner earning more than both the employee and the consultancy worker

You’re comparing two different sized paycheques, it’s apples and oranges. I don’t accept your assertion that one always gets paid more than the other.

> The framing asks you to compare only the worker's personal tax position to an employee's

Because that’s what IR35 is targeting for the reason I stated, not because of class.

> while ignoring that the entity capturing the surplus

Irrelevant. They’re completely different types of work and working arrangement. The employee embedded in the company is acting like an employee and are taxed as one.

> The ownership structure triggers the regime.

It triggers the test, it does not determine the outcome. The outcome is, fundamentally, based on whether the worker acts as an employee or a self employed contractor. Class doesn’t come into it.