Tag: Contractors

30/10/2018

Postponed: Extension of IR35 to Private Sector

Chancellor, Philip Hammond delivered the Autumn Budget for 2018 on Monday 29 October 2018. As well as confirming plans to raise the national living wage to £8.21 per hour from 2019 and the personal allowance threshold to £12,500, it was also announced that the extension of IR35 to the private sector would be postponed until April 2020.

Mr Hammond announced that contractors working in the private sector would face tighter tax rules; an extension from the current rules for those working in the public sector. This means that, from April 2020, many private sector contractors will face increased tax and National Insurance (NI) bills.

IT contractors and consultants will be affected by the rules, which are being implemented to target those considered by HM Revenue and Customs (HMRC) to be employees. The rule change will not apply to the smallest 1.5 million businesses but the IR35 rules will apply if:

you work through your own company for another business
the way that you work is comparable to an employee of that business – you will, therefore, be required to pay income tax and NI at 12%

Taking on the responsibility for determining which contractors will be required to pay more tax and NI from April 2020 are larger companies, such as banks. If it is deemed that they are an employee, the organisation using the contractor will also be required to pay NI.

As for businesses, from 6 April 2020, they will need to extension as to whether the IR35 rules apply to contractors working through their company. If they do apply, the organisation paying the worker’s company will be required to:

deduct income tax
deduct employee NI contributions
pay employer NI contributions

They have until April 2020 to enforce the changes, with the current rules continuing to apply to the 1.5 million smallest businesses.

Will the new rules affect your business?

The Check Employment Status for Tax (CEST) service to help you determine whether the new rules apply to your organisation.

Within the next few months, an additional consultation on the full reform details will be published. This will inform the draft Finance Bill legislation which is anticipated for publication in Summer 2019.

Want to know more?

Click here for the full IR35 update document from HM Treasury titled ‘Increasing compliance with the off-payroll working rules in the private sector’ – Budget, 2018.

19/07/2018

May IR35 Forum key findings published

Improving the way IR35 is administrated, HM Revenue and Customs (HMRC) continue to work with the IR35 Forum. A summary of May’s minutes can be seen below:

Compliance has improved

Following the reform of IR35 in the public sector in April 2017, as a result, compliance has improved. HMRC provided the supporting evidence:

“In the first 10 months (since reform) an additional 90,000 engagements have been registered on Real Time Information (RTI) equating to 58,000 individuals paying income tax and NICs.”

At estimate, since the public sector IR35 reforms was introduced, an additional £410m of income tax and National Insurance Contributions (NICs) have been remitted. Figures from HMRC’s annual report for 2017-18 is largely in line with Treasury’s initial forecast.

Check Employment Status for Tax (CEST)

Usage of CEST has steadied at around 40,000 – 50,000 per month. The determinations according to HMRC are matching similar tools in the private sector, by finding 60% self-employed and 40% employed. However, the employed ratio is much higher.

Sector- specific data

HMRC does not have data relating to sectors on the IR35 reform issues. Although they will investigate whether it is possible to find out if there are issues relevant to some sectors.

Institute of Chartered Accountants in England and Wales (ICAEW) concerns

The department has agreed to work with the ICAEW, to improve guidance on existing rules about the public sector IR35 legislation.

Employment agencies and umbrella companies

In relation to tax, the department is “exploring the feasibility” of setting out standards and expectations of employment agencies and umbrella companies. Tax officials will report back to the next Forum meeting about whether this can be taken forward.

Further examples

Draft examples of exceptions and exemptions, especially on outsourced services, was shared with Forum members. The examples will be reinstated on the gov.uk website once they have been agreed.

Online

The new terms of the reconstituted IR35 Form have been published on the forum’s website.
The department’s Mutuality of obligation (MOO) Paper (published since these minutes) is subject to HMRC’s consideration following feedback received from members.
Despite suggesting that members’ feedback would be factored in to the final draft of the MOO paper, many IR35 Forum members have distanced themselves from the paper since publication on the forum’s website. No (external) members appear to have spoken up to endorse it.

HMRC has offered a round table event for IR35 Forum members to respond to the private sector IR35 reform consultation. The next IR35 Forum meeting is also scheduled for August 2nd 2018.

Click here to subscribe for more IR35 updates.

24/05/2018

IR35 private sector consultation launched

HMRC is nearing the private sector ‘off-payroll’ rollout, launching its consultation into ‘off-payroll’ working in the private sector. This news comes just days after an IT contractor won an IR35 appeal.

The objective of the consultation is to improve the rules regarding ‘off-payroll’ working so that contractors who work through their own company pay the right amount of tax. HMRC states:

“The consultation will specifically look at how to increase compliance with the existing ‘off-payroll’ working rules. These rules mean that contractors such as IT and management consultants who work through their own company but are in practice employed by a third party, pay the right tax as employees.”

Evidence suggests that people are getting the rules wrong and incorrectly paying tax as if they were self-employed. The aim of the consultation is to look at how to improve this.

Mel Stride, Financial Secretary to the Treasury, said:

“It’s very important that we recognise the hard work of contractors across all sectors, who contribute to our growing economy.

“But it’s also right that we have a fair tax system that balances efficiency and simplicity for taxpayers, while also supporting our vital public services. That’s why we’re consulting carefully and welcome a wide range of opinions and evidence on how to tackle non-compliance.”

Click here to read and respond to the consultation.

The consultation closing date is 10 August 2018.

18/05/2018

IT contractor wins IR35 appeal

Yet another contractor has won an IR35 appeal in a series of recent rulings to arise in 2018. This most recent case involves an IT contractor.

The key factors included:

The level of control fell below the sufficient degree required to demonstrate a contract of service
Mutuality of Obligation (MOO) was not sufficient enough to point to a contract of service (inside IR35)
The right to substitution pointed away from an employment contract
Elements of the contract pointed towards the individual being an independent contractor

Read a full article here

Again, control was the major aspect in this case, with insufficient evidence to accompany HMRC’s claim.

28/03/2018

Contractor wins IR35 appeal

A construction contractor has defeated HM Revenue and Customs (HMRC), winning an appeal in the second IR35 ruling to arise within eight weeks.

Once again, control was the major aspect in this case, with insufficient evidence to accompany HMRC’s claim. Three key factors outlined by the tribunal included:

There was no contract termination notice period.
The contractor was not considered part of the business in question.
The contractor paid his own expenses.

Read the full article here

This is now the 23^rd IR35 court case. Looking at this and previous cases, nine (39%) cannot determine the status. What does the future hold?

15/03/2018

IR35 reforms likely to be delayed until 2020

The Chancellor’s Spring Statement has not provided updates on government proposals to the potential IR35 reforms which were speculated to impact private sector contractors next year.

Rumours had pointed towards the extension to the private sector commencing in April 2019, with a common expectation that an update regarding the progress of the IR35 consultation would be delivered within the Spring Statement.

Given time restrictions, a consultation would realistically need to be implemented within the coming weeks in order for there to be ample time for reasonable considerations to be made. It is therefore likely that, if there are any reforms, they would be delayed until at least 2020.

Let’s wait and see if anything crops up in the next few weeks.

12/12/2016

IR35 – Public Sector Reform

IR35 affects all IT contractors who do not meet HMRC’s definition of ‘self-employment.’ You can use HMRC’s Employment Status Indicator to determine your employment status. IR35 came about as a result of HMRC’s belief that a number of contractors are actually disguised employees.

HMRC has been unable to set clear rules and defined legally sustainable tests to determine whether the contract is ‘IR35 caught.’ Because of this, HMRC believes that there are still thousands of employees operating as contractors and so are set to make yet another change to IR35 to combat this.

The Autumn Statement 2016 which can be viewed here, says:

“The government will reform the off-payroll working rules in the public sector from April 2017.”

It adds: “This reform will help to tackle the high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees.”

Judging by the above, reforms are intended solely for the public sector for the time being, but should HMRC find that the new reforms work they could be extended to the private sector too. Although there have been no official indications, this will be the case and many believe it is unlikely to be rolled out past the public sector.

The IT contractor will still have the general expense of running a business, but the government thinks that the entire 5% will be spent on determining their IR35 status.

HMRC is making end-hirers responsible, but they can immediately delegate that responsibility and liability to agencies. Essentially what they are doing is making a party responsible, but then allowing it to be passed on to another party who is separate from the assignment working practices, and therefore less able to take a view on IR35 status.

What else was announced?
Other key Autumn Statement announcements include:

Corporation tax will fall to 17% by 2020 as planned.
The National Living Wage (NLW) will rise by 4.2% from £7.20 to £7.50 from April 2017.
A new 16.5% VAT flat rate will take effect from April 2017 for businesses with limited costs, such as many labour-only businesses.
The tax advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions, childcare, cycle-to-work schemes and low-emission cars.

We’ll keep you updated with any changes to IR35 over the coming months.

Surge in temporary jobs following Brexit

29/07/2016

Surge in number of temporary vacancies following Brexit

Research by the Association of Professional Staffing Companies (APSCo) indicates that there has been a dramatic surge in the number of temporary positions since last year.

Although Brexit has led to a decrease in the number of permanent positions, research suggests that the number of temporary vacancies in the UK has increased substantially.

According to Innovantage, demand for professionals in the technology sector increased by 57%. Data also revealed that despite a decrease in the number of permanent vacancies, the number of temporary positions increased across a range of sectors including technology and construction.

Julie Selby, Membership Relations Manager at APSCo, said:

“It is evident that increased uncertainty in the weeks prior to the EU referendum weighed down heavily on overall hiring sentiment, and clear that employers have adopted a tentative approach to employing professionals on a permanent basis in favour of temporary hiring.

“While permanent vacancies in the construction sector did also experience an uplift year on year, the temporary market experienced the most significant growth, with demand soaring by 45% year on year to June.”

So contractors, have no fear there is still work out there for you! If you’re interested in finding your next contract get in touch, we’ll be happy to help. Email contact@corecomconsulting.co.uk or call 0113 457 1454.

12/07/2016

What does Brexit mean for contractors?

Ever since the shock decision that Britain will leave the European Union (EU) there has been little said about the plan going forward. This may be confusing if you’re a contractor or freelancer and you may well be left concerned about your future, especially as there have been warnings about the economic consequences of Britain leaving the EU.

Uncertainty

As no set plan has been put into motion yet, it is clear that Britain is in a state of uncertainty with regards to the next couple of years. This has a negative effect on businesses whom, like many, dislike uncertainty.

That being said it has emerged that, at least for contractors, the uncertain nature of Britain’s future could end up boosting demand for contractor workers.

Dave Chaplin, CEO of Contractor Calculator said:

“It is during this time of uncertainty that contractors will benefit from businesses hiring contingent workers in order that they can manage risk.”

In the past when we’ve encountered doubt and uncertainty in economic environments, there has been an increase in demand for hiring contractors rather than permanent workers, and there is nothing to say that this won’t happen in this instance.

This shift could place contractors in the driving seat and could well encourage more experienced professionals to make the leap to contracting.

New Opportunities

The Association for Independent Professionals and the Self-Employed (IPSE) also believes that Britain leaving the EU brings lots of prospects for the UK’s contractors and freelancers.

Chris Bryce, IPSE CEO said:

“Today’s historic result has huge implications for the UK’s 4.7 million self-employed workers and they’ll be wondering what it means for them.

“IPSE believes this new era can and must be taken as an opportunity for the UK. Priorities should be new global trading arrangements, cutting burdensome regulation on small and micro businesses and ensuring that Britain has the most flexible and attractive economy in the world. With these priorities, the UK can be a place where freelancing and contracting can thrive.

“New circumstances always bring new opportunities for freelancers. We should be optimistic about the future and IPSE will continue to push the importance and value freelancers bring to our economy.”

It is clear that although uncertain times are upon us, contractors can feel safe in the fact that uncertainty will lend itself to their nature of work and that contractors may well benefit from the vote to leave the EU.

20/06/2016

Contractors, Unicorns and Brexit – what does it mean?

The EU Referendum is fast approaching and voting will commence on 23 June 2016. This is a short article about the implications of a Brexit on contractors and on Unicorns*.

Contractors

The upcoming EU referendum could see Britain leaving the EU and this, according to CXC Global, may have a negative impact on the UK contractor arena. The implications of a potential ‘Brexit’ is looking to lead to added administration challenges for EU-based companies should they decide to use specialist contractors.

One of the benefits of using contractors is that they can provide immediate expertise and are ready to work within a few days. There are concerns that should Britain leave the EU, this ease of access to contractors could be limited. Another key benefit of utilising expert contractors is that they work independently and require limited management or supervision, but a Brexit could mean that they require increased supervision and management from the client. Although nothing is set in stone there are deep concerns that contractors might suffer were a Brexit to occur.

Unicorns

Loss of status

London is globally recognised as the digital capital of Europe and there are concerns that a Brexit could threaten to undermine its position. According to Tech London Advocates, 87% of representatives are against Britain leaving the EU for one reason or another. There are fears by many major tech companies that should a Brexit occur the likes of Berlin, Paris Stockholm could take over due to it being harder to reach EU countries, harder to source talent from overseas and harder to convince international companies to operate in the UK at scale.

Talent sourcing from EU countries

A talent shortage is the largest concern facing the London tech sector, especially when it comes to developers and engineers according to research by TLA. It is often the case that these skills are easier to find in the EU, but should a Brexit occur and free movement of workers within the EU ends, talent sourcing from the EU would prove to be much more of a challenge.

Taavet Hinrikus, co-founder of TransferWise, a unicorn company, said:

“We believe it would be crazy for the UK to leave the EU, both for businesses and consumers.”

A Brexit could have a huge impact on tech companies and some have even expressed that they will relocate should Britain end up leaving the EU.

On the other hand, leaving the EU could result in developing and implementing new immigration laws which might be more favourable for attracting top tech talent from abroad, although this may take some time to come to fruition.

Whatever the case, there are deep concerns by contractors and Unicorns that a Brexit could have far-reaching implications.

*A unicorn is a term which refers to a tech company valued at over $1 billion.

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