Finance & Banking Companies
80% of Finance & Banking companies say that the looming IR35 reforms in the private sector will affect the number of contractors that they hire.
And I don’t think many of them mean that they will increase their contractor numbers. This will be a serious problem for UK contractors and freelancers.
Questions for Finance & Banking Companies Contractors
- What are the IR35 Reforms?
- When will the IR35 Reforms be implemented?
- How will the IR35 Reforms affect contractors?
- What will contractors do?
What are the IR35 Reforms
Currently, all contractors and freelancers in the private sector decide their own IR35 statuses. In 2017 the Government changed this in the public sector. They made it so that the person and organisation hiring the contractor became responsible for deciding the contractor’s status. If they get it wrong there would be a financial penalty on the organisation.
So some of them decided that this was too risky and decided that they would hire no more limited company contractors. Many contractors who operated for years as contractors outside IR35 now found themselves inside IR35. The consequence of this was that they paid taxes to the same level as an employee. However, they got none of the benefits of being an employee.
When Will the IR35 Reforms be Implemented
The IR35 reforms for finance & banking companies will be implemented in April 2020. That’s unless Boris Johnson and Sajid Javid change that in their Autumn Budget. See Boris Johnson IR35 Views and Repeal Silly IR35 Tax on Contractors Says Sajid Javid.
How Will the IR35 Reforms Affect Contractors
According to the Government, 170,000 contractors who are currently classed as outside the scope of IR35 will now be inside. Those contractors will be expected to pay what the Government consider to be their fair rate of tax. This will mean that they could lose up to 25% of their current income.
What Will Contractors Do?
What most contractors, found to be inside IR35 did in the public sector was to join an umbrella company. It is still financially marginally better than paying the IR35 tax like an employee. It would also mean that companies and organisations could pass the buck to a third party company, i.e. an umbrella company.
What other contractors could do is work with the finance & banking companies themselves to take themselves outside of IR35. Read How Companies Can Help Contractors Stay Outside IR35.
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