IR35 Free Contractors
The MOD is effectively forcing IR35 Free contractors to operate now using umbrella companies.
This is despite some contractors passing HMRC’s IR35 Employment Status Test which shows them to be outside IR35.
So, these contractors are legally outside IR35. Yet the MOD are telling them to either pay it or join an umbrella company.
Either way it is going to get lots more tax and national insurance for the Government.
Contractors Outside IR35
These contractors should not legally be paying the IR35 Tax. IR35 does not hold them in its clutches.
It’s like forcing people to pay Inheritance Tax when they are not even dead.
Of course, the MOD is not telling the IR35 Free contractors that they must use an umbrella company. However, they are effectively telling them to do so.
The MOD are telling at least these contractors that they cannot use their limited companies as personal service companies any more.
Paying IR35 Tax When Outside IR35
This should mean contractors who are outside IR35 paying IR35 tax.
This should be collected by their agencies from contractors’ income and passed to the Government.
However, the agencies are telling the contractors that they don’t want to operate a payroll system for them with all the extra expense and work involved.
Umbrella Companies Only option for MOD Contractors
So, umbrella companies look to be the only option for MOD contractors who are currently using personal service companies.
It seems that the MOD are arbitrarily forcing contractors down this route.
What’s more this must all be done by early April.
When contractors come up for renewal the MOD tell them that they must change their modis operandi.
There is currently a public sector umbrella companies IR35 contractor bonanza.
Contractors Quitting the Public Sector
There are stories elsewhere that IT Contractors are quitting the public sector in droves.
I’m sure there are some.
However, the vast majority of IT Contractors cannot afford to just dump their contracts.
Nor it is wise for them to do so – at least till they can get a contract in the private sector.
Contractors Paying More in Tax
It seems that the average IT Contractor will now have to pay around £15,000 extra in tax a year.
This is when the law shows them to be in business in their own account, as does HMRC’s new IR35 test.
This is a tyranny. It’s completely unfair.
However, the Conservatives appear to believe that they can bash contractors again and again with impunity.
Contractors Group IPSE
Contractors Group IPSE do not appear to be effective enough to stop this tyranny.
I hope that IPSE, and other contractors groups, will gather their forces ready for when Theresa May and her Chancellor try to roll this out in the private sector, as well, in maybe a year’s time.
We hear that they are already working on the planning of this at HMRC.
Umbrella Companies Look to be the Future for UK Contractors.
Private Sector Companies and IR35 Changes
Can you imagine in a year’s time many companies telling contractors in the private sector that they will no longer be allowed to use their personal service companies?
That’s why this battle must be fought now.
There should be a legal challenge to this.
This should be IPSE’s line in the sand.
Are they up to it?
Well, we can see that Hammond and May certainly have no fear of upsetting them and their freelance members.
They have to prove that they are not just Insurance Salesmen and can defend the rights of freelancers to be freelancers – and not PAYE umbrella company employees.
If you do need an umbrella company you could try one of the following:-
If you want to cut your Accountancy costs by using apps try Aardvark Accounting.
For Mortgages specially designed for contractors try Specialist Contractor Mortgages.