UK Contractors Future – We’re at the IR35 Crossroads – End Game Near

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UK Contractors Future
UK Contractors Future

UK Contractors Future

With the recent news that the Government’s public sector IR35 changes will be rolled out to the private sector in April 2020, UK contractors future is now in the balance.

With the Government deciding to roll out their IR35 public sector contractors changes to the private sector the game is up.

And there are strong indications of further IR35 changes to come.

IR35 Changes in Public Sector

These changes have already caused chaos in the public sector.

Contractors always decided their own IR35 status in the past.

If they chose wrongly they could come under investigation and end up paying tens of thousands of pounds in back tax, interest and penalties.

However, HMRC wins only a tiny percentage of these investigations.

Also, you had a better chance of being struck by lightning than being investigated for IR35.

UK Contractors Future – New IR35 Rules for Public Sector

Theresa May and Philip Hammond changed all that though when they brought in the IR35 rules for the public sector.

Government departments would now decide a contractor’s IR35 status.

As HMRC have a poor legal view of who is inside IR35, shown by all their lost IR35 cases, how could anyone expect Government department hirers to suddenly become experts in IR35?

Furthermore, if they do not inform the contractor’s agency within 45 days of the contractor’s status the department may become liable for the tax.

New Online IR35 Employment Status Test

HMRC created a new online IR35 Employment Status Test to help them.

However, many departments, just to be safe, said that they will no longer deal with contractors operating via personal service companies.

Others, are saying that their contracts are now all inside IR35.

So, anyone taking those contracts, even if the contractor is outside IR35, will still have to pay the IR35 tax.

This has caused chaos in the public sector with many contractors leaving the public sector rather than take the huge drop in income.

UK Contractors Future – IR35 Changes in Private Sector

Now, the Government is going to roll this out in the private sector too.

Government Ministers had said previously that they have ‘no plans’ to roll this out in the private sector.

However, freelancers were not fooled – most of them anyway.

The ‘no plans’ expression is a favourite expression of wily politicians. It leaves them wiggle room as they are not saying they won’t.

Extra Contractor Tax from Public Sector

Despite the chaos it is causing in the public sector, the Government got only a relatively small amount from it in extra tax.

That is, it is a small amount of money in tax terms.

However, the roll out to the private sector will bring in much more.

Private Sector Contractors Disbelief

Many contractors said that they would never roll this out in the private sector.

They said that public sector bosses wouldn’t be so easily cowed by the Government.

They were wrong.

The Government does not fear freelancers and their representatives.

That’s for sure!

UK Contractors Future Not Safe

UK Contractors future is in the balance.

That the Government is rolling it out to the private sector, has come as a great shock to many of contractors leaders.

However, that’s not the end of it.

The Matthew Taylor Report recommended to the Government that, in future, there should be three types of worker.

There would be Employees, Independent Contractors and Dependent Contractors.

The Dependent Contractors would be taxed as employees. That’s not been implemented yet.

Boris Johnson Wants to Screw Contractors Again Over IR35

Boris Johnson said, in the Queen’s Speech, that “We will increase fairness and and flexibility in the labour market by stopping employers and workers experiencing significantly different outcomes from flexible forms of working.”

This echos Theresa May’s statement that “it is an unfair anomaly that a self employed person earning £100,000 a year pays less tax than en employee earning £100,000”

That fits in with Treasury Minister, Jesse Norman, saying that there is only 10% compliance to IR35. HMRC repeated this soon afterwards.

They are planning some other hit on contractors after the election which will make almost all of them pay PAYE. That would fix their ‘unfair anomaly’.

It would fulfill Boris Johnson’s ambition of “stopping employers and workers experiencing significantly different outcomes from flexible forms of working.”

Watch this space.

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