Contractors IR35 Bill Shock – 170,000 Limited Company Freelancers Hit

Contractors IR35 Bill Shock
Contractors IR35 Bill Shock

Contractors IR35 Bill Shock

A contractors IR35 bill shock was felt all over the UK as 170,000 freelancers who currently operate via limited companies will now have to pay the same tax as an employee. The day has finally dawned for limited company contractors. HMRC and the Government have completely ignored all advice from the consultation period and are going ahead anyway. This is teh new world of contracting.

Major Points After Contractors IR35 Bill Shock

  • What are the IR35 changes in the Finance Bill?
  • Contractors to pay same tax as employees after contractors IR35 bill
  • Contractors Different from Employees
  • Tax anomaly fixed after contractors IR35 Bill
  • Matthew Taylor Report Recommendations for contractors partly implemented
  • Dependent Contractors and Independent Contractors

What are the Main Changes in the IR35 Finance Bill

The main change is that contractors will no longer decide their own IR35 status. It will be the hiring company who will decide. To ‘encourage’ them, if the hiring company get it wrong they may have to pay the back tax, penalties and interest of contractors who they mistakenly judged to be outside IR35.

This has caused 59% of companies to say that they are considering not having any more limited company contractors. It is also, in the survey by Brookson Legal, causing 85% of companies to say that it will have an impact on their hiring of IT Contractors in terms of numbers hired.

Contractors to Pay Same Tax as Employees After Contractors IR35 Bill

Treasury Minister Jess Norman said that the new rules would “ensure two people working side by side in a similar role for the same employer pay the same employment taxes,”

In last year’s budget Chancellor Philip Hammond, backed up by Theresa May, said that “It was an anomaly that a self employed person earning !00,000 pounds a year pays less tax than an employee earning 100,000 pounds a year”.

They have now well and truly ‘fixed” that anomaly.

Contractors Different from Employees

We all know that this is complete nonsense as the permanent employee gets a stack of benefits that a self employed person doesn’t get. Contractors also don’t have the job security that an employee has.

They are different because they are part of a flexible workforce, which is very useful for companies but which has just become a lot less flexible.

Tax Anomaly Fixed After Contractors IR35 Bill

So Theresa May and Philip Hammond have finally fixed this ‘anomaly’ as they see it. This was put in place in the public sector by Cameron and Osborne in 2017. Now it is May and Hammond’s turn to screw up a system that was working perfectly well for companies.

Although they purport to know how much tax this will bring in, they don’t know what the cost will be to British industry (and to tax receipts) of them interfering in a market place that was working optimally for companies.

There will be a major cost to those 170,000 contractors. It is likely that they will be losing 20% to 25% of their income. This contractor IR35 bill will devastate and change the industry for good. It will change companies’ usage of contractors for good.

Matthew Taylor Report Recommendations for Contractors Partly Implemented

Matthew Taylor was charged by Prime Minister Theresa May and Chancellor Philip Hammond to produce a report on what should be done about limited company contractors.

His report said that there should now be two groups of contractors. There should be Independent Contractors and Dependent Contractors. The Independent Contractors should operate as now.

Dependent Contractors and Independent Contractors

The Dependent Contractors should pay the same tax as employees but also receive benefits like employees. The Government has gone ahead with the taxation part but has ignored the benefits part.

As a result 170,000 contractors now using limited companies will pay a lot more tax but will get no extra benefits. Jesse Norman, Philip Hammond and Theresa May are very pleased with themselves this morning after righting this terrible wrong.

What have they done?

Oh, what have the done?

If you know anyone else who would find this article useful, please share it with them using the social media buttons at the top and bottom of the page.

Ad – Contractor Services

When the IR35 changes were implemented in the public sector, rather than just pay the IR35 tax, most contractors inside IR35 decided to take the umbrella company route. If you are inside IR35, or caught by a blanket ban on Limited Company contractors, it would be worthwhile checking to see how much income you would keep using an umbrella company. Just fill out the form below and someone will be in touch to let you know.

If you think you can benefit from using an umbrella company, try the following:-

Simply Umbrella

Best Umbrella Companies for Banking Contractors / Finance Contractors

Best Umbrella Companies for IT Contractors

Do you need some professional advice on which umbrella company is right for you? Do you want to get better returns from your Umbrella Company? Fill out the form below to receive expert advice.

For all necessary business insurance, including IR35, try Business Insurance for Contractors

    Your Name (required)

    Your Email (required)

    Your Telephone (required)

    Your Daily Rate (required)

    Please Fill in Answer to Simple Quiz Question




    Please enter your comment!
    Please enter your name here

    This site uses Akismet to reduce spam. Learn how your comment data is processed.