Private Sector Tax on Contractors
It looks certain now that a Private Sector Tax on Contractors will appear in this year’s November Budget, if not before.
The Government have decided to give an extra £20 billion for the National Health Service.
They said that this would be partly funded by a Brexit dividend.
However, everyone knows there will be no Brexit dividend.
The Government have now admitted that they will have to increase taxes and increase borrowing.
As they don’t like to increase the basic rate of tax they’ll look at other means of raising tax income.
Public Sector IR35 Changes
They are already investigating how to roll the public sector IR35 changes they made to the private sector too.
Some pundits say that it is more likely that they will roll this out in 2020 rather than 2019.
However, with this desperate search for extra taxation, it now looks nearly certain that they will roll this out in April 2019.
They will most likely announce this Private Sector Tax on Contractors in November 2018’s Budget.
Tax Money to Fund the NHS
According to leaks the main reason why the Government hasn’t announced where they will get the money from is because they have only identified £11m of the £20m needed for the NHS.
They have already said that rolling out a Private Sector Tax on Contractors would bring in around a billion pounds.
So, that would cut the amount they have to find or borrow.
Government Attacks on UK Contractors
Contractors have been an easy touch to the Government in recent years as they seek to find extra income without raising the basic rate of tax.
Despite there being 4.8m freelancers in the UK they don’t have very effective lobbyists.
If they did, the Government wouldn’t keep crapping on them.
Contractors are Tax Avoiders
The Government believe all contractors to be tax avoiders.
Theresa May said “It is an unfair anomaly that self employed people who earn £100,000 a year pay less tax and national insurance than a permanent employee earning £100,000 a year”.
This is an ‘unfair anomaly’ that Theresa May and Phillip Hammond obviously intend to fix.
And as there is no reason that they would believe that this ‘unfair anomaly’ should only be fixed in the public sector it stands to reason that they will want to roll it out in the private sector too.
So, expect and announcement some time this year that they will roll the IR35 changes out to the private sector.
Employers Responsible for Contractor’s IR35 Status
Part of the Government’s IR35 change is to pass over the responsibility for a contractor’s IR35 status from the contractor to the employer.
They will penalise the employer if they get it wrong.
To assist the employer in their decision making HMRC have created a new IR35 test called the Check for Employment Status Test (CEST).
However, this is dodgy in the extreme and heavily favours HMRC’s view of who is inside IR35 and who is outside.
HMRC Lose IR35 Cases to Contractors
Recent IR35 cases that HMRC have brought against contractors and lost show that HMRC don’t have a good grasp on who is a really contractor and who is a disguised employee.
This test has no basis in law.
The IR35 laws haven’t changed.
Yet, it is being used as if it was the definitive arbiter of a freelancer’s IR35 status.
Contractors Using Personal Service Companies
Indeed, almost half of contractors who currently use personal service companies who sit the test are found to be now inside IR35 or non-determinable.
As employers would not take any chance with the indeterminables this effectively means that almost half of limited company contractors in the public sector would now have to switch out of limited companies.
And it looks like this will soon be the same in the private sector too.
So, if you work via a limited company in the private sector now there is a 46% chance that you will be found to be inside IR35.
It’s just the latest attack by Governments of all hues on UK freelancers.
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