A couple of weeks on from the 2017 Autumn Budget, the dust has settled. It’s fair to say that the reaction, from a contracting perspective at least, was mixed. On the one hand, the government took a big step closer towards extending its much-maligned clampdown on IR35 into the private sector. On the other, there was a clear effort at a more conciliatory approach towards the flexible working market than many expected. The immediate tax hikes and Draconian reform of previous years were replaced by a stream of consultations and discussion documents. An unsteady half step forward, then, rather than one giant leap back.
2017 stands as something of an anomaly on the important political announcement front – the one and only time that there will be two Budgets in a single year. As noted by the Chancellor last November, the Autumn Statement has now ceased to be. Tomorrow’s spring Budget will be the last of its kind (for the foreseeable future at least), replaced by a yearly autumn Budget (commencing in autumn of this year), followed from 2018 onwards by a Spring Statement.
Confusing? Yes. A good idea? Definitely. By holding the Budget in the autumn it will allow for major tax changes to occur annually, well before the start of the fiscal year. The Spring Statement will then exist to respond to OBR forecasts, but will not be a major fiscal event in itself.
So what should contractors expect tomorrow? As always, it’s impossible to truly predict what will happen (take last year’s Autumn Statement as an unwelcome example) but there are a few key pointers to look out for. We don’t expect to see anything dramatic given that there will only be a 6 month gap between Budgets (not to mention the fact that the Government’s self-imposed 31st March deadline to begin the formal Brexit process is arriving at a startling pace) but there’s always room for a surprise or two. What do we already know, and what would we like to see? Read on below for our observations.
April’s IR35 changes have been looming large in the rear view mirror for some time now. With the self-assessment deadline having come and gone at the end of January, the focus of the contracting community has now fallen firmly upon Philip Hammond’s Spring Budget on 8th March, followed swiftly by the much-maligned changes in IR35 status for personal service company contractors in the public sector that are due to come into force from 6th April 2017. If labyrinthine policy change doesn’t fill you with vernal optimism, then we’re not sure what will.
From now on, we’ll be rounding up the latest and most relevant contractor news for the contracting community once or twice a week and summarising it here on the Kingsbridge blog, making it your one-stop shop for all the latest information that’s relevant to you. Without further ado, here’s the first round up:
“HMRC confirmed at the most recent IR35 Forum meeting on 15 December 2015 that no kneejerk measures will be implemented between now and the next Budget.
HMRC was reluctant to provide any timescale with regards to its next decision over the legislation, but it has confirmed that there will be no changes to IR35 included in the Finance Act 2016, meaning no new measures will take place during the 2016/17 tax year.”
“Limited company contractors not caught by IR35 – a tax legislation designed to combat tax avoidance by workers supplying their services to clients via an intermediary – can still claim travel and subsistence tax relief.”
“Many people choose to become a freelancer or start their own business to have more control over their schedule and enjoy a better work-life balance. A new study has now suggested that freelancers get so much gratification from their job that they are happier the busier they are.
Researchers from the University of Leicester and the University of London looked at the work schedule of 45 freelance workers over a six-month period. The study, published in the SAGE journal Human Relations, found that their wellbeing fluctuated in-line with their schedule.”
“The number of self-employed contractors in the UK has reached an all-time high. This is according to the latest figures published by the Office for National Statistics (ONS) which show that the UK’s self-employed headcount rose above 4.6m in the three months leading to October, reflecting a 71k increase year-on-year and a 94k improvement on the previous quarter.” (Contractor Calculator).”
“The Government has revealed further details concerning plans to request quarterly tax returns from contractors over the coming years. In a document titled: ‘Making tax digital’, HMRC highlights that quarterly tax returns are set to be implemented from April 2018, as part of its new digital tax initiative.” (Contractor Calculator).
“On 11 December 2015 we issued a briefing looking at the key points and likely problems with the draft travel and subsistence legislation released on 9 December 2015, and on 14 December 2015 we looked at how umbrella models would be affected. Those were the first two briefings in a series of briefings about the draft legislation.
In this third of four briefings we comment on the impact of the proposals on users and suppliers of personal service company contractors (“PSCs”).”
Today saw the release of the Draft Finance Bill 2016. After an Autumn Statement surprisingly devoid of any mention of changes to IR35 rules, despite significant pre-Statement speculation to the contrary, most members of the contracting community expected to see changes announced in today’s draft Bill. However, IR35 was once again conspicuous by its absence.
Any proposals for change that may have been happening behind government walls are staying there for the time being. The Draft Finance Bill did include the changes to tax relief on Travel and Subsistence expenses where a contract is inside IR35 that were announced in the Autumn Statement. However, the lack of any IR35 reform suggests the government took heed of the advice of the stakeholders they consulted, as well as the overwhelmingly negative reaction to the proposed changes from the contracting community as a whole.
In a letter received by Nick Holmes, CEO of Umbrella.co.uk, and timed to coincide with the release of the Draft Finance Bill, the Chancellor stated: “We will be considering this issue carefully before taking any further decisions. Should any further changes be introduced they would be subject to detailed consultation before publishing any draft legislation.”
Whether this means that the Government are simply biding their time, or whether they have abandoned their plans for IR35 reform altogether, remains to be seen. It seems now that all eyes have moved to the next Budget statement on 16th March 2016.
Despite numerous rumours to the contrary over the past few weeks, professional contractors broadly came out of the 2015 Autumn Statement unscathed (for now at least). Recent reports from HM Treasury had suggested that contractors would no longer be able to work for a single client for an uncapped period and would have to move onto the payroll after one month, but no mention was made of this in the Chancellor’s speech or in the ‘blue book’ released immediately afterwards.
It seems likely that any proposals for changes to IR35 legislation will be pushed back to April 2017. A press release from APSCo, circulated shortly after the conclusion of the Autumn Statement, stated: “It appears that, following the overwhelming negative response from business as a whole and a rigorous press and lobbying campaign by APSCo, the Government has chosen to think more carefully about the unintended consequences of the proposals.”
Samantha Hurley, Head of External Relations and Compliance at APSCo, followed up by saying:
“Of course, the lack of an announcement in the Autumn Statement doesn’t mean that the Government won’t go forward with this proposal in the future, but it does almost certainly mean that it won’t come into effect in April, 2016, which is what we feared.”
Wednesday 25th November will be a big day for the contracting community. George Osborne will be delivering the first purely Conservative Autumn Statement. Following on from a summer Budget which wasn’t exactly contractor friendly, it’s heavily rumoured that the Chancellor will be addressing the contentious issue of IR35 – either offering a proposal for further reform, or at very least the introduction of further consultation. Of course, despite all the speculation, what will actually be said currently remains unknown.
It seems as though changes will be announced that will see PSC contractors no longer being able to work for a single client for an uncapped amount of time. Although earlier rumours suggested that contractors would be obliged to move onto the payroll of their client after one month of work, it now seems that will not be the case as long as they pass a new version of the ESI test. However, who must decide whether or not the contractor is inside IR35 (i.e. which contractual party will stop proceedings as early as four weeks in) remains unclear.
Join us from 9am on Wednesday 25th as we live Tweet the Autumn Statement, followed by our reaction later in the day and an in depth look at exactly what kind of impact the current Conservative government has had on the contracting community.
We’re taking another look at IR35 on the Kingsbridge Contractor Insurance blog today. This week – should you get your contract reviewed for IR35 compliance?
IR35 is the legislation on everyone’s lips and it’s a subject that we have covered a number of times. Since its passing into law in 2000, it’s been a priority for freelancers and contractors to make sure they don’t get caught in the IR35 net.
Some professional organisations now offer independent reviews of your contracts that check for IR35 compliance, giving you the peace of mind from the outset that you are not at risk of being caught out. This week, we’re going to investigate if these contract reviews are really worth it for independent professionals today.
At Kingsbridge Contractor Insurance, sometimes we like to revisit blog posts we’ve done in the past. It might be that you didn’t see the post first time around, or that you’ve only recently taken out an insurance policy with us. For this post we’re going back to October 2014, to take another look at our Contractor’s Guide to IR35 Legislation.
The Intermediaries Legislation, or IR35 as it is more commonly known, has been a topic of conversation for many in the world of contracting. With HMRC this year promising to reduce IR35 case investigation time, this key piece of legislation is now a topic that no contractor can afford to ignore.
Our comprehensive insurance policy package includes professional indemnity insurance, public liability insurance, personal accident cover, directors’ and officers’ liability, and employers’ liability. But covering you as you go about your work is only part of what we do. There are numerous other benefits to holding the correct insurance:
It’s a key IR35 indicator:
There’s enough to discuss about IR35 to make another blog post entirely (in fact, we’ve done just that). But, to put it simply, it’s a piece of government legislation aimed at uncovering ‘disguised employment’. What’s that? In essence, ‘disguised employment’ is when a freelancer works on a contract through their limited company, but their working conditions and contract indicate that they are working in the same way as a traditional employee.
If you get caught up in this legislation then your income will be subject to normal income tax and National Insurance contributions, meaning that you’ll lose the advantage of the low salary, high dividends tax arrangement that many contractors benefit from.
If HMRC decide to investigate the validity of your contract against the stipulations of IR35 legislation then they’ll carry out a series of Business Entity Tests. These tests function as one of the ways to prove that your contract is at low, medium, or high risk of being caught out by IR35.
Being covered by professional indemnity insurance (one of the elements of the Kingsbridge policy package) can improve your IR35 stance significantly, and forms a significant part of the Business Entity Test.
Ensuring you are fully covered as a freelance contractor is a vital step towards covering yourself at every level. At Kingsbridge we have designed our core insurance package to cover the risks you’re exposed to as a freelance contractor. This includes Professional Indemnity, Public Liability and Employers’ Liability cover, all at levels that suit the needs of the modern freelancer.