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Budget 2016: What Contractors Would Like To See

Budget 2016

It’s almost that time of year again. If you’re a regular reader of the Kingsbridge blog you’ll know that we’ve been following the potential impact of political changes on the contractor community for a while now. Whilst the outlook had seemed quite bleak going into the winter of 2015, following on from a relatively unfavourable summer Budget, the wider picture has become a little rosier since then. An uneventful Autumn Statement was followed up by a Draft Finance Bill surprisingly void of any mention of IR35, which in turn was followed up by Julie Deane’s thorough and balanced Self-Employment Review, arguing for more support for contractors and the self-employed.

So what should contractors expect when the next Budget is delivered on 16th March? There are strong rumours that the Chancellor is planning another increase in Insurance Premium Tax (IPT), up to 12.5%. Given that IPT was raised from 6% to 9.5% in November 2015, if the speculation was true it’d mean that the tax would be doubled in less than six months – a remarkable increase by any standard. Should it go ahead, an increase in IPT could raise as much as £1.3bn for the Treasury in the first year alone.

Such rumour gives credence to the feeling among many that the insurance industry is being singled out, as Treasury minister Harriet Baldwin MP more or less admitted recently in a letter to the AA, stating: “IPT is not a tax on consumers but on insurance companies.” BIBA (The British Insurance Brokers’ Association) also noted that a rise in IPT would discourage customers from taking out policies.

Speculation abounds that the Chancellor will also seek to end the abuse of PSC’s in a crackdown on what many see as an income tax loophole. Pushed firmly into the spotlight by the media in recent months due to the likes of Fiona Bruce and Jeremy Paxman setting themselves up as “one-man companies”, the Chancellor believes that the rules that were designed to help contractors and freelance workers are now widely abused and “completely unfair”.

With an £18bn “black hole” to plug as a result of the significant economic downturn in recent months, Osborne seems set to renew his efforts to tackle tax avoidance. Traditionally PSC’s were used by professional contractors doing short-term work for a number of clients. By paying corporation tax at 20% and taking a modest wage, plus dividends from the company, they save on both income tax and NI.

But abuse of the tax rules is estimated to help around 20,000 public sector workers who should pay equivalent taxes to other workers avoid on average over £3,500 a year in income tax and National Insurance contributions.

In future, the public sector body employing the worker will be responsible for deciding whether income should be taxed in the normal way as employment income, rather than leaving it up to the individual worker. New guidance will also be published to make it clearer when employment taxes should be paid.

A government source, quoted in the Telegraph, said:

“Personal service companies can be legitimate, but we estimate that 90 per cent of people who should comply with the rules, don’t.

“Some may not understand the rules but it’s clear others are using them as a way to minimise their tax bills. You have situations where someone working in a public body pays thousands of pounds less in tax than someone doing exactly the same job alongside them who’s taxed as an employee.

“That can’t be fair – either on the taxpayer or their fellow workers. We are going to put a stop to it.”

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Compliance and the Modern Day Contractor

Contractor Compliance

We recently wrote the below blog post for our good friends at Jonathan Lee Recruitment. You can read more excellent material over on their blog. Read on below:

Contractors and the self-employed have been in the news more than usual over the last year. Whether it was the Autumn Statement, the Draft Finance Bill, or last month’s Self-Employment Review, it’s fair to say that the importance of contractors to the British economy is firmly on the agenda.

Figures released last year indicated that the number of individuals entering the contractor community has grown dramatically over the last 8 years. There are now close to 2 million independent professionals working in the UK – an increase of over 35% since 2008.

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Four Reasons To Become A Contractor

Reasons To Become A Contractor

More and more people working in what one might term ‘traditional’ employment are moving into the freelance and contracting sectors. As Julie Deane’s recent Self-Employment Review made clear, the number of people currently self-employed in the UK has reached unprecedented levels, not only making a crucial economic impact but also ensuring that the sustained growth of recent years continues on an upward trajectory. It’s true, in many ways, that there’s never been a better time to make the switch and plough your own furrow – leave the office, leave your routines, perhaps even leave your comfort zone. Contractors are well and truly making their own mark on the economic landscape. Read on below to see just a few of the reasons why you should consider following the self-employment path.

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Self-Employment Review: Contractors Need More Support

Self-Employment Review

After what could’ve been a challenging year for the contracting community passed without being, well, quite so challenging (evidence here and here), more positive news was received today in the 41-page shape of Julie Deane’s government commissioned independent report on self-employment. You can read Deane’s report in full here (and we encourage you to do so), but the takeaway was one many contractors, and the self-employed in general, would wholeheartedly agree with: more support is required.

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Contractor News Round-Up: 12th February 2016

Contractor News Round-Up

Below you’ll find our latest round-up of contractor relevant news stories that have surfaced over the past few weeks. We’re starting to see a lot of chatter around HMRC’s new IR35-specific ESI tool, rumoured to be coming into play in the spring. Read on for news on that, as well the other subjects that have caught the eye at Kingsbridge over the last week or two.

HMRC confirms ‘IR35-specific ESI tool’

“Speaking at the December IR35 Forum, HM Revenue & Customs said its aim was to have a beta version of an “IR35 specific ESI tool” by “spring 2016”.

HMRC’s Mark Frampton also told the forum that the hope is for the tool to provide “clearances” on status, much as the Contract Review Service is meant to now, to a “mass” of contractors.”

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The Self-Assessment Deadline – Tips For Contractors

Self-Assessment Deadline

The beginning of the year can be a stressful time for everyone, with new resolutions to keep to, the return to work after Christmas excess, and the cold days of winter. For contractors, there’s also the added burden of the self-assessment deadline looming large at the end of January (the 31st to be exact). We can’t ever promise to make doing your tax returns any more fun (although we find a glass or two of wine tends to help), but we can give you some tips to help the process go more smoothly for this year and the years beyond. We know your time is at a premium so we’ll get on with our guide without any further fuss:

Make sure you submit your tax return on time

It might sound like a given, but you’d be surprised at the number of horror stories we’ve heard about contractors leaving things too late and not making the deadline (which, to remind you again, is 11:59pm on 31st January). If your tax return arrives after this point you’ll pick up a £100 fine. So check those internet connections, make sure you know where all your paperwork is, and give yourself more time than you think you’ll need.

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Kingsbridge and Genie Accountancy Announce Partnership

Genie Accountancy

Kingsbridge Contractor Insurance are pleased to announce a new partnership with Genie Accountancy, one of the most well respected specialist contractor accountants in the UK.

Kingsbridge have many years of experience in the contracting industry, and we’ve used our expertise to put together a comprehensive, compliant, and competitive insurance solution specifically tailored to meet the needs of contractors, freelancers, and independent professionals. Our policy package offers all the key insurances limited company contractors require in one easy to manage product, including professional indemnity, public liability and employers’ liability, meaning only one policy is needed to cover a contractor’s main exposures.

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Reasons to Renew Your Contractor Insurance Policy: Part 2

Renewing Your Insurance

Last week we took our first look at two of the reasons why you should renew your contractor insurance policy. This week we’re back with another three. You might not be sure that you want to renew, or you might be unaware of the benefits that come with renewing your policy, or you might not be sure if you should continue insuring with Kingsbridge Contractor Insurance. Let us explain.

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Contractor News Round-Up: 18th December 2015

Contractor News Round-Up

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:

IR35 will not change until at least April 2017, confirms HMRC to IR35 Forum (Contractor Calculator):

“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.”

Contractors not caught by IR35 can still claim tax reliefs (TaxAssist):

“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.”

Busier freelancers are happier (Brookson):

“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.”

Self-employed contractor numbers reach record high (ONS):

“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).”

Contractors to submit quarterly tax returns from April 2018 (Gov.uk):

“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).

Draft 2016 travel and subsistence legislation – Briefing 3: Will there be a surge of PSC contracting and, if so, what risks might that involve? (Osborne Clark):

“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”).”