psc Articles

Could treasury extend IR35 reforms to private sector?
marketing | 6 November 2017
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Reforms to ‘disguised employment’ IR35 rules were introduced in the public sector this year. The new rules caused confusion amongst recruiters and lead to a take-home pay cut for many contractors.

Now the Treasury has dropped its strongest hint yet that similar reforms could be introduced in the private sector – with the potential to affect millions of contractors and freelancers. 

Umbrella or PSC: What’s better for public sector contractors?

It’s a question that many limited company contractors will be asking in the coming months as impending changes threaten some of the biggest financial advantages that come along with limited company status.

For public sector contractors operating through personal service companies (PSCs) the changes could prove catastrophic.

The big shift concerns the IR35 status of public sector contractors – specifically, who judges a contractor’s IR35 status. From April, the responsibility for judging IR35 status will pass from the individual contractor to the hiring public sector body or agency charged with recruitment.

As a result, more contractors will be ‘caught out’ by the IR35 rules. Anyone ‘caught out’ by the changes will be reclassified by HMRC as being in ‘disguised employment.’ This means they will be taxed as if they were regular employees.

Umbrella.co.uk Budget Briefing
marketing | 21 March 2016
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The Chancellors fourth Budget in 12 months arrived on Wednesday and it confirmed a number of policy changes that we already knew were going to arrive. Restrictions on Travel and Subsistence tax relief for IR35 contractors and changes to the dividend tax will take effect as planned in April.

The most significant new announcement will be of concern to contractors working through a personal service company (PSC) in the public sector.

An HMRC policy document reveals that from April 2017, public sector organisations will be responsible for enforcing IR35. This marks a significant change from the current system, whereby the PSC or agency judges whether a contractor is caught out by IR35.

Effectively, this means that many more public sector contractors will fall under the remit of IR35 legislation and will receive less take home pay as a result. This change is scheduled to take effect in April 2017 following a consultation. 

HMRC confirms Travel & Subsistence Restrictions

The confusion that was surrounding the wording in the Autumn Statement documents regarding restrictions to be imposed on tax relief for Contractor Travel and Subsistence claims has now been clarified by HMRC.

The initial confusion was compounded by the fact that George Osborne made no mention of any proposed changes during his speech. 

George Osborne Eyes Contractors

In a speech designed to show how well the economy was recovering and how it was prosperity all around it may have been hard to notice that George Osborne had one eye on the huge number of contractors and freelancers that support the economy and its recovery.

April IR35 Changes. Now is the time for public sector contractors to act
marketing | 27 February 2017
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Changes are coming to Public Sector contracting in April 2017.

The key area which could affect your company in April will be the following;

Change
From 1st April this year many Limited Company Contractors working on a contract for a Public Sector institution will be classed as “Inside IR35” which means that the income from that contract will be taxed as if it was employment income. This can drastically increase the tax burden on the company.

Public Sector Contractors: Top tips for avoiding IR35
marketing | 16 December 2016
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From April, contractors working in the public sector will lose the right to determine their own IR35 status. As a consequence, thousands of PSC contractors could see their take home pay reduced.

In many cases it is feared that the legitimate contractors will be caught out by the reforms and unfairly end up on inside-IR35 contract and paying a heavy price for it.

There are, however, some ways that contractors can try to avoid IR35 and, if inevitable, mitigate the impact of an imposed inside-IR35 contract.

Government ‘back in listening mode’ on IR35

HMRC has shelved plans to change IR35 legislation for at least one year. The Association of Independent Professionals and the Self-Employed (IPSE) claims to have received confirmation that no new legislation relating to IR35 and personal service companies (PSCs) would be published in 2016-17.

At the 2015 budget, the Chancellor George Osborne indicated that IR35 Intermediaries Legislation had to be changed because it wasn’t working properly. After a period of consultation, it seems that ministers want more time to assess the impact that any changes will have on contractors. 

Tax Changes for Contractors

Yesterday we highlighted the key changes to the amounts of personal taxation and national insurance contractors will pay due to changes that come into force for the new tax year (started 6th April 2015).

One of the changes that dictates how much many contractors will pay themselves as wages when working through their own Personal Service Company (PSC) is that employees national insurance now starts at a lower amount than employers national insurance (but up from the £153 in the prior tax year).

Why Introduced:

So HMRC can tackle Employment Intermediaries that use false self-employment and offshore locations to reduce taxes and avoid employment rights.

HMRC want to know amounts paid to workers supplied by the Employment Intermediary where PAYE has not been deducted.

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