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UK wages rose in the three months to October, but continued falling in real terms amid the ongoing cost of living crisis.
Figures also revealed that while unemployment is still low, it increased slightly to 3.7%. Meanwhile the number of open job vacancies fell by 65,000 to 1.19 million.
The Office for National Statistics figures show that both average total pay (including bonuses) and regular pay (excluding bonuses) increased by 6.1% between August and October 2022.
Ahead of reforms to private sector IR35 rules, new research shows that several public sector organisations are, in the majority of cases, judging contractors to be inside IR35.
Since 2017, public bodies have been responsible for deciding whether a contractor is truly self-employed or whether they should be taxed as if they were an employee of the firm.
The rules apply to limited company contractors who, before the rule change, were responsible for judging their own IR35 status.
From April 2020, the same reforms will be introduced in the private sector, so that organisations with 50 or more employees will be responsible for judging a contractor’s IR35 status.
The Government has said that it will ban tier one contractors from bidding for work if they don’t pay their suppliers promptly.
As part of a broader package of measures designed to protect smaller businesses, the Government announced plans to exclude suppliers from major Government procurements if they cannot demonstrate “fair and effective” payment practices with their subcontractors.
HM Revenue and Customs (HMRC) has released more information about the rules governing off-payroll contractors in the public sector.
HMRC updated its guidance on the rules, which have been in effect since April.
The updated guidance clarifies some sticking points that have confused contractors for months.
Since 6 April 2017, responsibility for determining IR35 status has passed from public sector contractors, operating through an intermediary, to the public sector body engaging the contractor.
Although the fundamental rules are the same, the April change is seismic in terms of how the rules are applied.
There will be a number of things changing this April, some of which will affect them negatively.
We assess the changes and suggest some tax-efficient ways for contractors to respond.
An influential group of MPs has blamed HMRC for ‘widespread non-compliance’ with IR35 rules in Government departments.
A new Public Accounts Committee (PAC) report on IR35 in the public sector has concluded that HMRC rushed the implementation of reforms and didn’t give public bodies enough guidance through the process.
IR35 rules were changed in the Public Sector in 2017 and the rules were extended to the Private Sector in 2021.
If you contract through a limited company, there are certain expenses that you can claim against your income to reduce your tax liability.
If your limited company makes £50,000 and you claim back £10,000 in allowable expenses, the taxable profit will be £40,000.
There are some rules governing what expenses limited company contractors can claim.
Some self-employed contractors lost 30% of their income in the wake of IR35 reforms that took effect in the public sector this in April.
As the dust settles around the changes IT recruitment company, CW Jobs, found that more than 70% of their clients saw a reduction in income after the IR35 reforms.
Of these contractors, a quarter saw a reduction close to 30%.
The IR35 reforms mean that contractors who work solely or primarily for public sector bodies are being taxed as if they were regular employees of that company. But are no receiving any of the accompanying benefits such as such pay or holiday entitlement.
The controversial changes to IR35 legislation, which affect contractors working in the public sector, have been in place for more than two months now. Already it is clear that the new tax policy has had a number of unintended consequences that have made life more difficult for contractors and the public sector organisations that want to employ them.
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.
