Autumn Budget Could Cost Contractors

Reports suggest that the Chancellor Rishi Sunak could increase limited company contractor taxes to help reduce Britain’s COVID-19 debt.

The Autumn Statement isn’t expected until mid-to-late November at the earliest, but the rumour mill is already beginning to swirl - and tax hikes for companies and contractors look to be on top of the Chancellor’s agenda.

Contractor income down 25% in locked down Q2
Editor | 20 August 2020
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UK contractors’ average income dropped by 25% in the second quarter of 2020 according to the Freelancer Confidence Index, run by contractor interest group IPSE and PeoplePerHour.

The three-month period, which includes the height of the UK’s national coronavirus lockdown, saw a record fall in the average number of weeks worked by contractors in a quarter. In the 13 weeks between March and June, the average freelancer went five-and-a-half weeks without work.

Following an independent review of the controversial loan charge, the Government has launched a consultation on how it can tackle the use of these arrangements.

The loan charge was applied to contractors that participated in so-called ‘disguised remuneration’ tax avoidance schemes. In many of these schemes, contractors were effectively paid using ‘loans’ which did not have to be repaid.

How Summer Mini Budget Will Affect Contractors
Editor | 9 July 2020
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The Chancellor’s £30bn plan to protect jobs and boost the economy in the wake of the coronavirus outbreak doesn’t include everything on contractor’s wishlist, but some of the measures will be welcome.

The ‘mini budget’ includes plans to reward employers that bring back furloughed workers, increase the threshold on stamp duty and cut VAT in some key at-risk sectors.

End of Furlough Looms for Contractors

Many industries have been rocked by the ongoing coronavirus pandemic. As the smallest entity in supply chains, contractors will be among the hardest hit by the virus lockdown.

For many contractors, the Coronavirus Job Retention Scheme (CJRS) has been a valuable source of support when other work has dried up.

Because umbrella companies employ umbrella contractors on a PAYE system, contractors have had the opportunity to receive furlough payments since the scheme was announced.

Contractor productivity worth £5,000 per employee

A new report into contractor productivity has found that firms with at least 11% of their workforce as contractors are more productive, with each employee generating an extra £4,669 for their organisation on average.

Researchers from the Trinity Business School and the University of Derby said the results showed the important role that contractors can play in the UK’s recovery.

Survey: Lockdown and IR35 Affecting Contractor Wellbeing

IR35 concerns and the coronavirus lockdown has had a negative impact on UK contractor wellbeing and finances, a survey has found.

The survey of over 1,000 limited company contractors found that many were disappointed to be excluded from government support schemes like the self-employed income support and furlough schemes.

Government’s Meek Response to Lords IR35 Report

HMRC and the Treasury have published a weak response to a damning House of Lords committee report on off-payroll (IR35) working rules. 

Industry commentators said that while the response acknowledged many of the issues facing limited company contractors, they failed to propose any proactive solutions. 

How do umbrella companies avoid IR35?

Umbrella companies allow contractors to achieve IR35 compliance. If a limited company contract is deemed ‘inside IR35’, contracting through an umbrella company is usually preferable.

This will become more important as an upcoming rule change will mean that many more contractors are caught out by IR35 legislation.

Construction: Reverse VAT charge delayed until 2021

A major change to the way that VAT is paid on building and construction invoices has been delayed again, this time until 1 March 2021.

At the end of May, HMRC said that the domestic reverse charge rules for the construction industry would commence on 1 October 2020. However, a week later, the tax authority confirmed that this would be pushed back by five months, due to the impact of the coronavirus pandemic on the sector.

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