IR35: It’s coming, if we like it or not

IR35: It’s coming, if we like it or not

In approximately 10 weeks, new procedures come into effect, changing the way the IR35 status is determined for contractors who operate via their own PSC within the public sector.

The decision for determining if the contractor operates within or outside of IR35 will transfer from the contractor themselves to the public sector body they are engaged with.

What’s the reason for the change?

The government was embarrassed a few years ago when the press revealed that the Chief Executive of the Student Loan Company was being paid through his own limited company. As a result HMRC believe that as it stands, IR35 isn’t working in the public sector. Currently, a contractor’s IR35 status is decided by him or herself.. HMRC are not happy with this arrangement within the public sector and believe that some contractors are classifying themselves as working outside of IR35 in order to pay themselves a salary through their PSC without deducting PAYE. HMRC appear to be ignoring the fact contractors working through their own PSC are paying both Income Tax and Corporation Tax.

By forcing the public sector body to determine a contractor’s IR35 status, they are hoping they will be able to collect more tax revenue through PAYE and NIC.

Is it a welcome change?

Only HMRC see it as a positive step. It has come under fierce criticism from contractors, recruiters and professional bodies representing both contractors and the recruitment industry. Nevertheless, the concerns raised seem to have been pushed to one side and the changes come into effect in April 2017.

Who will it affect?

It will affect any contractor operating via their own PSC and who contracts for a public sector organisation. The term ‘public sector’ itself is extremely broad and includes for example; central government departments, local councils, parliament, NHS, MOD, Police, the BBC and Channel 4.

How will it work?

The public sector body will be held responsible for determining the IR35 status of any off-payroll person they engage with. To make it easier for the organisation to decide this status, HMRC are in the midst of developing an online tool that will help determine if the contractor is inside or outside of IR35.

Firstly, the tool is still being developed, with only 10 weeks left to go and this is a worrying situation. Secondly, the information that the tool gives out will only be as good as the information that is fed into it.

It becomes even more complicated if the contractor is engaged through a third party organisation, such as an agency. In this case, the public sector body is responsible for determining the status and informing the agency of their decision.

If the public sector body fails to do this the agency can write to them asking for their decision. The public sector body then has 31 days to give their response.

The agency’s role is that they are responsible for collecting the appropriate level of tax through PAYE and NIC.

Will it be a failure or a success?

No one knows if it will be a failure or a success, but many are putting money on it being the former.

Contractors who currently operate in the public sector are predicting that they will be forced to find contracts outside of the public sector, and some are already looking for new positions.

If you are a contractor in the public sector and are looking for advice on your tax situation, speak to our team on 020 8952 2234. 

Why people choose to go freelancing

Freelancing seems to be the ‘cool’ thing to do at the moment. Phrases such as the ‘gig economy’ and ‘start-up’ are often bounded around.

Traditionally freelancing was associated with web developers and graphic designers. But, now you will find that people from all industries and niches are going freelance. We attended a freelance networking event not so long ago and we met people who were Change / Program managers, Script Writers, Copywriters, Interior Designers, Business Coaches and even a Composer!

The question I asked all of them was, “what made you become a freelancer?”

Here are some of their reasons:

I do freelance work alongside my part time job. I can work the hours I want which fits in perfectly with having a young family and it is a way for me to earn some extra money“. Caroline, London.

I was made redundant from my position as an IT Manager and after 8 months of looking for a new position, I decided to set up my own freelance business. I now handle the IT requirements for small businesses who can’t afford to hire an in-house IT Manager“. Nick, Manchester.

I got tired of working long hours and building up the business for somebody else. I decided to put my energy into building a business for myself instead. That was 5 years ago and it was the best decision I ever made. I now get to work with clients who operate in different industries, every project is different and they all bring their own set of challenges. I am constantly learning new skills and this keeps me interested in what I am doing“. Claire, Cardiff.

Many of those we spoke said they had simply got tired of the corporate world and were looking for a refreshing change.

In fact, the profile of your average freelancer is changing. If you look back 7-8 years, freelancers were typically in their 20’s. Now, you find that the majority of freelancers are 30+, who have been employed and are now branching out on their own.

Is freelancing for everyone?

No! That may seem like a bold statement. But, the truth is, it isn’t! You won’t work 9-5, it can be lonely (you might spend a lot of your time working on your own), you don’t have colleagues around you to ask for advice, you will not have a fixed monthly salary and you have to say goodbye to paid holidays.

However, it is not all doom and gloom. We mentioned many of the positives earlier, and if you do feel lonely working on your own there are lots of shared workspaces popping up that don’t cost a fortune to use.

Is freelancing risky?

Not anymore. Long term job security doesn’t exist anymore. You could be working for a company for 15 years and then they go into administration and you lose your job.

When you launch your own freelance business, you hold responsibility for the business and it is down to you to make the business a success and profitable.

You are not alone

If you are thinking of going freelance there are lots of sites that can give you useful information, these include; Network Freelance, Freelancer News and Freelance UK.

Additionally, if you are new to freelancing and would like advice about the best way to set up your freelance business, give us a call on 020 8952 2234, and our team will discuss the best option for you.

Cloud Accountancy for Contractors: Do you find it mystifying?

Technology is evolving at a pace that we are finding hard to keep up with. Like it or not, technology now has a major impact on every part of life. Thankfully, the majority of the time it is a positive impact.

Cloud-based accountancy software has definitely made contractors life’s much easier.

For those who are unsure what cloud-based software is, it is another name for internet based software. Therefore it is accessible on differing devices (desktop, tablet, mobile) that has a connection to the internet.

Contractors and freelancers who use it say it has made understanding their businesses’ financial data much easier. What they like is, it;

“cuts back on the time they spend doing their accounts”

“is easy to use, even for technophobes”

“they can access it anytime, anywhere”

Cloud-based accountancy packages are ideal for busy contractors and freelancers as:

  • they require no software upgrades
  • it is accessible anytime, anywhere (as long as you have an internet connection)
  • the accountant has access to the same data as them
  • they can raise invoices through it
  • it can help estimate corporation tax
  • it can be used to keep track of dividends

Cloud accountancy and Making Tax Digital

By 2020, every business must report their tax information online, using a compatible accountancy software package. The first roll out starts in 2018, when sole traders and partnerships will be required to report their tax information online.

Cloud accountancy and accountants 

Cloud-based accountancy software has been described as a ‘virtual accountant’, but it should NOT signal the end of the relationship contractors and freelancers have with their accountant.

Cloud-based accountancy software packages can not provide you with strategic tax planning and advice. You cannot call upon ‘the cloud’ to help you with a question about VAT, for example. However, using the two in conjunction will make you a super-powered contractor or freelancer.

If you are looking to upgrade to a cloud-based accountancy package, speak to us today to find out the many benefits it can have to your business. Speak to us 020 8952 2234. 

Job search apps to look out for in 2017

Apps the way!

Now is a great time to be a contractor. And, the demand for skilled contract professionals is expected to continue to rise in 2017.

This has partially been fueled by the EU Referendum vote. Employers are not willing to risk taking on permanent employees and are instead opting to hire contractors and freelancers.

Recruitment agencies still continue to be a valuable source for contractors, with 80% of all contracts awarded through an agent.

However, times are changing and over the last year there has been a rise in the number of mobile apps and web platforms that are enabling employers and contractors to connect directly, cutting out the middleman (the recruitment agency).

This is not surprising as now 7 in 10 in the UK own a smartphone.  According to data from The Balance, 72% of all jobseekers search for and apply for roles using mobile phones.

Here are top 4 sites for contractors and freelancers to look at in 2017:

Fluxible

This app is specifically targeted at contractors who work in financial crime and compliance. It is scheduled to be launched in January 2017.

The app enables businesses and managed service companies to find and hire contractors directly.

http://www.fluxible.co/

Ryalto

Ryalto has been designed to connect organisations with skilled IT contractors and freelancers.

Contractors and freelancers create a profile detailing their area of expertise, daily rate, number of years’ experience and regions they are willing to work in.

Employers using the app have the ability to search through profiles to find available contractors and freelancers and message them directly.

http://www.ryaltoapp.com/

Elevate

Elevate is an online platform for contractors and freelancers working in all sectors and industries. It has been developed by a team of ex-recruiters to connect skilled professionals with contractors and freelancers.

To create a profile upload your CV and the system automatically extracts the relevant information and adds it to the appropriate section.

Notifications will be sent when the system finds a matching job. You choose to either apply or ignore it.

http://elevatedirect.com/

WiseCrowd

WiseCrowd is specifically aimed at freelancers who operate in the Governance, Risk and Compliance sector.

As with the other platforms, the freelancer creates an online profile listing their skills and details of previous projects they have worked on.

Using a calendar, employers can view details of freelancers who are available to work.

The platform is designed to speed up the hiring process and reduce the inefficiencies that can be experienced by using a third party.

http://wisecrowd.global/

Let’s make 2017 the year of the contractor and freelancer!

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