A number of our Cogent team took time out from the office on Tuesday 9th July to visit the House of Commons and meet with their local MPs.

They had come to Westminster to join with dozens of freelance contractors on a Lobby Day for the STOP THE OFF-PAYROLL TAX Campaign ably organised by Contractor Calculator, a leading contractor website.

The new IR35 Off Payroll legislation is due to come into play in April 2020 and with draft legislation published by the Treasury on 11th July, it looks likely that there will be no change.

We and many industry commentators feel that MPs are not being given correct information by the Treasury/HMRC to be able to make a fair evaluation so we strongly support the STOP THE OFF-PAYROLL TAX Campaign. As the famous saying attributed to Edmund Burke says “the only thing necessary for the triumph of evil, is for good men to do nothing”.

This saying may seem extreme in relation to a tax, but we believe that whilst tax is accepted by all as necessary, a government must make taxation fair and not abuse this power. We were surprised that no other accountants came to Westminster to lobby for their clients’ interest. All our team have written to their MPs and encourage all of our clients to do so as well. A template letter to your MP can be found within our June Newswire.

Victor Korman, founder of Cogent, explained why they had come to Westminster: “At first sight, tax is not emotive. However, with this new tax, the Treasury and HMRC are determined to destroy this highly skilled and flexible workforce at a time when the UK can least afford to lose a resource that has helped UK business to be world leaders in IT and Engineering. This is something everyone should care about.

We can see how hasty tax decisions on Doctor’s pensions is hurting the NHS by creating longer waiting times for operations and major problems for GP practices. We are asking MPs to use their influence to ensure this is not another example of a hasty tax being brought in for short-term political gain that UK business will regret in the future.

We were very grateful to all the MPs for taking the time to come and see us and we trust that the genuine interest they took in this campaign will be shown in their influence in the Parliamentary process of this tax.”

After much anticipation, the Government has now published it’s draft legislation for the off-payroll working (IR35) rules, which will be enforced in the private sector from 6 April 2020.

The latest policy document for the private sector shares a number of similarities with that already in force in the public sector.

However, it does introduce a few new changes of which contractors should be aware as they begin to prepare for the changes ahead.

Small businesses exemption

It was already known that the Government intended to introduce some form of exemption for small businesses, but this has now been confirmed in the draft legislation.

This will mean that contractors engaged by a company classed as ‘small’ in a tax year according to the Companies Act 2006 will need to continue operating IR35 as they currently do.

Contractors who are unsure of their client’s classification should ascertain with their client where the responsibility lies as early as possible.

Status Determination Statement’

The new legislation will introduce a new term for hiring organisations to provide IR35 decisions, referred to as a ‘status determination statement’ (SDS).

This statement must be provided by the client to contractors and must include both a decision and the reasoning behind the decision for including the contractor within the IR35 regime.

Where a client fails to do this, it will be seen as a failure by the client to fulfil their obligations, and thus the liability will sit with them until a suitable SDS is submitted to HM Revenue & Customs (HMRC).

This places the responsibility on the client to provide the IR35 determination as quickly as possible to both the contractor and HMRC.

Disagreement process

To reduce the number of client/contractor conflicts, the draft legislation has confirmed that under the rules, clients will have 45 days to consider and respond to any disagreements of a status decision with the reasoning behind their decision.

It is feared that this client-led process will essentially allow some employers to withhold their original decision with no further avenue for redress open to contractors – leading to a rise in employment ultimatums.

This differs drastically from the current system which allows a contractor to challenge the decision via HMRC or through an appeal heard at Alternative Dispute Resolution (ADR) and/or judge at a tribunal hearing.

Under the new client-led system, it will be down to clients with no previous IR35 experience and who may not be an impartial judge to make a decision, which offers little redress to contractors.

How you can prepare

Despite the best efforts of campaigners, including our team at Cogent, it seems likely that the IR35 legislation with go ahead in the form outlined above next year.

With this being the case, it is important that contractors take the following steps to help them prepare:

• Discuss IR35 with your client – it is important that contractors open up a clear avenue of conversation with their client to see if they are aware of the new rules and how they intend to apply them next year.
• Know your rights – Take time to learn about the various obligations your client faces and the rules that are in place to protect your work and self-employed status.
• Build a portfolio of evidence – If you are concerned about a blanket approach to IR35 or you think you may have to challenge a determination in future then it might be worth collecting evidence for your current status so that it can correctly challenged at a later date

If you are struggling to get to grips with IR35 and would like to discuss your circumstance, why not speak to our team today.

The Association of Taxation Technicians (ATT) has revealed that problems with HMRC’s IT systems earlier this year, relating to calculations for payment on account, mean that some taxpayers will not receive tax demands this month.

The glitches in the tax authority’s systems during the self-assessment tax return season also mean that calculations for payment on account on some returns may not be adjusted correctly.

It was apparently made clear at the time that HMRC’s systems had not processed payments on account for 2018/19 correctly. Unless affected taxpayers contacted HMRC to correct the position, they will not have received a demand in June or July for the second payment on account due by 31 July 2019.

Instead, those affected by this HMRC failure will need to pay their total 2018/19 self-assessment tax bill by the end of January 2020 and the ATT is advising them to set additional money aside to make sure their bill is covered.

Jon Stride, Co-Chair of the ATT’s technical steering group, said: “If a taxpayer does not make any payments on account during 2019, then their tax bill in January 2020 could be significantly larger than they are expecting and could come as quite a shock.

“Individuals who do not receive expected demands should either set aside the funds needed ready for next year or, if they wish, they can make a voluntary payment on account to HMRC of their July payment – and their January payment if that was also missed.”

The ATT has been told by HMRC that if no 2018/19 payments on account have been demanded, then the taxpayer will receive a demand from HMRC for the full amount of tax in January 2020.

Self-assessment taxpayers with annual tax demands of £1,000 or less, do not have to make payments on account, while those in the regime who have 80 per cent or more of their total annual tax collected at source, such as by PAYE, do not have to make payments on account either.

New research has revealed that employers risk losing out on the skills and flexibility of contractors if they fail to give them the opportunity to continue operating outside the IR35 legislation.

The research carried out by Contractor Weekly found that 72 per cent of the 1200 independent workers surveyed would stop working on a particular project if their client attempted to force them under the IR35 regime.

The study follows the news that HSBC, M&G Investments and Morgan Stanley are all preparing to stop working with contractors who operate outside of IR35 or who set up alternative engagement models which would mean these businesses do not need to administer the rules.

Although it is unclear of the exact policy, the research suggests that many operators may refuse to work for companies that enforce an ultimatum on IR35.

As an alternative, 18 per cent said they would continue working on a specific project but only through an umbrella company. Incredibly only 10 per cent said they would be happy to accept any offer to go PAYE and become an employee.

Along with the fact that 91 per cent of independent professionals said they take particular pride in working this way, that very few of these workers have the intention of entering employment is something that private sector firms must take into account.

Have you always suspected that the ancient tea cosy you inherited from your great grandmother could be worth thousands?

Well for one family, this odd scenario became reality when a chess piece stored in a draw turned out to be worth nearly three-quarters of a million pounds.

The unassuming chess piece was bought for £5 in 1964 by an antiques dealer and had passed down through the family.

They had no idea about it’s special significance until they took it to Sotheby’s auction house to be valued.

To their utter amazement the warder – equivalent to a rook on a modern chessboard – was discovered to be part of a set known as the Lewis Chessmen that was made from walrus ivory in the late 12th or early 13th century.

Having looked after it for more than 50 years, the antiques dealer’s family were “quite amazed” by it’s value and decided to put it up for auction where it achieved a price of £735,000.

The Lewis Chessmen was discovered on the Isle of Lewis in the Outer Hebrides in 1831, only 93 pieces were found and it was unknown where the remainder of the set lay.

It is thought that the pieces may have been buried by a merchant to avoid taxes after being shipwrecked.