Contractors have faced a tough couple of years dealing with rising costs, the COVID-19 pandemic, Brexit and, of course, the challenges of IR35.

These issues have constrained the contracting community, forcing some freelancers to completely alter the way in which they work.

So, what does the future hold? Our team has looked at some of the key developments on the horizon.

IR35 is not going away

Although many contractors have had to get used to the issues created by IR35, the reality is that it is still the biggest and most persistent difficulty that most contractors face.

The reforms have caused major disruption during a really tough time. Many contractors working via a PSC have had to alter their working arrangements to adapt.

However, things may be looking up. Although the Government hasn’t altered the IR35 rules, there is unmistakable evidence that larger businesses required to abide by these new rules have stopped using blanket bans in the main and have got to grips with making proper status assessments.

In fact, thousands of firms are still collaborating with contractors, engaging them outside IR35 and many more now better understand their requirements under the off-payroll legislation.

IR35 to be scrutinised

The well-publicised cases of incorrect status determinations and the various legal decisions against employers and HMRC over IR35 status has drawn the attention of Parliament.

There are several groups and committees requesting evidence and further scrutiny of the rules is expected.

This year we should see the follow-up Lords review into IR35 reform and a further National Audit Office investigation, which should reveal the true impact of the reforms.

It is hoped that the Government will make positive changes to the rules based on the recommendations that are delivered but much will depend on whether they listen.

Alongside this HMRC continues to update and overhaul its fundamentally flawed IR35 tool, CEST.

Tax avoidance is public enemy number one

Given the significant spending during the pandemic, HMRC is keen to stamp out tax avoidance, especially among smaller businesses and taxpayers.

During 2022, the Government has promised to tackle tax avoidance schemes and is implementing new powers under the latest Finance Bill to do so.

When it comes to contractors, there are growing calls for some umbrella companies to be investigated and new rules to be enforced preventing these businesses operation as unscrupulous tax avoidance schemes. We operate a fully compliant umbrella company under our Cogent brand should you be required to work through one: https://cogentaccountants.co.uk/cogent-umbrella

Many contractors may have already been stung by the Loan Charge legislation and should avoid repeating this situation again by using the wrong umbrella company, despite the assurances given by promoters of some schemes.

False self-employment

It is thought that the Government wants to take a wide look at the self-employed workforce beyond the IR35 reforms, which predominantly affected contractors working via PSCs.

It is understood that it may be looking into whether sole traders are genuinely self-employed or if the businesses engaging them are facilitating ‘false self-employment’.

Here to help

Whatever challenges may come your way in the year ahead, our team at Cogent are here to offer a helping hand, so please get in touch.